Income Tax Act 1961

INCOME-TAX ACT, 1961*
[43 OF 1961]
[AS AMENDED BY FINANCE ACT, 2008]
An Act to con solidate an d am en d th e law relatin g to
in com e-tax an d super-tax
BE it enacted by Par liament in the Twelfth Year of the Republic of
India as follows :
CHAPTER I
PRELIMINARY
Short title, extent and commencement.
1
1.
2
(1) This Act may be called the Income-tax Act, 1961.
(2) It extends to the whole of India.
(3) Save as other wise pr ovided in this Act, it shall come into for ce on the 1st day
of Apr il, 1962.
Definitions.
2. In this Act, unless the context other wise r equir es,
3
[(1) advance tax means the advance tax payable in accor dance with the
pr ovisions of Chapter XVII-C;]
1. For applicability of the Act to State of Sikkim, see section 26 of the Finance Act, 1989.
For extension of Act to Continental Shelf of India, see Notification No. GSR 304(E), dated
31-3-1983. For details, see Taxmanns Master Guide to Income-tax Act.
2. For effective date for the applicability of the Act in the State of Sikkim, see Notification
No. SO 148(E), dated 23-2-1989. For details, see Taxmanns Master Guide to Income-tax
Act .
3. Inser ted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
*Am en dm en t s m ade by t h e Fin an ce Act , 2008 n ot wit h st an din g t h e dat es f rom wh ich t h ey
com e in t o ef f ect , h ave been prin t ed in it alics en closed wit h bold squ are brack et s.
Am en dm en t s m ade by t h e Fin an ce Act , 2007 com in g in t o f orce f rom April 1, 2008 h ave also
been prin t ed in it alics bu t en closed wit h in m ediu m squ are brack et s.
1.1
4
[
5
(1A)]
6
agr icultur al income
7
means
8
9
[(a) any r ent
10
or r evenue der ived fr om land
10
which is situated in
India and is used for agr icultur al pur poses;]
(b) any income der ived fr om such land
10
by
(i) agr icultur e
10
; or
(ii) the per for mance by a cultivator or r eceiver of r ent-in-kind of
any pr ocess or dinar ily employed by a cultivator or r eceiver
of r ent-in-kind to r ender the pr oduce r aised or r eceived by
him fit to be taken to mar ket
10
; or
(iii) the sale by a cultivator or r eceiver of r ent-in-kind of the
pr oduce r aised or r eceived by him, in r espect of which no
pr ocess has been per for med other than a pr ocess of the
natur e descr ibed in par agr aph (ii) of this sub-clause ;
(c) any income der ived fr om any building owned and occupied by
the r eceiver of the r ent or r evenue of any such land, or occupied
by the cultivator or the r eceiver of r ent-in-kind, of any land with
r espect to which, or the pr oduce of which, any pr ocess mentioned
in par agr aphs (ii) and (iii) of sub-clause (b) is car r ied on :
9
[Provided that
(i) the building is on or in the immediate vicinity of the land, and
is a building which the r eceiver of the r ent or r evenue or the
cultivator , or the r eceiver of r ent-in-kind, by r eason of his
connection with the land, r equir es as a dwelling house, or as
a stor e-house, or other out-building, and
(ii) the land is either assessed to land r evenue in India or is
subject to a local r ate assessed and collected by officer s of the
Gover nment as such or wher e the land is not so assessed to
land r evenue or subject to a local r ate, it is not situated
(A) in any ar ea which is compr ised within the jur isdiction
of a municipality (whether known as a municipality,
municipal cor por ation, notified ar ea committee, town
ar ea committee, town committee or by any other name)
S. 2(1A) I.T. ACT, 1961 1.2
4. Renumber ed as clause (1A) by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989.
5. For r elevant case laws, see Taxmanns Master Guide to Income-tax Act.
6. See r ules 7 and 8 for manner of computation of income which is par tially agr icultur al and
par tially fr om business. See also r ules 7A & 7B.
7. The Finance Act, 1973 intr oduced for the fir st time a scheme of par tially integr ated
t axat ion of non-agr icult ur al income wit h incomes der ived fr om agr icult ur e for t he
pur poses of deter mining the r ate of income-tax that will apply to cer tain non-cor por ate
assessees. The scheme is since continued by the Annual Finance Acts. The pr ovisions
applicable for the assessment year 2008-09 ar e contained in section 2(2)/ 2(13)(c) and Par t
IV of the Fir st Schedule to the Finance Act, 2008.
8. See also Cir cular No. 310, dated 29-7-1981 and Cir cular No. 5/ 2003, dated 22-5-2003. For
details, see Taxmanns Master Guide to Income-tax Act.
9. Substituted by the Taxation Laws (Amendment) Act, 1970, w.r .e.f. 1-4-1962.
10. For meaning of the ter ms/ expr essions r ent, r evenue, der ived, r evenue der ived fr om
land, such land, agr icultur e and mar ket, see Taxmanns Dir ect Taxes Manual, Vol. 3.
or a cantonment boar d and which has a population of
not less than ten thousand accor ding to the last pr eced-
ing census of which the r elevant figur es have been
published befor e the fir st day of the pr evious year ; or
(B) in any ar ea within such distance, not being mor e than
eight kilometr es, fr om the local limits of any municipal-
ity or cantonment boar d r efer r ed to in item (A), as the
Centr al Gover nment may, having r egar d to the extent
of, and scope for , ur banisation of that ar ea and other
r elevant consider ations, specify in this behalf by notifi-
cation in the Official Gazette
11
.]
12
[
13
[Explan ation 1.]For the r emoval of doubts, it is her eby declar ed
that r evenue der ived fr om land shall not include and shall be deemed
never to have included any income ar ising fr om the tr ansfer of any
land r efer r ed to in item (a) or item (b) of sub-clause (iii) of clause (14)
of this section.]
14
[Explan ation 2.For the r emoval of doubts, it is her eby declar ed
that income der ived fr om any building or land r efer r ed to in sub-
clause (c) ar ising fr om the use of such building or land for any pur pose
(including letting for r esidential pur pose or for the pur pose of any
business or pr ofession) other than agr icultur e falling under sub-
clause (a) or sub-clause (b) shall not be agr icultur al income;]
The following Explan at ion 3 shall be inserted after Explan at ion 2
in clause (1A) of section 2 by the Finance Act, 2008, w.e.f. 1-4-2009 :
Explanation 3.For th e purposes of th is clause, an y in com e derived
from saplin gs or seedlin gs grown in a n ursery sh all be deem ed to be
agricultural in com e;
15
[
16
[(1B)] amalgamation, in r elation to companies, means the mer ger of one
or mor e companies with another company or the mer ger of two or
mor e companies to for m one company (the company or companies
which so mer ge being r efer r ed to as the amalgamating company or
companies and the company with which they mer ge or which is
for med as a r esult of the mer ger , as the amalgamated company) in
such a manner that
(i) all the pr oper ty of the amalgamating company or companies
immediately befor e the amalgamation becomes the pr oper ty of
the amalgamated company by vir tue of the amalgamation ;
(ii) all the liabilities of the amalgamating company or companies
immediately befor e the amalgamation become the liabilities of
the amalgamated company by vir tue of the amalgamation ;
1.3 CH. I - PRELIMINARY S. 2(1B)
11. For specified ur ban ar eas, r efer Taxmanns Dir ect Taxes Cir cular s.
12. Inser ted by the Finance Act, 1989, w.r .e.f. 1-4-1970.
13. Explan ation r enumber ed as Explan ation 1 by the Finance Act, 2000, w.e.f. 1-4-2001.
14. Inser ted, ibid.
15. Inser ted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
16. Renumber ed as clause (1B) by t he Dir ect Tax Laws (Amendment ) Act , 1987, w.e.f.
1-4-1989.
(iii) shar eholder s holding not less than
17
[thr ee-four ths] in value of the
shar es in the amalgamating company or companies (other than
shar es alr eady held ther ein immediately befor e the amalga-
mation by, or by a nominee for , the amalgamated company or its
subsidiar y) become shar eholder s of the amalgamated company
by vir tue of the amalgamation,
other wise than as a r esult of the acquisition of the pr oper ty of one
company by another company pur suant to the pur chase of such
pr oper ty by the other company or as a r esult of the distr ibution of
such pr oper ty to the other company after the winding up of the fir st-
mentioned company ;]
18
[(1C) Additional Commissioner means a per son appointed to be an Addi-
tional Commissioner of Income-tax under sub-section (1) of section
117;
(1D) Additional Dir ector means a per son appointed to be an Additional
Dir ector of Income-tax under sub-section (1) of section 117 ;]
(2) annual value, in r elation to any pr oper ty, means its annual value as
deter mined under section 23 ;
(3)
19
[* * *]
(4) Appellate Tr ibunal means the Appellate Tr ibunal constituted under
section 252 ;
(5) appr oved gr atuity fund means a gr atuity fund which has been and
continues to be appr oved by the
20
[Chief Commissioner or Commis-
sioner ] in accor dance with the r ules contained in Par t C of the Four th
Schedule ;
(6) appr oved super annuation fund means a super annuation fund or
any par t of a super annuation fund which has been and continues to
be appr oved by the
20
[Chief Commissioner or Commissioner ] in
accor dance with the r ules contained in Par t B of the Four th Sche-
dule ;
21
(7) assessee
22
means a per son by whom
23
[any tax] or any other sum of
money is payable under this Act, and includes
(a) ever y per son in r espect of whom any pr oceeding under this Act
has been taken for the assessment of his income
24
[or assessment
of fr inge benefits] or of the income of any other per son in r espect
of which he is assessable, or of the loss sustained by him or by
such other per son, or of the amount of r efund due to him or to
such other per son ;
S. 2(7) I.T. ACT, 1961 1.4
17. Substituted for nine-tenths by the Finance Act, 1999, w.e.f. 1-4-2000.
18. Clauses (1C) and (1D) inser ted by the Finance Act, 2007, w.r .e.f. 1-6-1994.
19. Clause (3) omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
20. Substituted for Commissioner , ibid.
22. For meaning of the ter m assessee, see Taxmanns Dir ect Taxes Manual, Vol. 3.
23. Substituted for income-tax or super -tax by the Finance Act, 1965, w.e.f. 1-4-1965.
24. Inser ted by the Finance Act, 2005, w.e.f. 1-4-2006.
(b) ever y per son who is deemed to be an assessee under any pr ovi-
sion of this Act ;
(c) ever y per son who is deemed to be an assessee in default under
any pr ovision of this Act ;
25
[(7A) Assessing Officer means the Assistant Commissioner
26
[or Deputy
Commissioner ]
27
[or Assistant Dir ector ]
26
[or Deputy Dir ector ] or the
Income-tax Officer who is vested with the r elevant jur isdiction by
vir tue of dir ections or or der s issued under sub-section (1) or sub-
section (2) of section 120 or any other pr ovision of this Act, and the
28
[Additional Commissioner or ]
29
[Additional Dir ector or ]
30
[Joint
Commissioner or Joint Dir ector ] who is dir ected under clause (b) of
sub-section (4) of that section to exer cise or per for m all or any of the
power s and functions confer r ed on, or assigned to, an Assessing
Officer under this Act ;]
(8) assessment
31
includes r eassessment ;
(9) assessment year means the per iod of twelve months commencing
on the 1st day of Apr il ever y year ;
32
[(9A) Assistant Commissioner means a per son appointed to be anAssistant
Commissioner of Income-t ax
33
[or a Deput y Commissioner of
Income-tax] under sub-section (1) of section 117 ;]
34
[(9B) Assistant Dir ector means a per son appointed to be an Assistant
Dir ector of Income-tax under sub-section (1) of section 117;]
(10) aver age r ate of income-tax means the r ate ar r ived at by dividing the
amount of income-tax calculated on the total income, by such total
income ;
35
[(11) block of assets means a gr oup of assets falling within a class of assets
compr ising
(a) tangible assets, being buildings, machiner y, plant or fur nitur e;
1.5 CH. I - PRELIMINARY S. 2(11)
29. Inser ted, ibid., w.r .e.f. 1-10-1996.
30. Substituted for Deputy Commissioner or Deputy Dir ector by the Finance (No. 2) Act,
1998, w.e.f. 1-10-1998. Ear lier or Deputy Dir ector was inser ted by the Finance (No. 2) Act,
1996, w.e.f. 1-10-1996.
31. For the meaning of the ter m assessment, see Taxmanns Dir ect Taxes Manual, Vol. 3.
35. Substituted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Pr ior to its substitution, clause
(11), as inser ted by the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986,
w.e.f. 1-4-1988, r ead as under :
(11) block of assets means a gr oup of assets falling within a class of assets, being
buildings, machiner y, plant or fur nitur e, in r espect of which the same per centage
of depr eciation is pr escr ibed ;
Or iginal clause was ear lier omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
(b) intangible assets, being know-how, patents, copyr ights, tr ade-
mar ks, licences, fr anchises or any other business or commer cial
r ights of similar natur e,
in r espect of which the same per centage of depr eciation is pr e-
scr ibed;]
(12) Boar d means the
36
[Centr al Boar d of Dir ect Taxes constituted
under the Centr al Boar ds of Revenue Act, 1963 (54 of 1963)] ;
37
[(12A) books or books of account includes ledger s, day-books, cash books,
account-books and other books, whether kept in the wr itten for m or
as pr int-outs of data stor ed in a floppy, disc, tape or any other for m of
electr o-magnetic data stor age device;]
38
(13) business
39
includes any tr ade
39
, commer ce or manufactur e or any
adventur e
39
or concer n in the natur e of tr ade
39
, commer ce or manu-
factur e ;
40
(14) capital asset means pr oper ty
41
of any kind held by an assessee,
whether or not connected with his business or pr ofession, but does
not include
(i) any stock-in-tr ade, consumable stor es or r aw mater ials held for
the pur poses of his business or pr ofession ;
42
[(ii) person al effects
43
, th at is to say, m ovable property (in cludin g
wearin g apparel an d furn iture) h eld for person al use
43
by th e
assessee or an y m em ber of h is f am ily depen den t on h im , but
excludes
(a) jewellery;
(b) arch aeological collection s;
S. 2(14) I.T. ACT, 1961 1.6
36. Substituted for Centr al Boar d of Revenue constituted under the Centr al Boar d of
Revenue Act, 1924 (4 of 1924) by the Centr al Boar ds of Revenue Act, 1963, w.e.f. 1-1-1964.
39. For the meaning of the ter ms/ expr essions business, tr ade, adventur e and in the
natur e of tr ade, see Taxmanns Dir ect Taxes Manual, Vol. 3.
41. For the meaning of the ter m pr oper ty, see Taxmanns Dir ect Taxes Manual, Vol. 3.
42. Substituted by the Finance Act, 2007, w.e.f. 1-4-2008. Pr ior to its substitution, sub-clause
(ii), as substituted by the Finance Act, 1972, w.e.f. 1-4-1973, r ead as under :
(ii) per sonal effects, that is to say, movable pr oper ty (including wear ing appar el and
fur nitur e, but excluding jeweller y) held for per sonal use by the assessee or any
member of his family dependent on him.
Explan ation .For the pur poses of this sub-clause, jeweller y includes
(a) or naments made of gold, silver , platinum or any other pr ecious metal or any
alloy cont aining one or mor e of such pr ecious met als, whet her or not
containing any pr ecious or semi-pr ecious stone, and whether or not wor ked
or sewn into any wear ing appar el ;
(b) pr ecious or semi-pr ecious stones, whether or not set in any fur nitur e, utensil
or other ar ticle or wor ked or sewn into any wear ing appar el ;
43. For the meaning of the expr essions per sonal effects and per sonal use, see Taxmanns
Dir ect Taxes Manual, Vol. 3.
(c) drawin gs;
(d) pain tin gs;
(e) sculptures; or
(f) an y work of art.
Explanation.For th e purposes of th is sub-clause, jewellery
in cludes
(a) orn am en ts m ade of gold, silver, platin um or an y oth er
precious m etal or an y alloy con tain in g on e or m ore of such
precious m etals, wh eth er or n ot con tain in g an y precious or
sem i-precious ston e, an d wh eth er or n ot work ed or sewn in to
an y wearin g apparel;
(b) precious or sem i-precious ston es, wh eth er or n ot set in an y
furn iture, uten sil or oth er article or work ed or sewn in to an y
wearin g apparel ;]
44
[(iii) agr icultur al land
45
in India, not being land situate
(a) in any ar ea which is compr ised within the jur isdiction of a
municipality
45
(whether known as a municipality, municipal
cor por ation, notified ar ea committee, town ar ea committee,
town committee, or by any other name) or a cantonment
boar d and which has a population
45
of not less than ten
thousand accor ding to the last pr eceding census of which the
r elevant figur es have been published befor e the fir st day of
the pr evious year ; or
(b) in any ar ea within such distance, not being mor e than eight
kilometr es, fr om the local limits of any municipality or
cantonment boar d r efer r ed to in item (a), as the Centr al
Gover nment may, having r egar d to the extent of, and scope
for , ur banisation of that ar ea and other r elevant consider -
ations, specify in this behalf by notification in the Official
Gazette
46
;]
47
[(iv) 6 per cent Gold Bonds, 1977,
48
[or 7 per cent Gold Bonds, 1980,]
49
[or National Defence Gold Bonds, 1980,] issued by the Centr al
Gover nment ;]
50
[(v) Special Bear er Bonds, 1991, issued by the Centr al Gover nment ;]
44. Substituted for (iii) agr icultur al land in India by the Finance Act, 1970, w.e.f. 1-4-1970.
45. For the meaning of the ter ms/ expr essions agr icultur al land, municipality and popu-
lation, see Taxmanns Dir ect Taxes Manual, Vol. 3.
46. For specified ur ban ar eas, r efer Taxmanns Dir ect Taxes Cir cular s.
47. Inser ted by the Taxation Laws (Amendment) Act, 1962, w.e.f. 13-12-1962.
49. Inser ted by the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1965, w.e.f.
4-12-1965.
50. Inser ted by the Special Bear er Bonds (Immunities and Exemptions) Act, 1981, w.e.f.
12-1-1981.
51
[(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999
notified by the Centr al Gover nment ;]
52
(15)
53
char it able pur pose
54
includes r elief of the poor , education
54
,
medical r elief, and the advancement of any other
54
object of gener al
public utility
55
[* * *] ;
The following clause (15) shall be substituted for clause (15) of
section 2 by the Finance Act, 2008, w.e.f. 1-4-2009 :
(15) ch aritable purposein cludes relief of th e poor, education , m edical
relief, an d th e advan cem en t of an y oth er object of gen eral public
utility:
Provided th at th e advan cem en t of an y oth er object of gen eral public
utility sh all n ot be a ch aritable purpose, if it in volves th e carryin g on
of an y activity in th e n ature of trade, com m erce or busin ess, or an y
activity of ren derin g an y service in relation to an y trade, com m erce or
busin ess, for a cess or fee or an y oth er con sideration , irrespective of th e
n ature of use or application , or reten tion , of th e in com e from such
activity;
56
[(15A) Chief Commissioner means a per son appointed to be a Chief
Commissioner of Income-tax under sub-section (1) of section 117 ;]
57
[
58
[(15B)] child, in r elation to an individual, includes a step-child and an
adopted child of that individual ;]
59
[(16) Commissioner means a per son appointed to be a Commissioner of
Income-tax under sub-section (1) of section 117
60
[* * *] ;]
61
[(16A) Commissioner (Appeals) means a per son appointed to be a Commis-
sioner of Income-tax (Appeals) under sub-section (1) of section 117 ;]
62
[(17) company means
(i) any Indian company, or
(ii) any body cor por ate incor por ated by or under the laws of a
countr y outside India, or
(iii) any institution, association or body which is or was assessable or
was assessed as a company for any assessment year under the
S. 2(17) I.T. ACT, 1961 1.8
52. See also Cir cular No. 395, dated 24-9-1984. For details, see Taxmanns Master Guide to
Income-tax Act.
54. For the meaning of ter ms/ expr ession char itable pur pose, education and object of
gener al public utility, see Taxmanns Dir ect Taxes Manual, Vol. 3.
55. not involving the car r ying on of any activity for pr ofit omitted by the Finance Act, 1983,
w.e.f. 1-4-1984.
58. Renumber ed by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
59. Substituted by the Finance Act, 1970, w.e.f. 1-4-1970.
60. Wor ds , and includes a per son appointed to be an Additional Commissioner of Income-
tax under that sub-section omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1988.
62. Substituted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971.
Indian Income-tax Act, 1922 (11 of 1922), or which is or was
assessable or was assessed under this Act as a company for any
assessment year commencing on or befor e the 1st day of Apr il,
1970, or
(iv) any institution, association or body, whether incor por ated or not
and whether Indian or non-Indian, which is declar ed by gener al
or special or der of the Boar d to be a company :
Provided that such institution, association or body shall be deemed
to be a company only for such assessment year or assessment
year s (whether commencing befor e the 1st day of Apr il, 1971, or
on or after that date) as may be specified in the declar ation ;]
(18) company in which the public ar e substantially inter esteda com-
pany is said to be a company in which the public
63
ar e substantially
inter ested
64
[(a) if it is a company owned by the Gover nment or the Reser ve Bank
of India or in which not less than for ty per cent of the shar es ar e
held (whether singly or taken together ) by the Gover nment or the
Reser ve Bank of India or a cor por ation owned by that bank ; or ]
65
[(aa) if it is a company which is r egister ed under section 25 of the
Companies Act, 1956 (1 of 1956)
66
; or
(ab) if it is a company having no shar e capital and if, having r egar d to
its objects, the natur e and composition of its member ship and
other r elevant consider ations, it is declar ed by or der of the Boar d
to be a company in which the public ar e substantially inter ested:
Provided that such company shall be deemed to be a company in
which the public ar e substantially inter ested only for such assess-
ment year or assessment year s (whether commencing befor e the
1st day of Apr il, 1971, or on or after that date) as may be specified
in the declar ation ; or ]
67
[(ac) if it is a mutual benefit finance company, that is to say, a company
which car r ies on, as it s pr incipal business, t he business of
acceptance of deposits fr om its member s and which is declar ed
by the Centr al Gover nment under section 620A
68
of the Com-
panies Act, 1956 (1 of 1956), to be a Nidh i or Mutual Benefit
Society ; or ]
69
[(ad) if it is a company, wher ein shar es (not being shar es entitled to a
fixed r ate of dividend whether with or without a fur ther r ight
to par ticipate in pr ofits) car r ying not less than fifty per cent of
the voting power have been allotted unconditionally to, or
63. For the meaning of the ter m public, see Taxmanns Dir ect Taxes Manual, Vol. 3.
66. For text of section 25 of the Companies Act, 1956, see Appendix.
68. For text of section 620A of the Companies Act, 1956, and notified Nidhi(s) ther eunder , see
Appendix.
acquir ed unconditionally by, and wer e thr oughout the r elevant
pr evious year beneficially held by, one or mor e co-oper ative
societies ;]
70
[(b) if it is a company which is not a
71
pr ivate company as defined in
the Companies Act, 1956 (1 of 1956), and the conditions specified
either in item (A) or in item (B) ar e fulfilled, namely :
(A) shar es in t he company (not being shar es ent it led t o a
fixed r ate of dividend whether with or without a fur ther
r ight to par ticipate in pr ofits) wer e, as on the last day of the
r elevant pr evious year , listed in a r ecognised stock exchange
in India in accor dance wit h t he Secu r it ies Cont r act s
(Regulation) Act, 1956 (42 of 1956), and any r ules made
ther eunder ;
72
[(B) shar es in t he company (not being shar es ent it led t o a
fixed r ate of dividend whether with or without a fur ther
r ight to par ticipate in pr ofits) car r ying not less than fifty
per cent of the voting power have been allotted uncondi-
t ionally t o, or acqu ir ed u ncondit ionally by, and wer e
thr oughout the r elevant pr evious year beneficially held
by
(a) the Gover nment, or
(b) a cor por ation established by a Centr al, State or Pr o-
vincial Act, or
(c) any company to which this clause applies or any
subsidiar y company of such company
73
[if the whole of
the shar e capital of such subsidiar y company has been
held by the par ent company or by its nominees thr ough-
out the pr evious year .]
Explan ation .In its application to an Indian company whose
business consists mainly in the constr uction of ships or in the
manufactur e or pr ocessing of goods or in mining or in the
gener ation or distr ibution of electr icity or any other for m of
power , item (B) shall have effect as if for the wor ds not less
than fifty per cent, the wor ds not less than for ty per cent
had been substituted ;]]
(19) co-oper ative society means a co-oper ative society r egister ed under
the Co-oper ative Societies Act, 1912 (2 of 1912), or under any other
law for the time being in for ce in any State for the r egistr ation of co-
oper ative societies ;
S. 2(19) I.T. ACT, 1961 1.10
70. Substituted by the Finance Act, 1969, w.e.f. 1-4-1970. Ear lier , clause (b) was amended fir st
by the Finance Act, 1965, w.e.f. 1-4-1965 and then by the Finance Act, 1966, w.e.f. 1-4-1966.
71. Clause (iii) of section 3(1) of the Companies Act, 1956, defines pr ivate company. For text
of section 3, see Appendix.
73. Substituted for wher e such subsidiar y company fulfils the conditions laid down in clause
(b) of section 108 by the Finance Act, 1987, w.e.f. 1-4-1988.
74
[(19A) Deputy Commissioner means a per son appointed to be a Deputy
Commissioner of Income-tax
75
[* * *] under sub-section (1) of section
117 ;
76
[(19AA) demer ger , in r elation to companies, means the tr ansfer , pur suant to
a scheme of ar r angement under sections 391 to 394
77
of the Compa-
nies Act, 1956 (1 of 1956), by a demer ged company of its one or mor e
under takings to any r esulting company in such a manner that
(i) all the pr oper ty of the under taking, being tr ansfer r ed by the
demer ged company, immediately befor e the demer ger , becomes
the pr oper ty of the r esulting company by vir tue of the demer ger ;
(ii) all the liabilities r elatable to the under taking, being tr ansfer r ed by
the demer ged company, immediately befor e the demer ger ,
become the liabilities of the r esulting company by vir tue of the
demer ger ;
(iii) the pr oper ty and the liabilities of the under taking or under takings
being tr ansfer r ed by the demer ged company ar e tr ansfer r ed at
values appear ing in its books of account immediately befor e the
demer ger ;
(iv) the r esulting company issues, in consider ation of the demer ger ,
its shar es to the shar eholder s of the demer ged company on a
pr opor tionate basis;
(v) the shar eholder s holding not less than thr ee-four ths in value of
the shar es in the demer ged company (other than shar es alr eady
held ther ein immediately befor e the demer ger , or by a nominee
for , the r esulting company or , its subsidiar y) become shar e-
holder s of the r esulting company or companies by vir tue of the
demer ger ,
other wise than as a r esult of the acquisition of the pr oper ty or
assets of the demer ged company or any under taking ther eof by
the r esulting company;
(vi) the tr ansfer of the under taking is on a going concer n basis;
(vii) the demer ger is in accor dance with the conditions, if any, notified
under sub-section (5) of section 72A by the Centr al Gover nment
in this behalf.
Explan ation 1.For the pur poses of this clause, under taking shall
include any par t of an under taking, or a unit or division of an
under taking or a business activity taken as a whole, but does not
include individual assets or liabilities or any combination ther eof not
constituting a business activity.
1.11 CH. I - PRELIMINARY S. 2(19AA)
75. Wor ds or an Additional Commissioner of Income-taxomitted by the Finance (No. 2) Act,
1998, w.e.f. 1-10-1998. Ear lier the quoted wor ds wer e inser ted by the Finance Act, 1994,
w.e.f. 1-6-1994.
76. Clauses (19AA) and (19AAA) inser ted by the Finance Act, 1999, w.e.f. 1-4-2000.
77. For text of sections 391 to 394 of the Companies Act, 1956, see Appendix.
Explan ation 2.For the pur poses of this clause, the liabilities r efer r ed
to in sub-clause (ii), shall include
(a) the liabilities which ar ise out of the activities or oper ations of the
under taking;
(b) the specific loans or bor r owings (including debentur es) r aised,
incur r ed and utilised solely for the activities or oper ations of the
under taking; and
(c) in cases, other than those r efer r ed to in clause (a) or clause (b), so
much of the amounts of gener al or multipur pose bor r owings, if
any, of the demer ged company as stand in the same pr opor tion
which the value of the assets tr ansfer r ed in a demer ger bear s to
the total value of the assets of such demer ged company immedi-
ately befor e the demer ger .
Explan ation 3.For deter mining the value of the pr oper ty r efer r ed to
in sub-clause (iii), any change in the value of assets consequent to
their r evaluation shall be ignor ed.
Explan ation 4.For the pur poses of this clause, the splitting up or the
r econstr uction of any author ity or a body constituted or established
under a Centr al, State or Pr ovincial Act, or a local author ity or a public
sector company, into separ ate author ities or bodies or local author i-
ties or companies, as the case may be, shall be deemed to be a
demer ger if such split up or r econstr uction fulfils
78
[such conditions
as may be notified in the Official Gazette
79
, by the Central Government];
(19AAA) demer ged company means the company whose under taking is
tr ansfer r ed, pur suant to a demer ger , to a r esulting company;]
(19B) Deputy Commissioner (Appeals) means a per son appointed to be a
Deputy Commissioner of Income-tax (Appeals)
80
[or an Additional
Commissioner of Income-tax (Appeals)] under sub-section (1) of
section 117 ;]
81
[(19C) Deputy Dir ector means a per son appointed to be a Deputy Dir ector
of Income-tax
82
[* * *] under sub-section (1) of section 117 ;]
(20)
83
dir ector , manager and managing agent, in r elation to a com-
pany, have the meanings r espectively assigned to them in the Compa-
nies Act, 1956 (1 of 1956) ;
S. 2(20) I.T. ACT, 1961 1.12
78. Substituted for the conditions specified in sub-clauses (i) to (vii) of this clause, to the
extent applicable by the Finance Act, 2000, w.e.f. 1-4-2000.
79. For notified conditions, see Taxmanns Master Guide to Income-tax Act.
82. Wor ds or an Additional Dir ector of Income-tax omitted by the Finance (No. 2) Act, 1998,
w.e.f. 1-10-1998.
83. Clauses (13), (24) and (25) of section 2 of the Companies Act, 1956, define expr essions
dir ector , manager and managing agent, r espectively. For text of pr ovisions, see
Appendix.
84
[(21) Dir ector Gener al or Dir ector means a per son appointed to be a
Dir ector Gener al of Income-tax or , as the case may be, a Dir ector of
Income-tax, under sub-section (1) of section 117, and includes a
per son appointed under that sub-section to be
85
[an Additional
Dir ector of Income-tax or ] a
86
[Joint] Dir ector of Income-tax or an
Assistant Dir ector
87
[or Deputy Dir ector ] of Income-tax ;]
(22)
88
dividend
89
includes
(a) any distribution
89
by a company of accumulated profits
89
, whether
capitalised or not, if such distr ibution entails the r elease by the
company to its shar eholder s of all or any par t of the assets of the
company ;
(b) any distr ibution
89
to its shar eholder s by a company of debentur es,
debentur e-stock, or deposit cer tificates in any for m, whether
with or without inter est, and any distr ibution to its pr efer ence
shar eholder s of shar es by way of bonus, to the extent to which the
company possesses accumulated pr ofits
89
, whether capitalised or
not ;
(c) any distr ibution
89
made to the shar eholder s of a company on its
liquidation, to the extent to which the distr ibution is attr ibutable
to the accumulated pr ofits of the company immediately befor e its
liquidation, whether capitalised or not ;
(d) any distr ibution
89
to its shar eholder s by a company on the r educ-
tion of its capital, to the extent to which the company possesses
accumulated pr ofits
89
which ar ose after the end of the pr evious
year ending next befor e the 1st day of Apr il, 1933, whether such
accumulated pr ofits have been capitalised or not ;
(e) any payment by a company, not being a company in which the
public ar e substantially inter ested, of any sum (whether as r epr e-
senting a par t of the assets of the company or other wise)
90
[made after the 31st day of May, 1987, by way of advance or loan
to a shar eholder
91
, being a per son who is the beneficial owner of
shar es (not being shar es entitled to a fixed r ate of dividend
whether with or without a r ight to par ticipate in pr ofits) holding
not less than ten per cent of the voting power , or to any concer n
84. Substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
86. Substituted for Deputy by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998.
89. For the meaning of the ter ms dividend, distr ibution and pr ofits, see Taxmanns
90. Substituted for by way of advance or loan to a shar eholder , being a per son who has a
substantial inter est in the company, by the Finance Act, 1987, w.e.f. 1-4-1988.
91. For the meaning of the ter m shar eholder , see Taxmanns Dir ect Taxes Manual, Vol. 3.
in which such shar eholder is a member or a par tner and in which
he has a substantial inter est (her eafter in this clause r efer r ed to
as the said concer n)] or any payment by any such company on
behalf, or for the individual benefit, of any such shar eholder , to
the extent to which the company in either case possesses accumu-
lated pr ofits
92
;
but dividend does not include
(i) a distr ibution made in accor dance with sub-clause (c) or sub-
clause (d) in r espect of any shar e issued for full cash consider -
ation, wher e the holder of the shar e is not entitled in the event of
liquidation to par ticipate in the sur plus assets ;
93
[(ia) a distr ibution made in accor dance with sub-clause (c) or sub-
clause (d) in so far as such distr ibution is attr ibutable to the
capitalised pr ofits of the company r epr esenting bonus shar es
allotted to its equity shar eholder s after the 31st day of Mar ch,
1964,
94
[and befor e the 1st day of Apr il, 1965] ;]
(ii) any advance or loan made to a shar eholder
95
[or the said concer n]
by a company in the or dinar y cour se of its business, wher e the
lending of money is a substantial par t of the business of the
company ;
(iii) any dividend paid by a company which is set off by the company
against the whole or any par t of any sum pr eviously paid by it and
tr eated as a dividend within the meaning of sub-clause (e), to the
extent to which it is so set off;
96
[(iv) any payment made by a company on pur chase of its own shar es
fr om a shar eholder in accor dance with the pr ovisions of section
77A
97
of the Companies Act, 1956 (1 of 1956);
(v) any distr ibution of shar es pur suant to a demer ger by the r esulting
company to the shar eholder s of the demer ged company (whether
or not ther e is a r eduction of capital in the demer ged company).]
Explan ation 1.The expr ession accumulated pr ofits, wher ever it
occur s in this clause, shall not include capital gains ar ising befor e the
1st day of Apr il, 1946, or after the 31st day of Mar ch, 1948, and befor e
the 1st day of Apr il, 1956.
Explan ation 2.The expr ession accumulated pr ofits in sub-clauses
(a), (b), (d) and (e), shall include all pr ofits of the company up to the date
of distr ibution or payment r efer r ed to in those sub-clauses, and in
sub-clause (c) shall include all pr ofits of the company up to the date
92. For the meaning of the ter ms pr ofits and distr ibution, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
97. For text of section 77A of the Companies Act, 1956, see Appendix.
S. 2(22) I.T. ACT, 1961 1.14
of liquidation,
98
[but shall not, wher e the liquidation is consequent on
the compulsor y acquisition of its under taking by the Gover nment or
a cor por ation owned or contr olled by the Gover nment under any law
for the time being in for ce, include any pr ofits of the company pr ior
to thr ee successive pr evious year s immediately pr eceding the pr evi-
ous year in which such acquisition took place].
99
[Explan ation 3.For the pur poses of this clause,
(a) concer n means a Hindu undivided family, or a fir m or an
association of per sons or a body of individuals or a company ;
(b) a per son shall be deemed to have a substantial inter est in a
concer n, other than a company, if he is, at any time dur ing the
pr evious year , beneficially entitled to not less than twenty per
cent of the income of such concer n ;]
1
[(22A) domestic company means an Indian company, or any other com-
pany which, in r espect of its income liable to tax under this Act, has
made the pr escr ibed ar r angements for the declar ation and payment,
within India, of the dividends (including dividends on pr efer ence
shar es) payable out of such income ;]
2
[(22AA) document includes an electr onic r ecor d as defined in clause (t)
3
of
sub-section (1) of section 2 of the Infor mation Technology Act, 2000
(21 of 2000);]
4
[
5
[(22B)] fair mar ket value, in r elation to a capital asset, means
(i) the pr ice that the capital asset would or dinar ily fetch on sale in the
open mar ket on the r elevant date ; and
(ii) wher e the pr ice r efer r ed to in sub-clause (i) is not ascer tainable,
such pr ice as may be deter mined in accor dance with the r ules
made under this Act ;]
(23)
6
fir m, par tner and par tner ship have the meanings r espectively
assigned to them in the Indian Par tner ship Act, 1932 (9 of 1932) ; but
the expr ession par tner shall also include any per son who, being a
minor , has been admitted to the benefits of par tner ship ;
98. Inser ted by the Dir ect Taxes (Amendment) Act, 1964, w.r .e.f. 1-4-1962.
3. For definition of document under section 2(1)(t) of the Infor mation Technology Act,
2000, see Appendix.
5. Renumber ed as clause (22B) by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989.
6. Section 4 of the Indian Par tner ship Act, 1932, defines expr essions fir m, par tner and
par t ner ship as follows :
Par tner ship is the r elation between per sons who have agr eed to shar e the pr ofits of a
business car r ied on by all or any of them acting for all.
Per sons who have enter ed into par tner ship with one another ar e called individually
par tner s and collectively a fir m, and the name under which their business is car r ied on
is called the fir m name.
7
[(23A) for eign company means a company which is not a domestic
company ;]
8
[(23B) fr inge benefits means any fr inge benefits r efer r ed to in section
115WB;]
9
(24) income
10
includes
10
(i) pr ofits and gains

10
;
(ii) dividend ;
11
[(iia) voluntar y contr ibutions r eceived by a tr ust cr eated wholly or
par tly for char itable or r eligious pur poses or by an institution
established wholly or par tly for such pur poses
12
[or by an associa-
tion or institution r efer r ed to in clause (21) or clause (23), or by a
fund or tr ust or institution r efer r ed to in sub-clause (iv) or sub-
clause (v)
13
[or by any univer sity or other educational institution
r efer r ed to in sub-clause (iiiad) or sub-clause (vi) or by any
hospital or other institution r efer r ed to in sub-clause (iiiae) or sub-
clause (via)] of clause (23C) of section 10].
Explan ation .For t he pu r poses of t his su b-clau se, t r u st
includes any other legal obligation ;]
(iii) the value of any per quisite or pr ofit in lieu of salar y taxable under
clauses (2) and (3) of section 17 ;
14
[(iiia) any special allowance or benefit, other than per quisite included
under sub-clause (iii), specifically gr anted to the assessee to meet
expenses wholly, necessar ily and exclusively for the per for -
mance of the duties of an office or employment of pr ofit ;
(iiib) any allowance gr anted to the assessee either to meet his per sonal
expenses at the place wher e the duties of his office or employ-
ment of pr ofit ar e or dinar ily per for med by him or at a place
wher e he or dinar ily r esides or to compensate him for the in-
cr eased cost of living ;]
S. 2(24) I.T. ACT, 1961 1.16
10. For the meaning of the ter ms/ expr ession income, includes and pr ofits and gains, see
Taxmanns Dir ect Taxes Manual, Vol. 3.
12. Substituted for or by a tr ust or institution of national impor tance r efer r ed to in clause
(d) of sub-section (1) of section 80F by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989. Ear lier , the said expr ession was substituted for , not being contr ibutions made
with a specific dir ection that they shall for m par t of the cor pus of the tr ust or institution
by the Dir ect Tax Laws (Amendment) Act, 1987, with effect fr om the same date.
13. Substituted for or by any univer sity or other educational institution r efer r ed to in sub-
clause (vi) or by any hospital or other institution r efer r ed to in sub-clause (via) by the
Finance Act, 2006, w.e.f. 1-4-2007. Ear lier the quoted wor ds wer e inser ted by the Finance
Act, 2006, w.r .e.f. 1-4-1999.
14. Inser ted by the Dir ect Tax Laws (Amendment) Act, 1989, w.r .e.f. 1-4-1962.
(iv) the value of any benefit or per quisite
15
, whether conver tible into
money or not, obtained fr om a company either by a dir ector or by
a per son who has a substantial inter est in the company, or by a
r elative of the dir ector or such per son, and any sum paid by any
such company in r espect of any obligation which, but for such
payment, would have been payable by the dir ector or other
per son afor esaid ;
16
[(iva) the value of any benefit or per quisite
15
, whether conver tible into
money or not, obtained by any r epr esentative assessee men-
tioned in clause (iii) or clause (iv) of sub-section (1) of section 160
or by any per son on whose behalf or for whose benefit any
income is r eceivable by the r epr esentative assessee (such per son
being her eafter in this sub-clause r efer r ed to as the beneficiar y)
and any sum paid by the r epr esentative assessee in r espect of any
obligation which, but for such payment, would have been payable
by the beneficiar y ;]
(v) any sum char geable to income-tax under clauses (ii) and (iii) of
section 28 or section 41 or section 59 ;
17
[(va) any sum char geable to income-tax under clause (iiia) of section
28 ;]
18
[(vb) any sum char geable to income-tax under clause (iiib) of section
28 ;]
19
[(vc) any sum char geable to income-tax under clause (iiic) of section
28 ;]
20
[(vd )] the value of any benefit or per quisite taxable under clause (iv) of
section 28 ;
21
[(ve) any sum char geable to income-tax under clause (v) of section
28 ;]
(vi) any capital gains char geable under section 45 ;
(vii) the pr ofits and gains of any business of insur ance car r ied on by
a mutual insur ance company or by a co-oper ative society, com-
puted in accor dance with section 44 or any sur plus taken to be
such pr ofits and gains by vir tue of pr ovisions contained in the
Fir st Schedule ;
15. For the meaning of the expr ession benefit or per quisite, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
20. Reletter ed by the Finance Act, 1990, w.r .e.f. 1-4-1962. Ear lier the or iginal sub-clause (va)
was inser ted by the Finance Act, 1964, w.e.f. 1-4-1964.
22
[(viia) the pr ofits and gains of any business of banking (including
pr oviding cr edit facilities) car r ied on by a co-oper ative society
with its member s;]
(viii) [Om itted by th e Fin an ce Act, 1988, w.e.f. 1-4-1988. Origin al sub-
clause (viii) was in serted by th e Fin an ce Act, 1964, w.e.f. 1-4-1964;]
23
[(ix) any winnings fr om lotter ies
24
, cr osswor d puzzles, r aces including
hor se r aces, car d games and other games of any sor t or fr om
gambling or betting of any for m or natur e whatsoever .]
25
[Explan ation .For the pur poses of this sub-clause,
(i) lotter y includes winnings fr om pr izes awar ded to any per -
son by dr aw of lots or by chance or in any other manner
whatsoever , under any scheme or ar r angement by whatever
name called ;
(ii) car d game and other game of any sor t includes any game
show, an entertainment programme on television or electronic
mode, in which people compete to win pr izes or any other
similar game ;]
26
[(x) any sum r eceived by t he assessee fr om his employees as
contr ibutions to any pr ovident fund or super annuation fund or
any fund set up under the pr ovisions of the Employees State
Insur ance Act, 1948 (34 of 1948), or any other fund for the welfar e
of such employees ;]
27
[(xi) any sum r eceived under a Keyman insur ance policy including the
sum allocated by way of bonus on such policy.
Explan ation .For the pur poses of this clause*, the expr ession
Keyman insur ance policy shall have the meaning assigned to it
in the Explan ation to clause (10D) of section 10 ;]
28
[(xii) any sum r efer r ed to in
29
[clause (va)] of section 28;]
30
[(xiii) any sum r efer r ed to in clause (v) of sub-section (2) of section 56;]
31
[(xiv) any sum r efer r ed to in clause (vi) of sub-section (2) of section 56;]
(25) Income-tax Officer means a per son appointed to be an Income-tax
Officer under
32
[* * *] section 117 ;
S. 2(25) I.T. ACT, 1961 1.18
24. For the meaning of the ter m lotter ies, see Taxmanns Dir ect Taxes Manual, Vol. 3.
29. Subst it ut ed for clause (vii) by the Finance Act, 2003, w.e.f. 1-4-2003.
32. Wor ds sub-section (1) of omitted by the Dir ect Tax Laws (Amendment) Act, 1989, w.r .e.f.
1-4-1988. Ear lier , that expr ession was inser ted by the Dir ect Tax Laws (Amendment) Act,
1987, with effect fr om the same date.
*Should be r ead as sub-clause.
33
[(25A) India means the ter r itor y of India as r efer r ed to in ar ticle 1 of the
Constitution, its ter r itor ial water s, seabed and subsoil under lying
such water s, continental shelf, exclusive economic zone or any other
mar itime zone as r efer r ed to in the Ter r itor ial Water s, Continental
Shelf, Exclusive Economic Zone and other Mar itime Zones Act, 1976
(80 of 1976), and the air space above its ter r itor y and ter r itor ial
water s;]
(26) Indian company means a company for med and r egister ed under
the Companies Act, 1956 (1 of 1956), and includes
(i) a company for med and r egister ed under any law r elating to
companies for mer ly in for ce in any par t of India (other than the
St at e of Jammu and Kashmir
34
[and t he Union t er r it or ies
specified in sub-clause (iii) of this clause]) ;
35
[(ia) a cor por at ion est ablished by or under a Cent r al, St at e or
Pr ovincial Act ;
(ib) any institution, association or body which is declar ed by the
Boar d to be a company under clause (17) ;]
(ii) in the case of the State of Jammu and Kashmir , a company
for med and r egister ed under any law for the time being in for ce
in that State ;
36
[(iii) in the case of any of the Union ter r itor ies of Dadr a and Nagar
Haveli, Goa, Daman and Diu, and Pondicher r y, a company
for med and r egister ed under any law for the time being in for ce
in that Union ter r itor y :]
Provided that the
37
[r egister ed or , as the case may be, pr incipal office
of the company, cor por ation, institution, association or body] in all
cases is in India ;
38
[(26A) infr astr uctur e capital company means such company which makes
investments by way of acquir ing shar es or pr oviding long-ter m
finance to any enter pr ise or under taking wholly engaged in the
1.19 CH. I - PRELIMINARY S. 2(26A)
33. Substituted by the Finance Act, 2007, w.r .e.f. 25-8-1976. Pr ior to its substitution, clause
(25A), as inser ted by the Taxation Laws (Extension to Union Ter r itor ies) Regulation, 1963,
(25A) India shall be deemed to include the Union ter r itor ies of Dadr a and Nagar Haveli,
Goa, Daman and Diu, and Pondicher r y,
(a) as r espects any per iod, for the pur poses of section 6 ; and
(b) as r espects any per iod included in the pr evious year , for the pur poses of
making any assessment for the assessment year commencing on the 1st day
of Apr il, 1963, or for any subsequent year ;
34. Inser ted by the Taxation Laws (Extension to Union Ter r itor ies) Regulation, 1963, w.e.f.
1-4-1963.
1-4-1963.
37. Substituted for r egister ed office of the company by the Finance (No. 2) Act, 1971, w.e.f.
1-4-1971.
38. Clauses (26A) and (26B) inser ted by the Finance Act, 2006, w.e.f. 1-4-2006.
Now State of Goa.
business r efer r ed to in sub-section (4) of section 80-IA or sub-section
(1) of section 80-IAB or an under taking developing and building a
housing pr oject r efer r ed to in sub-section (10) of section 80-IB or a
pr oject for constr ucting a hotel of not less than thr ee-star categor y as
classified by the Centr al Gover nment or a pr oject for constr ucting a
hospital with at least one hundr ed beds for patients;
(26B) infr astr uctur e capital fund means such fund oper ating under a tr ust
deed r egister ed under the pr ovisions of the Registr ation Act, 1908 (16
of 1908) established to r aise monies by the tr ustees for investment by
way of acquir ing shar es or pr oviding long-ter m finance to any
enter pr ise or under taking wholly engaged in the business r efer r ed to
in sub-section (4) of section 80-IA or sub-section (1) of section 80-IAB
or an under taking developing and building a housing pr oject r efer r ed
to in sub-section (10) of section 80-IB or a pr oject for constr ucting a
hotel of not less than thr ee-star categor y as classified by the Centr al
Gover nment or a pr oject for constr ucting a hospital with at least one
hundr ed beds for patients;]
(27)
39
[* * *]
(28) Inspect or of Income-t ax means a per son appoint ed t o be an
Inspector of Income-tax under sub-section
40
[(1)] of section 117 ;
41
[
42
(28A) inter est means inter est payable in any manner in r espect of any
moneys bor r owed or debt incur r ed (including a deposit, claim or
other similar r ight or obligation) and includes any ser vice fee or other
char ge in r espect of the moneys bor r owed or debt incur r ed or in
r espect of any cr edit facility which has not been utilised ;]
43
[(28B) inter est on secur ities means,
(i) inter est on any secur ity of the Centr al Gover nment or a State
Gover nment ;
(ii) inter est on debentur es or other secur ities for money issued by or
on behalf of a local author ity or a company or a cor por ation
established by a Centr al, State or Pr ovincial Act ;]
44
[(28BB) insur er means an insur er , being an Indian insur ance company, as
defined under clause (7A) of section 2
45
of the Insur ance Act, 1938 (4
of 1938), which has been gr anted a cer tificate of r egistr ation under
section 3 of that Act;]
46
[(28C) Joint Commissioner means a per son appointed to be a Joint Com-
missioner of Income-tax or an Additional Commissioner of Income-
tax under sub-section (1) of section 117;
S. 2(28C) I.T. ACT, 1961 1.20
39. Omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
40. Substituted for (2), ibid.
42. See also Letter F. No. 164/ 18/ 77-IT(A-I), dated 13-7-1978. For details, see Taxmanns
Master Guide to Income-tax Act.
45. For text of section 2(7A) of the Insur ance Act, see Appendix.
(28D) Joint Dir ector means a per son appointed to be a Joint Dir ector of
Income-tax or an Additional Dir ector of Income-tax under sub-
section (1) of section 117;]
(29) legal r epr esentative has the meaning assigned to it in clause (11) of
section 2 of the Code of Civil Pr ocedur e, 1908 (5 of 1908)
47
;
48
[(29A) long-ter m capital asset means a capital asset which is not a shor t-
ter m capital asset ;
(29B) long-ter m capital gain means capital gain ar ising fr om the tr ansfer
of a long-ter m capital asset ;]
49
[(29C) maximum mar ginal r ate means the r ate of income-tax (including
sur char ge on income-tax, if any) applicable in r elation to the highest
slab of income in the case of an individual
50
[, association of per sons
or , as the case may be, body of individuals] as specified in the Finance
Act of the r elevant year ;]
51
[(29D) National Tax Tr ibunal means the National Tax Tr ibunal established
under section 3 of the National Tax Tr ibunal Act, 2005;]
(30) non-r esident means a per son who is not a r esident
52
[, and for the
pur poses of sections 92, 93
53
[* * *] and 168, includes a per son who is
not or dinar ily r esident within the meaning of clause (6) of section 6] ;
54
(31) per son includes
(i) an individual
55
,
(ii) a Hindu undivided family
55
,
(iii) a company,
(iv) a fir m
56
,
(v) an association of per sons
56
or a body of individuals
56
, whether
incor por ated or not,
(vi) a local author ity, and
(vii) ever y ar tificial jur idical per son, not falling within any of the
pr eceding sub-clauses.
47. Clause (11) of section 2 of the Code of Civil Pr ocedur e defines legal r epr esentative as
follows :
(11) legal r epr esentative means a per son who in law r epr esents the estate of a deceased
per son, and includes any per son who inter meddles with the estate of the deceased
and wher e a par ty sues or is sued in a r epr esentative char acter the per son on whom
the estate devolves on the death of the par ty so suing or sued ;
51. Inser ted by the National Tax Tr ibunal Act, 2005, with effect fr om a date yet to be notified.
52. Inser ted by the Finance Act, 1999, w.e.f. 1-4-1999. Ear lier these wor ds wer e omitted by the
Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
53. , 113 omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
55. For the meaning of the ter m/ expr ession individual and Hindu undivided family, see
56. For the meaning of the ter m/ expr essions fir m, association of per sons and body of
individuals, see Taxmanns Dir ect Taxes Manual, Vol. 3.
57
[Explan ation .For the pur poses of this clause, an association of
per sons or a body of individuals or a local author ity or an ar tificial
jur idical per son shall be deemed to be a per son, whether or not such
per son or body or author ity or jur idical per son was for med or esta-
blished or incor por ated with the object of der iving income, pr ofits or
gains;]
(32) per son who has a substantial inter est in the company, in r elation to
a company, means a per son who is the beneficial owner of shar es, not
being shar es entitled to a fixed r ate of dividend whether with or
without a r ight to par ticipate in pr ofits, car r ying not less than twenty
per cent of the voting power ;
(33) pr escr ibed means pr escr ibed by r ules made under this Act ;
(34) pr evious year means the pr evious year as defined in section 3 ;
58
(35) pr incipal officer , used with r efer ence to a local author ity or a
company or any other public body or any association of per sons or
any body of individuals, means
(a) the secr etar y, tr easur er , manager or agent of the author ity,
company, association or body, or
(b) any per son connected with the management or administr ation of
the local author ity, company, association or body upon whom the
59
[Assessing] Officer has ser ved a notice of his intention of tr eat-
ing him as the pr incipal officer ther eof ;
60
(36) pr ofession includes vocation
61
;
62
[(36A) public sector company means any cor por ation established by or
under any Centr al, State or Pr ovincial Act or a Gover nment com-
pany
63
as defined in sect ion 617 of t he Companies Act , 1956
(1 of 1956) ;]
(37)
64
public ser vant has the same meaning as in section 21 of the Indian
Penal Code (45 of 1860) ;
65
[(37A) r ate or r ates in for ce or r ates in for ce, in r elation to an assessment
year or financial year , means
S. 2(37A) I.T. ACT, 1961 1.22
59. Substituted for Income-tax by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1988.
61. For the meaning of the ter m vocation, see Taxmanns Dir ect Taxes Manual, Vol. 3.
63. Section 617 of the Companies Act, 1956, defines Gover nment company as follows :
617. Defin ition of Govern m en t com pan y.For the pur poses of this Act, Gover nment
company means any company in which not less than fifty-one per cent of the paid-up shar e
capital is held by the Centr al Gover nment, or by any State Gover nment or Gover nments,
or par tly by the Centr al Gover nment and par tly by one or mor e State Gover nments and
includes a company which is a subsidiar y of a Gover nment company as thus defined.
64. Section 21 of the Indian Penal Code defines public ser vant. For text of section 21, see
Appendix.
(i) for the pur poses of calculating income-tax under the fir st pr oviso
to sub-section (5) of section 132, or computing the income-tax
char geable under sub-section (4) of section 172 or sub-section (2)
of section 174 or section 175 or sub-section (2) of section 176 or
deducting income-tax under section 192 fr om income char ge-
able under the head Salar ies
66
[* * *] or
67
[computation of the
advance tax payable under Chapter XVII-C in a case not falling
under
68
[section 115A or section 115B
69
[or section 115BB
70
[or
section 115BBB] or section 115E] or ] section 164
69
[or section
164A
71
[* * *]]
72
[or section 167B], the r ate or r ates of income-tax
specified in this behalf in the Finance Act of the r elevant year , and
for the pur poses of computation of the advance tax payable
under Chapter XVII-C
73
[in a case falling under section 115A or
section 115B
74
[or section 115BB
75
[or section 115BBB] or section
115E] or section 164
74
[or section 164A
76
[* * *]]
77
[or section 167B],
the r ate or r ates specified in section 115A or
78
[section 115B or
section 115BB
79
[or section 115BBB] or section 115E or section
164 or section 164A
76
[* * *]
77
[or section 167B], as the case may be,]
or the r ate or r ates of income-tax specified in this behalf in the
Finance Act of the r elevant year , whichever is applicable ;]
(ii) for the pur poses of deduction of tax under sections 193, 194, 194A
80
[, 194B]
81
[, 194BB]
82
[and 194D], the r ate or r ates of income-tax
specified in this behalf in the Finance Act of the r elevant year ;]
66. or sub-section (9) of section 80E fr om any payment r efer r ed to ther ein omitted by the
Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Or iginally, the said expr ession
67. Substituted for computation of the advance tax payable under Chapter XVII-C, the r ate
or r ates of income-tax specified in this behalf in the Finance Act of the r elevant year by
the Finance Act, 1970, w.e.f. 1-4-1971.
71. or section 167A omitted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
Ear lier this expr ession was inser ted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1988.
73. Substituted for in a case falling under section 164, the r ate specified in that section by
76. or section 167A omitted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
Ear lier this expr ession was inser ted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1988.
78. Substituted for section 115B or , as the case may be, section 164 by the Dir ect Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
82. Substituted for , 194D and 195 by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
83
[(iii) for the pur poses of deduction of tax under section 195, the r ate
or r ates of income-tax specified in this behalf in the Finance Act
of the r elevant year or the r ate or r ates of income-tax specified in
84
[an agr eement enter ed into by the Centr al Gover nment under
section 90, or an agr eement notified by the Centr al Gover nment
under section 90A, whichever is applicable by vir tue of the
pr ovisions of section 90, or section 90A, as the case may be];
85
(38) r ecognised pr ovident fund means a pr ovident fund which has been
and continues to be r ecognised by the
86
[Chief Commissioner or
Commissioner ] in accor dance with the r ules contained in Par t A of the
Four th Schedule, and includes a pr ovident fund established under a
scheme fr amed under the Employees Pr ovident Funds Act, 1952 (19
of 1952) ;
(39)
87
[Om itted by th e Fin an ce Act, 1992, w.e.f. 1-4-1993;]
(40) r egular assessment means the assessment made under
88
[sub-
section (3) of ] section 143 or section 144 ;
(41) r elative, in r elation to an individual, means the husband, wife,
br other or sister or any lineal ascendant or descendant of that
individual ;
89
[(41A) r esulting company means one or mor e companies (including a
wholly owned subsidiar y ther eof) to which the under taking of the
demer ged company is tr ansfer r ed in a demer ger and, the r esulting
company in consider ation of such tr ansfer of under taking, issues
shar es to the shar eholder s of the demer ged company and includes
any author ity or body or local author ity or public sector company or
a company established, constituted or for med as a r esult of demer ger ;]
(42) r esident means a per son who is r esident in India within the meaning
of section 6 ;
S. 2(42) I.T. ACT, 1961 1.24
(iii) was inser ted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
84. Substituted for an agr eement enter ed into by the Centr al Gover nment under section 90,
whichever is applicable by vir tue of the pr ovisions of section 90 by the Finance Act, 2006,
w.e.f. 1-6-2006.
Income-tax Act.
86. Substituted for Commissioner by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1988.
87. Pr ior t o omission, clause (39) was substituted by the Dir ect Tax Laws (Second Amend-
ment) Act, 1989, w.e.f. 1-4-1989. Ear lier clause (39) was omitted by the Dir ect Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1989 and was later r eintr oduced by the Dir ect Tax Laws
90
[
91
(42A)
92
[shor t-ter m capital asset means a capital asset held by an assessee
for not mor e than
93
[thir ty-six] months immediately pr eceding the
date of its tr ansfer :]
94
[Provided that in the case of a shar e held in a company
95
[or any
other secur ity listed in a r ecognised stock exchange in India or a unit
of the Unit Tr ust of India established under the Unit Tr ust of India Act,
1963 (52 of 1963) or a unit of a Mutual Fund specified under clause
(23D) of section 10]
96
[or a zer o coupon bond], the pr ovisions of this
clause shall have effect as if for the wor ds thir ty-six months, the
wor ds twelve months had been substituted.]
97
[Explan ation 1].(i) In deter mining the per iod for which any capital
asset is held by the assessee
(a) in the case of a shar e held in a company in liquidation, ther e shall
be excluded the per iod subsequent to the date on which the
company goes into liquidation ;
(b) in the case of a capital asset which becomes the pr oper ty of the
assessee in the cir cumstances mentioned in
98
[sub-section (1)] of
section 49, ther e shall be included the per iod for which the asset
was held by the pr evious owner r efer r ed to in the said section ;
99
[(c) in the case of a capital asset being a shar e or shar es in an Indian
company, which becomes t he pr oper t y of t he assessee in
consider ation of a tr ansfer r efer r ed to in clause (vii) of section 47,
ther e shall be included the per iod for which the shar e or shar es
in the amalgamating company wer e held by the assessee ;]
1
[(d) in the case of a capital asset, being a shar e or any other secur ity
(her eafter in this clause r efer r ed to as the financial asset) sub-
scr ibed to by the assessee on the basis of his r ight to subscr ibe to
such financial asset or subscr ibed to by the per son in whose
favour the assessee has r enounced his r ight to subscr ibe to such
financial asset, the per iod shall be r eckoned fr om the date of
allotment of such financial asset ;
(e) in the case of a capital asset, being the r ight to subscr ibe to any
financial asset, which is r enounced in favour of any other per son,
the per iod shall be r eckoned fr om the date of the offer of such
91. See also Cir cular No. 415, dated 14-3-1985 and Cir cular No. 704, dated 28-4-1995. For
details and r elevant case laws, see Taxmanns Master Guide to Income-tax Act.
92. Substituted for the por tion beginning with shor t-ter m capital asset and ending with
pr eceding the date of its tr ansfer ; by the Finance Act, 1973, w.e.f. 1-4-1974. Ear lier clause
(42A) was fir st amended by the Finance Act, 1966, w.e.f. 1-4-1966 and later by the Finance
Act, 1968, w.e.f. 1-4-1969.
93. Substituted for sixty by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
97. Exist ing Explan ation r enumber ed as Explan ation 1 by the Finance Act, 1994, w.e.f.
1-4-1995.
98. Subst it ut ed for clauses (i) t o (iii) by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
r ight by the company or institution, as the case may be, making
such offer ;]
2
[(f) in the case of a capital asset, being a financial asset, allotted
without any payment and on the basis of holding of any other
financial asset, the per iod shall be r eckoned fr om the date of the
allotment of such financial asset ;]
3
[(g) in the case of a capital asset, being a shar e or shar es in an Indian
company, which becomes the pr oper ty of the assessee in consi-
der ation of a demer ger , ther e shall be included the per iod for
which the shar e or shar es held in the demer ged company wer e
held by the assessee ;]
4
[(h ) in the case of a capital asset, being tr ading or clear ing r ights of a
r ecognised stock exchange in India acquir ed by a per son pur su-
ant to demutualisation or cor por atisation of the r ecognised stock
exchange in India as r efer r ed to in clause (xiii) of section 47, ther e
shall be included the per iod for which the per son was a member
of the r ecognised stock exchange in India immediately pr ior to
such demutualisation or cor por atisation;
(ha) in the case of a capital asset, being equity shar e or shar es in a
company allotted pur suant to demutualisation or cor por atisation
of a r ecognised stock exchange in India as r efer r ed to in clause
(xiii) of section 47, ther e shall be included the per iod for which the
per son was a member of the r ecognised stock exchange in India
immediately pr ior to such demutualisation or cor por atisation;]
5
[(hb) in th e case of a capital asset, bein g an y specified security or sweat
equity sh ares allotted or tran sferred, directly or in directly, by th e
em ployer free of cost or at con cession al rate to h is em ployees
(in cludin g form er em ployee or em ployees), th e period sh all be
reck on ed from th e date of allotm en t or tran sfer of such specified
security or sweat equity sh ares;]
(ii) In r espect of capit al asset s ot her t han t hose ment ioned in
clause (i), the per iod for which any capital asset is held by the assessee
shall be deter mined subject to any r ules which the Boar d may make
in this behalf.]
6
[Explan ation 2.For the pur poses of this clause, the expr ession
secur ity
7
shall have the meaning assigned to it in clause (h ) of section
2 of the Secur ities Contr acts (Regulation) Act, 1956 (42 of 1956).]
S. 2(42A) I.T. ACT, 1961 1.26
7. Clause (h ) of sect ion 2 of t he Secur it ies Cont r act s (Regulat ion) Act , 1956, defines
secur it ies as follows :
(h ) secur ities include
(i) shar es, scr ips, stocks, bonds, debentur es, debentur e stock or other mar ket-
able secur ities of a like natur e in or of any incor por ated company or other
body cor por ate;
(Con td. on p. 1.27)
8
[Explanation 3.For th e purposes of th is clause, th e expression s
specified securityan d sweat equity sh aressh all h ave th e m ean in gs
respectively assign ed to th em in th e Explanation to clause (d) of sub-
section (1) of section 115WB;]
9
[(42B) shor t-ter m capital gain means capital gain ar ising fr om the tr ansfer
of a shor t-ter m capital asset ;]
10
[(42C) slump sale means the tr ansfer of one or mor e under takings as a
r esult of the sale for a lump sum consider ation without values being
assigned to the individual assets and liabilities in such sales.
Explan ation 1.For the pur poses of this clause, under taking shall
have the meaning assigned to it in Explan ation 1 to clause (19AA).
Explan ation 2.For the r emoval of doubts, it is her eby declar ed that
the deter mination of the value of an asset or liability for the sole
pur pose of payment of stamp duty, r egistr ation fees or other similar
taxes or fees shall not be r egar ded as assignment of values to
individual assets or liabilities ; ]
11
[(43) tax in r elation to the assessment year commencing on the 1st day of
Apr il, 1965, and any subsequent assessment year means income-tax
char geable under the pr ovisions of this Act, and in r elation to any
other assessment year income-tax and super -tax char geable under
the pr ovisions of this Act pr ior to the afor esaid date
12
[and in r elation
to the assessment year commencing on the 1st day of Apr il, 2006, and
any subsequent assessment year includes the fr inge benefit tax
payable under section 115WA] ;]
13
[(43A) tax cr edit cer tificate means a tax cr edit cer tificate gr anted to any
per son in accor dance with the pr ovisions of Chapter XXII-B
14
and any
scheme made ther eunder ;]
(Con td. f rom p. 1.26)
(ia) der ivat ive;
(ib) units or any other instr ument issued by any collective investment scheme to
the investor s in such schemes;
(ic) secur ity r eceipt as defined in clause (zg) of section 2 of the Secur itisation and
Reconstr uction of Financial Assets and Enfor cement of Secur ity Inter est
Act, 2002;
(id) units or any other such instr ument issued to the investor s under any mutual
fund scheme;
(ii) Gover nment secur ities;
(iia) such other instr uments as may be declar ed by the Centr al Gover nment to be
secur ities; and
(iii) r ights or inter est in secur ities;
10. Inser ted by the Finance Act, 1999, w.e.f. 1-4-2000. Ear lier clause (42C) was inser ted by the
Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990 and later on omitted by
14. Chapter XXII-B was omitted by the Finance Act, 1990, w.e.f. 1-4-1990.
(43B)
15
[* * *]
16
[(44) Tax Recover y Officer means any Income-tax Officer who may be
author ised by the Chief Commissioner or Commissioner , by gener al
or special or der in wr iting, to exer cise the power s of a Tax Recover y
Officer
17
[and also to exer cise or per for m such power s and functions
which ar e confer r ed on, or assigned to, an Assessing Officer under this
Act and which may be pr escr ibed];]
(45) total income means the total amount of income r efer r ed to in
section 5, computed in the manner laid down in this Act ;
(46)
18
[* * *]
19
(47)
20
[tr ansfer
21
, in r elation to a capital asset, includes,
(i) the sale
21
, exchange
21
or r elinquishment
21
of the asset ; or
(ii) the extinguishment of any r ights ther ein
21
; or
(iii) the compulsor y acquisition ther eof under any law ; or
(iv) in a case wher e the asset is conver ted by the owner ther eof into,
or is tr eated by him as, stock-in-tr ade of a business car r ied on by
him, such conver sion or tr eatment ;]
22
[or ]
23
[(iva) the matur ity or r edemption of a zer o coupon bond; or ]
24
[(v) any tr ansaction involving the allowing of the possession of any
immovable pr oper ty to be taken or r etained in par t per for mance
of a contr act of the natur e r efer r ed to in section 53A
25
of the
Tr ansfer of Pr oper ty Act, 1882 (4 of 1882) ; or
(vi) any tr ansaction (whether by way of becoming a member of, or
acquir ing shar es in, a co-oper ative society, company or other
association of per sons or by way of any agr eement or any
ar r angement or in any other manner whatsoever ) which has the
effect of tr ansfer r ing, or enabling the enjoyment of, any immov-
able pr oper ty.
Explan at ion .For t he pu r poses of su b-cla u ses (v ) a nd (vi),
immovable pr oper ty shall have the same meaning as in clause (d) of
section 269UA;]
S. 2(47) I.T. ACT, 1961 1.28
15. Omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Or iginal clause
(43B) was inser ted by the Finance (No. 2) Act, 1971, w.e.f. 1-1-1972.
16. Substituted by the Dir ect Tax Laws (Amendment) Act, 1987 [as amended by the Dir ect Tax
Laws (Amendment) Act, 1989], w.r .e.f. 1-4-1988. Pr ior to substitution clause (44) was
substituted by the Finance Act, 1963, w.r .e.f. 1-4-1962.
18. Omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
19. For r elevant case laws, see Taxmanns Master Guide to Income-tax Act. For Letter F. No.
34/ 11/ 65-IT(A-I), dated 15-1-1966, Cir cular No. 751, dated 10-2-1997 and Cir cular No.
2/ 2008, dated 22-2-2008, see Taxmanns Master Guide to Income-tax Act.
20. Substituted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
21. For the meaning of the ter ms/ expr ession tr ansfer , sale, exchange, r elinquishment
and extinguishment of any r ights ther ein, see Taxmanns Dir ect Taxes Manual, Vol. 3.
25. For text of section 53A of the Tr ansfer of Pr oper ty Act, 1882, see Appendix.
26
[(48) zer o coupon bond means a bond
(a) issued by any infr astr uctur e capital company or infr astr uctur e
capital fund or public sector company on or after the 1st day of
June, 2005;
(b) in r espect of which no payment and benefit is r eceived or
r eceivable befor e matur ity or r edemption fr om infr astr uctur e
capital company or infr astr uctur e capital fund or public sector
company; and
(c) which the Centr al Gover nment may, by notification
27
in the
Official Gazette, specify in this behalf.
28
[***]]
29
[Previous year defined.
3. For the pur poses of this Act, pr evious year means the financial year imme-
diately pr eceding the assessment year :
Provided that, in the case of a business or pr ofession newly set up, or a sour ce
of income newly coming into existence, in the said financial year , the pr evious
year shall be the per iod beginning with the date of setting up of the business or
pr ofession or , as the case may be, the date on which the sour ce of income newly
comes into existence and ending with the said financial year .]
CHAPTER I I
BASIS OF CHARGE
Charge of income-tax.
30
4.
31
(1) Wher e any Centr al Act enacts that income-tax
32
shall be char ged for
any assessment year at any r ate or r ates, income-tax at that r ate or those
r ates shall be char ged for that year in accor dance with, and
33
[subject to the
1.29 CH. II - BASIS OF CHARGE S. 4
26. Inser ted by the Finance Act, 2005, w.e.f. 1-4-2006. Ear lier clause (48) was omitted by the
Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. It was later r e-intr oduced by the
Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989 and again omitted by the Finance
Act, 1992, w.e.f. 1-4-1993.
27. For specified bonds, see Taxmanns Master Guide to Income-tax Act. See also r ules 8B &
8C and For m No. 5B.
28. Explan ation omitted by the Finance Act, 2006, w.e.f. 1-4-2006. Pr ior to its omission,
Explan ation r ead as under :
Explan ation .For the pur poses of this clause, the expr essions infr astr uctur e capital
company and infr astr uctur e capital fund shall have the same meanings r espectively
assigned to them in clauses (a) and (b) of Explan ation 1 t o clause (23G) of section 10.
29. Substituted by the Finance Act, 1999, w.e.f. 1-4-2000. Pr ior to its substitution, section 3 was
amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the Dir ect
Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
30. See also Cir cular No. 142, dated 1-8-1974, Cir cular No. 447, dated 22-1-1986, Cir cular
No. 573, dated 21-8-1990, Cir cular No. 776, dated 8-6-1999 and Instr uction No. 747 [F. No.
288/ 29/ 74-IT(A-II)], (r elevant ext r act s), dat ed 30-8-1974. For det ails, see Taxmanns
32. For the meaning of the ter m income-tax, see Taxmanns Dir ect Taxes Manual, Vol. 3.
33. Substituted for subject to the pr ovisions of this Act by the Dir ect Tax Laws (Amendment)
Act, 1987, w.e.f. 1-4-1989.
pr ovisions (including pr ovisions for the levy of additional income-tax) of, this
Act]
34
in r espect of the total income
34
of the pr evious year
35
[* * *] of ever y per son :
Provided that wher e by vir tue of any pr ovision of this Act income-tax is to be
char ged in r espect of the income of a per iod other than the pr evious year ,
income-tax shall be char ged accor dingly.
(2) In r espect of income char geable under sub-section (1), income-tax shall be
deducted at the sour ce or paid in advance, wher e it is so deductible or payable
under any pr ovision of this Act.
Scope of total income.
36
5.
37
(1) Subject to
38
the pr ovisions of this Act, the total income
38
of any pr evious
year of a per son who is a r esident includes all income fr om whatever sour ce
der ived which
(a) is r eceived
39
or is deemed to be r eceived
39
in India in such year by or
on behalf of such per son ; or
(b) accr ues
39
or ar ises
39
or is deemed
39
to accr ue or ar ise to him in India
dur ing such year ; or
(c) accr ues
39
or ar ises
39
to him outside India dur ing such year :
Provided that, in the case of a per son not or dinar ily r esident in India
within the meaning of sub-section (6)* of section 6, the income which
accr ues or ar ises to him outside India shall not be so included unless
it is der ived fr om a business contr olled in or a pr ofession set up in
India.
(2) Subject to
38
the pr ovisions of this Act, the total income
38
of any pr evious year
of a per son who is a non-r esident includes all income fr om whatever sour ce
der ived which
(a) is r eceived
39
or is deemed to be r eceived
39
in India in such year by or
on behalf of such per son ; or
(b) accr ues
39
or ar ises
39
or is deemed to accr ue or ar ise to him in India
dur ing such year .
Explan ation 1.Income accr uing or ar ising outside India shall not be deemed to
be r eceived
39
in India within the meaning of this section by r eason only of the fact
that it is taken into account in a balance sheet pr epar ed in India.
S. 5 I.T. ACT, 1961 1.30
34. For the meaning of the expr essions in accor dance with, and subject to the pr ovisions of,
this Act and total income, see Taxmanns Dir ect Taxes Manual, Vol. 3.
35. or pr evious year s, as the case may be, omitted by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989.
Income-tax Act.
38. For the meaning of the ter ms/ expr essions subject to and total income, see Taxmanns
39. For the meaning of the ter ms/ expr essions is r eceived, deemed to be r eceived, accr ues
or ar ises, accr ued or ar isen and deemed to have accr ued, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
*Should be r ead as clause (6).
Explan ation 2.For the r emoval of doubts, it is her eby declar ed that income
which has been included in the total income of a per son on the basis that it has
accr ued
40
or ar isen
40
or is deemed to have accr ued
40
or ar isen
40
to him shall not
again be so included on the basis that it is r eceived or deemed to be r eceived by
him in India.
41
[Apportionment of income between spouses governed by Portuguese Civil Code.
5A. (1) Wher e the husband and wife ar e gover ned by the system of commu-
nit y of pr oper t y (known u nder t he Por t u gu ese Civil Code of 1860
as COMMUNIAO DOS BENS) in for ce in the State of Goa and in the Union
ter r itor ies of Dadr a and Nagar Haveli and Daman and Diu, the income of
the husband and of the wife under any head of income shall not be assessed as
that of such community of pr oper ty (whether tr eated as an association of
per sons or a body of individuals), but such income of the husband and of the wife
under each head of income (other than under the head Salar ies) shall be
appor tioned equally between the husband and the wife and the income so
appor tioned shall be included separ ately in the total income of the husband and
of the wife r espectively, and the r emaining pr ovisions of this Act shall apply
accor dingly.
(2) Wher e the husband or , as the case may be, the wife gover ned by the afor esaid
system of community of pr oper ty has any income under the head Salar ies, such
income shall be included in the total income of the spouse who has actually
ear ned it.]
Residence in India.
42
6. For the pur poses of this Act,
(1) An individual is said to be r esident in India in any pr evious year , if he
(a) is in India in that year for a per iod or per iods amounting in all to
one hundr ed and eighty-two days or mor e ; or
(b)
43
[* * *]
(c) having within the four year s pr eceding that year been in India for
a per iod or per iods amounting in all to thr ee hundr ed and sixty-
five days or mor e, is in India for a per iod or per iods amounting
in all to sixty days or mor e in that year .
44
[Explan ation .In the case of an individual,
40. For the meaning of the ter ms/ expr essions is r eceived, deemed to be r eceived, accr ues
or ar ises, accr ued or ar isen and deemed to have accr ued or ar isen, see Taxmanns
44. Substituted by the Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990.
Or iginal Explan ation was inser ted by the Finance Act, 1978, w.e.f. 1-4-1979 and later
amended by the Finance Act, 1982, w.e.f. 1-4-1983.
(a) being a citizen of India, who leaves India in any pr evious year
45
[as a member of the cr ew of an
46
Indian ship as defined in
clause (18) of section 3 of the Mer chant Shipping Act, 1958 (44
of 1958), or ] for the pur poses of employment outside India, the
pr ovisions of sub-clause (c) shall apply in r elation to that year as
if for the wor ds sixty days, occur r ing ther ein, the wor ds one
hundr ed and eighty-two days had been substituted ;
(b) being a citizen of India, or a per son of Indian or igin within the
meaning of Explan ation to clause (e) of section 115C, who, being
outside India, comes on a visit to India in any pr evious year , the
pr ovisions of sub-clause (c) shall apply in r elation to that year as
if for the wor ds sixty days, occur r ing ther ein, the wor ds one
hundr ed and
47
[eighty-two] days had been substituted.]
(2) A Hindu undivided family, fir m or other association of per sons is said
to be r esident in India in any pr evious year in ever y case except wher e
dur ing that year the contr ol and management
48
of its affair s
48
is
situated wholly
48
outside India.
(3) A company is said to be r esident in India in any pr evious year , if
(i) it is an Indian company ; or
(ii) dur ing that year , the contr ol and management
48
of its affair s
48
is
situated wholly
48
in India.
(4) Ever y other per son is said to be r esident in India in any pr evious year
in ever y case, except wher e dur ing that year the contr ol and manage-
ment of his affair s is situated wholly outside India.
(5) If a per son is r esident in India in a pr evious year r elevant to
an assessment year in r espect of any sou r ce of income, he
shall be deemed to be r esident in India in the pr evious year r elevant
to the assessment year in r espect of each of his other sour ces of
income.
49
[(6) A per son is said to be not or dinar ily r esident in India in any pr evious
year if such per son is
S. 6 I.T. ACT, 1961 1.32
46. Clause (18) of section 3 of the Mer chant Shipping Act, 1958, defines Indian ship as
follows:
(18) Indian ship means a ship r egister ed as such under this Act and includes any ship
r egister ed at any por t in India at the commencement of this Act which is r ecognised
as an Indian ship under the pr oviso to sub-section (2) of section 22;
47. Substituted for fifty by the Finance Act, 1994, w.e.f. 1-4-1995.
48. For the meaning of the ter ms/ expr essions contr ol and management, affair s and
wholly, see Taxmanns Dir ect Taxes Manual, Vol. 3.
49. Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Pr ior to its substitution, clause (6)
r ead as under :
(6) A per son is said to be not or dinar ily r esident in India in any pr evious year if such
per son is
(a) an individual who has been a non-r esident in India in nine out of
the ten pr evious year s pr eceding that year , or has dur ing the
seven pr evious year s pr eceding that year been in India for a
per iod of, or per iods amounting in all to, seven hundr ed and
twenty-nine days or less; or
(b) a Hindu undivided family whose manager has been a non-
r esident in India in nine out of the ten pr evious year s pr eceding
that year , or has dur ing the seven pr evious year s pr eceding that
year been in India for a per iod of, or per iods amounting in all to,
seven hundr ed and twenty-nine days or less.]
Income deemed to be received.
7. The following incomes shall be deemed to be r eceived in the pr evious year :
(i) the annual accr etion in the pr evious year to the balance at the cr edit
of an employee par ticipating in a r ecognised pr ovident fund, to the
extent pr ovided in r ule 6 of Par t A of the Four th Schedule ;
(ii) the tr ansfer r ed balance in a r ecognised pr ovident fund, to the extent
pr ovided in sub-r ule (4) of r ule 11 of Par t A of the Four th Schedule ;
50
[(iii) the contr ibution made, by the Centr al Gover nment
51
[or any other
employer ] in the pr evious year , to the account of an employee under
a pension scheme r efer r ed to in section 80CCD.]
Dividend income.
8.
52
[For the pur poses of inclusion in the total income of an assessee,
(a) any dividend] declar ed by a company or distr ibuted or paid by it
within the meaning of sub-clause (a) or sub-clause (b) or sub-clause
(c) or sub-clause (d) or sub-clause (e) of clause (22) of section 2 shall
be deemed to be the income of the pr evious year in which it is so
declar ed, distr ibuted or paid, as the case may be ;
53
[(b) any inter im dividend shall be deemed to be the income of the pr evious
year in which the amount of such dividend is unconditionally made
available by the company to the member who is entitled to it.]
(a) an individual who has not been r esident in India in nine out of the ten
pr evious year s pr eceding that year , or has not dur ing the seven pr evious
year s pr eceding that year been in India for a per iod of, or per iods amounting
in all to, seven hundr ed and thir ty days or mor e ; or
(b) a Hindu undivided family whose manager has not been r esident in India in
nine out of the ten pr evious year s pr eceding that year , or has not dur ing the
seven pr evious year s pr eceding that year been in India for a per iod of, or
per iods amounting in all to, seven hundr ed and thir ty days or mor e.
50. Inser ted by the Finance (No. 2) Act, 2004, w.r .e.f. 1-4-2004.
52. Substituted for For the pur poses of inclusion in the total income of an assessee, any
dividend by the Finance Act, 1965, w.e.f. 1-4-1965.
Income deemed to accrue or arise in India.
54
9.
55
(1) The following incomes shall be deemed
56
to accr ue or ar ise in India :
57
(i) all income accr uing or ar ising, whether dir ectly or indir ectly, thr ough
or fr om any business connection
58
in India, or thr ough or fr om any
pr oper ty
58
in India, or thr ough or fr om any asset or sour ce of income
in India,
59
[* * *] or thr ough the tr ansfer of a capital asset situate in
India.
60
[Explan ation 1].For the pur poses of this clause
(a) in the case of a business of which all the oper ations
61
ar e not
car r ied out in India, the income of the business deemed under this
clause to accr ue or ar ise in India shall be only such par t of the
income as is r easonably attr ibutable to the oper ations
61
car r ied
out in India;
(b) in the case of a non-r esident, no income shall be deemed to
accr ue or ar ise in India to him thr ough or fr om oper ations which
ar e confined to the pur chase of goods in India for the pur pose of
expor t ;
62
[* * *]
63
[(c) in the case of a non-r esident, being a per son engaged in the
business of r unning a news agency or of publishing newspaper s,
magazines or jour nals, no income shall be deemed to accr ue or
ar ise in India to him thr ough or fr om activities which ar e confined
to the collection of news and views in India for tr ansmission out
of India ;]
64
[(d) in the case of a non-r esident, being
(1) an individual who is not a citizen of India ; or
(2) a fir m which does not have any par tner who is a citizen of
India or who is r esident in India ; or
(3) a company which does not have any shar eholder who is a
citizen of India or who is r esident in India,
S. 9 I.T. ACT, 1961 1.34
No. 35(XXXIII-7) of 1956, dat ed 3-9-1956, Cir cular No. 4, dat ed 20-2-1969, Cir cular
No. 382, dat ed 4-5-1984, and Cir cular No. 5/ 2004, dat ed 28-9-2004. For det ails, see
Taxmanns Master Guide to Income-tax Act.
56. For the meaning of the ter m deemed, see Taxmanns Dir ect Taxes Manual, Vol. 3.
57. See r ule 10 for manner of computation of income of non-r esidents in cer tain cases.
58. For the meaning of the ter ms/ expr essions business connection and pr oper ty, see
59. Wor ds or thr ough or fr om any money lent at inter est and br ought into India in cash or
in kind omitted by the Finance Act, 1976, w.e.f. 1-6-1976.
61. For the meaning of the ter m oper ations, see Taxmanns Dir ect Taxes Manual, Vol. 3.
62. Pr oviso omitted by the Finance Act, 1964, w.e.f. 1-4-1964.
64. Inser ted by the Taxation Laws (Amendment) Act, 1984, w.r .e.f. 1-4-1982.
no income shall be deemed to accr ue or ar ise in India to such
individual, fir m or company thr ough or fr om oper ations
65
which
ar e confined to the shooting of any cinematogr aph film in India.]
66
that business connection shall include any business activity car r ied
out thr ough a per son who, acting on behalf of the non-r esident,
(a) has and habitually exer cises in India, an author ity to conclude
contr acts on behalf of the non-r esident, unless his activities ar e
limited to the pur chase of goods or mer chandise for the non-
r esident; or
(b) has no such author ity, but habitually maintains in India a stock of
goods or mer chandise fr om which he r egular ly deliver s goods or
mer chandise on behalf of the non-r esident; or
(c) habitually secur es or der s in India, mainly or wholly for the non-
r esident or for that non-r esident and other non-r esidents contr ol-
ling, contr olled by, or subject to the same common contr ol, as that
non-r esident:
Provided that such business connection shall not include any busi-
ness activity car r ied out thr ough a br oker , gener al commission agent
or any other agent having an independent status, if such br oker ,
gener al commission agent or any other agent having an independent
status is acting in the or dinar y cour se of his business :
Provided further that wher e such br oker , gener al commission agent
or any other agent wor ks mainly or wholly on behalf of a non-r esident
(her eafter in this pr oviso r efer r ed to as the pr incipal non-r esident) or
on behalf of such non-r esident and other non-r esidents which ar e
contr olled by the pr incipal non-r esident or have a contr olling inter est
in the pr incipal non-r esident or ar e subject to the same common
contr ol as the pr incipal non-r esident, he shall not be deemed to be a
br oker , gener al commission agent or an agent of an independent
status.
Explan ation 3.Wher e a business is car r ied on in India thr ough a
person referred to in clause (a) or clause (b) or clause (c) of Explan ation
2, only so much of income as is attr ibutable to the oper ations car r ied
out in India shall be deemed to accr ue or ar ise in India;]
(ii) income which falls under the head Salar ies, if it is ear ned
67
in India.
68
[Explan ation .For the r emoval of doubts, it is her eby declar ed that
the income of the natur e r efer r ed to in this clause payable for
65. For the meaning of the ter m oper ations, see Taxmanns Dir ect Taxes Manual, Vol. 3.
67. For the meaning of the ter m ear ned, see Taxmanns Dir ect Taxes Manual, Vol. 3.
68. Substituted by the Finance Act, 1999, w.e.f. 1-4-2000. Pr ior to its substitution, Explan ation ,
as inser ted by the Finance Act, 1983, w.r .e.f. 1-4-1979, r ead as under :
Explan ation .For the r emoval of doubts, it is her eby declar ed that income of the natur e
r efer r ed to in this clause payable for ser vice r ender ed in India shall be r egar ded as income
ear ned in India ;
(a) ser vice r ender ed in India; and
(b) the r est per iod or leave per iod which is pr eceded and succeeded
by ser vices r ender ed in India and for ms par t of the ser vice
contr act of employment,
shall be r egar ded as income ear ned in India ;]
(iii) income char geable under the head Salar ies payable by the Gover n-
ment to a citizen of India for ser vice outside India ;
(iv) a dividend paid by an Indian company outside India ;
69
[(v) income by way of inter est payable by
(a) the Gover nment ; or
(b) a per son who is a r esident, except wher e the inter est is payable in
r espect of any debt incur r ed, or moneys bor r owed and used, for
the pur poses of a business or pr ofession car r ied on by such
per son outside India or for the pur poses of making or ear ning any
income fr om any sour ce outside India ; or
(c) a per son who is a non-r esident, wher e the inter est is payable in
r espect of any debt incur r ed, or moneys bor r owed and used, for
the pur poses of a business or pr ofession car r ied on by such
per son in India ;
(vi) income by way of r oyalty
70
payable by
(b) a per son who is a r esident, except wher e the r oyalty is payable in
r espect of any r ight, pr oper ty or infor mation used or ser vices
utilised for the pur poses of a business or pr ofession car r ied on by
such per son outside India or for the pur poses of making or
ear ning any income fr om any sour ce outside India ; or
(c) a per son who is a non-r esident, wher e the r oyalty is payable in
r espect of any r ight, pr oper ty or infor mation used or ser vices
utilised for the pur poses of a business or pr ofession car r ied on by
such per son in India or for the pur poses of making or ear ning any
income fr om any sour ce in India :
Provided that nothing contained in this clause shall apply in r elation
to so much of the income by way of r oyalty as consists of lump sum
consider ation for the tr ansfer outside India of, or the impar ting of
infor mation outside India in r espect of, any data, documentation,
dr awing or specification r elating to any patent, invention, model,
design, secr et for mula or pr ocess or tr ade mar k or similar pr oper ty,
if such income is payable in pur suance of an agr eement made befor e
the 1st day of Apr il, 1976, and the agr eement is appr oved by the
Centr al Gover nment :
S. 9 I.T. ACT, 1961 1.36
69. Clauses (v), (vi) and (vii) inser ted by the Finance Act, 1976, w.e.f. 1-6-1976.
70. For the meaning of the ter m r oyalty, see Taxmanns Dir ect Taxes Manual, Vol. 3.
71
[Provided further that nothing contained in this clause shall apply in
r elation to so much of the income by way of r oyalty as consists of
lump sum payment made by a per son, who is a r esident, for the
tr ansfer of all or any r ights (including the gr anting of a licence) in
r espect of computer softwar e supplied by a non-r esident manufac-
tur er along with a computer or computer -based equipment under
any scheme appr oved under the Policy on Computer Softwar e
Expor t, Softwar e Development and Tr aining, 1986 of the Gover n-
ment of India.]
Explan ation 1.For the pur poses of the
72
[fir st] pr oviso, an agr ee-
ment made on or after the 1st day of Apr il, 1976, shall be deemed to
have been made befor e that date if the agr eement is made in
accor dance with pr oposals appr oved by the Centr al Gover nment
befor e that date ; so, however , that, wher e the r ecipient of the income
by way of r oyalty is a for eign company, the agr eement shall not be
deemed to have been made befor e that date unless, befor e the expir y
of the time allowed under sub-section (1) or sub-section (2) of section
139 (whether fixed or iginally or on extension) for fur nishing the
r etur n of income for the assessment year commencing on the 1st day
of Apr il, 1977, or the assessment year in r espect of which such income
fir st becomes char geable to tax under this Act, whichever assessment
year is later , the company exer cises an option by fur nishing a
declar ation in wr iting to the
73
[Assessing] Officer (such option being
final for that assessment year and for ever y subsequent assessment
year ) that the agr eement may be r egar ded as an agr eement made
befor e the 1st day of Apr il, 1976.
Explan ation 2.For the pur poses of this clause, r oyalty means
consider ation (including any lump sum consider ation but excluding
any consider ation which would be the income of the r ecipient
char geable under the head Capital gains) for
(i) the tr ansfer of all or any r ights (including the gr anting of a
licence) in r espect of a patent, invention, model, design, secr et
for mula or pr ocess or tr ade mar k or similar pr oper ty ;
(ii) the impar ting of any infor mation concer ning the wor king of, or
the use of, a patent, invention, model, design, secr et for mula or
pr ocess or tr ade mar k or similar pr oper ty ;
(iii) the use of any patent, invention, model, design, secr et for mula or
pr ocess or tr ade mar k or similar pr oper ty ;
(iv) t he impa r t ing of a ny infor ma t ion concer ning t echnica l,
industr ial, commer cial or scientific knowledge, exper ience or
skill ;
72. Substituted for for egoing, ibid.
1-4-1988.
S. 9 I.T. ACT, 1961 1.38
74
[(iva) the use or r ight to use any industr ial, commer cial or scientific
equipment but not including the amounts r efer r ed to in section
44BB;]
(v) the tr ansfer of all or any r ights (including the gr anting of a
licence) in r espect of any copyr ight, liter ar y, ar tistic or scientific
wor k including films or video tapes for use in connection with
television or tapes for use in connection with r adio br oadcasting,
but not including consider ation for the sale, distr ibution or
exhibition of cinematogr aphic films ; or
(vi) the r ender ing of any ser vices in connection with the activities
r efer r ed to in sub-clauses (i) to
74
[(iv), (iva) and] (v).
75
[Explan ation 3.For the pur poses of this clause, computer soft-
war e means any computer pr ogr amme r ecor ded on any disc, tape,
per for ated media or other infor mation stor age device and includes
any such pr ogr amme or any customized electr onic data;]
(vii) income by way of fees for technical ser vices payable
76
by
(b) a per son who is a r esident, except wher e the fees ar e payable in
r espect of ser vices utilised in a business or pr ofession car r ied on
by such per son outside India or for the pur poses of making or
ear ning any income fr om any sour ce outside India ; or
(c) a per son who is a non-r esident, wher e the fees ar e payable in
r espect of ser vices utilised in a business or pr ofession car r ied on
by such per son in India or for the pur poses of making or ear ning
any income fr om any sour ce in India :
77
[Provided that nothing contained in this clause shall apply in r elation
to any income by way of fees for technical ser vices payable in
pur suance of an agr eement made befor e the 1st day of Apr il, 1976,
and appr oved by the Centr al Gover nment.]
77
[Explan ation 1.For the pur poses of the for egoing pr oviso, an
agr eement made on or after the 1st day of Apr il, 1976, shall be deemed
to have been made befor e that date if the agr eement is made in
accor dance with pr oposals appr oved by the Centr al Gover nment
befor e that date.]
Explan ation
77
[2].For the pur poses of this clause, fees for technical
ser vices means any consider ation (including any lump sum consi-
75. Substituted by the Finance Act, 2000, w.e.f. 1-4-2001. Pr ior to its substitution, Explan ation
3, as inser ted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991, r ead as under :
Explan ation 3.For the pur poses of this clause, the expr ession computer softwar e
shall have the meaning assigned to it in clause (b) of the Explan ation to section 80HHE;
76. For the meaning of the expr ession fees for technical ser vices payable, see Taxmanns
deration) for the rendering of any managerial, technical or consultancy
ser vices (including the pr ovision of ser vices of technical or other
per sonnel) but does not include consider ation for any constr uction
78
,
assembly, mining or like pr oject under taken by the r ecipient or
consider ation which would be income of the r ecipient char geable
under the head Salar ies.]
(2) Notwithstanding anything contained in sub-section (1), any pension payable
outside India to a per son r esiding per manently outside India shall not be deemed
to accr ue or ar ise in India, if the pension is payable to a per son r efer r ed to in
ar ticle 314 of the Constitution or to a per son who, having been appointed befor e
the 15th day of August, 1947, to be a Judge of the Feder al Cour t or of a High Cour t
within the meaning of the Gover nment of India Act, 1935, continues to ser ve on
or after the commencement of the Constitution as a Judge in India.
79
[Explan ation .For the r emoval of doubts, it is her eby declar ed that for the
pur poses of this section, wher e income is deemed to accr ue or ar ise in India
under clauses (v), (vi) and (vii) of sub-section (1), such income shall be included
in the total income of the non-r esident, whether or not the non-r esident has a
r esidence or place of business or business connection in India.]
CHAPTER I I I
INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
Incomes not included in total income.
10. In computing the total income of a pr evious year of any per son, any income
falling within any of the following clauses shall not be included
(1) agr icultur al income ;
80
(2)
81
[subject to the pr ovisions of sub-section (2) of section 64,] any sum
r eceived by an individual as a member of a Hindu undivided family,
wher e such sum has been paid out of the income of the family, or , in
the case of any impar tible estate, wher e such sum has been paid out
of the income of the estate belonging to the family ;
82
[(2A) in the case of a per son being a par tner of a fir m which is separ ately
assessed as such, his shar e in the total income of the fir m.
Explan ation .For the pur poses of this clause, the shar e of a par tner
in the total income of a fir m separ ately assessed as such shall,
notwithstanding anything contained in any other law, be an amount
which bear s to the total income of the fir m the same pr opor tion as the
amount of his shar e in the pr ofits of the fir m in accor dance with the
par tner ship deed bear s to such pr ofits ;]
1.39 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(2A)
78. For the meaning of the ter m constr uction, see Taxmanns Dir ect Taxes Manual, Vol. 3.
82. Inser ted by the Finance Act, 1992, w.e.f. 1-4-1993. Ear lier , clause (2A) was inser ted by the
Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and was omitted by the Dir ect Tax
Laws (Amendment) Act, 1989, with effect fr om the same date.
(3)
83
[***]
84
[(4) (i) in the case of a non-r esident, any income by way of inter est
on such secur ities or bonds as the Centr al Gover nment may, by
not ifica t ion in t he Officia l Ga zet t e
85
, specify in t his beha lf,
including income by way of pr emium on the r edemption of such
bonds :
86
[Provided that the Centr al Gover nment shall not specify, for the
pur poses of this sub-clause, such secur ities or bonds on or after the
1st day of June, 2002;]
87
[
88
(ii) in the case of an individual, any income by way of inter est
on moneys standing to his cr edit in a Non-Resident (Exter nal)
Account in any bank in India in accor dance with the For eign
Exchange Regulation Act, 1973 (46 of 1973), and the r ules made
ther eunder :
Provided that such individual is a per son r esident outside India as
defined in clause (q) of section 2
89
of the said Act or is a per son who
has been per mitted by the Reser ve Bank of India to maintain the
afor esaid Account ;]]
83. Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Pr ior to its omission, clause (3), as
substituted by the Finance Act, 1972, w.e.f. 1-4-1972, and amended by the Finance Act,
1986, w.e.f. 1-4-1987, Finance (No. 2) Act, 1991, w.e.f. 1-10-1991 and Finance Act, 1992, w.e.f.
1-4-1992, r ead as under :
(3) any r eceipts which ar e of a casual and non-r ecur r ing natur e, to the extent such
r eceipts do not exceed five thousand r upees in the aggr egate :
Provided that wher e such r eceipts r elate to winnings fr om r aces including hor se
r aces, the pr ovisions of this clause shall have effect as if for the wor ds five thousand
r upees, the wor ds two thousand five hundr ed r upees had been substituted :
Provided further that this clause shall not apply to
(i) capital gains char geable under the pr ovisions of section 45 ; or
(ii) r eceipts ar ising fr om business or the exer cise of a pr ofession or occupa-
tion ; or
(iii) r eceipts by way of addition to the r emuner ation of an employee;
84. Substituted for clauses (4) and (4A) by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989. Pr ior to their substitution, clause (4) was amended by the Finance Act, 1964,
w.e.f. 1-4-1964. Clause (4A) was inser t ed by t he Finance Act , 1964, w.e.f. 1-4-1965,
subsequently amended by the Finance Act, 1968, w.e.f. 1-4-1969 and substituted by the
Finance Act, 1982, w.e.f. 1-4-1982.
85. For specified secur ities, see Notification No. SO 3331, dated 19-10-1965. For details, see
Income-tax Act.
89. Clause (q) of section 2 of the For eign Exchange Regulation Act, 1973, defines per son
r esident out side India as follows :
(q) per son r esident outside India means a per son who is not r esident in India ;
For definition of the above ter m in FEMA, 1999, see Appendix.
S. 10(4) I.T. ACT, 1961 1.40
90
[***]
91
[(4B) in the case of an individual, being a citizen of India or a per son of
Indian or igin, who is a non-r esident, any income fr om inter est on such
savings cer tificates issued
92
[befor e the 1st day of June, 2002] by the
Centr al Gover nment as that Gover nment may, by notification in the
Official Gazette
93
, specify in this behalf:
Provided that the individual has subscr ibed to such cer tificates
in conver t ible for eign exchange r emit t ed fr om a count r y out -
side India in accor dance wit h t he pr ovisions of t he For eign
Exchange Regulation Act, 1973 (46 of 1973), and any r ules made
ther eunder .
Explan ation .For the pur poses of this clause,
(a) a per son shall be deemed to be of Indian or igin if he, or either of
his par ents or any of his gr andpar ents, was bor n in undivided
India ;
(b) conver tible for eign exchange means for eign exchange which is
for the time being tr eated by the Reser ve Bank of India as
conver tible for eign exchange for the pur poses of the For eign
Exchange Regulation Act, 1973 (46 of 1973), and any r ules made
ther eunder ;]
94
[(5) in the case of an individual, the value of any tr avel concession or
assistance r eceived by, or due to, him,
(a) fr om his employer for himself and his family, in connection with
his pr oceeding on leave to any place in India ;
(b) fr om his employer or for mer employer for himself and his
family, in connection with his pr oceeding to any place in India
after r etir ement fr om ser vice or after the ter mination of his
ser vice,
subject to such conditions as may be pr escr ibed
95
(including condi-
tions as to number of jour neys and the amount which shall be exempt
1.41 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(5)
90. Omitted by the Finance Act, 2005, w.e.f. 1-4-2006. Pr ior to its omission, second pr oviso, as
inser ted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2006, r ead as under :
Provided further that nothing contained in this sub-clause shall apply to any income by
way of inter est paid or cr edited on or after the 1st day of Apr il, 2005 to the Non-Resident
(Exter nal) Account of such individual;
93. For specified savings cer tificates, see Notification No. SO 653(E), dated 8-9-1982. For
94. Substituted by the Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989. Ear lier
clause (5) was amended by the Finance Act, 1975, w.e.f. 1-4-1975, the Taxation Laws
(Amendment) Act, 1970, w.r .e.f. 1-4-1962 and the Dir ect Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989.
95. Rule 2B pr escr ibes the conditions as well as quantum of exemption, which ar e as follows:
Con dition s to be satisfied - Conditions to be satisfied ar e as under :
S. 10(5) I.T. ACT, 1961 1.42
per head) having r egar d to the tr avel concession or assistance gr anted
to the employees of the Centr al Gover nment:
Air economy far e of the national car r ier
(Indian Air lines or Air India) by the shor t-
est r oute to the place of destination.
Air -conditioned fir st class r ail far e by the
shor test r oute to the place of destination.
(i) Wher e a r ecognised public tr anspor t
system exists, the fir st class or deluxe class
far e on such t r anspor t by t he shor t est
r oute to the place of destination.
(ii) Wher e no r ecognised public tr anspor t
system exists, the air -conditioned fir st class
r ail far e, for the distance of the jour ney by
the shor test r oute, as if the jour ney has
been per for med by r ail.
u The exemption is admissible on the value of any tr avel concession or assistance r eceived
by or due to an assessee fr om his employer or for mer employer , as the case may be, for
himself and his family, in connection with his pr oceeding (i) on leave to any place in India,
or (ii) to any place in India after the r etir ement fr om ser vice, or (iii) to any place in India
after the ter mination of his ser vice.
u The exemption is admissible in r espect of actual expenditur e incur r ed for jour neys
per for med, not only by the assessee but also by his family.
For t his pur pose, family means (i) the spouse and childr en of the assessee, and (ii) the
par ents, br other s and sister s of the assessee pr ovided that they ar e wholly or mainly
dependent on the assessee. With effect fr om 1-10-1997, the Centr al Civil Ser vice Leave
Tr avel Concession Rules have been amended in this r espect.
u The exemption can be availed only in r espect of two journ eys per for med in a block of
four calen dar years. For this pur pose, the fir st four -year block commenced with the
calendar year 1986. Thus, the four -year blocks will be 1986-89, 1990-93, 1994-97, 1998-
2001, 2002-05 and so on.
u If an assessee has not availed tr avel concession or assistance dur ing any of the specified
four -year block per iods on one of the two per mitted occasions, or on both occasions,
exemption can be claimed pr ovided he avails the concession or assistance in the calendar
year immediat ely following t hat block. This is popular ly known as t he car r y-over
concession. In such cases, the exemption so availed will not be counted for pur poses of
r egulating the futur e exemptions allowable for the succeeding block of four year s.
Quan tum of exemption .The basic r ule is that the quantum of exemption will be limited
to the actual expenses incur r ed on the jour ney. This pr e-supposes that, without per for m-
ing any jour ney and incur r ing expenses ther eon, no exemption can be claimed.
In addition to the above gener al limitation, the quantum of exemption will also be subject
to the following maximum limits, depending upon the mode of tr anspor t used or available:
JOURNEYS PERFORMED ON OR AFTER 1-10-1997
For jour neys per for med by Air
Wher e place of or igin of jour ney
and destination ar e connected by
r ail and the jour ney is per for med by
any mode of tr anspor t other than by
air
Wher e place of or igin of jour ney
and destination or par t ther eof ar e
not connected by r ail
Restricted con cession for ch ildren .Under sub-r ule (4) of r ule 2B, inser ted with effect
fr om 1-10-1997, exemption on tr avel concession will not be admissible to mor e than two
Provided that the amount exempt under this clause shall in no case
exceed the amount of expenses actually incur r ed for the pur pose of
such tr avel.
Explan ation .For the pur poses of this clause, family, in r elation to
an individual, means
(i) the spouse and childr en of the individual ; and
(ii) the par ents, br other s and sister s of the individual or any of
them, wholly or mainly dependent on the individual; ]
(5A)
96
[Om itted by th e Fin an ce (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(5B)
97
1.43 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(5B)
sur viving childr en of an individual bor n after 1-10-1998. This r estr iction will not however
apply in r espect of childr en bor n befor e 1-10-1998, and also in cases wher e an individual,
after getting one child, begets multiple childr en (twins/ tr iplets/ quadr uplets, etc.) on the
second occasion. The implications of this r estr iction will be as follows :
u In r espect of jour neys per for med on or befor e 1-10-1998 exemption will be admissible
in r espect of all the sur viving childr en of the individual.
u In r espect of jour neys per for med after 1-10-1998
- the exemption will be admissible to all sur viving childr en bor n befor e 1-10-1998;
- in addition, the exemption will be admissible to only two sur viving childr en bor n on
or after 1-10-1998. In r eckoning this limit of two childr en, childr en bor n out of
multiple bir th after the fir st child will be tr eated as one child only.
It may be noted that section 2(15B) of the Act defines a child as includes a step-child
and an adopted child of the individual. Hence the afor esaid r estr ictions will oper ate in
r espect of step-childr en and adopted childr en also pr ovided they ar e bor n on or after
1-10-1998.
96. Pr ior to its omission, clause (5A), as inser ted by the Taxation Laws (Amendment) Act, 1984,
w.r .e.f. 1-4-1982, r ead as under :
(5A) in the case of an individual who is not a citizen of India and is a non-r esident, who
comes to India solely in connection with the shooting of a cinematogr aph film in
India by the individual, fir m or company r efer r ed to in clause (d) of the Explan ation
t o clause (i) of sub-section (1) of section 9, any r emuner ation r eceived by him for
r ender ing any ser vice in connection with such shooting ;
97. Pr ior to its omission, clause (5B), as inser ted by the Finance Act, 1993, w.e.f. 1-4-1994, and
later on amended by the Finance Act, 1999, w.e.f. 1-4-1999, r ead as under :
(5B) in the case of an individual who r ender s ser vices as a technician in the employment
(commencing fr om a date after the 31st day of Mar ch, 1993) of the Gover nment or
of a local author ity or of any cor por ation set up under any special law or of any such
institution or body established in India for car r ying on scientific r esear ch as is
appr oved for t he pu r poses of t his clau se by t he pr escr ibed au t hor it y or in
any business car r ied on in India and the individual was not r esident in India in any
of the four financial year s immediately pr eceding the financial year in which he
ar r ived in India and the tax on his income for such ser vices char geable under the
head Salar ies is paid to the Centr al Gover nment by the employer [which tax, in the
case of an employer , being a company, may be paid notwithstanding anything
contained in section 200 of the Companies Act, 1956 (1 of 1956)], the tax so paid by
the employer for a per iod not exceeding for ty-eight months commencing fr om the
date of his ar r ival in India :
(6) in the case of an individual who is not a citizen of India,
(i)
98
[***]
99
[(ii) the r emuner ation r eceived by him as an official, by whatever
name called, of an embassy, high commission, legation, commis-
sion, consulate or the tr ade r epr esentation of a for eign State, or
as a member of the staff of any of these officials, for ser vice in
such capacity :
Provided that the r emuner ation r eceived by him as tr ade commis-
sioner or other official r epr esentative in India of the Gover nment
of a for eign State (not holding office as such in an honor ar y
capacity), or as a member of the staff of any of those officials,
shall be exempt only if the r emuner ation of the cor r esponding
officials or , as the case may be, member s of the staff, if any, of the
Gover nment r esident for similar pur poses in the countr y con-
cer ned enjoys a similar exemption in that countr y :
Provided further that such member s of the staff ar e subjects of
the countr y r epr esented and ar e not engaged in any business or
pr ofession or employment in India other wise than as member s of
such staff ;]
S. 10(6) I.T. ACT, 1961 1.44
Provided that the Centr al Gover nment may, if it consider s it necessar y or expedient
in the public inter est so to do, waive the condition r elating to non-r esidence in India
as specified in this clause in the case of any individual who is employed in India for
designing, er ection or commissioning of machiner y or plant or super vising activi-
ties connected with such designing, er ection or commissioning.
Explan ation .For the pur poses of this clause, technician means a per son having
specialised knowledge and exper ience in
(i) constr uctional or manufactur ing oper ations, or in mining or in the gener a-
tion of electr icity or any other for m of power , or
(ii) agr icult ur e, animal husbandr y, dair y far ming, deep sea fishing or ship
building, or
(iii) such other field as the Centr al Gover nment may, having r egar d to availability
of Indians having specialised knowledge and exper ience ther ein, the needs of
the countr y and other r elevant cir cumstances, by notification in the Official
Gazette, specify,
who is employed in India in a capacity in which such specialised knowledge and
exper ience ar e actually utilised ;
98. Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Pr ior to its omission, sub-clause (i), as
substituted by the Taxation Laws (Amendment) Act, 1970, w.r .e.f. 1-4-1962 and amended
by the Finance (No. 2) Act, 1977, w.r .e.f. 1-4-1972 and the Finance (No. 2) Act, 1998, w.e.f.
(i) subject to such conditions as the Centr al Gover nment may pr escr ibe, passage
moneys or the value of any fr ee or concessional passage r eceived by or due to such
individu al
(a) fr om his employer , for himself, his spouse and childr en, in connection with
his pr oceeding on home leave out of India ;
(aa) [* * *]
(b) fr om his employer or for mer employer for himself, his spouse and childr en,
in connection with his pr oceeding to his home countr y out of India after
r etir ement fr om ser vice in India or after the ter mination of such ser vice ;
99. Subst it ut ed for sub-clauses (ii) t o (v) by the Finance Act, 1988, w.e.f. 1-4-1989.
(iii) to (v) [Sub-clause (ii) substituted for sub-clauses (ii) to (v) by th e Fin an ce
Act, 1988, w.e.f. 1-4-1989;]
(vi) the r emuner ation r eceived by him as an employee of a for eign
enter pr ise for ser vices r ender ed by him dur ing his stay in India,
pr ovided the following conditions ar e fulfilled
(a) the for eign enter pr ise is not engaged in any tr ade or business
in India ;
(b) his stay in India does not exceed in the aggr egate a per iod of
ninety days in such pr evious year ; and
(c) such r emuner ation is not liable to be deducted fr om the
income of the employer char geable under this Act ;
(via)
1
(vii)
2
(viia)
3
1. Pr ior to its omission, sub-clause (via), as inser ted by the Taxation Laws (Amendment) Act,
1975, w.e.f. 1-10-1975, r ead as under :
(via) the r emuner ation r eceived by him as an employee of, or a consultant to, an
institution or association or a body established or for med outside India solely for
philanthr opic pur poses, for ser vices r ender ed by him in India in connection with
such pur poses ; pr ovided that such institution or association or body and the
pur poses for which his ser vices ar e r ender ed in India ar e appr oved by the Centr al
Gover nment ;
2. Pr ior to omission, sub-clause (vii) was amended by the Finance Act, 1964, w.e.f. 1-4-1964,
Finance Act, 1965, w.e.f. 1-4-1965 and Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971.
3. Pr ior to its omission, sub-clause (viia), as inser ted by the Taxation Laws (Amendment) Act,
1970, w.e.f. 1-4-1971 and later on amended by the Dir ect Taxes (Amendment) Act, 1974,
w.r .e.f. 1-4-1973, Finance Act, 1979, w.e.f. 1-6-1979, Finance Act, 1988, w.e.f. 1-4-1988,
Finance Act, 1992, w.e.f. 1-6-1992 and Finance Act, 1993, w.e.f. 1-4-1993, r ead as under :
(viia) wher e such individual r ender s ser vices as a technician in the employment of the
Gover nment or of a local author ity or of any cor por ation set up under any special
law or of any such institution or body established in India for car r ying on scientific
r esear ch as is appr oved for the pur poses of this sub-clause by the pr escr ibed
author ity or in any business car r ied on in India and the individual was not r esident
in India in any of the four financial year s immediately pr eceding the financial year
in which he ar r ived in India,
the r emuner ation for such ser vices due to or r eceived by him, which is char geable
under the head Salar ies, to the extent mentioned below, namely :
(I) wher e such ser vices commence fr om a date after the 31st day of Mar ch, 1971
but befor e the 1st day of Apr il, 1988,
(A) such r emuner ation due to or r eceived by him dur ing the per iod of
twenty-four months commencing fr om the date of his ar r ival in India,
in so far as such r emuner ation does not exceed an amount calculated
at the r ate of four thousand r upees per month, and wher e the tax on the
excess, if any, of such r emuner ation for the per iod afor esaid over the
amount so calculated is paid to the Centr al Gover nment by the em-
ployer [which tax, in the case of an employer , being a company, may be
paid notwithstanding anything contained in section 200 of the Compa-
nies Act, 1956 (1 of 1956)], also the tax so paid by the employer ; and
(viii) any income char geable under the head Salar ies r eceived by or
due to any such individual being a non-r esident as r emuner ation
for ser vices r ender ed in connection with his employment on a
for eign ship wher e his total stay in India does not exceed in the
aggr egate a per iod of ninety days in the pr evious year ;
(ix)
4
S. 10(6) I.T. ACT, 1961 1.46
(B) wher e he continues, with the appr oval of the Centr al Gover nment
obtained befor e the 1st day of October of the r elevant assessment year ,
to r emain in employment in India after the expir y of the per iod of
twenty-four months afor esaid and the tax on his income char geable
under the head Salar ies is paid to the Centr al Gover nment by the
employer [which tax, in the case of an employer , being a company, may
be paid not wit hst anding anyt hing cont ained in sect ion 200 of t he
Companies Act, 1956 (1 of 1956)], the tax so paid by the employer for a
per iod not exceeding twenty-four months next following the expir y of
t he fir st -ment ioned t went y-four mont hs ;
(II) wher e such ser vices commence fr om a date after the 31st day of Mar ch, 1988
but befor e the 1st day of Apr il, 1993, and tax on his income char geable under
the head Salar ies is paid to the Centr al Gover nment by the employer [which
tax, in the case of an employer , being a company, may be paid notwith-
standing anything contained in section 200 of the Companies Act, 1956 (1 of
1956)], the tax so paid by the employer for a per iod not exceeding for ty-eight
months commencing fr om the date of his ar r ival in India :
Provided that the Centr al Gover nment may, if it consider s it necessar y or expedient
in the public inter est so to do, waive the condition r elating to non-r esidence in India
as specified in this sub-clause in the case of any individual who is employed in India
for designing, er ection or commissioning of machiner y or plant or super vising
activities connected with such designing, er ection or commissioning.
Explan ation .For the pur poses of this sub-clause, technician means a per son
having specialised knowledge and exper ience in
(i) constr uctional or manufactur ing oper ations, or in mining or in the gener a-
tion of electr icity or any other for m of power , or
(ii) agr icult ur e, animal husbandr y, dair y far ming, deep sea fishing or ship
building, or
(iii) such other field as the Centr al Gover nment may, having r egar d to the
availability of Indians having specialised knowledge and exper ience ther ein,
the needs of the countr y and other r elevant cir cumstances, by notification in
the Official Gazette, specify,
who is employed in India in a capacity in which such specialised knowledge and
exper ience ar e actually utilised ;
4. Pr ior to its omission, sub-clause (ix), as inser ted by the Finance Act, 1964, w.e.f. 1-4-1964,
r ead as under :
(ix) any income char geable under the head Salar ies r eceived by or due to him dur ing
the thir ty-six months commencing fr om the date of his ar r ival in India for ser vice
r ender ed as a pr ofessor or other teacher in a Univer sity or other educational
institution, and wher e any such individual continues to r emain in employment in
India after the expir y of the thir ty-six months afor esaid and the tax on his income
char geable under the head Salar ies is paid by the Univer sity or other educational
institution concer ned to the Centr al Gover nment, the tax so paid for a per iod not
exceeding t went y-four mont hs following t he expir y of t he t hir t y-six mont hs
afor esaid, pr ovided in either case the following conditions ar e fulfilled, namely :
(x)
5
6
[(xi) t he r emuner at ion r eceived by him as an employee of t he
Gover nment of a for eign State dur ing his stay in India in
connection with his tr aining in any establishment or office of, or
in any under taking owned by,
(i) the Gover nment ; or
(ii) any company in which the entir e paid-up shar e capital is held
by the Centr al Gover nment, or any State Gover nment or
Gover nments, or par tly by the Centr al Gover nment and
par tly by one or mor e State Gover nments ; or
(iii) any company which is a subsidiar y of a company r efer r ed to
in item (ii) ; or
(iv) any cor por ation established by or under a Centr al, State or
Pr ovincial Act ; or
(v) any society r egister ed under the Societies Registr ation Act,
1860 (14 of 1860), or under any other cor r esponding law for
the time being in for ce and wholly financed by the Centr al
Gover nment, or any State Gover nment or State Gover n-
ments, or par tly by the Centr al Gover nment and par tly by one
or mor e State Gover nments ;]
7
[(6A) wher e in the case of a for eign company der iving income by way
of r oyalty or fees for technical ser vices r eceived fr om Gover nment
or an Indian concer n in pur suance of an agr eement made by
the for eign company with Gover nment or the Indian concer n after
(i) such individual was not r esident in any of the four financial year s immedi-
ately pr eceding the financial year in which he ar r ived in India ; and
(ii) his contr act of ser vice is appr oved by the Centr al Gover nment
(a) on or befor e the 1st day of October , 1964, in the case of a pr ofessor or
other teacher whose ser vice commenced befor e the 1st day of Apr il, 1964 ;
(b) befor e the commencement of his ser vice or within one year of such
commencement, in any other case ;
5. Pr ior t o it s omission, sub-clause (x), as inser ted by the Finance Act, 1964, w.e.f. 1-4-1964,
r ead as under :
(x) any sum due to or r eceived by him, dur ing the twenty-four months commencing
fr om the date of his ar r ival in India, for under taking any r esear ch wor k in India,
pr ovided the following conditions ar e fulfilled, namely :
(a) the r esear ch wor k is under taken in connection with a r esear ch scheme
appr oved in this behalf by the Centr al Gover nment on or befor e the 1st day
of October of the r elevant assessment year ; and
(b) such sum is payable or paid dir ectly or indir ectly by the Gover nment of a
for eign State or any institution or association or other body established
outside India ;
S. 10(6BB) I.T. ACT, 1961 1.48
the 31st day of Mar ch, 1976
8
[but befor e the 1st day of June, 2002]
9
[and,
(a) wher e the agr eement r elates to a matter included in the industr ial
policy, for the time being in for ce, of the Gover nment of India,
such agr eement is in accor dance with that policy ; and
(b) in any other case, the agr eement is appr oved by the Centr al
Gover nment,
the tax on such income is payable, under the ter ms of the agr eement,
by Gover nment or the Indian concer n to the Centr al Gover nment, the
tax so paid].
Explan ation .For the pur poses of this clause
10
[and clause (6B)],
(a) fees for technical ser vices shall have the same meaning as in
Explan ation 2 to clause (vii) of sub-section (1) of section 9 ;
(b) for eign company shall have the same meaning as in section80B;
(c) r oyalty shall have the same meaning as in Explan ation 2 to
clause (vi) of sub-section (1) of section 9;]
10
[(6B) wher e in the case of a non-r esident (not being a company) or of a
for eign company der iving income (not being salar y, r oyalty or fees for
technical ser vices) fr om Gover nment or an Indian concer n in pur -
suance of an agr eement enter ed into
11
[befor e the 1st day of June,
2002] by the Centr al Gover nment with the Gover nment of a for eign
State or an inter national or ganisation, the tax on such income is
payable by Gover nment or the Indian concer n to the Centr al Gover n-
ment under the ter ms of thatagr eement or any other r elated agr ee-
ment appr oved
11
[befor e that date] by the Centr al Gover nment, the
tax so paid ;]
12
[(6BB) wher e in the case of the Gover nment of a for eign State or a for eign
enter pr ise der iving income fr om an Indian company engaged in the
business of oper ation of air cr aft, as a consider ation of acquir ing an
air cr aft or an air cr aft engine (other than payment for pr oviding
spar es, facilities or ser vices in connection with the oper ation of leased
air cr aft) on lease under
13
[an agr eement enter ed into after the 31st
day of Mar ch, 1997 but befor e the 1st day of Apr il, 1999, or enter ed
9. Substituted for and appr oved by the Centr al Gover nment, the tax on such income is
payable, under the ter ms of such agr eement, by Gover nment or the Indian concer n to the
Centr al Gover nment, the tax so paid by the Finance Act, 1992, w.e.f. 1-6-1992.
13. Substituted for an agr eement enter ed after the 31st day of Mar ch, 1997 (but befor e the
1st day of Apr il, 1999) and appr oved by the Centr al Gover nment in this behalf by the
Finance (No. 2) Act, 2004, w.e.f. 1-4-2006. Wor ds 30th day of September , 2005 substituted
for 31st day of Mar ch, 2005 by the Finance Act, 2005, w.e.f. 1-4-2006. Ear lier the
br acketed wor ds wer e amended by the Finance Act, 1999, w.e.f. 1-4-2000.
into after the
14
[31st day of Mar ch,
15
[2007]] and appr oved by the
Centr al Gover nment in this behalf] and the tax on such income is
payable by such Indian company under the ter ms of that agr eement
to the Centr al Gover nment, the tax so paid.
Explan ation .For the pur poses of this clause, the expr ession for eign
enter pr ise means a per son who is a non-r esident;]
16
[(6C) any income ar ising to such for eign company, as the Centr al Gover n-
ment may, by notification
17
in the Official Gazette, specify in this
behalf, by way of
18
[royalty or ] fees for technical ser vices r eceived in
pur suance of an agr eement enter ed into with that Gover nment for
pr oviding ser vices in or outside India in pr ojects connected with
secur ity of India ;]
(7) any allowances or per quisites paid or allowed as such outside India by
the Gover nment to a citizen of India for r ender ing ser vice outside
India;
(8) in the case of an individual who is assigned to duties in India in
connection with any co-oper ative technical assistance pr ogr ammes
and pr ojects in accor dance with an agr eement enter ed into by
the Centr al Gover nment and the Gover nment of a for eign State
(t he t er ms wher eof pr ovide for t he exempt ion given by t his
clause)
(a) the r emuner ation r eceived by him dir ectly or indir ectly fr om the
Gover nment of that for eign State for such duties, and
(b) any other income of such individual which accr ues or ar ises
outside India, and is not deemed to accr ue or ar ise in India,
in r espect of which such individual is r equir ed to pay any
income or social secur ity tax to the Gover nment of that for eign
State ;
19
[(8A) in the case of a consultant
(a) any r emuner ation or fee r eceived by him or it, dir ectly or
indir ectly, out of the funds made available to an inter national
or ganisation [her eafter r efer r ed to in this clause and clause (8B)
as the agency] under a technical assistance gr ant agr eement
between the agency and the Gover nment of a for eign State ; and
(b) any other income which accr ues or ar ises to him or it outside
India, and is not deemed to accr ue or ar ise in India, in r espect of
which such consultant is r equir ed to pay any income or social
secur ity tax to the Gover nment of the countr y of his or its or igin.
14. Substituted for 30th day of September , 2005 by the Taxation Laws (Amendment) Act,
2005, w.e.f. 1-4-2006.
15. Substituted for 2006 by the Finance Act, 2006, w.e.f. 1-4-2007.
17. For notified companies, see Taxmanns Master Guide to Income-tax Act.
S. 10(9) I.T. ACT, 1961 1.50
Explan ation .In this clause, consultant means
(i) any individual, who is either not a citizen of India or , being a
citizen of India, is not or dinar ily r esident in India ; or
(ii) any other per son, being a non-r esident,
engaged by the agency for r ender ing technical ser vices in India in
connection with any technical assistance pr ogr amme or pr oject,
pr ovided the following conditions ar e fulfilled, namely :
(1) the technical assistance is in accor dance with an agr eement
enter ed into by the Centr al Gover nment and the agency ; and
(2) the agr eement r elating to the engagement of the consultant is
appr oved by the pr escr ibed author ity
20
for the pur poses of this
clause ;
(8B) in the case of an individual who is assigned to duties in India in
connection with any technical assistance pr ogr amme and pr oject in
accor dance with an agr eement enter ed into by the Centr al Gover n-
ment and the agency
(a) the r emuner ation r eceived by him, dir ectly or indir ectly, for such
duties fr om any consultant r efer r ed to in clause (8A) ; and
(b) any other income of such individual which accr ues or ar ises
outside India, and is not deemed to accr ue or ar ise in India, in
r espect of which such individual is r equir ed to pay any income or
social secur ity tax to the countr y of his or igin, pr ovided the
following conditions ar e fulfilled, namely :
(i) the individual is an employee of the consultant r efer r ed
to in clause (8A) and is either not a citizen of India or ,
being a citizen of India, is not or dinar ily r esident in India ;
and
(ii) the contr act of ser vice of such individual is appr oved by the
pr escr ibed author ity
20
befor e the commencement of his
ser vice ;]
(9) the income of any member of the family of any such individual as is
r efer r ed to in clause (8)
21
[or clause (8A) or , as the case may be, clause
(8B)] accompanying him to India, which accr ues or ar ises outside
India, and is not deemed to accr ue or ar ise in India, in r espect of which
such member is r equir ed to pay any income or social secur ity tax to
the Gover nment of that for eign State
21
[or , as the case may be,
countr y of or igin of such member ];
20. The pr escr ibed au t hor it y u nder r u le 16B is Addit ional Secr et ar y, Depar t ment of
Economic Affair s in Ministr y of Finance, Gover nment of India in concur r ence with
Member (Income-tax), CBDT.
22
[
23
(10)
24
(i) any death-cum -r etir ement gr atuity r eceived under the r evised
Pension Rules of the Centr al Gover nment or , as the case may be, the
Centr al Civil Ser vices (Pension) Rules, 1972, or under any similar
scheme applicable to the member s of the civil ser vices of the Union
or holder s of posts connected with defence or of civil posts under the
Union (such member s or holder s being per sons not gover ned by
the said Rules) or to the member s of the all-India ser vices or to the
member s of the civil ser vices of a State or holder s of civil posts under
a State or to the employees of a local author ity or any payment of
r etir ing gr atuity r eceived under the Pension Code or Regulations
applicable to the member s of the defence ser vices ;
(ii) any gr atuity r eceived under the Payment of Gr atuity Act, 1972 (39
of 1972), to the extent it does not exceed an amount calculated in
accor dance with the pr ovisions of sub-sections (2) and (3) of section
4
25
of that Act ;
(iii) any other gr atuity r eceived by an employee on his r etir ement or
on his becoming incapacitated pr ior to such r etir ement or on ter mi-
nation of his employment, or any gr atuity r eceived by his widow,
childr en or dependants on his death, to the extent it does not, in either
case, exceed one-half months salar y for each year of completed
ser vice
26
,
27
[calculated on the basis of the aver age salar y for the ten
months immediately pr eceding the month in which any such event
occur s, subject to such limit
28
as the Centr al Gover nment may, by
notification in the Official Gazette, specify in this behalf having r egar d
to the limit applicable in this behalf to the employees of that Gover n-
ment] :
Provided that wher e any gr atuities r efer r ed to in this clause
29
ar e
r eceived by an employee fr om mor e than one employer in the same
22. Substituted by the Finance Act, 1974, w.e.f. 1-4-1975. Or iginal clause was amended fir st
by t he Finance Act , 1972, w.e.f. 1-4-1973 and t hen by t he Finance Act , 1974, wit h
r etr ospective effect fr om 1-6-1972/ 1-4-1962.
23. See also Letter F. No. 1(179)-62/ TPL, dated 13-12-1962 and Letter F. No. 194/ 6/ 73-IT
(A-I), dated 19-6-1973. For details, see Taxmanns Master Guide to Income-tax Act.
25. For text of sub-sections (2) and (3) of section 4 of the Payment of Gr atuity Act, 1972, see
Appendix.
The limit laid down under section 4(3) of the Payment of Gr atuity Act, 1972 [as amended
by the Payment of Gr atuity (Amendment) Act, 1998, w.r .e.f. 24-9-1997] is Rs. 3,50,000.
26. For the meaning of the expr ession each year of completed ser vice, see Taxmanns Dir ect
Taxes Manual, Vol. 3.
27. Subst it ut ed for calculat ed on t he basis of t he aver age salar y for t he t hr ee year s
immediately pr eceding the year in which the gr atuity is paid, subject to a maximum of
*thir ty-six thousand r upees or twenty months salar y so calculated, whichever is less by
the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
*Substituted for thir ty thousand r upees by the Finance Act, 1983, w.r .e.f. 1-4-1982.
28. Rs. 3,50,000 has been specified as the limit in case of r etir ement, etc., on or after 24-9-1997
vide Notification No. 10772 [F. No. 200/ 77/ 97-IT(A-I)], dated 20-1-1999. For details, see
29. For meaning of the expr ession this clause, see Taxmanns Dir ect Taxes Manual, Vol. 3.
pr evious year , the aggr egate amount exempt fr om income-tax under
this clause
30
[shall not exceed the limit so specified] :
Provided further that wher e any such gr atuity or gr atuities was or
wer e r eceived in any one or mor e ear lier pr evious year s also and the
whole or any par t of the amount of such gr atuity or gr atuities was not
included in the total income of the assessee of such pr evious year or
year s, the amount exempt fr om income-tax under this clause
30
[shall
not exceed the limit so specified] as r educed by the amount or , as the
case may be, the aggr egate amount not included in the total income
of any such pr evious year or year s.
31
[* * *]
Explan ation .
32
[In this clause, and in clause (10AA)], salar y shall
have the meaning assigned to it in clause (h ) of r ule 2 of Par t A of the
Four th Schedule ;]
33
[
34
(10A)
35
(i) any payment in commutation of pension r eceived under the Civil
Pensions (Commutation) Rules of the Centr al Gover nment or under
any similar scheme applicable
36
[to the member s of the civil ser vices
of the Union or holder s of posts connected with defence or of civil
posts under the Union (such member s or holder s being per sons not
gover ned by the said Rules) or to the member s of the all-India ser vices
or to the member s of the defence ser vices or to the member s of the
civil ser vices of a State or holder s of civil posts under a State or to the
employees of a local author ity] or a cor por ation established by a
Centr al, State or Pr ovincial Act ;
(ii) any payment in commutation of pension r eceived under any
scheme of any other employer , to the extent it does not exceed
(a) in a case wher e the employee r eceives any gr atuity, the com-
muted value of one-thir d of the pension which he is nor mally
entitled to r eceive, and
(b) in any other case, the commuted value of one-half of such
pension,
S. 10(10A) I.T. ACT, 1961 1.52
30. Substituted for shall not exceed *thir ty-six thousand r upees by the Dir ect Tax Laws
*Substituted for thir ty thousand r upees by the Finance Act, 1983, w.r .e.f. 1-4-1982.
31. Omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Or iginal thir d and
four th pr ovisos wer e inser ted by the Finance Act, 1983, w.r .e.f. 1-4-1982.
32. Substituted for In this clause by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989.
36. Substituted for to the member s of the Defence Ser vices or to the employees of a State
Gover nment, a local author ity by the Finance Act, 1974, w.r .e.f. 1-4-1962.
such commuted value being deter mined having r egar d to the age of
the r ecipient, the state of his health, the r ate of inter est and officially
r ecognised tables of mor tality ;
37
[* * *]
38
[(iii) any payment in commutation of pension r eceived fr om a fund
under clause (23AAB) ;]
39
[
40
(10AA) (i) any payment r eceived by an employee of the Centr al Gover nment
or a State Gover nment as the cash equivalent of the leave salar y in
r espect of the per iod of ear ned leave at his cr edit at the time of his
41
r etir ement
42
[whether ] on super annuation or other wise ;
(ii) any payment of the natur e r efer r ed to in sub-clause (i) r eceived
by an employee, other than an employee of the Centr al Gover nment
or a State Gover nment, in r espect of so much of the per iod of ear ned
leave at his cr edit at the time of his r etir ement
42
[whether ] on
super annuation
41
or other wise as does not exceed
43
[ten] months,
calculated on the basis of the aver age salar y dr awn by the employee
dur ing the per iod of ten months immediately pr eceding his r etir e-
ment
42
[whether ] on super annuation or other wise,
44
[subject to such
limit as the Centr al Gover nment may, by notification in the Official
Gazette, specify in this behalf having r egar d to the limit
45
applicable
in this behalf to the employees of that Gover nment] :
Provided that wher e any such payments ar e r eceived by an employee
fr om mor e than one employer in the same pr evious year , the aggr e-
gate amount exempt fr om income-tax under this sub-clause
46
[shall
not exceed the limit so specified] :
Provided further that wher e any such payment or payments was or
wer e r eceived in any one or mor e ear lier pr evious year s also and the
whole or any par t of the amount of such payment or payments was
1.53 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(10AA)
41. For the meaning of the ter ms r etir ement, and or other wise see Taxmanns Dir ect Taxes
Manual, Vol. 3.
43. Substituted for eight by the Finance Act, 1999, w.r .e.f. 1-4-1998. Ear lier eight was
substituted for six by the Dir ect Tax Laws (Amendment) Act, 1987, w.r .e.f. 1-7-1986.
44. Substituted for or thir ty thousand r upees, whichever is less by the Dir ect Tax Laws
(Amendment) Act, 1987, w.r .e.f. 1-7-1986.
45. Specified exemption limit applicable in r elation to employees who r etir e, whether on
super annuation or other wise, after 1-4-1998 : Rs. 3,00,000 - Notification No. SO 588(E),
dated 31-5-2002. For details, see Taxmanns Master Guide to Income-tax Act.
46. Subst it ut ed for shall not exceed t hir t y t housand r upees by t he Dir ect Tax Laws
S. 10(10B) I.T. ACT, 1961 1.54
or wer e not included in the total income of the assessee of such
pr evious year or year s, the amount exempt fr om income-tax under
this sub-clause
47
[shall not exceed the limit so specified], as r educed
by the amount or , as the case may be, the aggr egate amount not
included in the total income of any such pr evious year or year s.
48
[* * *]
Explan ation .For the pur poses of sub-clause (ii),
49
[* * *] the entitlement to ear ned leave of an employee shall not exceed
thir ty days for ever y year of actual ser vice r ender ed by him as an
employee of the employer fr om whose ser vice he has r etir ed ;
50
[* * *]
51
[(10B) any compensation r eceived by a wor kman under the Industr ial
Disputes Act, 1947 (14 of 1947), or under any other Act or Rules,
or der s or notifications issued ther eunder or under any standing
or der s or under any awar d, contr act of ser vice or other wise,
52
[at the
time of his r etr enchment :
Provided that the amount exempt under this clause shall not exceed
(i) an amount calculated in accor dance with the pr ovisions of
53
clause (b) of section 25F of the Industr ial Disputes Act, 1947 (14
of 1947) ; or
54
[(ii) such amount, not being less than fifty thousand r upees, as the
Cent r al Gover nment may, by not ificat ion
55
in t he Official
Gazette, specify in this behalf,]
whichever is less :
47. Subst it ut ed for shall not exceed t hir t y t housand r upees by t he Dir ect Tax Laws
48. Thir d and four th pr ovisos omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.r .e.f.
1-7-1986. Pr ior to their omission, the thir d and four th pr ovisos wer e amended by the
Taxation Laws (Amendment) Act, 1984, w.r .e.f. 1-4-1978.
49. (i) omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.r .e.f. 1-7-1986.
50. Clause (ii) omitted, ibid.
52. Substituted for the following by the Finance Act, 1985, w.e.f. 1-4-1986 :
at the time of his r etr enchment, to the extent such compensation does not exceed
(i) an amount calculated in accor dance with the pr ovisions of clause (b) of section 25F
of the Industr ial Disputes Act, 1947 (14 of 1947) ; or
(ii) twenty thousand r upees,
whichever is less.
53. Clause (b) of section 25F of the Industr ial Disputes Act, 1947, r ead as follows :
(b) the wor kman has been paid, at the time of r etr enchment, compensation which shall
be equivalent to fifteen days aver age pay for ever y completed year of continuous
ser vice or any par t ther eof in excess of six months ; and
55. Maximum limit is Rs. 5,00,000 wher e r etr enchment is on or after 1-1-1997 - Notification
No. 10969 [F. No. 200/ 21/ 97-IT(A-I)], dated 25-6-1999.
Provided further that the pr eceding pr oviso shall not apply in r espect
of any compensation r eceived by a wor kman in accor dance with any
scheme which the Centr al Gover nment may, having r egar d to the
need for extending special pr otection to the wor kmen in the under -
taking to which such scheme applies and other r elevant cir cum-
stances, appr ove in this behalf.]
(a) compensation r eceived by a wor kman at the time of the closing
down of the under taking in which he is employed shall be deemed
to be compensation r eceived at the time of his r etr enchment ;
(b) compensation r eceived by a wor kman, at the time of the tr ansfer
(whether by agr eement or by oper ation of law) of the owner ship
or management of the under taking in which he is employed fr om
the employer in r elation to that under taking to a new employer ,
shall be deemed to be compensation r eceived at the time of his
r etr enchment if
(i) the ser vice of the wor kman has been inter r upted by such
tr ansfer ; or
(ii) the ter ms and conditions of ser vice applicable to the wor k-
man after such tr ansfer ar e in any way less favour able to the
wor kman than those applicable to him immediately befor e
the tr ansfer ; or
(iii) the new employer is, under the ter ms of such tr ansfer or
other wise, legally not liable to pay to the wor kman, in the
event of his r etr enchment, compensation on the basis that his
ser vice has been continuous and has not been inter r upted by
the tr ansfer ;
56
(c) t he expr essions employer and wor kman shall have t he
same meanings as in the Industr ial Disputes Act, 1947 (14 of
1947);]
57
[(10BB) any payments made under the Bhopal Gas Leak Disaster (Pr ocessing
of Claims) Act, 1985 (21 of 1985), and any scheme fr amed ther eunder
except payment made to any assessee in connection with the Bhopal
Gas Leak Disaster to the extent such assessee has been allowed a
deduction under this Act on account of any loss or damage caused to
him by such disaster ;]
58
[(10BC) any amount r eceived or r eceivable fr om the Centr al Gover nment or
a State Gover nment or a local author ity by an individual or his legal
heir by way of compensation on account of any disaster , except the
amount r eceived or r eceivable to the extent such individual or his
1.55 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(10BC)
56. For text of clause (g) and clause (s) of section 2 of the Industr ial Disputes Act, 1947, defining
employer and wor kman, r espectively, see Appendix.
legal heir has been allowed a deduction under this Act on account of
any loss or damage caused by such disaster .
Explan ation .For the pur poses of this clause, the expr ession disas-
ter shall have the meaning assigned to it under clause (d) of sec-
tion 2
59
of the Disaster Management Act, 2005 (53 of 2005);]
60
[(10C)
61
any amount r eceived
62

63
[or r eceivable] by an employee of
(i) a public sector company ; or
(ii) any other company ; or
(iii) an author ity established under a Centr al, State or Pr ovincial Act;
or
(iv) a local
64
[author ity ; or ]
65
[(v) a co-oper ative society ; or
(vi) a Univer sity established or incor por ated by or under a Centr al,
State or Pr ovincial Act and an institution declar ed to be a
Univer sity under section 3 of the Univer sity Gr ants Commission
Act, 1956 (3 of 1956) ; or
(vii) an Indian Institute of Technology within the meaning of clause
(g) of section 3
66
of the Institutes of Technology Act, 1961 (59 of
1961); or
67
[(viia) any State Gover nment; or ]
68
[(viib) the Centr al Gover nment; or ]
69
[(viic) an institution, having impor tance thr oughout India or in any
State or States, as the Centr al Gover nment may, by notification
in the Official Gazette
70
, specify in this behalf; or ]
(viii) such institute of management as the Centr al Gover nment may,
by notification
71
in the Official Gazette, specify in this behalf,]
S. 10(10C) I.T. ACT, 1961 1.56
59. For the definition of ter m disaster , see Appendix.
60. Substituted by the Finance Act, 1993, w.e.f. 1-4-1993. Pr ior to substitution, clause (10C) was
inser ted by the Finance Act, 1987, w.e.f. 1-4-1987 and later substituted by the Finance Act,
1992, w.e.f. 1-4-1993.
61. See also Cir cular No. 640, dated 26-11-1992 and Cir cular F. No. 184/ 7/ 2003-ITAT, dated
62. For the meaning of expr ession amount r eceived, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
64. Substituted for author ity, by the Finance Act, 1994, w.e.f. 1-4-1995.
66. Clause (g) of section 3 of the Institutes of Technology Act, 1961, defines Institute as
follows:
(g) Institute means any of the Institutions mentioned in section 2 and includes the
Indian Institute of Technology, Khar agpur , incor por ated under the Indian Institute
of Technology (Khar agpur ) Act, 1956 (5 of 1956);
68. Inser ted, ibid., w.e.f. 1-4-2002.
70. For notified institutions, see Taxmanns Master Guide to Income-tax Act.
71. For notified Institutes of Management, see Taxmanns Master Guide to Income-tax Act.
1.57 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(10CC)
72
[on his]
73
[voluntar y r etir ement or ter mination of his ser vice, in
accor dance with any scheme or schemes of voluntar y r etir ement or
in the case of a public sector company r efer r ed to in sub-clause (i), a
scheme of voluntar y separ ation, to the extent such amount does not
exceed five lakh r upees] :
Provided that the schemes of the said companies or author ities
74
[or
societies or Univer sities or the Institutes r efer r ed to in sub-clauses
(vii) and (viii)], as the case may be, gover ning the payment of such
amount ar e fr amed in accor dance with such guidelines (including
in ter alia cr iter ia of economic viability) as may be
75
pr escr ibed
76
[***] :
Provided further that wher e exemption has been allowed to an
employee under this clause for any assessment year , no exemption
ther eunder shall be allowed to him in r elation to any other assessment
year ;]
77
[(10CC) in the case of an employee, being an individual der iving income in the
natur e of a per quisite, not pr ovided for by way of monetar y payment,
within the meaning of clause (2) of section 17, the tax on such income
actually paid by his employer , at the option of the employer , on behalf
of such employee, notwithstanding anything contained in section
200
78
of the Companies Act, 1956 (1 of 1956);]
72. Substituted for at the time of his by the Finance Act, 2003, w.e.f. 1-4-2004.
73. Substituted for voluntar y r etir ement, in accor dance with any scheme or schemes of
voluntar y r etir ement, to the extent such amount does not exceed five lakh r upees by the
Finance Act, 2000, w.e.f. 1-4-2001.
75. Rule 2BA pr escr ibes r equir ements for a Scheme of Voluntar y Retir ement, which ar e as
follows :
(1) It applies to an employee who has completed ten year s of ser vice or completed 40 year s
of age. This condition is not applicable in case of amount r eceived by an employee of a
public sect or company under scheme of volunt ar y separ at ion fr amed by t he said
company. (2) It applies to all employees (by whatever name called), including wor ker s and
executives of the company/ author ity/ co-oper ative society excepting dir ector s of the
company/ co-oper ative society. (3) The scheme of voluntar y r etir ement/ separ ation has
been dr awn to r esult in over all r eduction in the existing str ength of the employees. (4) The
vacancy caused by voluntar y r etir ement/ separ ation is not to be filled up, nor , the r etir ing
employee is to be employed in another company or concer n belonging to the same
management. (5) The amount r eceivable on account of voluntar y r etir ement/ separ ation
of the employees, does not exceed the amount equivalent to thr ee months salar y for each
completed year of ser vice or salar y at the time of r etir ement multiplied by the balance
months of ser vice left befor e the date of his r etir ement on super annuation.
76. Wor ds and such schemes in r elation to companies r efer r ed to in sub-clause (ii) or co-
oper ative societies r efer r ed to in sub-clause (v) ar e appr oved by the Chief Commissioner
or , as the case may be, Dir ector -Gener al in this behalf omitted by the Finance Act, 2000,
w.e.f. 1-4-2001. Ear lier the quoted wor ds wer e amended by the Finance Act, 1994, w.e.f.
1-4-1995.
79
[(10D) any sum r eceived under a life insur ance policy, including the sum
allocated by way of bonus on such policy, other than
(a) any sum r eceived under sub-section (3) of section 80DD or sub-
section (3) of section 80DDA*; or
(b) any sum r eceived under a Keyman insur ance policy; or
(c) any sum r eceived under an insur ance policy issued on or after the
1st day of Apr il, 2003 in r espect of which the pr emium payable for
any of the year s dur ing the ter m of the policy exceeds twenty per
cent of the actual capital sum assur ed:
Provided that the pr ovisions of this sub-clause shall not apply to
any sum r eceived on the death of a per son:
Provided further that for the pur pose of calculating the actual
capital sum assur ed under this sub-clause, effect shall be given
to the
80
[Explan ation to sub-section (3) of section 80C or the
Explan ation to sub-section (2A) of section 88, as the case may be].
Explan ation .For the pur poses of this clause, Keyman insur ance
policy means a life insur ance policy taken by a per son on the life of
another per son who is or was the employee of the fir st-mentioned
per son or is or was connected in any manner whatsoever with the
business of the fir st-mentioned per son;]
(11) any payment fr om a pr ovident fund to which the Pr ovident Funds
Act, 1925 (19 of 1925), applies
81
[or fr om any other pr ovident fund set
up by the Centr al Gover nment and notified
82
by it in this behalf in the
Official Gazette ];
(12) the accumulated balance due and becoming payable to an employee
par ticipating in a r ecognised pr ovident fund, to the extent pr ovided in
r ule 8 of Par t A of the Four th Schedule ;
83
[(13) any payment fr om an appr oved super annuation fund made
S. 10(13) I.T. ACT, 1961 1.58
79. Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Pr ior to its substitution, clause (10D),
as inser ted by the Finance (No. 2) Act, 1991, w.r .e.f. 1-4-1962, and later on amended by the
Finance Act, 1995, w.e.f. 1-4-1996 and Finance (No. 2) Act, 1996, w.e.f. 1-10-1996, r ead as
under :
(10D) any sum r eceived under a life insur ance policy, including the sum allocated by
way of bonus on such policy other than any sum r eceived under sub-section (3)
of section 80DDA or under a Keyman insur ance policy.
Explan ation .For the pur poses of this clause, Keyman insur ance policy means
a life insur ance policy taken by a per son on the life of another per son who is or
was the employee of the fir st mentioned per son or is or was connected in any
manner whatsoever with the business of the fir st mentioned per son;
80. Subst it ut ed for Explan ation to sub-section (2A) of section 88 by the Finance Act, 2005,
w.e.f. 1-4-2006.
82. For notified public pr ovident fund, see Notification No. SO 2430, dated 2-7-1968. For
83. Substituted by the Finance Act, 1965, w.r .e.f. 1-4-1962.
*With effect fr om 1-4-2004, section 80DD has been substituted for sections 80DD & 80DDA.
(i) on the death of a beneficiar y ; or
(ii) to an employee in lieu of or in commutation of an annuity on his
r etir ement at or after a specified age or on his becoming incapa-
citated pr ior to such r etir ement ; or
(iii) by way of r efund of contr ibutions on the death of a beneficiar y;
or
(iv) by way of r efund of contr ibutions to an employee on his leaving
the ser vice in connection with which the fund is established
other wise than by r etir ement at or after a specified age or on
his becoming incapacitated pr ior to such r etir ement, to the
extent to which such payment does not exceed the contr ibutions
made pr ior to the commencement of this Act and any inter est
ther eon;]
84
[
85
(13A) any special allowance specifically gr anted to an assessee by his
employer to meet expenditur e actually incur r ed on payment of r ent
(by whatever name called) in r espect of r esidential accommoda-
tion occupied by the assessee, to such extent
86
[* * *] as may be
pr escr ibed
87
having r egar d to the ar ea or place in which such accom-
modation is situate and other r elevant consider ations.]
88
nothing contained in this clause shall apply in a case wher e
84. Inser ted by the Dir ect Taxes (Amendment) Act, 1964, w.e.f. 6-10-1964.
85. See also Cir cu lar No. 90, dat ed 26-6-1972, Let t er F. No. 12/ 19/ 64-IT (A-I), dat ed
2-1-1967 and Cir cular No. 9/ 2003, dated 18-11-2003. For details, see Taxmanns Master
Guide to Income-tax Act.
86. (not exceeding four hundr ed r upees per month) omitted by the Finance Act, 1986, w.e.f.
1-4-1987. Ear lier , in this omitted expr ession four was substituted for thr ee by the
Finance Act, 1975, w.e.f. 1-4-1975.
87. Rule 2A pr escr ibes the quantum of exemption available, which will be the least of the
following :
Bombay/ Calcutta/ Delh i/ Madras Oth er Cities
Allowance actually r eceived Allowance actually r eceived
Rent paid in excess of 10%of salar y Rent paid in excess of 10%of salar y
50 per cent of salar y 40 per cent of salar y
Salar y for this pur pose includes basic salar y as well as dear ness allowance if the ter ms
of employment so pr ovide. It also includes commission based on a fixed per centage of
tur nover achieved by an employee as per ter ms of contr act of employment but excludes
all other allowances and per quisites. In view of Explan ation (ii) to r ule 2A, basic pay,
dear ness allowance and commission ar e deter mined on due basis in r espect of the per iod
dur ing which r ental accommodation is occupied by the employee in the pr evious year .
Thus, emoluments of a per iod other than pr evious year ar e not to be consider ed, even
though such amount is r eceived (as well as taxed) dur ing the pr evious year . Again,
emoluments of the per iod dur ing which r ental accommodation is not occupied in the
pr evious year ar e left out of computation. It is impor tant to note that wher e r ent paid is
10 per cent or less than 10 per cent of salar y, no exemption will be admissible. Again
exemption is denied wher e an employee lives in his own house, or in a house for which he
does not pay r ent.
(a) the r esidential accommodation occupied by the assessee is owned
by him ; or
(b) the assessee has not actually incur r ed expenditur e on payment of
r ent (by whatever name called) in r espect of the r esidential
accommodation occupied by him ;]
89
[(14) (i) any such special allowance or benefit, not being in the natur e of a
per quisite within the meaning of clause (2) of section 17, specifically
gr ant ed t o meet expenses wholly, necessar ily and exclusively
incur r ed
90
in the per for mance of the duties of an office or employ-
ment of pr ofit
91
,
92
[as may be pr escr ibed], to the extent to which such
expenses ar e actually incur r ed for that pur pose ;
(ii) any such allowance gr anted to the assessee either to meet his
per sonal expenses at the place wher e the duties of his office or
employment of pr ofit
91
ar e or dinar ily per for med by him or at the
place wher e he or dinar ily r esides, or to compensate him for the
incr eased cost of living,
93
[as may be pr escr ibed and to the extent as
may be pr escr ibed] :]
94
[Provided that nothing in sub-clause (ii) shall apply to any allowance
in the natur e of per sonal allowance gr anted to the assessee to
r emuner ate or compensate him for per for ming duties of a special
natur e r elating to his office or employment unless such allowance is
r elated to the place of his posting or r esidence ;]
(14A)
95
[***]
S. 10(14A) I.T. ACT, 1961 1.60
89. Substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Pr ior to its
subst it ut ion, clause (14) was amended by the Finance Act, 1975, w.r .e.f. 1-4-1962.
90. For the meaning of the ter ms/ expr essions incur r ed and office or employment of pr ofit,
see Taxmanns Dir ect Taxes Manual, Vol. 3.
91. For the meaning of the expr ession office or employment of pr ofit, see Taxmanns Dir ect
92. Substituted for as the Centr al Gover nment may, by notification in the Official Gazette,
specify by the Finance Act, 1995, w.e.f. 1-7-1995.
For pr escr ibed allowances, see r ule 2BB(1).
93. Substituted for as the Centr al Gover nment may, by notification in the Official Gazette,
specify, to the extent specified in the notification by the Finance Act, 1995, w.e.f. 1-7-1995.
For pr escr ibed allowances, see r ule 2BB(2).
94. Inser ted by the Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989.
95. Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Pr ior to its omission, clause (14A), as
inser ted by the Finance Act, 1989, w.e.f. 1-4-1989, r ead as under :
(14A) any income r eceived by a public financial institution as exchange r isk pr emium
fr om any per son bor r owing for eign cur r ency fr om such institution, pr ovided the
amount of such pr emium is cr edited by such institution to a fund specified under
clause (23E).
(i) the expr ession public financial institution shall have the meaning assigned
to it in section 4A of the Companies Act, 1956 (1 of 1956) ;
(ii) the expr ession exchange r isk pr emium means a pr emium paid by a per son
bor r owing for eign cur r ency fr om a public financial institution to cover the
r isk which may be bor ne by such institution on account of fluctuations in
exchange r ate of for eign cur r encies bor r owed by such institution ;
(15)
96
[(i) income by way of inter est, pr emium on r edemption or other
payment on such secur ities, bonds, annuity cer tificates, savings
cer tificates, other cer tificates issued by the Centr al Gover nment and
deposits as the Centr al Gover nment may, by notification
97
in the
Official Gazette, specify in this behalf, subject to such conditions and
limits as may be specified in the said notification ;]
98
[(iib)
99
[in the case of an individual or a Hindu undivided family,]
inter est on such Capital Investment Bonds as the Centr al Gover nment
may, by notification
1
in the Official Gazette, specify in this behalf :]
2
[Provided that the Centr al Gover nment shall not specify, for the
pur poses of this sub-clause, such Capital Investment Bonds on or
after the 1st day of June, 2002;]
3
[(iic) in the case of an individual or a Hindu undivided family, inter est
on such Relief Bonds
4
as the Centr al Gover nment may, by notification
in the Official Gazette, specify in this behalf ;]
5
[(iid) inter est on such bonds, as the Centr al Gover nment may, by
notification
6
in the Official Gazette, specify, ar ising to
(a) a non-r esident Indian, being an individual owning the bonds ; or
(b) any individual owning the bonds by vir tue of being a nominee or
sur vivor of the non-r esident Indian ; or
(c) any individual to whom the bonds have been gifted by the non-
r esident Indian :
Provided that the afor esaid bonds ar e pur chased by a non-r esident
Indian in for eign exchange and the inter est and pr incipal r eceived in
r espect of such bonds, whether on their matur ity or other wise, is not
allowable to be taken out of India :
Provided further that wher e an individual, who is a non-r esident
Indian in any pr evious year in which the bonds ar e acquir ed, becomes
a r esident in India in any subsequent year , the pr ovisions of this sub-
clause shall continue to apply in r elation to such individual :
96. Substituted for sub-clauses (i), (ia), (ib), (ii) and (iia) by the Dir ect Tax Laws (Amendment)
Act, 1987, w.e.f. 1-4-1989. Or iginal sub-clauses (ia) and (ib) wer e inser ted by the Taxation
Laws (Amendment & Miscellaneous Pr ovisions) Act, 1965, w.e.f. 4-12-1965 and Special
Bear er Bonds (Immunities & Exemptions) Act, 1981, w.e.f. 12-1-1981, r espectively ; sub-
clause (ii) was amended by the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965, the Finance Act,
1979, w.e.f. 1-4-1980 and the Finance Act, 1987, w.r .e.f. 1-4-1983 ; and sub-clause (iia) was
inser ted by the Finance Act, 1968, w.e.f. 1-4-1969.
97. For notified secur ities, bonds, annuity cer tificates, savings cer tificates, etc., see Taxmanns
1. For notified capital investment bonds, see Taxmanns Master Guide to Income-tax Act.
4. For details see Taxmanns Master Guide to Income-tax Act.
6. For specified NRI bonds, see Taxmanns Master Guide to Income-tax Act.
Provided also that in a case wher e the bonds ar e encashed in a
pr evious year pr ior to their matur ity by an individual who is so
entitled, the pr ovisions of this sub-clause shall not apply to such
individual in r elation to the assessment year r elevant to such pr evious
year :
7
[Provided also that the Centr al Gover nment shall not specify, for the
pur poses of this sub-clause, such bonds on or after the 1st day of June,
2002.]
Explan ation .For the pur poses of this sub-clause, the expr ession
non-r esident Indian shall have the meaning assigned to it in clause
(e) of section 115C;]
(iii) inter est on secur ities held by the Issue Depar tment of the Centr al
Bank of Ceylon constituted under the Ceylon Monetary Law Act, 1949;
8
[(iiia) inter est payable to any bank incor por ated in a countr y outside
India and author ised to per for m centr al banking functions in that
countr y on any deposits made by it, with the appr oval of the Reser ve
Bank of India, with any scheduled bank.
Explan ation .For t he pur poses of t his sub-clause, scheduled
bank shall have the meaning assigned to it in
9
[clause (ii) of the
Explan ation to clause (viia) of sub-section (1) of section 36];]
10
[(iiib) inter est payable to the Nor dic Investment Bank, being a
multilater al financial institution constituted by the Gover nments of
Denmar k, Finland, Iceland, Nor way and Sweden, on a loan advanced
by it to a pr oject appr oved by the Centr al Gover nment in ter ms of the
Memor andu m of Under st anding ent er ed int o by t he Cent r al
Gover nment with that Bank on the 25th day of November , 1986;]
11
[(iiic) inter est payable to the Eur opean Investment Bank, on a loan
gr anted by it in pur suance of the fr amewor k-agr eement for financial
co-oper ation enter ed into on the 25th day of November , 1993 by the
Centr al Gover nment with that Bank;]
(iv) inter est payable
12
[(a) by Gover nment or a local author ity on moneys bor r owed by
it befor e the 1st day of June, 2001 fr om, or debts owed by it
befor e the 1st day of June, 2001 to, sour ces outside India;]
(b) by an industr ial under taking in India on moneys bor r owed
by it under
13
[a loan agr eement enter ed into befor e the 1st day
S. 10(15) I.T. ACT, 1961 1.62
9. Substituted for the Explan ation to clause (iii) of sub-section (5) of section 11 by the Dir ect
12. Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Pr ior to its substitution, item (a), as
amended by the Finance Act, 1983, w.e.f. 1-4-1983, r ead as under :
(a) by Gover nment or a local author ity on moneys bor r owed by it fr om, or debts owed
by it to, sour ces outside India ;
13. Substituted for a loan agr eement enter ed into with any such financial institution by the
Finance Act, 2001, w.e.f. 1-4-2002.
of June, 2001 with any such financial institution] in a for eign
countr y as may be appr oved
14
in this behalf by the Centr al
Gover nment by gener al or special or der ;
15
(c) by an indust r ial under t aking in India on any moneys
bor r owed or debt incur r ed by it
16
[befor e the 1st day of June,
2001] in a for eign countr y in r espect of the pur chase outside
India of r aw mater ials
17
[or components] or capital plant and
machiner y,
18
[to the extent to which such inter est does not
exceed the amount of inter est calculated at the r ate appr oved
by the Centr al Gover nment in this behalf
19
, having r egar d to
the ter ms of the loan or debt and its r epayment.]
20
[
21
[Explan ation 1.]For the pur poses of this item, pur chase
of capital plant and machiner y includes the pur chase of such
capital plant and machiner y under a hir e-pur chase agr ee-
ment or a lease agr eement with an option to pur chase such
plant and machiner y.]
22
[Explan ation 2.For the r emoval of doubts, it is her eby
declar ed that the usance inter est payable outside India by an
under taking engaged in the business of ship-br eaking in
r espect of pur chase of a ship fr om outside India shall be
deemed to be the inter est payable on a debt incur r ed in a
for eign countr y in r espect of the pur chase outside India;]
23
[(d) by the Industr ial Finance Cor por ation of India established by
the Industr ial Finance Cor por ation Act, 1948 (15 of 1948), or
the Industr ial Development Bank of India established under
the Industr ial Development Bank of India Act, 1964 (18 of
1964),
24
[or the Expor t-Impor t Bank of India established
under the Expor t-Impor t Bank of India Act, 1981 (28 of
1981),]
25
[or the National Housing Bank established under
section 3 of the National Housing Bank Act, 1987 (53 of 1987),]
14. For appr oved institutions, see Taxmanns Master Guide to Income-tax Act.
15. See also Letter [F. No. 21/ 221/ 64-IT(A-I)], dated 24-8-1964. For details, see Taxmanns
Master Guide to Income-tax Act. For for m of application for obtaining exemption, r efer
Taxmanns Dir ect Taxes Cir cular s.
18. Substituted for in any case wher e the loan or debt is appr oved by the Centr al Gover n-
ment, having r egar d to its ter ms gener ally and in par ticular to the ter ms of its r epayment
by the Finance Act, 1964, w.e.f. 1-4-1964.
19. For the meaning of the ter m in this behalf, see Taxmanns Dir ect Taxes Manual, Vol. 3.
21. Explan ation r enumber ed as Explan ation 1 by the Taxation Laws (Amendment) Act, 2003,
w.r .e.f. 1-4-1962.
26
[or the Small Industr ies Development Bank of India estab-
lished under section 3 of the Small Industr ies Development
Bank of India Act, 1989 (39 of 1989),] or the Industr ial Cr edit
and Investment Cor por ation of India [a company for med and
r egister ed under the Indian Companies Act, 1913 (7 of 1913)],
on any moneys bor r owed by it fr om sour ces outside India
27
[befor e the 1st day of June, 2001], to the extent to which such
inter est does not exceed the amount of inter est calculated at
the r ate appr oved by the Centr al Gover nment in this behalf,
having r egar d to the ter ms of the loan and its r epayment;]
28
[(e) by any other financial institution established in India or a
banking company to which the Banking Regulation Act, 1949
(10 of 1949), applies (including any bank or banking insti-
tution r efer r ed to in section 51 of that Act), on any moneys
bor r owed by it fr om sour ces outside India
29
[befor e the 1st
day of June, 2001] under a loan agr eement appr oved by the
Centr al Gover nment wher e the moneys ar e bor r owed either
for the pur pose of advancing loans to industr ial under takings
in India for pur chase outside India of r aw mater ials or capital
plant and machiner y or for the pur pose of impor ting any
goods which the Centr al Gover nment may consider neces-
sar y to impor t in the public inter est, to the extent to which
such inter est does not exceed the amount of inter est calcu-
lated at the r ate appr oved by the Centr al Gover nment in this
behalf, having r egar d to the ter ms of the loan and its r epay-
ment;]
30
[(f) by an indust r ial under t aking in India on any moneys
bor r owed by it in for eign cur r ency fr om sour ces outside
India under a loan agr eement appr oved by the Centr al
Gover nment
31
[befor e the 1st day of June, 2001] having
r egar d to the need for industr ial development in India, to the
extent to which such inter est does not exceed the amount of
interest calculated at the rate approved by the Central Govern-
ment in this behalf, having r egar d to the ter ms of the loan and
its r epayment;
32
[(fa) by a scheduled bank
33
[***]
34
[to a non-r esident or to a per son
who is not or dinar ily r esident within the meaning of sub-
S. 10(15) I.T. ACT, 1961 1.64
33. Wor ds befor e the 1st day of Apr il, 2005 omitted by the Finance Act, 2005, w.e.f. 1-4-2006.
Ear lier the quoted wor ds wer e inser ted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2006.
section (6) of section 6] on deposits in for eign cur r ency
wher e the acceptance of such deposits by the bank is
appr oved by the Reser ve Bank of India.
35
[Explan ation .For the pur poses of this item, the expr ession
scheduled bank means the State Bank of India constituted
under the State Bank of India Act, 1955 (23 of 1955), a
subsidiar y bank as defined in the State Bank of India (Subsi-
diar y Banks) Act, 1959 (38 of 1959), a cor r esponding new
bank constituted under section 3 of the Banking Companies
(Acquisition and Tr ansfer of Under takings) Act, 1970 (5 of
1970), or under section 3 of the Banking Companies (Acqui-
sition and Tr ansfer of Under takings) Act, 1980 (40 of 1980), or
any other bank being a bank included in the Second Schedule
to the Reser ve Bank of India Act, 1934 (2 of 1934), but does
not include a co-oper ative bank;]
36
[(g) by a public company for med and r egister ed in India with the
main object of car r ying on the business of pr oviding long-
ter m finance for constr uction or pur chase of houses in India
for r esidential pur poses,
37
[being a company eligible for
deduction under clause (viii) of sub-section (1) of section 36]
on any moneys bor r owed by it in for eign cur r ency fr om
sour ces outside India under a loan agr eement appr oved by
the Centr al Gover nment
38
[befor e the 1st day of June, 2003],
to the extent to which such inter est does not exceed the
amount of inter est calculated at the r ate appr oved by the
Centr al Gover nment in this behalf, having r egar d to the ter ms
of the loan and its r epayment.]
Explan ation .For the pur poses of
39
[it ems (f)
40
[, (fa)] and
(g)], t he expr ession
41
for eign cur r ency shall have t he
meaning assigned to it in the For eign Exchange Regulation
Act, 1973 (46 of 1973);]
35. Substituted by the Finance Act, 2007, w.e.f. 1-4-2007. Pr ior to its substitution, the Explan ation
r ead as under :
Explan ation .For the pur poses of this item, the expr ession scheduled bank shall have
the meaning assigned to it in clause (ii) of the Explan ation to clause (viia) of sub-section
(1) of section 36;
37. Substituted for being a company appr oved by the Centr al Gover nment for the pur poses
of clause (viii) of sub-section (1) of section 36 by the Finance Act, 2000, w.e.f. 1-4-2000.
39. Substituted for this item by the Finance Act, 1983, w.e.f. 1-4-1983.
41. Clause (g) of section 2 of the For eign Exchange Regulation Act, 1973, defines for eign
cur r ency as follows:
(g) for eign cur r ency means any cur r ency other than *Indian cur r ency;
*Indian cur r ency has been defined in clause (k), see footnote 42 on p. 1.432 post.
For definitions of above ter ms under FEMA, 1999, see Appendix.
Should be r ead as clause.
42
[(h) by any public sector company in r espect of such bonds or
debentur es and subject to such conditions, including the
condition that the holder of such bonds or debentur es r egis-
ter s his name and the holding with that company, as the
Centr al Gover nment may, by notification
43
in the Official
Gazette, specify in this behalf;]
44
[(i) by Gover nment on deposits made by an employee of the
Centr al Gover nment or a State Gover nment
45
[or a public
sector company], in accor dance with such scheme as the
46
in the Official
Gazette, fr ame in this behalf, out of the moneys due to him on
account of his r etir ement, whether on super annuation or
other wise.]
47
[
48
[Explan ation 1].For the pur poses of this sub-clause, the expr es-
sion indust r ial under t aking means any under t aking which is
engaged in
(a) the manufactur e or pr ocessing of goods; or
49
[(aa) the manufacture of computer software or recording of programme
on any disc, tape, perforated media or other information device; or]
(b) the business of gener ation or distr ibution of electr icity or any
other for m of power ; or
50
[(ba) the business of pr oviding telecommunication ser vices; or ]
(c) mining; or
(d) the constr uction of ships; or
51
[(da) the business of ship-br eaking; or ]
52
[(e) the oper ation of ships or air cr afts or constr uction or oper ation of
r ail systems.]]
S. 10(15) I.T. ACT, 1961 1.66
43. For specified bonds/ debentur es of public sector companies, see Taxmanns Dir ect Taxes
Cir cular s.
46. For notified deposit schemes for r etir ed Gover nment employees/ employees of public
sector companies, r efer Taxmanns Dir ect Taxes Cir cular s. No new account can be opened
under the Schemes, fr om the close of business on 9-7-2004. For details, see Taxmanns
(e), as inser ted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991, r ead as under :
(e) the oper ation of ships or air cr afts;
53
[Explan ation 1A.For the pur poses of this sub-clause, the ex-
pr ession inter est shall not include inter est paid on delayed payment
of loan or on default if it is in excess of two per cent per annum over
the r ate of inter est payable in ter ms of such loan.]
54
[Explan ation 2.For the pur poses of this clause, the expr ession
int er est includes hedging t r ansact ion char ges on account of
cur r ency fluctuation;]
55
[(v) inter est on
(a) secu r it ies held by t he Welfar e Commissioner , Bhopal
GasVictims, Bhopal, in the Reser ve Banks SGL Account No.
SL/ DH 048;
(b) deposits for the benefit of the victims of the Bhopal gas leak
disaster held in such account, with the Reser ve Bank of India
or with a public sector bank, as the Centr al Gover nment may,
by notification
56
in the Official Gazette, specify, whether
pr ospectively or r etr ospectively but in no case ear lier than
the 1st day of Apr il, 1994 in this behalf.
public sector bank shall have the meaning assigned to it in the
Explan ation to clause (23D);]
57
[(vi) inter est on Gold Deposit Bonds issued under the Gold Deposit
Scheme, 1999 notified by the Centr al Gover nment;]
58
[(vii) in terest on bon ds
(a) issued by a local auth ority or by a State Pooled Fin an ce En tity;
an d
(b) specified by th e Cen tral Govern m en t by n otification
59
in th e
Official Gazette.
Explanation.For th e purposes of th is sub-clause, th e expression
State Pooled Fin an ce En titysh all m ean such en tity wh ich is set up in
1A, as inser ted by the Finance Act, 2000, w.e.f. 1-4-2001, r ead as under :
Explan ation 1A.For the pur poses of this sub-clause, the expr ession inter est shall not
include inter est paid on delayed payment of loan or on default.
(v), as inser ted by the Finance Act, 1990, w.r .e.f. 1-4-1989 and later amended by the Finance
Act, 1993, w.r .e.f. 2-11-1992, r ead as under :
(v) inter est on secur ities held by the Welfar e Commissioner , Bhopal Gas Victims,
Bhopal, in Reser ve Banks SGL Account No. SL/ DH 048;
56. For notified accounts, see Taxmanns Master Guide to Income-tax Act.
58. Substituted by the Finance Act, 2007, w.e.f. 1-4-2008. Pr ior t o it s subst it ut ion, sub-clause
(vii), as inser ted by the Finance Act, 2000, w.e.f. 1-4-2001, r ead as under :
(vii) inter est on bonds
(a) issued by a local author ity; and
(b) specified by the Centr al Gover nment by notification in the Official Gazette;
59. For notified bonds issued by local author ities, see Taxmanns Master Guide to Income-tax
Act .
accordan ce with th e guidelin es for th e Pooled Fin an ce Developm en t
Sch em e n otified by th e Cen tral Govern m en t in th e Min istry of Urban
Developmen t;]
60
[(viii) any income by way of inter est r eceived by a non-r esident or
a per son who is not or dinar ily r esident, in India on a deposit made on
or after the 1st day of Apr il, 2005, in an Offshor e Banking Unit
61
r efer r ed to in clause (u) of section 2 of the Special Economic Zones
Act, 2005;]
62
[(15A) any payment made, by an Indian company engaged in the business of
oper ation of air cr aft, to acquir e an air cr aft or an air cr aft engine
(other than a payment for pr oviding spar es, facilities or ser vices in
connection with the oper ation of leased air cr aft) on lease fr om the
Gover nment of a for eign State or a for eign enter pr ise under an
agr eement
63
[
64
[, not being an agr eement enter ed into between the 1st
day of Apr il, 1997 and the 31st day of Mar ch, 1999,] and] appr oved by
the Centr al Gover nment in this behalf :
65
[Provided that nothing contained in this clause shall apply to any
such agr eement enter ed into on or after the
66
[1st day of Apr il,
67
[2007]].]
Explan ation .For t he pur poses of t his clause, t he expr ession
for eign enter pr ise means a per son who is a non-r esident;]
68
(16)
69
scholar ships gr anted to meet the cost of education;
S. 10(16) I.T. ACT, 1961 1.68
60. Inser ted by the Special Economic Zones Act, 2005, w.e.f. 10-2-2006.
61. For definition of offshor e banking unit, see Appendix.
62. Substituted by the Finance Act, 1995, w.e.f. 1-4-1996. Pr ior to its substitution, clause (15A),
as inser ted by the Income-tax (Amendment) Act, 1989, w.e.f. 24-1-1989, r ead as under :
(15A) any payment made, by an Indian company engaged in the business of oper ation
of air cr aft, to acquir e an air cr aft on lease fr om the Gover nment of a for eign State
or a for eign enter pr ise under an agr eement appr oved by the Centr al Gover nment
in this behalf.
Explan ation .For the pur pose of this clause, for eign enter pr ise means a per son
who is a non-r esident;
64. Substituted for enter ed befor e the 1st day of Apr il, 1997 by the Finance Act, 1999, w.e.f.
1-4-2000.
66. Substituted for 1st day of October , 2005 by the Taxation Laws (Amendment) Act, 2005,
w.e.f. 1-4-2006. Ear lier 1st day of October , 2005 was substituted for 1st day of Apr il,
2005 by the Finance Act, 2005, w.e.f. 1-4-2006.
68. See also Letter [F. No. 24/ 35/ 66-IT(A-I)], dated 4-10-1966, Letter [F. No. 24/ 2/ 69-IT
(A-I)], dated 14-1-1968, Letter [F. No. 24/ 25/ 68-IT(A-I)], dated 18-9-1966, Letter [F. No. 24/
22/ 67-IT(A-I)], dated 7-7-1967, Letter [F. No. 25/ 37/ 66-IT(A-I)], dated 2-12-1966, Letter [F.
No. 24/ 7/ 64-IT(A-I)], dated 24-3-1964, Letter [F. No. 24/ 4/ 64-IT(A-I)], dated 12-2-1964,
Letter [F. No. 24/ 34/ 62-IT(A-I)], dated 25-1-1963, Cir cular No. 3(XXIII-23), dated 12-1-
1961, Cir cular No. 49 (XXIII-12), dated 13-12-1956, Income-tax Cir cular s, published by
Dir ector ate of Inspection (Resear ch, Statistics and Publication), 1968 edn., p. 89 and
Cir cular No. 11 (XXIII-24), dated 4-4-1961. For details, see Taxmanns Master Guide to
Income-tax Act.
70
[(17) any income by way of
(i) daily allowance r eceived by any per son by r eason of his member -
ship of Par liament or of any State Legislatur e or of any Commit-
tee ther eof;
71
[* * *]
72
[(ii) any allowance r eceived by any per son by r eason of his member -
ship of Par liament under the Member s of Par liament (Constitu-
ency Allowance) Rules, 1986;
73
[(iii) any constituency allowance r eceived by any per son by r eason of
his member ship of any State Legislatur e under any Act or r ules
made by that State Legislatur e;]]]
74
[(17A) any payment made, whether in cash or in kind,
(i) in pur suance of any awar d instituted in the public inter est by the
Centr al Gover nment or any State Gover nment or instituted by
any other body and appr oved
75
by the Centr al Gover nment in this
behalf; or
(ii) as a r ewar d by the Centr al Gover nment or any State Gover nment
for such pur poses as may be appr oved
75
by the Centr al Gover n-
ment in this behalf in the public inter est;]
76
[(18) any income by way of
(i) pension r eceived by an individual who has been in the ser vice of
the Centr al Gover nment or State Gover nment and has been
awar ded Par am Vir Chakr a or Maha Vir Chakr a or Vir
Chakr a or such other gallantr y awar d as the Centr al Gover n-
77
behalf;
(ii) family pension r eceived by any member of the family of an
individual r efer r ed to in sub-clause (i).
70. Substituted by the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986,
w.e.f. 1-4-1986. Pr ior to its substitution, clause (17) was amended by the Finance Act, 1976,
w.e.f. 1-4-1976.
71. Wor d and omitted by the Finance Act, 1987, w.r .e.f. 1-4-1986.
72. Substituted by the Finance Act, 1987, w.r .e.f. 1-4-1986. Ear lier sub-clause (ii) was amended
by t he Taxat ion Laws (Amendment and Miscellaneous Pr ovisions) Act , 1986, w.e.f.
1-4-1986.
(iii), as amended by the Finance Act, 1997, w.e.f. 1-4-1998, r ead as under :
(iii) all other allowances not exceeding two thousand r upees per month in the aggr egate
r eceived by any per son by r eason of his member ship of any State Legislatur e or of
any Committee ther eof, which the Centr al Gover nment may, by notification* in the
Official Gazette, specify in this behalf;
*For notified allowances, see Taxmanns Master Guide to Income-tax Act.
74. Subst it ut ed for clauses (17A), (17B) and (18) by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989. Or iginal clauses (17A) and (17B) wer e inser ted by the Dir ect Taxes
(Amendment) Act, 1974, w.r .e.f. 1-4-1973. Clause (17A) was later on amended by the
Finance Act, 1980, w.e.f. 1-4-1980.
75. For notified awar ds/ r ewar ds, see Taxmanns Master Guide to Income-tax Act.
77. For notified gallantr y awar ds, see Taxmanns Master Guide to Income-tax Act.
Explan ation .For t he pur poses of t his clause, t he expr ession
family shall have the meaning assigned to it in the Explan ation to
clause (5);]
(18A)
78
79
[(19) family pension r eceived by the widow or childr en or nominated heir s,
as the case may be, of a member of the ar med for ces (including par a-
militar y for ces) of the Union, wher e the death of such member has
occur r ed in the cour se of oper ational duties, in such cir cumstances
and subject to such conditions, as may be pr escr ibed
80
;]
81
[(19A) the annual value of any one palace in the occupation of a Ruler , being
a palace, the annual value wher eof was exempt fr om income-tax
befor e the commencement of the Constitution (Twenty-sixth Amend-
ment) Act, 1971, by vir tue of the pr ovisions of the Mer ged States
(Taxation Concessions) Or der , 1949, or the Par t B States (Taxation
Concessions) Or der , 1950, or , as the case may be, the Jammu and
Kashmir (Taxation Concessions) Or der , 1958:
Provided that for the assessment year commencing on the 1st day of
Apr il, 1972, the annual value of ever y such palace in the occupation
82
of such Ruler dur ing the r elevant pr evious year shall be exempt fr om
income-tax;]
83
(20) the income of a local author ity which is char geable under the head
84
[* * *] Income fr om house pr oper ty, Capital gains or Income fr om
other sour ces or fr om a tr ade or business car r ied on by it which
accr ues or ar ises fr om the supply of a commodity or ser vice
85
[(not
being water or electr icity) within its own jur isdictional ar ea or fr om
the supply of water or electr icity within or outside its own jur isdic-
tional ar ea].
86
[Explan ation .For the pur poses of this clause, the expr ession local
author ity means
(i) Panchayat as r efer r ed to in clause (d) of ar ticle 243 of the
Constitution
87
; or
S. 10(20) I.T. ACT, 1961 1.70
78. Pr ior to its omission, clause (18A), as inser ted by the Ruler s of Indian States (Abolition of
Pr ivileges) Act, 1972, w.e.f. 9-9-1972, r ead as under :
(18A) any ex gratia payments made by the Centr al Gover nment consequent on the
abolition of pr ivy pur se;
79. Inser ted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. Ear lier or iginal clause (19) was
omitted by the Ruler s of Indian States (Abolition of Pr ivileges) Act, 1972, w.e.f. 2-4-1973.
80. See r ule 2BBA for pr escr ibed cir cumstances and conditions.
81. Inser t ed by t he Ruler s of Indian St at es (Abolit ion of Pr ivileges) Act , 1972, w.r .e.f.
28-12-1971.
82. For the meaning of the ter m occupation, see Taxmanns Dir ect Taxes Manual, Vol. 3.
84. Inter est on secur ities, omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
85. Substituted for within its own jur isdictional ar ea by the Finance (No. 2) Act, 1971, w.e.f.
1-4-1972.
87. See Appendix.
(ii) Municipality as r efer r ed to in clause (e) of ar ticle 243P of the
Constitution
88
; or
(iii) Municipal Committee and Distr ict Boar d,
legally entitled to, or entr usted by the Gover nment with, the
contr ol or management of a Municipal or local fund; or
(iv) Cantonment Boar d as defined in section 3
89
of the Cantonments
Act, 1924 (2 of 1924);]
(20A)
89
[***]
90
[
91
(21)
92
any income of a scientific r esear ch association for the time being
appr oved for the pur pose of clause (ii) of sub-section (1) of section 35:
Provided that the scientific r esear ch association
(a) applies its income, or accumulates it for application, wholly and
exclusively to the objects for which it is established, and the
pr ovisions of sub-section (2) and sub-section (3) of section 11 shall
apply in r elation to such accumulation subject to the following
modifications, namely :
(i) in sub-section (2),
(1) the wor ds, br ackets, letter s and figur e r efer r ed to in
clause (a) or clause (b) of sub-section (1) r ead with the
Explan ation to that sub-section shall be omitted;
(2) for the wor ds to char itable or r eligious pur poses, the
wor ds for the pur poses of scientific r esear ch shall be
substituted;
(3) the r efer ence to Assessing Officer in clause (a) ther eof
shall be constr ued as a r efer ence to the pr escr ibed
author ity r efer r ed to in clause (ii) of sub-section (1) of
section 35;
(ii) in sub-section (3), in clause (a), for the wor ds char itable or
r eligious pur poses, the wor ds the pur poses of scientific
r esear ch shall be substituted; and
88. See Appendix.
89. Omitted by the Finance Act, 2002, w.e.f. 1-4-2003. Pr ior to its omission, clause (20A), as
inser ted by the Finance Act, 1970, w.r .e.f. 1-4-1962, r ead as under :
(20A) any income of an author ity constituted in India by or under any law enacted either
for the pur pose of dealing with and satisfying the need for housing accommoda-
tion or for the pur pose of planning, development or impr ovement of cities, towns
and villages, or for both;
90. Substituted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1990. Ear lier clause
(21), was amended by the Finance Act, 1983, w.e.f. 1-4-1984, Dir ect Tax Laws (Amendment)
Act, 1987, w.e.f. 1-4-1989 and Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
For r elevant case laws, see Taxmanns Master Guide to Income-tax Act.
92. See r ule 17 and For m No. 10, for notice of accumulation of income by char itable tr ust or
institution [to be fur nished befor e expir y of time allowed under section 139(1)].
93
[(b) does not invest or deposit its funds, other than
(i) any assets held by the scientific r esear ch association wher e
such assets for m par t of the cor pus of the fund of the
association as on the 1st day of June, 1973;
(ii) any assets (being debentur es issued by, or on behalf of, any
company or cor por ation), acquir ed by the scientific r esear ch
association befor e the 1st day of Mar ch, 1983;
(iii) any accr etion to the shar es, for ming par t of the cor pus of the
fund mentioned in sub-clause (i), by way of bonus shar es
allotted to the scientific r esear ch association;
(iv) voluntar y contr ibutions r eceived and maintained in the for m
of jeweller y, fur nitur e or any other ar ticle as the Boar d may,
by notification in the Official Gazette, specify,
for any per iod dur ing the pr evious year other wise than in any one
or mor e of the for ms or modes specified in sub-section (5) of
section 11:]
94
[Provided further that the exemption under this clause shall not be
denied in r elation to voluntar y contr ibution, other than voluntar y
contr ibution in cash or voluntar y contr ibution of the natur e r efer r ed
to in clause (b) of the fir st pr oviso to this clause, subject to the
condition that such voluntar y contr ibution is not held by the scientific
r esear ch association, other wise than in any one or mor e of the for ms
or modes specified in sub-section (5) of section 11, after the expir y of
one year fr om the end of the pr evious year in which such asset is
acquir ed or the 31st day of Mar ch, 1992, whichever is later :
Provided also] that nothing contained in this clause shall apply in
r elation to any income of the scientific r esear ch association, being
pr ofits and gains of business, unless the business is incidental to the
attainment of its objectives and separ ate books of account ar e
maintained by it in r espect of such business:]
95
[Provided also that wher e the scientific r esear ch association is
appr oved by the Centr al Gover nment and subsequently that Gover n-
ment is satisfied that
(i) the scientific r esear ch association has not applied its income in
accor dance with the pr ovisions contained in clause (a) of the fir st
pr oviso; or
(ii) the scientific r esear ch association has not invested or deposited
its funds in accor dance with the pr ovisions contained in clause (b)
of the fir st pr oviso; or
(iii) the activities of the scientific r esear ch association ar e not genu-
ine; or
S. 10(21) I.T. ACT, 1961 1.72
94. Substituted for the wor ds Pr ovided fur ther by the Finance (No. 2) Act, 1991, w.r .e.f.
1-4-1990.
(iv) the activities of the scientific r esear ch association ar e not being
car r ied out in accor dance with all or any of the conditions subject
to which such association was appr oved,
it may, at any time after giving a r easonable oppor tunity of showing
cause against the pr oposed withdr awal to the concer ned association,
by or der , withdr aw the appr oval and for war d a copy of the or der
withdr awing the appr oval to such association and to the Assessing
Officer ;]
(22)
96
(22A)
97
98
[(22B) any income of such news agency set up in India solely for collection
and distr ibution of news as the Centr al Gover nment may, by notifica-
tion
99
in the Official Gazette, specify in this behalf:
Provided that the news agency applies its income or accumulates it
for application solely for collection and distr ibution of news and does
not distr ibute its income in any manner to its member s:
Provided further that any notification issued by the Centr al Gover n-
ment under this clause shall, at any one time, have effect for such
assessment year or year s, not exceeding thr ee assessment year s
(including an assessment year or year s commencing befor e the date
on which such notification is issued) as may be specified in the
notification:]
1
[Provided also that wher e the news agency has been specified, by
notification, by the Centr al Gover nment and subsequently that
Gover nment is satisfied that such news agency has not applied or
accumulated or distr ibuted its income in accor dance with the
pr ovisions contained in the fir st pr oviso, it may, at any time after
giving a r easonable oppor tunity of showing cause, r escind the
notification and forward a copy of the order rescinding the notification
to such agency and to the Assessing Officer ;]
96. Pr ior t o it s omission, clause (22) r ead as under :
(22) any income of a univer sity or other educational institution, existing solely for
educational pur poses and not for pur poses of pr ofit;
Clauses (22) and (22A) ar e now r e-enacted in section 10(23C).
97. Pr ior to its omission, clause (22A), as inser ted by the Finance Act, 1970, w.e.f. 1-4-1970, r ead
as under :
(22A) any income of a hospital or other institution for the r eception and tr eatment of
per sons suffer ing fr om illness or mental defectiveness or for the r eception and
t r eat ment of per sons dur ing convalescence or of per sons r equir ing medical
attention or r ehabilitation, existing solely for philanthr opic pur poses and not for
pur poses of pr ofit;
99. For notified news agencies, see Taxmanns Master Guide to Income-tax Act.
S. 10(23) I.T. ACT, 1961 1.74
2. Pr ior t o it s omission, clause (23), as amended by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989, Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, substituted
by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1990 and fur ther amended by
the Finance (No. 2) Act, 1991, w.r .e.f. 1-4-1990, Finance Act, 1992, w.r .e.f. 1-4-1990/ w.e.f.
1-4-1992 and Finance Act, 2000, w.e.f. 1-4-2001, r ead as under :
(23) any income of an association or institution established in India which may be
notified by the Centr al Gover nment in the Official Gazette having r egar d to the fact
t hat t he associat ion or inst it ut ion has as it s object t he cont r ol, super vision,
r egulation or encour agement in India of the games of cr icket, hockey, football,
tennis or such other games or spor ts as the Centr al Gover nment may, by notifica-
tion in the Official Gazette, specify in this behalf :
Provided t hat t he associat ion or inst it ut ion shall make an applicat ion in t he
pr escr ibed for m and manner to the pr escr ibed author ity for the pur pose of gr ant
of the exemption, or continuance ther eof, under this clause:
Provided further that the Centr al Gover nment may, befor e notifying the associa-
tion or institution under this clause, call for such documents (including audited
annual accounts) or infor mation fr om the association or institution as it thinks
necessar y in or der to satisfy itself about the genuineness of the activities of the
association or institution and that Gover nment may also make such inquir ies as it
may deem necessar y in this behalf :
Provided also that the association or institution,
(a) applies its income or accumulates it for application, wholly and exclusively
to the objects for which it is established and the pr ovisions of sub-section (2)
and sub-section (3) of section 11 shall apply in r elation to such accumulation
subject to the following modifications, namely :
(i) in sub-section (2),
(1) the wor ds, br ackets, letter s and figur e r efer r ed to in clause (a) or
clause (b) of sub-section (1) r ead with the Explan ation to that sub-
section shall be omitted;
(2) for the wor ds to char itable or r eligious pur poses, the wor ds for
the pur poses of games or spor ts shall be substituted;
(3) the r efer ence to Assessing Officer in clause (a) ther eof shall be
constr ued as a r efer ence to the pr escr ibed author ity r efer r ed to
in the fir st pr oviso to this clause;
(ii) in sub-section (3), in clause (a), for the wor ds char itable or r eligious
pur poses, the wor ds the pur poses of games or spor ts shall be substi-
tuted; and
(b) does not invest or deposit its funds, other than
(i) any assets held by the association or institution wher e such assets for m
par t of the cor pus of the fund of the association or institution as on the
1st day of June, 1973;
(ii) any assets (being debentur es issued by, or on behalf of, any company or
cor por ation), acquir ed by the association or institution befor e the 1st
day of Mar ch, 1983;
(iii) any accr etion to the shar es, for ming par t of the cor pus of the fund
mentioned in sub-clause (i), by way of bonus shar es allotted to the
association or institution;
(iv ) voluntar y contr ibutions r eceived and maintained in the for m of jeweller y,
fur nitur e or any other ar ticle as the Boar d may, by notification in the
Official Gazette, specify,
for any per iod dur ing the pr evious year other wise than in any one or mor e
of the for ms or modes specified in sub-section (5) of section 11; and
(23)
2
3
[
4
(23A) any income (other than income char geable under the head
5
[* * *]
Income fr om house pr oper ty or any income r eceived for r ender ing
any specific ser vices or income by way of inter est or dividends
der ived fr om it s invest ment s) of an associat ion or inst it ut ion
established in India having as its object the contr ol, super vision,
r egulation or encour agement of the pr ofession of law, medicine,
accountancy, engineer ing or ar chitectur e or such other pr ofession
6
as the Centr al Gover nment may specify in this behalf, fr om time to
time, by notification in the Official Gazette:
Provided that
(i) the association or institution applies its income, or accumulates
it for application, solely to the objects for which it is established;
and
(c) does not distr ibute any par t of its income in any manner to its member s
except as gr ants to any association or institution affiliated to it;
(d) applies the amount r eceived by way of donations r efer r ed to in clause (c)
of sub-section (2) of section 80G for pur poses of development of infr astr uc-
tur e for games or spor ts in India or for sponsor ing of games and spor ts in
India :
Provided also that the exemption under this clause shall not be denied in r elation
to any funds invested or deposited befor e the 1st day of Apr il, 1989 other wise than
in any one or mor e of the for ms or modes specified in sub-section (5) of section 11
if such funds do not continue to r emain so invested or deposited after the 30th day
of Mar ch, 1993 :
Provided also that the exemption under this clause shall not be denied in r elation
to voluntar y contr ibution, other than voluntar y contr ibution in cash or voluntar y
contr ibution of the natur e r efer r ed to in clause (b) of the thir d pr oviso to this clause,
subject t o t he condit ion t hat such volunt ar y cont r ibut ion is not held by t he
association or institution, other wise than in any one or mor e of the for ms or modes
specified in sub-section (5) of section 11, after the expir y of one year fr om the end
of the pr evious year in which such asset is acquir ed or the 31st day of Mar ch, 1992,
whichever is later :
Provided also that nothing contained in this clause shall apply in r elation to any
income of the association or institution, being pr ofits and gains of business, unless
the business is incidental to the attainment of its objectives and separ ate books of
account ar e maintained by it in r espect of such business :
Provided also that any notification issued by the Centr al Gover nment under this
clause in r elation to any association or institution shall, at any one time, have effect
for such assessment year or year s, not exceeding thr ee assessment year s (including
an assessment year or year s commencing befor e the date on which such notifica-
tion is issued), as may be specified in the notification*;
*For appr oved spor t s associat ions/ inst it u t ions, see Taxmanns Dir ect Taxes
Cir cular s.
Income-tax Act.
5. Inter est on secur ities or omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
6. For specified pr ofessions, see Taxmanns Master Guide to Income-tax Act.
S. 10(23AAA) I.T. ACT, 1961 1.76
(ii) the association or institution is for the time being appr oved
7
for
the pur pose of this clause by the Centr al Gover nment by gener al
or special or der :]
8
[Provided further that wher e the association or institution has been
appr oved by the Centr al Gover nment and subsequently that Gover n-
ment is satisfied that
(i) such association or institution has not applied or accumulated its
income in accor dance with the pr ovisions contained in the fir st
pr oviso; or
(ii) the activities of the association or institution ar e not being car r ied
out in accor dance with all or any of the conditions subject to
which such association or institution was appr oved,
cause against the pr oposed withdr awal to the concer ned association
or institution, by or der , withdr aw the appr oval and for war d a copy
of the order withdrawing the approval to such association or institution
and to the Assessing Officer ;]
9
[(23AA) any income r eceived by any per son on behalf of any Regimental Fund
or Non-Public Fund established by the ar med for ces of the Union for
the welfar e of the past and pr esent member s of such for ces or their
dependants;]
10
[(23AAA) any income r eceived by any per son on behalf of a fund established,
for such pur poses as may be notified
11
by the Boar d in the Official
Gazette, for the welfar e of employees or their dependants and of
which fund such employees ar e member s if such fund fulfils the
following conditions, namely :
(a) the fund
(i) applies its income or accumulates it for application, wholly
and exclusively to the objects for which it is established;
and
(ii) invests its funds and contr ibutions and other sums r eceived
by it in the for ms or modes specified in sub-section (5) of
section 11;
(b) the fund is appr oved by the Commissioner in accor dance with the
r ules
12
made in this behalf:
Provided that any such appr oval shall at any one time have effect for
such assessment year or year s not exceeding thr ee assessment year s
as may be specified in the or der of appr oval;]
7. For appr oved association/ institution, see Taxmanns Master Guide to Income-tax Act.
11. For notified pur poses, see Taxmanns Master Guide to Income-tax Act.
12. See r ule 16C and For m No. 9.
13
[(23AAB) any income of a fund, by whatever name called, set up by the Life
Insur ance Cor por ation of India on or after the 1st day of August, 1996
14
[or any other insur er ] under a pension scheme,
(i) to which contr ibution is made by any per son for the pur pose of
r eceiving pension fr om such fund;
(ii) which is appr oved by the Contr oller of Insur ance
15
[or the Insur -
ance Regulator y and Development Author ity established under
sub-section (1) of section 3 of the Insur ance Regulator y and
Development Author ity Act, 1999 (41 of 1999), as the case may be].
Explan ation .For the pur poses of this clause, the expr ession Con-
tr oller of Insur ance shall have the meaning assigned to it in clause
(5B) of section 2 of the Insur ance Act, 1938 (4 of 1938)
16
;]
17
[(23B) any income of an institution constituted as a public char itable tr ust or
r egister ed under the Societies Registr ation Act, 1860 (21 of 1860), or
under any law cor r esponding to that Act in for ce in any par t of India,
and existing solely for the development of khadi or village industr ies
or both, and not for pur poses of pr ofit, to the extent such income is
attr ibutable to the business of pr oduction, sale, or mar keting, of khadi
or pr oducts of village industr ies:
Provided that
(i) the institution applies its income, or accumulates it for applica-
tion, solely for the development of khadi or village industr ies or
both; and
(ii) the institution is, for the time being, appr oved for the pur pose of
this clause by the Khadi and Village Industr ies Commission:
Provided further that the Commission shall not, at any one time, gr ant
such appr oval for mor e than thr ee assessment year s beginning with
the assessment year next following the financial year in which it is
gr anted:
18
[Provided also that wher e the institution has been appr oved by the
Khadi and Village Industr ies Commission and subsequently that
Commission is satisfied that
(i) the institution has not applied or accumulated its income in
accor dance with the pr ovisions contained in the fir st pr oviso; or
(ii) the activities of the institution ar e not being car r ied out in
accor dance with all or any of the conditions subject to which such
institution was appr oved,
cause against the pr oposed withdr awal to the concer ned institution,
16. For text of section 2(5B) of the Insur ance Act, 1938, see Appendix.
S. 10(23BBB) I.T. ACT, 1961 1.78
by or der , withdr aw the appr oval and for war d a copy of the or der
withdr awing the appr oval to such institution and to the Assessing
Officer .]
(i) Khadi and Village Industr ies Commission means the Khadi and
Village Industr ies Commission established under the Khadi and
Village Industr ies Commission Act, 1956 (61 of 1956);
(ii)
19
khadi and village industr ies have the meanings r espectively
assigned to them in that Act;]
20
[(23BB) any income of an author ity (whether known as the Khadi and Village
Industr ies Boar d or by any other name) established in a State by or
under a State or Pr ovincial Act for the development of khadi or village
industr ies in the State.
19
khadi and village
industr ies have the meanings r espectively assigned to them in the
Khadi and Village Industr ies Commission Act, 1956 (61 of 1956);]
20
[(23BBA) any income of any body or author ity (whether or not a body cor por ate
or cor por ation sole) established, constituted or appointed by or under
any Centr al, State or Pr ovincial Act which pr ovides for the adminis-
tr ation of any one or mor e of the following, that is to say, public
r eligious or char itable tr usts or endowments (including maths,
temples, gur dwar as, wakfs, chur ches, synagogues, agiar ies or other
places of public r eligious wor ship) or societies for r eligious or
char itable pur poses r egister ed as such under the Societies Registr a-
tion Act, 1860 (21 of 1860), or any other law for the time being in for ce:
Provided that nothing in this clause shall be constr ued to exempt fr om
tax the income of any tr ust, endowment or society r efer r ed to
ther ein;]
21
[(23BBB) any income of the Eur opean Economic Community der ived in India
by way of inter est, dividends or capital gains fr om investments made
out of its funds under such scheme
22
as the Centr al Gover nment may,
by notification in the Official Gazette, specify in this behalf.
Explan ation .For the pur poses of this clause, Eur opean Economic
Community means the Eur opean Economic Community established
by the Tr eaty of Rome of 25th Mar ch, 1957;]
19. Clauses (d) and (h ) of section 2 of the Khadi and Village Industr ies Commission Act, 1956,
define khadi and village industr ies as follows :
(d) khadi means any cloth woven on handlooms in India fr om cotton, silk or woollen
yar n handspun in India or fr om a mixtur e of any two or all of such yar ns;
(h ) village industr ies means all or any of the industr ies specified in the Schedule and
includes any other industr y deemed to be specified in the Schedule by r eason of a
notification under section 3.
22. For notified scheme, see Taxmanns Master Guide to Income-tax Act.
1.79 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(23BBG)
23
[(23BBC ) any income of the SAARC Fund for Regional Pr ojects set up by
Colombo Declar ation issued on the 21st day of December , 1991 by the
Heads of State or Gover nment of the Member Countr ies of South
Asian Association for Regional Cooper ation established on the 8th
day of December , 1985 by the Char ter of the South Asian Association
for Regional Cooper ation;]
24
[(23BBD) any income of the Secr etar iat of the Asian Or ganisation of the
Supr eme Audit Inst it ut ions r egist er ed as ASOSAI-SECRETARIAT
under the Societies Registr ation Act, 1860 (21 of 1860) for
25
[ten
previous years relevan t to th e assessm en t years begin n in g an th e 1st
day of April, 2001 an d en din g on th e 31st day of March , 2011];
(23BBE) any income of the Insur ance Regulator y and Development Author ity
established under sub-section (1) of section 3 of the Insur ance
Regulator y and Development Author ity Act, 1999 (41 of 1999);]
26
[(23BBF) any income of the Nor th-Easter n Development Finance Cor por ation
Limited, being a company for med and r egister ed under the Compa-
nies Act, 1956 (1 of 1956) :
Provided that in computing the total income of the Nor th-Easter n
Development Finance Cor por ation Limited, the amount to the extent
of
(i) twenty per cent of the total income for assessment year beginning
on the 1st day of Apr il, 2006;
(ii) for ty per cent of the total income for assessment year beginning
(iii) sixty per cent of the total income for assessment year beginning
(iv) eighty per cent of the total income for assessment year beginning
(v) one hundr ed per cent of the total income for assessment year
beginning on the 1st day of Apr il, 2010 and any subsequent
assessment year or year s,
shall be included in such total income;]
27
[(23BBG) an y in com e of th e Cen tral Electricity Regu latory Com m ission
con stituted un der sub-section (1) of section 76 of th e Electricity Act,
2003 (36 of 2003);]
25. Substituted for seven pr evious year s r elevant to the assessment year s beginning on the
1st day of Apr il, 2001 and ending on the 31st day of Mar ch, 2008 by the Finance Act, 2007,
w.e.f. 1-4-2008. Ear lier the quoted wor ds wer e substituted for thr ee pr evious year s
r elevant to the assessment year s beginning on the 1st day of Apr il, 2001 and ending on the
31st day of Mar ch, 2004 by the Finance Act, 2003, w.e.f. 1-4-2004.
S. 10(23C) I.T. ACT, 1961 1.80
28
[
29
(23C) any income r eceived by any per son on behalf of
(i) the Pr ime Minister s National Relief Fund; or
(ii) the Pr ime Minister s Fund (Pr omotion of Folk Ar t); or
(iii) the Pr ime Minister s Aid to Students Fund;
30
[or ]
31
[(iiia) the National Foundation for Communal Har mony; or ]
32
[(iiiab) any univer sity or other educational institution
33
existing
33
solely
33
for educational pur poses and not for pur poses of pr ofit, and
which is wholly or substantially financed by the Gover nment; or
(iiiac) any hospital or other institution for the r eception and tr eatment
of per sons suffer ing fr om illness or mental defectiveness or for
the r eception and tr eatment of per sons dur ing convalescence or
of per sons r equir ing medical attention or r ehabilitation, existing
solely for philanthropic purposes and not for purposes of profit, and
which is wholly or substantially financed by the Gover nment; or
(iiiad) any univer sity or other educational institution
33
existing
33
solely
33
for educational pur poses and not for pur poses of pr ofit if the
aggr egate annual r eceipts of such univer sity or educational
institution do not exceed the amount of annual r eceipts as may be
pr escr ibed
34
; or
(iiiae) any hospital or other institution for the r eception and tr eatment
solely for philanthr opic pur poses and not for pur poses of pr ofit,
if the aggr egate annual r eceipts of such hospital or institution
do not exceed t he amount of annual r eceipt s as may be
pr escr ibed
34
; or ]
35
[(iv)
36
any other fund or institution established for char itable pur poses
37
[which may be appr oved by the pr escr ibed author ity
37a
], having
29. See also Cir cular No. 557, dated 19-3-1990, Cir cular No. 580, dated 14-9-1990 and Cir cular
No. 584, dated 13-11-1990. For details, see Taxmanns Master Guide to Income-tax Act.
30. Reintr oduced by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Ear lier , it
was omitted by the Dir ect Tax Laws (Amendment) Act, 1987, with effect fr om the same
dat e.
32. Sub-clauses (iiiab) t o (iiiae) inser ted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
33. For the meaning of the ter ms/ expr essions education, educational institution, other
educational institution, existing and solely, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
34. Amount pr escr ibed is Rs. 1 cr or e vide r ule 2BC.
35. Substituted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1990. Ear lier , sub-
clauses (iv) and (v) wer e omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989 and later r eintr oduced by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
36. For complete list of appr oved funds/ institutions, see Taxmanns Dir ect Taxes Cir cular s
and Taxmanns Year ly Tax Digest & Refer encer .
37. Substituted for which may be notified by the Centr al Gover nment in the Official Gazette
37a. Pr escr ibed author ity is Chief Commissioner or Dir ector Gener al. See r ule 2C and For m
No. 56.
r egar d to the objects of the fund or institution and its impor tance
thr oughout India or thr oughout any State or States; or
(v)
38
any tr ust (including any other legal obligation) or institution
wholly for public r eligious pur poses or wholly for public r eligious
and char itable pur poses,
39
[which may be appr oved by the pr e-
scr ibed author ity
39a
], having r egar d to the manner in which the
affair s of the tr ust or institution ar e administer ed and super vised
for ensur ing that the income accr uing ther eto is pr oper ly applied
for the objects ther eof;
40
[(vi) any univer sity or other educational institution
41
existing
41
solely
41
for educational pur poses and not for pur poses of pr ofit, other
than those mentioned in sub-clause (iiiab) or sub-clause (iiiad)
and which may be appr oved
42
by the pr escr ibed author ity
43
; or
(via) any hospital or other institution for the r eception and tr eatment
solely for philanthr opic pur poses and not for pur poses of pr ofit,
other than those mentioned in sub-clause (iiiac) or sub-clause
(iiiae) and which may be appr oved
44
by the pr escr ibed autho-
r ity
45
:]
Provided that the fund or tr ust or institution
46
[or any univer sity or
other educational institution
47
or any hospital or other medical insti-
tution] r efer r ed to in sub-clause (iv) or sub-clause (v)
46
[or sub-clause
(vi) or sub-clause (via)] shall make an application in the pr escr ibed
for m
48
and manner to the pr escr ibed author ity
49
for the pur pose of
1.81 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(23C)
38. For complete list of appr oved tr usts/ institutions, see Taxmanns Dir ect Taxes Cir cular s
39. Substituted for which may be notified by the Centr al Gover nment in the Official Gazette
39a. Pr escr ibed author ity is Chief Commissioner or Dir ector Gener al. See r ule 2C and For m
No. 56.
40. Sub-clauses (vi) and (via) inser ted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
41. For the meaning of the ter ms/ expr essions other educational institution, existing and
solely, see Taxmanns Dir ect Taxes Manual, Vol. 3.
42. For notified univer sity/ educational institutions, see Taxmanns Dir ect Taxes Cir cular s
43. Pr escr ibed author ity is Chief Commissioner or Dir ector Gener al. See r ule 2CA and For m
No. 56D. See also Notification No. SO 852(E), dated 30-5-2007. For details, see Taxmanns
44. For notified hospital/ institution, see Taxmanns Dir ect Taxes Cir cular s.
45. Pr escr ibed author ity is Chief Commissioner or Dir ector Gener al. See r ule 2CA and For m
No. 56D. See also Notification No. SO 852(E), dated 30-5-2007. For details, see Taxmanns
47. For the meaning of the expr ession other educational institution, see Taxmanns Dir ect
48. See r ule 2C/ For m No. 56 and r ule 2CA/ For m No. 56D.
49. The pr escr ibed author ity for pur poses of section 10(23C)(iv)/ (v), under r ule 2C, as well as
for pur poses of section 10(23C)(vi)/ (via), under r ule 2CA, is Chief Commissioner or
Dir ector Gener al.
gr ant of the exemption, or continuance ther eof, under sub-clause (iv)
or sub-clause (v)
50
[or sub-clause (vi) or sub-clause (via)] :
51
[Provided further that the pr escr ibed author ity, befor e appr oving
any fund or tr ust or institution or any univer sity or other educational
institution or any hospital or other medical institution, under sub-
clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), may
call for such documents (including audited annual accounts) or
infor mation fr om the fund or tr ust or institution or any univer sity or
other educational institution or any hospital or other medical institu-
tion, as the case may be, as it thinks necessar y in or der to satisfy itself
about the genuineness of the activities of such fund or tr ust or
institution or any univer sity or other educational institution or any
hospital or other medical institution, as the case may be, and the
pr escr ibed author ity may also make such inquir ies as it deems
necessar y in this behalf:]
Provided also that the fund or tr ust or institution
52
[or any univer sity
or other educational institution
53
or any hospital or other medical
institution] r efer r ed to in sub-clause (iv) or sub-clause (v)
52
[or sub-
clause (vi) or sub-clause (via)]
54
[(a) applies its income, or accumulates it for application, wholly
and exclusively to the objects for which it is established and
in a case wher e mor e than fifteen per cent of its income is
accumulated on or after the 1st day of Apr il, 2002, the per iod
of the accumulation of the amount exceeding fifteen per cent
of its income shall in no case exceed five year s; and]
S. 10(23C) I.T. ACT, 1961 1.82
51. Substituted by the Finance Act, 2007, w.e.f. 1-6-2007. Pr ior to its substitution, the second
pr oviso, as amended by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999 and later on
substituted by the Finance Act, 1999, w.e.f. 1-4-1999, r ead as under :
Provided further that the Centr al Gover nment, befor e notifying the fund or tr ust or
institution, or the pr escr ibed author ity, befor e appr oving any univer sity or other educa-
tional institution or any hospital or other medical institution, under sub-clause (iv) or sub-
clause (v) or sub-clause (vi) or sub-clause (via), may call for such documents (including
audited annual accounts) or infor mation fr om the fund or tr ust or institution or any
univer sity or other educational institution or any hospital or other medical institution, as
the case may be, as it thinks necessar y in or der to satisfy itself about the genuineness of
the activities of the fund or tr ust or institution or any univer sity or other educational
institution or any hospital or other medical institution, as the case may be, and the Centr al
Gover nment or the pr escr ibed author ity, as the case may be, may also make such inquir ies
as it deems necessar y in this behalf :
54. Substituted by the Finance Act, 2002, w.e.f. 1-4-2003. Pr ior to its substitution, clause (a),
as amended by the Finance Act, 2001, w.e.f. 1-4-2002, r ead as under :
(a) applies its income, or accumulates it for application, wholly and exclusively to the
objects for which it is established and in a case wher e mor e than twenty-five per
cent of its income is accumulated on or after the 1st day of Apr il, 2001, the per iod
of the accumulation of the amount exceeding twenty-five per cent of its income
shall in no case exceed five year s; and
55
[(b) does not invest or deposit its funds, other than
(i) any assets held by the fund, tr ust or institution
56
[or any
univer sity or other educational institution
57
or any hos-
pital or other medical institution] wher e such assets
for m par t of the cor pus of the fund, tr ust or institution
58
[or any univer sity or other educational institution or
any hospital or other medical institution] as on the 1st
day of June, 1973;
59
[(ia) any asset, being equity shar es of a public company, held
by any univer sity or other educational institution or any
hospital or other medical institution wher e such assets
for m par t of the cor pus of any univer sity or other
educational institution or any hospital or other medical
institution as on the 1st day of June, 1998;]
(ii) any assets (being debentur es issued by, or on behalf of,
any company or cor por ation), acquir ed by the fund,
tr ust or institution
60
[or any univer sity or other educa-
tional institution
61
or any hospital or other medical
institution] befor e the 1st day of Mar ch, 1983;
(iii) any accr etion to the shar es, for ming par t of the cor pus
mentioned in sub-clause (i)
62
[and sub-clause (ia)], by
way of bonus shar es allotted to the fund, tr ust or
institution
60
[or any univer sity or other educational
institution or any hospital or other medical institution] ;
(iv) voluntar y contr ibutions r eceived and maintained in the
for m of jeweller y, fur nitur e or any other ar ticle as the
Boar d may, by notification in the Official Gazette,
specify,
for any per iod dur ing the pr evious year other wise than in
any one or mor e of the for ms or modes specified in sub-
section (5) of section 11:]
Provided also that the exemption under sub-clause (iv) or sub-clause
(v) shall not be denied in r elation to any funds invested or deposited
befor e the 1st day of Apr il, 1989, other wise than in any one or mor e
of the for ms or modes specified in sub-section (5) of section 11 if such
S. 10(23C) I.T. ACT, 1961 1.84
funds do not continue to r emain so invested or deposited after the
30th day of Mar ch,
63
[1993] :
64
[Provided also that the exemption under sub-clause (vi) or sub-
clause (via) shall not be denied in r elation to any funds invested or
deposited befor e the 1st day of June, 1998, other wise than in any one
or mor e of the for ms or modes specified in sub-section (5) of section
11 if such funds do not continue to r emain so invested or deposited
after the 30th day of Mar ch, 2001 :]
65
[Provided also that the exemption under sub-clause (iv) or sub-
clause (v)
64
[or sub-clause (vi) or sub-clause (via)] shall not be denied
in r elation to voluntar y contr ibution, other than voluntar y contr ibu-
tion in cash or voluntar y contr ibution of the natur e r efer r ed to in
clause (b) of the thir d pr oviso to this sub-clause, subject to the
condition that such voluntar y contr ibution is not held by the tr ust or
institution
66
[or any univer sity or other educational institution or any
hospital or other medical institution], other wise than in any one or
mor e of the for ms or modes specified in sub-section (5) of section 11,
after the expir y of one year fr om the end of the pr evious year in which
such asset is acquir ed or the 31st day of Mar ch, 1992, whichever is
later :]
Provided also that nothing contained in sub-clause (iv) or sub-clause
(v)
67
[or sub-clause (vi) or sub-clause (via)] shall apply in r elation to any
income of the fund or tr ust or institution
67
[or any univer sity or other
educational institution or any hospital or other medical institution],
being pr ofits and gains of business, unless the business is incidental to
the attainment of its objectives and separ ate books of account ar e
maintained by it in r espect of such business:
Provided also that any
68
[notification issued by the Centr al Gover n-
ment under sub-clause (iv) or sub-clause (v), befor e the date on which
the Taxation Laws (Amendment) Bill, 2006 r eceives the assent of the
Pr esident*, shall, at any one time, have effect for such assessment year
or year s, not exceeding thr ee assessment year s] (including an assess-
ment year or year s commencing befor e the date on which such
notification is issued) as may be specified in the notification:]
69
[Provided also that wher e an application under the fir st pr oviso is
made on or after the date on which the Taxation Laws (Amendment)
63. Substituted for 1992 by the Finance Act, 1992, w.e.f. 1-4-1992. Ear lier 1992 was
substituted for 1990 by the Finance (No. 2) Act, 1991, w.r .e.f. 1-4-1990.
68. Substituted for notification issued by the Centr al Gover nment under sub-clause (iv) or
sub-clause (v) shall, at any one time, have effect for such assessment year or year s, not
exceeding thr ee assessment year s by the Taxation Laws (Amendment) Act, 2006, w.r .e.f.
1-4-2006.
*13-7-2006.
Bill, 2006 r eceives the assent of the Pr esident,* ever y notification
under sub-clause (iv) or sub-clause (v) shall be issued or appr oval
under
70
[sub-clause (iv) or sub-clause (v) or ] sub-clause (vi) or sub-
clause (via) shall be gr anted or an or der r ejecting the application shall
be passed within the per iod of twelve months fr om the end of the
month in which such application was r eceived:
Provided also that wher e the total income, of the fund or tr ust or
institution or any univer sity or other educational institution or any
hospital or other medical institution r efer r ed to in sub-clause (iv) or
sub-clause (v) or sub-clause (vi) or sub-clause (via), without giving
effect to the pr ovisions of the said sub-clauses, exceeds the maximum
amount which is not char geable to tax in any pr evious year , such tr ust
or institution or any univer sity or other educational institution or any
hospital or other medical institution shall get its accounts audited in
r espect of that year by an accountant as defined in the Explan ation
below sub-section (2) of section 288 and fur nish along with the r etur n
of income for the r elevant assessment year , the r epor t of such audit
in the pr escr ibed for m
71
duly signed and ver ified by such accountant
and setting for th such par ticular s as may be pr escr ibed:]
72
[Provided also that any amount of donation r eceived by the fund or
institution in ter ms of clause (d) of sub-section (2) of section 80G
73
[in
r espect of which accounts of income and expenditur e have not been
r ender ed to the author ity pr escr ibed under clause (v) of sub-section
(5C) of that section, in the manner specified in that clause, or ] which
has been utilised for pur poses other than pr oviding r elief to the
victims of ear thquake in Gujar at or which r emains unutilised in ter ms
of sub-section (5C) of section 80G and not tr ansfer r ed to the Pr ime
Minister s National Relief Fund on or befor e the 31st day of Mar ch,
74
[2004] shall be deemed to be the income of the pr evious year and
shall accor dingly be char ged to tax:]
75
[***]
71. See r ule 16CC and For m No. 10BB.
74. Substituted for 2003 by the Finance Act, 2003, w.r .e.f. 3-2-2001. Ear lier 2003 was
substituted for 2002 by the Finance Act, 2002, w.r .e.f. 3-2-2001.
75. Omitted by the Finance Act, 2002, w.e.f. 1-4-2002. Pr ior to its omission, the pr oviso, as
Provided also that wher e the total r eceipts of the fund or institution r efer r ed to in sub-
clause (iv) or of any tr ust or institution r efer r ed to in sub-clause (v) or of any Univer sity
or other educational institution r efer r ed to in sub-clause (vi) or of any hospital or other
institution r efer r ed to in sub-clause (via) exceed one cr or e r upees in any pr eceding year ,
the fund or tr ust or institution or Univer sity or other educational institution or hospital
or other institution, as the case may be, shall
(i) publish its accounts in a local newspaper ; and
(ii) fur nish along with the application pr escr ibed in the fir st pr oviso to this clause, the
copy of the local newspaper in which such accounts have been published;
*13-7-2006.
76
[Provided also that wher e the fund or tr ust or institution or any
univer sity or other educational institution or any hospital or other
medical institution r efer r ed to in sub-clause (iv) or sub-clause (v) or
sub-clause (vi) or sub-clause (via) does not apply its income dur ing the
year of r eceipt and accumulates it, any payment or cr edit out of such
accumulation to any tr ust or institution r egister ed under section
12AA or to any fund or tr ust or institution or any univer sity or other
educational institution or any hospital or other medical institution
r efer r ed to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or
sub-clause (via) shall not be tr eated as application of income to the
objects for which such fund or tr ust or institution or univer sity or
educational institution or hospital or other medical institution, as the
case may be, is established :
Provided also that wher e the fund or institution r efer r ed to in sub-
clause (iv) or tr ust or institution r efer r ed to in sub-clause (v) is notified
by the Centr al Gover nment
77
[or is appr oved by the pr escr ibed
author ity, as the case may be,] or any univer sity or other educational
institution r efer r ed to in sub-clause (vi) or any hospital or other
medical institution r efer r ed to in sub-clause (via), is appr oved by the
pr escr ibed author ity and subsequently that Gover nment or the pr e-
scr ibed author ity is satisfied that
(i) such fund or institution or tr ust or any univer sity or other
educational institution or any hospital or other medical institu-
tion has not
(A) applied its income in accor dance with the pr ovisions con-
tained in clause (a) of the thir d pr oviso; or
(B) invested or deposited its funds in accor dance with the pr ovi-
sions contained in clause (b) of the thir d pr oviso; or
(ii) the activities of such fund or institution or tr ust or any univer sity
or other educational institution or any hospital or other medical
institution
(A) ar e not genuine; or
(B) ar e not being car r ied out in accor dance with all or any of the
conditions subject to which it was notified or appr oved,
cause against the pr oposed action to the concer ned fund or institution
or tr ust or any univer sity or other educational institution or any
hospital or other medical institution, r escind the notification or , by
or der , withdr aw the appr oval, as the case may be, and for war d a copy
of the or der r escinding the notification or withdr awing the appr oval
to such fund or institution or tr ust or any univer sity or other educa-
tional institution or any hospital or other medical institution and to the
Assessing Officer :]
S. 10(23C) I.T. ACT, 1961 1.86
1.87 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(23D)
78
[Provided also that in case the fund or tr ust or institution or any
medical institution r efer r ed to in the fir st pr oviso makes an applica-
tion on or after the 1st day of June, 2006 for the pur poses of gr ant of
exemption or continuance ther eof, such application shall be made at
any time dur ing the financial year immediately pr eceding the assess-
ment year fr om which the exemption is sought :]
79
[Provided also that any anonymous donation r efer r ed to in section
115BBC on which tax is payable in accor dance with the pr ovisions of
the said section shall be included in the total income :]
80
[Provided also that all pending applications, on which no notifica-
tion has been issued under sub-clause (iv) or sub-clause (v) befor e the
1st day of June, 2007, shall stand tr ansfer r ed on that day to the
pr escr ibed author ity and the pr escr ibed author ity may pr oceed with
such applications under those sub-clauses fr om the stage at which
they wer e on that day;]
81
[(23D)
82
[
83
[
84
[subject to the pr ovisions of Chapter XII-E, any income of ]]
(i) a Mutual Fund r egister ed under the Secur ities and Exchange
Boar d of India Act, 1992 (15 of 1992) or r egulations made
ther eunder ;
(ii) such other Mutual Fund set up by a public sector bank or a public
financial institution or author ised by the Reser ve Bank of India
and subject to such conditions as the Centr al Gover nment may,
by notification
85
in the Official Gazette, specify in this behalf.]
(a) the expr ession public sector bank means the State Bank of
India constituted under the State Bank of India Act, 1955 (23
of 1955), a subsidiar y bank as defined in the State Bank of
India (Subsidiar y Banks) Act, 1959 (38 of 1959), a cor r es-
82. Substituted for the por tion beginning with the wor ds any income of such Mutual Fund
and ending with the wor ds specify in this behalf by the Finance Act, 1995, w.e.f. 1-7-1995.
Pr ior to substitution, the said por tion, as amended by the Finance Act, 1988, w.e.f. 1-4-1988,
the Dir ect Tax Laws (Amendment) Act, 1989, w.r .e.f. 1-4-1988 and the Finance Act, 1992,
any income of such Mutual Fund set up by a public sector bank or a public financial
institution or author ised by the Secur ities and Exchange Boar d of India or the Reser ve
Bank of India and subject t o such condit ions as t he Cent r al Gover nment may, by
notification in the Official Gazette, specify in this behalf.
83. Substituted for any income of by the Finance Act, 1999, w.e.f. 1-4-2000.
84. Substituted for any income of by the Finance Act, 2003, w.e.f. 1-4-2004. Ear lier the wor ds
subject to the pr ovisions of Chapter XII-E, wer e omitted by the Finance Act, 2002, w.e.f.
1-4-2003.
85. For notified mutual funds, see Taxmanns Master Guide to Income-tax Act.
ponding new Bank const it ut ed under sect ion 3 of t he
Banking Companies (Acquisition and Tr ansfer of Under -
takings) Act, 1970 (5 of 1970), or under section 3 of the
Banking Companies (Acquisition and Tr ansfer of Under -
takings) Act, 1980 (40 of 1980);
(b) the expr ession public financial institution shall have the
meaning assigned to it in section 4A of the Companies Act,
1956 (1 of 1956)
86
;]
87
[(c) the expr ession
88
Secur ities and Exchange Boar d of India
shall have the meaning assigned to it in clause (a) of sub-
section (1) of section 2 of the Secur ities and Exchange Boar d
of India Act, 1992 (15 of 1992);]
(23E)
89
90
[(23EA) any income
91
[, by way of contr ibutions r eceived fr om r ecognised
stock exchanges and the member s ther eof,] of such Investor Pr otec-
tion Fund set up by r ecognised stock exchanges in India, either jointly
or separ ately, as the Centr al Gover nment may, by notification
92
in the
Official Gazette, specify in this behalf:
Provided that wher e any amount standing to the cr edit of the Fund
and not char ged to income-tax dur ing any pr evious year is shar ed,
either wholly or in par t, with a r ecognised stock exchange, the whole
of the amount so shar ed shall be deemed to be the income of the
pr evious year in which such amount is so shar ed and shall accor d-
ingly be char geable to income-tax;]
S. 10(23EA) I.T. ACT, 1961 1.88
86. For text of section 4A of the Companies Act, 1956, and notified institutions ther eunder , see
Appendix.
88. Clause (a) of section 2(1) of the Secur ities and Exchange Boar d of India Act, 1992, defines
Boar d as follows:
(a) Boar d means the Secur ities and Exchange Boar d of India established under
section 3;
89. Pr ior to its omission, clause (23E), as inser ted by the Finance Act, 1989, w.e.f. 1-4-1989, r ead
as under :
(23E) any income of such Exchange Risk Administr ation Fund set up by public financial
inst it ut ions, eit her joint ly or separ at ely, as t he Cent r al Gover nment may, by
notification in the Official Gazette, specify in this behalf:
Provided that wher e any amount standing to the cr edit of the Fund and not char ged
to income-tax dur ing any pr evious year is shar ed, either wholly or in par t, with a
public financial institution, the whole of the amount so shar ed shall be deemed to
be the income of the pr evious year in which such amount is so shar ed and shall
accor dingly be char geable to income-tax.
Explan ation .For the pur poses of this clause, the expr ession public financial
institution shall have the meaning assigned to it in section 4A of the Companies Act,
1956 (1 of 1956);
92. For notified Investor Pr otection Fund set up by r ecognised stock exchange, see Taxmanns
93
[(23EB) any income of the Cr edit Guar antee Fund Tr ust for Small
94
[***]
Industr ies, being a tr ust cr eated by the Gover nment of India and the
Small Industr ies Development Bank of India established under sub-
section (1) of section 3 of the Small Industr ies Development Bank of
India Act, 1989 (39 of 1989), for five pr evious year s r elevant to the
assessment year s beginning on the 1st day of Apr il, 2002 and ending
on the 31st day of Mar ch, 2007;]
95
[(23EC) an y in com e, by way of con tribution s received from com m odity ex-
ch an ges an d th e m em bers th ereof , of such In vestor Protection Fun d
set up by com m odity exch an ges in In dia, eith er join tly or separately, as
th e Cen tral Govern m en t m ay, by n otification in th e Official Gazette,
specify in th is beh alf:
Provided th at wh ere an y am oun t stan din g to th e credit of th e said
Fun d an d n ot ch arged to in com e-tax durin g an y previous year is
sh ared, eith er wh olly or in part, with a commodity exch an ge, th e wh ole
of th e am oun t so sh ared sh all be deem ed to be th e in com e of th e
previous year in wh ich such amoun t is so sh ared an d sh all accordin gly
be ch argeable to in com e-tax.
Explanation.For th e purposes of th is clause, com m odity exch an ge
sh all m ean a registered association as defin ed in clause (jj) of
section 2 of th e Forward Con tracts (Regulation ) Act, 1952 (74 of
1952)
96
;]
97
[(23F) any income by way of dividends or long-ter m capital gains of
a vent u r e ca pit a l fu nd or a vent u r e ca pit a l compa ny fr om
investments made by way of equity shar es in a ventur e capital
under taking :
Provided that such ventur e capital fund or ventur e capital company
is appr oved for the pur poses of this clause by the pr escr ibed autho-
r ity
98
in accor dance with the r ules
99
made in this behalf and satisfies
the pr escr ibed conditions :
Provided further that any appr oval by the pr escr ibed author ity shall,
at any one time, have effect for such assessment year or year s, not
exceeding thr ee assessment year s, as may be specified in the or der of
appr oval :
1
[Provided also that nothing contained in this clause shall apply
in r espect of any investment made after the 31st day of Mar ch,
1999.]
1.89 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(23F)
94. Wor d Scale omitted by the Finance Act, 2003, w.r .e.f. 1-4-2002.
96. For definition of Commodity exchange, see Appendix.
98. Pr escr ibed author ity is Dir ector of Income-tax (Exemptions).
99. See r ule 2D and For m Nos. 56A, 56B and 56C.
2
[* * *]
2
[* * *]
(a) ventur e capital fund means such fund, oper ating under a tr ust
deed r egister ed under the pr ovisions of the Registr ation Act, 1908
(16 of 1908), established to r aise monies by the tr ustees for
investments mainly by way of acquir ing equity shar es of a
ventur e capital under taking in accor dance with the pr escr ibed
guidelines;
(b) ventur e capital company means such company as has made
investments by way of acquir ing equity shar es of ventur e capital
under takings in accor dance with the pr escr ibed guidelines;
3
[(c) ventur e capital under taking means such domestic company
whose shar es ar e not listed in a r ecognised stock exchange in
India and which is engaged in the business of gener ation or
gener ation and distr ibution of electr icity or any other for m of
power or engaged in the business of pr oviding telecommunica-
tion ser vices or in the business of developing, maintaining and
oper ating any infr astr uctur e facility or engaged in the manufac-
tur e or pr oduction of such ar ticles or things (including computer
softwar e) as may be notified
4
by the Centr al Gover nment in this
behalf; and
(d) infr astr uctur e facility means a r oad, highway, br idge, air por t,
por t, r ail system, a water supply pr oject, ir r igation pr oject, sani-
tation and sewer age system or any other public facility of a
S. 10(23F) I.T. ACT, 1961 1.90
2. Thir d and four th pr ovisos omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Pr ior
to their omission, the thir d and four th pr ovisos, as inser ted by the Finance Act, 1995, w.e.f.
Provided also that if the afor esaid equity shar es ar e tr ansfer r ed (other than in the event
of the said shar es being listed in a r ecognised stock exchange in India) by a ventur e capital
fund or a ventur e capital company to any per son at any time within a per iod of thr ee year s
fr om the date of their acquisition, the aggr egate amount of income by way of dividends
on such equity shar es which has not been included in the total income of the pr evious year
or year s pr eceding the pr evious year in which such tr ansfer has taken place shall be
deemed to be the income of the ventur e capital fund or of the ventur e capital company
of the pr evious year in which such tr ansfer has taken place:
Provided also that the exemption shall not be allowed in r espect of the long-ter m capital
gains, if any, ar ising on such tr ansfer of equity shar es as is mentioned in the thir d pr oviso.
3. Clauses (c) and (d) substituted for clause (c) by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999. Pr ior to substitution, clause (c), as amended by the Finance Act, 1997, w.e.f.
(c) ventur e capital under taking means such domestic company whose shar es ar e
not listed in a r ecognised stock exchange in India and which is engaged in the
business of gener ation or gener ation and distr ibution of electr icity or any other
for m of power or business of pr oviding telecommunication ser vices or in the
manufactur e or pr oduction of such ar ticles or things (including computer
softwar e) as may be notified by the Centr al Gover nment in this behalf;
4. For notified ar ticles or things, see Taxmanns Master Guide to Income-tax Act.
1.91 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(23FA)
similar natur e as may be notified by the Boar d in this behalf in the
Official Gazette and which fulfils the conditions specified in sub-
section (4A) of section 80-IA;]
5
[(23FA) any income by way of dividends
6
[, other than dividends r efer r ed to
in section 115-O ], or long-ter m capital gains of a ventur e capital fund
or a ventur e capital company fr om investments made by way of
equity shar es in a ventur e capital under taking :
Provided that such ventur e capital fund or ventur e capital company
is appr oved, for the pur poses of this clause, by the Centr al Gover n-
ment on an application made to it in accor dance with the r ules
7
made
in this behalf and which satisfies the pr escr ibed conditions :
Provided further that any appr oval by the Centr al Gover nment shall,
at any one time, have effect for such assessment year or year s, not
exceeding thr ee assessment year s, as may be specified in the or der of
appr oval :
8
[Provided also that nothing contained in this clause shall apply in
r espect of any investment made after the 31st day of Mar ch, 2000.]
(a) ventur e capital fund means such fund, oper ating under a tr ust
deed r egister ed under the pr ovisions of the Registr ation Act, 1908
(16 of 1908), established to r aise monies by the tr ustees for
investments mainly by way of acquiring equity shares of a venture
capital under taking in accor dance with the pr escr ibed guidelines;
(b) ventur e capital company means such company as has made
investments by way of acquir ing equity shar es of ventur e capital
under takings in accor dance with the pr escr ibed guidelines; and
(c) ventur e capital under taking means such domestic company
whose shar es ar e not listed in a r ecognised stock exchange in
India and which is engaged in the
(i) business of
(A) softwar e;
(B) infor mation technology;
(C) pr oduction of basic dr ugs in the phar maceutical sector ;
(D) bio-technology;
(E) agr icultur e and allied sector s; or
(F) such other sector s as may be notified
9
by the Centr al
Gover nment in this behalf; or
6. Inser ted by the Finance Act, 2003, w.e.f. 1-4-2004. Ear lier , it was omitted by the Finance
Act, 2002, w.e.f. 1-4-2003.
7. See r ule 2DA and For m Nos. 56AA, 56BA and 56CA.
9. See also notification issued under section 10(23F). For details, see Taxmanns Master
(ii) pr oduction or manufactur e of any ar ticle or substance for
which patent has been gr anted to the National Resear ch
Labor at or y or any ot her scient ific r esear ch inst it ut ion
appr oved by the Depar tment of Science and Technology;]
10
[(23FB) any income of a ventur e capital company or ventur e capital fund
11
[f rom in vestm en t] in a ventur e capital under taking.
Explan ation
12
[1].For the pur poses of this clause,
(a) ventur e capital company means such company
(i) which has been gr anted a cer tificate of r egistr ation
under the Secur ities and Exchange Boar d of India Act,
1992 (15 of 1992), and r egulations made ther eunder ;
(ii) which fulfils the conditions as may be specified, with the
appr oval of the Centr al Gover nment, by the Secur ities
and Exchange Boar d of India, by notification in the
Official Gazette, in this behalf;
(b) ventur e capital fund means such fund
13
[(i) oper ating under a tr ust deed r egister ed under the
pr ovisions of the Registr ation Act, 1908 (16 of 1908) or
oper ating as a ventur e capital scheme made by the Unit
Tr ust of India established under the Unit Tr ust of India
Act, 1963 (52 of 1963);]
(ii) which has been gr anted a cer tificate of r egistr ation
under the Secur ities and Exchange Boar d of India Act,
1992 (15 of 1992), and r egulations made ther eunder ;
(iii) which fulfils the conditions as may be specified, with the
appr oval of the Centr al Gover nment, by the Secur ities
and Exchange Boar d of India, by notification in the
Official Gazette, in this behalf; and
14
[(c) ven ture capital un dertakin gmean s such domestic compan y
wh ose sh ares are n ot listed in a recogn ised stock exch an ge in
In dia an d wh ich is en gaged in th e
S. 10(23FB) I.T. ACT, 1961 1.92
11. Substituted for set up to r aise funds for investment by the Finance Act, 2007, w.e.f.
1-4-2008.
12. Explan ation number ed as Explan ation 1 by the Finance Act, 2001, w.e.f. 1-4-2001.
(i) r ead as under :
(i) oper ating under a tr ust deed r egister ed under the pr ovisions of the Registr ation
Act, 1908 (16 of 1908);
14. Substituted by the Finance Act, 2007, w.e.f. 1-4-2008. Pr ior t o it s subst it ut ion, clause (c)
of Explan ation 1, as substituted by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004, r ead as
under :
(c) ventur e capital under taking means a ventur e capital under taking r efer r ed to in
the Secur ities and Exchange Boar d of India (Ventur e Capital Funds) Regulations,
1996 made under the Secur ities and Exchange Boar d of India Act, 1992 (15 of 1992)
and notified as such in the Official Gazette by the Boar d for the pur poses of this
clau se;
(i) busin ess of
(A) n an otech n ology;
(B) in form ation tech n ology relatin g to h ardware an d
software developm en t;
(C) seed research an d developm en t;
(D) bio-tech n ology;
(E) research an d developm en t of n ew ch em ical en tities
in th e ph arm aceutical sector;
(F) production of bio-fuels;
(G) buildin g an d operatin g com posite h otel-cum-con -
ven tion cen tre with seatin g capacity of m ore th an
th ree th ousan d; or
(H) developin g or operatin g an d m ain tain in g or deve-
lopin g, operatin g an d m ain tain in g an y in frastruc-
ture facility as defin ed in th e Explanation to clause
(i) of sub-section (4) of section 80-IA; or
(ii) dairy or poultry in dustry;]
15
[***]
(23G)
16
1.93 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10(23G)
15. Omitted by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004. Pr ior to its omission, Explan ation
2, as inser ted by the Finance Act, 2001, w.e.f. 1-4-2001, r ead as under :
Explan ation 2.For the r emoval of doubts it is her eby declar ed that the income of a
ventur e capital company or ventur e capital fund shall continue to be exempt if the shar es
of the ventur e capital under taking, in which the ventur e capital company or ventur e
capital fund has made the initial investment, ar e subsequently listed in a r ecognised stock
exchange in India;
16. Pr ior to its omission, clause (23G), as inser ted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-
1997 and later on amended by the Finance Act, 1997, w.e.f. 1-4-1998, substituted by the
Finance (No. 2) Act, 1998, w.e.f. 1-4-1999 and fur ther amended by the Income-tax (Second
Amendment) Act, 1998, w.e.f. 1-4-1999, Finance Act, 1999, w.e.f. 1-4-2000, Finance Act,
2000, w.e.f. 1-4-2000/ 1-4-2001, Finance Act, 2001, w.e.f. 1-4-2002, Finance Act, 2002, w.e.f.
1-4-2003, Finance Act, 2003, w.e.f. 1-4-2004/ w.r .e.f. 1-4-2002, Finance (No. 2) Act, 2004,
w.e.f. 1-4-2005 and Special Economic Zones Act, 2005, w.e.f. 10-2-2006, r ead as under :
(23G) any income by way of dividends, other than dividends r efer r ed to in section
115-O, inter est or long-ter m capital gains of an infr astr uctur e capital fund or an
infr astr uctur e capital company or a co-oper ative bank fr om investments made on
or after the 1st day of June, 1998 by way of shar es or long-ter m finance in any
enter pr ise or under taking wholly engaged in the business r efer r ed to in sub-
section (4) of section 80-IA or sub-section (3) of section 80-IAB or a housing pr oject
r efer r ed to in sub-section (10) of section 80-IB or a hotel pr oject or a hospital
pr oject and which has been appr oved by the Centr al Gover nment on an applica-
tion made by it in accor dance with the r ules made in this behalf and which satisfies
t he pr escr ibed condit ions :
Provided that the income, by way of dividends, other than dividends r efer r ed to
in section 115-O, inter est or long-ter m capital gains of an infr astr uctur e capital
company, shall be taken into account in computing the book pr ofit and income-
tax payable under section 115JB.
S. 10(25) I.T. ACT, 1961 1.94
17
[
18
(24) any income char geable under t he heads Income fr om house
pr oper ty and Income fr om other sour ces of
(a) a r egister ed union within the meaning of the Tr ade Unions Act,
1926 (16 of 1926), for med pr imar ily for the pur pose of r egulating
the r elations between wor kmen and employer s or between wor k-
men and wor kmen;
(b) an association of r egister ed unions r efer r ed to in sub-clause (a);]
(25) (i) inter est on secur ities which ar e held by, or ar e the pr oper ty of, any
pr ovident fund to which the Pr ovident Funds Act, 1925 (19 of 1925),
applies, and any capital gains of the fund ar ising fr om the sale,
exchange or tr ansfer of such secur ities;
Explan ation 1.For the pur poses of this clause,
(a) infr astr uctur e capital company means such company as has made invest-
ments by way of acquir ing shar es or pr oviding long-ter m finance to an
enter pr ise wholly engaged in the business r efer r ed to in this clause;
(b) infr astr uctur e capital fund means such fund oper ating under a tr ust deed
r egister ed under the pr ovisions of the Registr ation Act, 1908 (16 of 1908)
est ablished t o r aise monies by t he t r ust ees for invest ment by way of
acquir ing shar es or pr oviding long-ter m finance to an enter pr ise wholly
engaged in the business r efer r ed to in this clause;
(c) [***]
(d) long-ter m finance shall have the meaning assigned to it in clause (viii) of
sub-section (1) of section 36;
(e) co-oper ative bank shall have the meaning assigned to it in clause (dd) of
section 2 of the Deposit Insur ance and Cr edit Guar antee Cor por ation Act,
1961 (47 of 1961);
(f ) inter est includes any fee or commission r eceived by a financial institution
for giving any guar antee to, or enhancing cr edit in r espect of, an enter pr ise
which has been appr oved by the Centr al Gover nment for the pur poses of this
clause;
(g) hotel pr oject means a pr oject for constr ucting a hotel of not less than thr ee-
star categor y as classified by the Centr al Gover nment;
(h ) hospital pr oject means a pr oject for constr ucting a hospital with at least one
hundr ed beds for patients.
Explan ation 2.For the r emoval of doubts, it is her eby declar ed that any income
by way of dividends, inter est or long-ter m capital gains of an infr astr uctur e
capital fund or an infr astr uctur e capital company fr om investments made befor e
the 1st day of June, 1998 by way of shar es or long-ter m finance in any enter pr ise
car r ying on the business of developing, maintaining and oper ating any infr astr uc-
tur e facility shall not be included and the pr ovisions of this clause as it stood
immediately befor e its amendment by the Finance (No. 2) Act, 1998 (21 of 1998)
shall apply to such income;
(24), as amended by the Finance Act, 1988, w.e.f. 1-4-1989, r ead as under :
(24) any income char geable under t he heads Income fr om house pr oper t y and
Income fr om other sour ces of a r egister ed union within the meaning of the Indian
Tr ade Unions Act, 1926 (16 of 1926), for med pr imar ily for the pur pose of r egulating
the r elations between wor kmen and employer s or between wor kmen and wor k-
men;
(ii) any income r eceived by the tr ustees on behalf of a r ecognised
pr ovident fund;
(iii) any income r eceived by the tr ustees on behalf of an appr oved
super annuation fund;
19
[(iv) any income r eceived by the tr ustees on behalf of an appr oved
gr atuity fund;]
20
[(v) any income r eceived
(a) by the Boar d of Tr ustees constituted under the Coal Mines
Pr ovident Funds and Miscellaneous Pr ovisions Act, 1948 (46 of
1948), on behalf of the Deposit-linked Insur ance Fund established
under section 3G of that Act; or
(b) by the Boar d of Tr ustees constituted under the Employees
Pr ovident Funds and Miscellaneous Pr ovisions Act, 1952 (19 of
1952), on behalf of the Deposit-linked Insur ance Fund established
under section 6C of that Act;]
21
[(25A) any income of the Employees State Insur ance Fund set up under
the pr ovisions of the Employees State Insur ance Act, 1948 (34 of
1948);]
22
[(26)
23
in the case of a member of a
24
Scheduled Tr ibe as defined in
clause (25) of ar ticle 366 of the Constitution, r esiding
23a
in any ar ea
specified in Par t I or Par t II of the Table appended to par agr aph 20 of
the Sixth Schedule to the Constitution or in the
25
[States of Ar unachal
Pr adesh, Manipur , Mizor am, Nagaland and Tr ipur a] or in the ar eas
cover ed by notification No. TAD/ R/ 35/ 50/ 109, dated the 23r d Feb-
r uar y, 1951, issued by the Gover nor of Assam under the pr oviso to
sub-par agr aph (3) of the said par agr aph 20 [as it stood immediately
befor e the commencement of the Nor th-Easter n Ar eas (Reor ga-
nisation) Act, 1971 (81 of 1971)]
26
[or in the Ladakh r egion of the State
20. Inser ted by the Labour Pr ovident Fund Laws (Amendment) Act, 1976, w.e.f. 1-8-1976.
22. Substituted by the Nor th-Easter n Ar eas (Reor ganisation) (Adaptation of Laws on Union
Subjects) Or der , 1974, with r etr ospective effect fr om 21-1-1972. Ear lier , clause (26) was
amended fir st by the State of Nagaland (Adaptation of Laws on Union Subjects) Or der ,
1965, with r etr ospective effect fr om 1-12-1963 and then by the Taxation Laws (Amend-
ment) Act, 1970, with r etr ospective effect fr om 1-4-1962.
23a. For the meaning of the ter m r esiding, see Taxmanns Dir ect Taxes Manual, Vol. 3.
24. Clause (25) of ar ticle 366 of the Constitution defines Scheduled Tr ibes as under :
(25) Scheduled Tr ibes means such tr ibes or tr ibal communities or par ts of or gr oups
within such tr ibes or tr ibal communities as ar e deemed under ar ticle 342 to be
Scheduled Tr ibes for the pur poses of this Constitution;
25. Substituted for States of Nagaland, Manipur and Tr ipur a or in the Union ter r itor ies of
Ar unachal Pr adesh and Mizor am by the Finance Act, 1994, w.e.f. 1-4-1995.
of Jammu and Kashmir ], any income which accr ues or ar ises to
him,
(a) fr om any sour ce in the ar eas
27
[or States afor esaid], or
(b) by way of dividend or inter est on secur ities;]
28
[(26A) any income accr uing or ar ising to any per son
29
[* * *] fr om any sour ce
in the distr ict of Ladakh or outside India in any pr evious year r elevant
to any assessment year commencing befor e the 1st day of Apr il,
30
[1989], wher e such per son is r esident in the said distr ict in that
pr evious year :
Provided that this clause shall not apply in the case of any such per son
unless he was r esident in that distr ict in the pr evious year r elevant to
the assessment year commencing on the 1st day of Apr il, 1962.
31
[Explan ation 1].For the pur poses of this clause, a per son shall be
deemed to be r esident in the distr ict of Ladakh if he fulfils the
r equir ements of sub-section (1)
32
or sub-section (2) or sub-section (3)
or sub-section (4) of section 6, as the case may be, subject to the
modifications that
(i) r efer ences in those sub-sections to India shall be constr ued as
r efer ences to the said distr ict; and
(ii) in clause (i) of sub-section (3), r efer ence to Indian company shall
be constr ued as r efer ence to a company for med and r egister ed
under any law for the time being in for ce in the State of Jammu
and Kashmir and having its r egister ed office in that distr ict in that
year .]
33
[Explan ation 2.In this clause, r efer ences to the distr ict of Ladakh
shall be constr ued as r efer ences to the ar eas compr ised in the said
distr ict on the 30th day of June, 1979;]
(26AA)
34
[* * *]
S. 10(26AA) I.T. ACT, 1961 1.96
27. Substituted for , States or Union ter r itor ies afor esaid by the Finance Act, 1994, w.e.f.
1-4-1995.
29. (not being an individual who is in the ser vice of Gover nment) omitted by the Finance
(No. 2) Act, 1971, w.r .e.f. 1-4-1962.
substituted for 1983 by the Finance Act, 1983, w.e.f. 1-4-1983, 1983 was substituted for
1980 by the Finance Act, 1980, w.e.f. 1-4-1980, 1980 was substituted for 1975 by the
Finance (No. 2) Act , 1977, wit h r et r ospect ive effect fr om 1-4-1975 and 1975 was
substituted for 1970 by the Finance (No. 2) Act, 1971, w.r .e.f. 1-4-1970.
31. Existing Explan ation r enumber ed as Explan ation 1 by the Finance Act, 1983, w.r .e.f.
1-4-1980.
32. Should be r ead as clause (1), etc.
34. Omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Pr ior to its omission, clause (26AA), as
(26AA) any income of a per son by way of winnings fr om any lotter y, the dr aw of which
is held in pur suance of any agr eement enter ed into on or befor e the 28th day
of Febr uar y, 1989 between the State Gover nment of Sikkim and the or ganising
agents of such lotter y, wher e such per son is r esident in the State of Sikkim in
any pr evious year .
34a
[(26AAA) in case of an in dividual, bein g a Sik k im ese, an y in com e wh ich accrues
or arises to h im
(a) from an y source in th e State of Sik k im ; or
(b) by way of dividen d or in terest on securities:
Provided th at n oth in g con tain ed in th is clause sh all apply to a
Sik k im ese wom an wh o, on or after th e 1st day of April, 2008, m arries
an in dividual wh o is n ot a Sik k im ese.
Explanation.For the purposes of this clause, Sikkimeseshall mean
(i) an in dividual, wh ose n am e is recorded in th e register m ain tain ed
un der th e Sik k im Subjects Regulation , 1961 read with th e Sik k im
Subject Rules, 1961 (h erein after referred to as th e Register of
Sikkim Subjects), im m ediately before th e 26th day of April, 1975;
or
(ii) an in dividual, wh ose n am e is in cluded in th e Register of Sik k im
Subjects by virtue of th e Govern m en t of In dia Order No. 26030/
36/ 90-I.C.I., dated th e 7th August, 1990 an d Order of even n um ber
dated th e 8th April, 1991; or
(iii) an y oth er in dividual, wh ose n am e does n ot appear in th e Register
of Sik k im Subjects, but it is establish ed beyon d doubt th at th e
n am e of such in dividuals fath er or h usban d or patern al gran d-
f ath er or broth er f rom th e sam e f ath er h as been recorded in th at
register;]
The following clause (26AAB) shall be inserted after clause (26AAA)
of section 10 by the Finance Act, 2008, w.e.f. 1-4-2009 :
(26AAB) an y in com e of an agricultural produce m ark et com m ittee or board
con stituted un der an y law for th e tim e bein g in force for th e purpose
of regulatin g th e m ark etin g of agricultural produce;
35
[(26B) any income of a cor por ation established by a Centr al, State or
Pr ovincial Act or of any other body, institution or association (being
a body, institution or association wholly financed by Gover nment)
wher e such cor por ation or other body or institution or association has
been established or for med for pr omoting the inter ests of the
36
[member s of the Scheduled Castes or the Scheduled Tr ibes or
backwar d classes or of any two or all of them].
Explan ation .For the pur poses of this clause, a per son shall be deemed to be
r esident in the State of Sikkim if he fulfils the r equir ements of clause (1) or
clause (2) or clause (3) or clause (4) of section 6, as the case may be, subject to
the modifications that
(i) r efer ences in those clauses to India shall be constr ued as r efer ences to the
State of Sikkim; and
(ii) in sub-clause (i) of clause (3), r efer ence to Indian company shall be
constr ued as r efer ence to a company for med and r egister ed under any
law for the time being in for ce in the State of Sikkim and having its
r egister ed office in that State in that year ;
34a. Inser ted by the Finance Act, 2008, w.r .e.f. 1-4-1990.
36. Substituted for member s of either the Scheduled Castes or the Scheduled Tr ibes or of
both by the Finance Act, 1994, w.r .e.f. 1-4-1993.
37
[Explan ation .For the pur poses of this clause,
(a)
38
Scheduled Castes and
39
Scheduled Tr ibes shall have the
meanings r espectively assigned to them in clauses (24) and (25) of
ar ticle 366 of the Constitution;
(b) backwar d classes means such classes of citizens, other than
the Scheduled Castes and the Scheduled Tr ibes, as may be
notified
(i) by the Centr al Gover nment; or
(ii) by any State Gover nment,
as the case may be, fr om time to time;]
40
[(26BB) any income of a cor por ation established by the Centr al Gover nment
or any State Gover nment for pr omoting the inter ests of the member s
of a minor ity community.
Explan ation .For the pur poses of this clause, minor ity community
means a community notified
41
as such by the Centr al Gover nment in
the Official Gazette in this behalf;]
42
[(26BBB) any income of a cor por ation established by a Centr al, State or
Pr ovincial Act for the welfar e and economic upliftment of ex-ser vice-
men being the citizens of India.
Explan ation .For the pur poses of this clause, ex-ser viceman means
a per son who has ser ved in any r ank, whether as combatant or non-
combatant, in the ar med for ces of the Union or ar med for ces of the
Indian States befor e the commencement of the Constitution (but
excluding the Assam Rifles, Defence Secur ity Cor ps, Gener al Reser ve
Engineer ing For ce, Lok Sahayak Sena, Jammu and Kashmir Militia
and Ter r itor ial Ar my) for a continuous per iod of not less than six
months after attestation and has been r eleased, other wise than by
way of dismissal or discharge on account of misconduct or inefficiency,
and in the case of a deceased or incapacitated ex-ser viceman includes
his wife, childr en, father , mother , minor br other , widowed daughter
and widowed sister , wholly dependant upon such ex-ser viceman
immediately befor e his death or incapacitation;]
43
[(27) any income of a co-oper ative society for med for pr omoting the
inter ests of the member s of either the Scheduled Castes or Scheduled
Tr ibes or both r efer r ed to in clause (26B) :
S. 10(27) I.T. ACT, 1961 1.98
37. Substituted by the Finance Act, 1994, w.r .e.f. 1-4-1993. Ear lier Explan ation , as inser ted by
the Finance Act, 1980, w.r .e.f. 1-4-1972.
38. Clause (24) of ar ticle 366 of the Constitution defines Scheduled Castes as under :
(24) Scheduled Castes means such castes, r aces or tr ibes or par ts of or gr oups within
such castes, r aces or tr ibes as ar e deemed under ar ticle 341 to be Scheduled Castes
for the pur poses of this Constitution;
39. For definition of Scheduled Tr ibes, see footnote 24 on p. 1.95 an te.
41. For notified minor ity communities, see Taxmanns Master Guide to Income-tax Act.
43. Inser ted by the Finance Act, 1992, w.r .e.f. 1-4-1989. Ear lier clause (27) was omitted by the
Finance Act, 1975, w.e.f. 1-4-1976 and r e-enacted in section 80JJ with modification.
Or iginally, clause (27) was inser ted by the Finance Act, 1964, w.e.f. 1-4-1964 and later on
amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
Provided that the member ship of the co-oper ative society consists of
only other co-oper ative societies for med for similar pur poses and the
finances of the society ar e pr ovided by the Gover nment and such
other societies;]
(28)
44
[* * *]
(29)
45
46
[(29A) any income accr uing or ar ising to
(a) the Coffee Boar d constituted under section 4 of the Coffee Act,
1942 (7 of 1942) in any pr evious year r elevant to any assessment
year commencing on or after the 1st day of Apr il, 1962 or the
pr evious year in which such Boar d was constituted, whichever is
later ;
(b) the Rubber Boar d constituted under sub-section (1) of section 4
of the Rubber Boar d Act, 1947 (24 of 1947) in any pr evious year
r elevant to any assessment year commencing on or after the 1st
day of Apr il, 1962 or the pr evious year in which such Boar d was
constituted, whichever is later ;
(c) the Tea Boar d established under section 4 of the Tea Act, 1953 (29
of 1953) in any pr evious year r elevant to any assessment year
commencing on or after the 1st day of Apr il, 1962 or the pr evious
year in which such Boar d was constituted, whichever is later ;
(d) the Tobacco Boar d constituted under the Tobacco Boar d Act,
1975 (4 of 1975) in any pr evious year r elevant to any assessment
year commencing on or after the 1st day of Apr il, 1975 or the
pr evious year in which such Boar d was constituted, whichever is
later ;
(e) the Mar ine Pr oducts Expor t Development Author ity established
under section 4 of the Mar ine Pr oducts Expor t Development
Author ity Act, 1972 (13 of 1972) in any pr evious year r elevant to
any assessment year commencing on or after the 1st day of Apr il,
1972 or the pr evious year in which such Author ity was consti-
tuted, whichever is later ;
(f) the Agr icultur al and Pr ocessed Food Pr oducts Expor t Develop-
ment Author ity established under section 4 of the Agr icultur al
and Pr ocessed Food Pr oducts Expor t Development Act, 1985 (2
of 1986) in any pr evious year r elevant to any assessment year
commencing on or after the 1st day of Apr il, 1985 or the pr evious
year in which such Author ity was constituted, whichever is later ;
(g) the Spices Boar d constituted under sub-section (1) of section 3 of
the Spices Boar d Act, 1986 (10 of 1986) in any pr evious year
r elevant to any assessment year commencing on or after the 1st
day of Apr il, 1986 or the pr evious year in which such Boar d was
constituted, whichever is later ;]
44. Omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Pr ior to its omission, clause (28) was
inser ted by the Finance Act, 1965, w.e.f. 1-4-1965 and substituted by the Finance (No. 2)
Act, 1965, w.e.f. 11-9-1965.
S. 10(31) I.T. ACT, 1961 1.100
46a
[(h) th e Coir Board establish ed un der section 4 of th e Coir In dustry Act,
1953 (45 of 1953);]
47
[(30)
48
in the case of an assessee who car r ies on the business of gr owing and
manufactur ing tea in India, the amount of any subsidy r eceived fr om
or thr ough the Tea Boar d under any such scheme
49
for r eplantation
or r eplacement of tea bushes
50
[or for r ejuvenation or consolidation
of ar eas used for cultivation of tea] as the Centr al Gover nment may,
by notification in the Official Gazette, specify:
Provided that the assessee fur nishes to the
51
[Assessing] Officer ,
along with his r etur n of income
51a
for the assessment year concer ned
or within such fur ther time as the
51
[Assessing] Officer may allow, a
cer tificate fr om the Tea Boar d as to the amount of such subsidy paid
to the assessee dur ing the pr evious year .
Explan ation .In this clause, Tea Boar d means the Tea Boar d
established under section 4 of the Tea Act, 1953 (29 of 1953);]
52
[(31) in the case of an assessee who car r ies on the business of gr owing and
manufactur ing r ubber , coffee, car damom or such other commodity
in India, as the Centr al Gover nment may, by notification in the Official
Gazette, specify in this behalf, the amount of any subsidy r eceived
fr om or thr ough the concer ned Boar d under any such scheme for
r eplantation or r eplacement of r ubber plants, coffee plants, car da-
mom plants or plants for the gr owing of such other commodity or for
r ejuvenation or consolidation of ar eas used for cultivation of r ubber ,
coffee, car damom or such other commodity as the Centr al Gover n-
ment may, by notification in the Official Gazette, specify:
Provided that the assessee fur nishes to the Assessing Officer , along
with his r etur n of income
51a
for the assessment year concer ned or
within such fur ther time as the Assessing Officer may allow, a
cer tificate fr om the concer ned Boar d, as to the amount of such
subsidy paid to the assessee dur ing the pr evious year .
Explan ation .In this clause, concer ned Boar d means,
(i) in r elation to r ubber , the Rubber Boar d constituted under section
4 of the Rubber Act, 1947 (24 of 1947),
(ii) in r elation to coffee, the Coffee Boar d constituted under section
4 of the Coffee Act, 1942 (7 of 1942),
(iii) in r elation to car damom, the Spices Boar d constituted under
section 3 of the Spices Boar d Act, 1986 (10 of 1986),
48. See r ule 8(2).
49. For specified schemes, see Taxmanns Master Guide to Income-tax Act.
1-4-1988.
51a. Rule 12 pr ovides that the r etur n of income shall not be accompanied by any document or
copy of any account or for m or r epor t of audit r equir ed to be attached with r etur n of
income under any of the pr ovisions of the Act.
(iv) in r elation to any other commodity specified under this clause,
any Boar d or other author ity established under any law for the
time being in for ce which the Centr al Gover nment may, by
notification in the Official Gazette, specify in this behalf;]
53
[(32) in the case of an assessee r efer r ed to in sub-section (1A) of section 64,
any income includible in his total income under that sub-section,
to the extent such income does not exceed one thousand five
hundr ed r upees in r espect of each minor child whose income is so
includible;]
54
[(33) any income ar ising fr om the tr ansfer of a capital asset, being a unit of
the Unit Scheme, 1964 r efer r ed to in Schedule I to the Unit Tr ust of
India (Tr ansfer of Under taking and Repeal) Act, 2002 (58 of 2002)
55
and wher e the tr ansfer of such asset takes place on or after the 1st day
of Apr il, 2002;]
56
[(34) any income by way of dividends r efer r ed to in section 115-O.
57
the dividend r efer r ed to in section 115-O shall not be included in the
total income of the assessee, being a Developer or entr epr eneur ;]
(35) any income by way of,
(a) income r eceived in r espect of the units of a Mutual Fund specified
under clause (23D); or
(b) income r eceived in r espect of units fr om the Administr ator of the
specified under taking; or
(c) income r eceived in r espect of units fr om the specified company:
Provided that this clause shall not apply to any income ar ising fr om
tr ansfer of units of the Administr ator of the specified under taking or
of the specified company or of a mutual fund, as the case may be.
(a) Administr ator means the Administr ator as r efer r ed to in clause
(a) of section 2 of the Unit Tr ust of India (Tr ansfer of Under taking
and Repeal) Act, 2002 (58 of 2002)
58
;
54. Inser ted by the Finance Act, 2003, w.e.f. 1-4-2003. Ear lier clause (33) was inser ted by the
Finance Act, 1997, w.e.f. 1-4-1998, substituted by the Finance Act, 1999, w.e.f. 1-4-2000,
amended by the Finance Act, 2001, w.r .e.f. 1-4-2000 and later on omitted by the Finance
Act, 2002, w.e.f. 1-4-2003. Pr ior to omission, clause (33) r ead as under :
(33) any income by way of
(i) dividends r efer r ed to in section 115-O; or
(ii) income r eceived in r espect of units fr om the Unit Tr ust of India established
under the Unit Tr ust of India Act, 1963 (52 of 1963); or
(iii) income r eceived in r espect of the units of a mutual fund specified under clause
(23D) :
Provided that this clause shall not apply to any income ar ising fr om tr ansfer of units
of the Unit Tr ust of India or of a mutual fund, as the case may be.
55. For text of the Unit Tr ust of India (Tr ansfer of Under taking & Repeal) Act, 2002, see
56. Clauses (34), (35) and (36) inser ted by the Finance Act, 2003, w.e.f. 1-4-2004.
58. For text of the Unit Tr ust of India (Tr ansfer of Under taking & Repeal) Act, 2002, see
S. 10(38) I.T. ACT, 1961 1.102
(b) specified company means a company as r efer r ed to in clause (h)
of section 2 of the Unit Tr ust of India (Tr ansfer of Under taking
and Repeal) Act, 2002 (58 of 2002)
58a
;
(36) any income ar ising fr om the tr ansfer of a long-ter m capital asset,
being an eligible equity shar e in a company pur chased on or after the
1st day of Mar ch, 2003 and befor e the 1st day of Mar ch, 2004 and held
for a per iod of twelve months or mor e.
Explan ation .For the pur poses of this clause, eligible equity shar e
means,
(i) any equity shar e in a company being a constituent of BSE-500
Index of the Stock Exchange, Mumbai as on the 1st day of Mar ch,
2003 and the tr ansactions of pur chase and sale of such equity
shar e ar e enter ed into on a r ecognised stock exchange in India;
(ii) any equity shar e in a company allotted thr ough a public issue on
or after the 1st day of Mar ch, 2003 and listed in a r ecognised stock
exchange in India befor e the 1st day of Mar ch, 2004 and the
tr ansaction of sale of such shar e is enter ed into on a r ecognised
stock exchange in India;]
59
[(37) in the case of an assessee, being an individual or a Hindu undivided
family, any income char geable under the head Capital gains ar ising
fr om the tr ansfer of agr icultur al land, wher e
(i) such land is situate in any ar ea r efer r ed to in item (a) or item (b)
of sub-clause (iii) of clause (14) of section 2;
(ii) such land, dur ing the per iod of two year s immediately pr eceding
the date of tr ansfer , was being used for agr icultur al pur poses by
such Hindu undivided family or individual or a par ent of his;
(iii) such tr ansfer is by way of compulsor y acquisition under any law,
or a tr ansfer the consider ation for which is deter mined or ap-
pr oved by the Centr al Gover nment or the Reser ve Bank of India;
(iv) such income has ar isen fr om the compensation or consider ation
for such tr ansfer r eceived by such assessee on or after the 1st day
of Apr il, 2004.
Explan ation .For the pur poses of this clause, the expr ession com-
pensation or consider ation includes the compensation or con-
sider ation enhanced or fur ther enhanced by any cour t, Tr ibunal or
other author ity;
(38) any income ar ising fr om the tr ansfer of a long-ter m capital asset,
being an equity shar e in a company or a unit of an equity or iented
fund wher e
(a) the tr ansaction of sale of such equity shar e or unit is enter ed into
on or after the date on which Chapter VII of the Finance (No. 2)
Act, 2004 comes into for ce; and
(b) such tr ansaction is char geable to secur ities tr ansaction tax under
that Chapter :
58a. For text of the Unit Tr ust of India (Tr ansfer of Under taking & Repeal) Act, 2002, see
59. Clauses (37) and (38) inser ted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.
60
[Provided that the income by way of long-ter m capital gain of a
company shall be taken into account in computing the book pr ofit and
income-tax payable under section 115JB.]
Explan ation .For the pur poses of this clause, equity or iented fund
means a fund
(i) wher e the investible funds ar e invested by way of equity shar es
in domestic companies to the extent of mor e than
61
[sixty-five] per
cent of the total pr oceeds of such fund; and
(ii) which has been set up under a scheme of a Mutual Fund specified
under clause (23D) :
Provided that the per centage of equity shar eholding of the fund shall
be computed with r efer ence to the annual aver age of the monthly
aver ages of the opening and closing figur es;]
62
[(39) any specified income, ar ising fr om any int er nat ional spor t ing
event held in India, to the per son or per sons notified
63
by the Centr al
Gover nment in the Official Gazette, if such inter national spor ting
event
(a) is appr oved by the inter national body r egulating the inter national
spor t r elating to such event;
(b) has par ticipation by mor e than two countr ies;
(c) is notified
63
by the Centr al Gover nment in the Official Gazette for
the pur poses of this clause.
Explan ation .For the pur poses of this clause, the specified income
means the income, of the natur e and to the extent, ar ising fr om the
inter national spor ting event, which the Centr al Gover nment may
notify
63
in this behalf;
(40) any income of any subsidiar y company by way of gr ant or other wise
r eceived fr om an Indian company, being its holding company en-
gaged in the business of gener ation or tr ansmission or distr ibution of
power if r eceipt of such income is for settlement of dues in connection
with r econstr uction or r evival of an existing business of power
gener ation:
Provided that the pr ovisions of this clause shall apply if r econ-
str uction or r evival of any existing business of power gener ation is by
way of tr ansfer of such business to the Indian company notified under
sub-clause (a) of clause (v) of sub-section (4) of section 80-IA;
(41) any income ar ising fr om tr ansfer of a capital asset, being an asset of
an under taking engaged in the business of gener ation or tr ansmission
or distr ibution of power wher e such tr ansfer is effected on or befor e
the 31st day of Mar ch, 2006, to the Indian company notified under
sub-clause (a) of clause (v) of sub-section (4) of section 80-IA;]
64
[(42) any specified income ar ising to a body or author ity which
61. Substituted for fifty, ibid., w.e.f. 1-6-2006.
62. Clauses (39) to (41) inser ted by the Taxation Laws (Amendment) Act, 2005, w.e.f. 1-4-2006.
63. For notified per sons, notified spor ting events and specified income, see Taxmanns Master
S. 10A I.T. ACT, 1961 1.104
(a) has been established or constituted or appointed under a tr eaty
or an agr eement enter ed into by the Centr al Gover nment with
two or mor e countr ies or a convention signed by the Centr al
Gover nment;
(b) is established or constituted or appointed not for the pur poses of
profit;
(c) is notified by the Centr al Gover nment in the Official Gazette
65
for
the pur poses of this clause.
Explan ation .For the pur poses of this clause, specified income
means the income, of the natur e and to the extent, ar ising to the body
or author ity r efer r ed to in this clause, which the Centr al Gover nment
may notify
65
in this behalf;]
65a
[(43) an y am oun t received by an in dividual as a loan , eith er in lum p sum or
in in stalmen t, in a tran saction of reverse mortgage referred to in clause
(xvi) of section 47.]
66
[Special provision in respect of newly established undertakings in free trade
zone, etc.
67
10A. (1) Subject to the pr ovisions of this section, a deduction of such pr ofits
and gains as ar e der ived by an under taking fr om the expor t of ar ticles or
things or computer softwar e for a per iod of ten consecutive assessment year s
beginning with the assessment year r elevant to the pr evious year in which the
under taking begins to manufactur e or pr oduce such ar ticles or things or
computer softwar e, as the case may be, shall be allowed fr om the total income
of the assessee :
Provided that wher e in computing the total income of the under taking for any
assessment year , its pr ofits and gains had not been included by application of the
pr ovisions of this section as it stood immediately befor e its substitution by the
Finance Act, 2000, the under taking shall be entitled to deduction r efer r ed to in
this sub-section only for the unexpir ed per iod of the afor esaid ten consecutive
assessment year s :
Provided further that wher e an under taking initially located in any fr ee tr ade
zone or expor t pr ocessing zone is subsequently located in a special economic
zone by r eason of conver sion of such fr ee tr ade zone or expor t pr ocessing zone
into a special economic zone, the per iod of ten consecutive assessment year s
r efer r ed to in this sub-section shall be r eckoned fr om the assessment year
r elevant to the pr evious year in which the
68
[under taking began to manufactur e
65. For notified author ity, see Taxmanns Master Guide to Income-tax Act.
65a. Inser ted by the Finance Act, 2008, w.e.f. 1-4-2008.
66. Substituted by the Finance Act, 2000, w.e.f. 1-4-2001. Pr ior to its substitution, section 10A
was inser ted by the Finance Act, 1981, w.e.f. 1-4-1981, and later on amended by the
Taxation Laws (Amendment and Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1987,
Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988/ 1-4-1989, Finance Act, 1987,
w.r .e.f. 1-4-1981/ w.e.f. 1-4-1988, Finance Act, 1988, w.e.f. 1-4-1989, Finance Act, 1993, w.e.f.
1-4-1994/ w.r .e.f. 1-4-1991, Finance Act, 1995, w.e.f. 1-4-1996, Income-tax (Second Amend-
ment) Act, 1998, w.e.f. 1-4-1999 and Finance Act, 1999, w.e.f. 1-4-2000.
67. See Instr uction No. 1/ 2006, dated 31-3-2006. For details, see Taxmanns Master Guide to
Income-tax Act.
68. Substituted for under taking was fir st set up by the Finance Act, 2001, w.e.f. 1-4-2001.
1.105 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10A
or pr oduce such ar ticles or things or computer softwar e] in such fr ee tr ade zone
or expor t pr ocessing zone :
69
[Provided also that for the assessment year beginning on the 1st day of Apr il,
2003, the deduction under this sub-section shall be ninety per cent of the pr ofits
and gains der ived by an under taking fr om the expor t of such ar ticles or things
or computer softwar e :]
Provided also that no deduction under this section shall be allowed to any
under taking for the assessment year beginning on the 1st day of Apr il,
69a
[2011]
and subsequent year s.
70
[(1A) Notwithstanding anything contained in sub-section (1), the deduction, in
computing the total income of an under taking, which begins to manufactur e or
pr oduce ar ticles or things or computer softwar e dur ing the pr evious year
r elevant to any assessment year commencing on or after the 1st day of Apr il,
2003, in any special economic zone, shall be,
(i) hundr ed per cent of pr ofits and gains der ived fr om the expor t of such
ar ticles or things or computer softwar e for a per iod of five consecu-
tive assessment year s beginning with the assessment year r elevant to
the pr evious year in which the under taking begins to manufactur e or
pr oduce such ar ticles or things or computer softwar e, as the case may
be, and ther eafter , fifty per cent of such pr ofits and gains for fur ther
two consecutive assessment year s, and ther eafter ;
(ii) for the next thr ee consecutive assessment year s, so much of the
amount not exceeding fifty per cent of the pr ofit as is debited to the
pr ofit and loss account of the pr evious year in r espect of which the
deduction is to be allowed and cr edited to a r eser ve account (to be
called the Special Economic Zone Re-investment Allowance Re-
ser ve Account) to be cr eated and utilised for the pur poses of the
business of the assessee in the manner laid down in sub-section (1B) :
71
[Provided that no deduction under this section shall be allowed to an assessee
who does not fur nish a r etur n of his income on or befor e the due date specified
under sub-section (1) of section 139.]
69. Inser ted by the Finance Act, 2002, w.e.f. 1-4-2003. Ear lier the thir d pr oviso was omitted by
the Finance Act, 2001, w.e.f. 1-4-2002. Pr ior to omission, thir d pr oviso r ead as under :
Provided also that the pr ofits and gains der ived fr om such domestic sales of ar ticles or
things or computer softwar e as do not exceed twenty-five per cent of total sales shall be
deemed to be the pr ofits and gains der ived fr om the expor t of ar ticles or things or
computer softwar e:
69a. Substituted for 2010 by the Finance Act, 2008, w.e.f. 1-4-2008.
70. Sub-sections (1A) to (1C) substituted for sub-section (1A) by the Finance Act, 2003, w.e.f.
1-4-2004. Pr ior to its substitution, sub-section (1A), as inser ted by the Finance Act, 2002,
(1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing
the total income of an under taking, which begins to manufactur e or pr oduce ar ticles or
things or computer softwar e dur ing the pr evious year r elevant to any assessment year
commencing on or after the 1st day of Apr il, 2003, in any special economic zone, shall be
hundr ed per cent of pr ofits and gains der ived fr om the expor t of such ar ticles or things
or computer softwar e for a per iod of five consecutive assessment year s beginning with
the assessment year r elevant to the pr evious year in which the under taking begins to
manufactur e or pr oduce such ar ticles or things or computer softwar e, as the case may be,
and ther eafter , fifty per cent of such pr ofits and gains for fur ther two assessment year s.
S. 10A I.T. ACT, 1961 1.106
(1B) The deduction under clause (ii) of sub-section (1A) shall be allowed only if
the following conditions ar e fulfilled, namely:
(a) the amount cr edited to the Special Economic Zone Re-investment
Allowance Reser ve Account is to be utilised
(i) for the pur poses of acquir ing new machiner y or plant which is
fir st put to use befor e the expir y of a per iod of thr ee year s next
following the pr evious year in which the r eser ve was cr eated; and
(ii) until the acquisition of new machiner y or plant as afor esaid, for
the pur poses of the business of the under taking other than for
distr ibution by way of dividends or pr ofits or for r emittance
outside India as pr ofits or for the cr eation of any asset outside
India;
(b) the par ticular s, as may be pr escr ibed
72
in this behalf, have been
fur nished by the assessee in r espect of new machiner y or plant along
with the r etur n of income for the assessment year r elevant to the
pr evious year in which such plant or machiner y was fir st put to use.
(1C) Wher e any amount cr edited to the Special Economic Zone Re-investment
Allowance Reser ve Account under clause (ii) of sub-section (1A),
(a) has been utilised for any pur pose other than those r efer r ed to in sub-
section (1B), the amount so utilised; or
(b) has not been utilised befor e the expir y of the per iod specified in sub-
clause (i) of clause (a) of sub-section (1B), the amount not so utilised,
shall be deemed to be the pr ofits,
(i) in a case r efer r ed to in clause (a), in the year in which the amount was
so utilised; or
(ii) in a case r efer r ed to in clause (b), in the year immediately following
the per iod of thr ee year s specified in sub-clause (i) of clause (a) of sub-
section (1B),
and shall be char ged to tax accor dingly.]
(2) This section applies to any under taking which fulfils all the following
conditions, namely :
(i) it has begun or begins to manufactur e or pr oduce ar ticles or things or
computer softwar e dur ing the pr evious year r elevant to the assess-
ment year
(a) commencing on or after the 1st day of Apr il, 1981, in any fr ee
tr ade zone; or
(b) commencing on or after the 1st day of Apr il, 1994, in any
electr onic har dwar e technology par k, or , as the case may be,
softwar e technology par k;
(c) commencing on or after the 1st day of Apr il, 2001 in any special
economic zone;
72. See r ule 16DD & For m No. 56FF.
(ii) it is not for med by the splitting up, or the r econstr uction, of a business
alr eady in existence :
Provided that this condition shall not apply in r espect of any under -
taking which is for med as a r esult of the r e-establishment, r econstr uc-
tion or r evival by the assessee of the business of any such under tak-
ings as is r efer r ed to in section 33B, in the cir cumstances and within
the per iod specified in that section;
(iii) it is not for med by the tr ansfer to a new business of machiner y or plant
pr eviously used for any pur pose.
Explan ation .The pr ovisions of Explan ation 1 and Explan ation 2 to sub-
section (2) of section 80-I shall apply for the pur poses of clause (iii) of this sub-
section as they apply for the pur poses of clause (ii) of that sub-section.
(3) This section applies to the under taking, if the sale pr oceeds of ar ticles or things
or computer softwar e expor ted out of India ar e r eceived in, or br ought into, India
by the assessee in conver tible for eign exchange, within a per iod of six months
fr om the end of the pr evious year or , within such fur ther per iod as the competent
author ity may allow in this behalf.
Explan ation 1.For the pur poses of this sub-section, the expr ession competent
author ity means the Reser ve Bank of India or such other author ity as is
author ised under any law for the time being in for ce for r egulating payments and
dealings in for eign exchange.
Explan ation 2.The sale pr oceeds r efer r ed to in this sub-section shall be deemed
to have been r eceived in India wher e such sale pr oceeds ar e cr edited to a
separ ate account maintained for the pur pose by the assessee with any bank
outside India with the appr oval of the Reser ve Bank of India.
73
[(4) For the pur poses of
74
[sub-sections (1) and (1A)], the pr ofits der ived fr om
expor t of ar ticles or things or computer softwar e shall be the amount which
bear s to the pr ofits of the business of the under taking, the same pr opor tion as the
expor t tur nover in r espect of such ar ticles or things or computer softwar e bear s
to the total tur nover of the business car r ied on by the under taking.]
(5) The deduction under
74
[this section] shall not be admissible for any assess-
ment year beginning on or after the 1st day of Apr il, 2001, unless the assessee
fur nishes in the pr escr ibed for m
75
, alongwith the r etur n of income, the r epor t of
an accountant, as defined in the Explan ation below sub-section (2) of section 288,
cer tifying that the deduction has been cor r ectly claimed in accor dance with the
pr ovisions of this section.
(6) Notwithstanding anything contained in any other pr ovision of this Act, in
computing the total income of the assessee of the pr evious year r elevant to the
73. Substituted by the Finance Act, 2001, w.e.f. 1-4-2001. Pr ior to its substitution, sub-section
(4) r ead as under :
(4) For the pur poses of sub-section (1), the pr ofits der ived fr om expor t of ar ticles or things
or computer softwar e shall be the amount which bear s to the pr ofits of the business, the
same pr opor tion as the expor t tur nover in r espect of such ar ticles or things or computer
softwar e bear s to the total tur nover of the business car r ied on by the assessee.
74. Substituted for sub-section (1) by the Finance Act, 2003, w.e.f. 1-4-2003.
75. See r ule 16D and For m No. 56F.
S. 10A I.T. ACT, 1961 1.108
assessment year immediately succeeding the last of the r elevant assessment
year s, or of any pr evious year , r elevant to any subsequent assessment year ,
(i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-
section (1) of section 36 shall apply as if ever y allowance or deduction
r efer r ed to ther ein and r elating to or allowable for any of the r elevant
assessment year s
76
[ending befor e the 1st day of Apr il, 2001], in
r elation to any building, machiner y, plant or fur nitur e used for the
pur poses of the business of the under taking in the pr evious year
r elevant to such assessment year or any expenditur e incur r ed for the
pur poses of such business in such pr evious year had been given full
effect to for that assessment year itself and accor dingly sub-section
(2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii)
of sub-section (2) of section 33, sub-section (4) of section 35 or the
second pr oviso to clause (ix) of sub-section (1) of section 36, as the
case may be, shall not apply in r elation to any such allowance or
deduction;
(ii) no loss r efer r ed to in sub-section (1) of section 72 or sub-section (1) or
sub-section (3) of section 74, in so far as such loss r elates to the
business of the under taking, shall be car r ied for war d or set off wher e
such loss r elates to any of the r elevant assessment year s
76
[ending
befor e the 1st day of Apr il, 2001];
(iii) no deduction shall be allowed under section 80HH or section 80HHA
or section 80-I or section 80-IA or section 80-IB in r elation to the
pr ofits and gains of the under taking; and
(iv) in computing the depr eciation allowance under section 32, the wr it-
ten down value of any asset used for the pur poses of the business of
the under taking shall be computed as if the assessee had claimed and
been actually allowed the deduction in r espect of depr eciation for
each of the r elevant assessment year .
(7) The pr ovisions of sub-section (8) and sub-section (10) of section 80-IA shall,
so far as may be, apply in r elation to the under taking r efer r ed to in this section
as they apply for the pur poses of the under taking r efer r ed to in section 80-IA.
77
[(7A) Wher e any under taking of an Indian company which is entitled to the
deduction under this section is tr ansfer r ed, befor e the expir y of the per iod
specified in this section, to another Indian company in a scheme of amalgamation
or demer ger ,
(a) no deduction shall be admissible under this section to the amalgam-
ating or the demer ged company for the pr evious year in which the
amalgamation or the demer ger takes place; and
(b) the pr ovisions of this section shall, as far as may be, apply to the
amalgamated or the r esulting company as they would have applied to
the amalgamating or the demer ged company if the amalgamation or
demer ger had not taken place.]
78
[(7B) The pr ovisions of this section shall not apply to any under taking, being a
Unit r efer r ed to in clause (zc) of section 2
79
of the Special Economic Zones Act,
2005, which has begun or begins to manufactur e or pr oduce ar ticles or things or
computer softwar e dur ing the pr evious year r elevant to the assessment year
commencing on or after the 1st day of Apr il, 2006 in any Special Economic Zone.]
(8) Notwithstanding anything contained in the for egoing pr ovisions of this
section, wher e the assessee, befor e the due date for fur nishing the r etur n of
income under sub-section (1) of section 139, fur nishes to the Assessing Officer a
declar ation in wr iting that the pr ovisions of this section may not be made
applicable to him, the pr ovisions of this section shall not apply to him for any of
the r elevant assessment year s.
(9)
80
[Om itted by th e Fin an ce Act, 2003, w.e.f. 1-4-2004.]
(9A)
81
Explan ation 1.
82
Explan ation 2.For the pur poses of this section,
(i) computer softwar e means
(a) any computer pr ogr amme r ecor ded on any disc, tape, per for ated
media or other infor mation stor age device; or
(b) any customized electr onic data or any pr oduct or ser vice of
similar natur e, as may be notified
83
by the Boar d,
(Con td. on p. 1.110)
79. For text of section 2(zc) of Special Economic Zones Act, 2005, see Appendix.
80. Pr ior to its omission, sub-section (9) r ead as under :
(9) Wher e dur ing any pr evious year , the owner ship or the beneficial inter est in the
under taking is tr ansfer r ed by any means, the deduction under sub-section (1) shall not be
allowed to the assessee for the assessment year r elevant to such pr evious year and the
subsequent year s.
81. Pr ior to its omission, sub-section (9A), as inser ted by the Finance Act, 2002, w.e.f. 1-4-2003,
r ead as under :
(9A) Not wit hst anding anyt hing cont ained in sub-sect ion (9), wher e as a r esult of
r eor ganisation of business, a fir m or a sole pr opr ietar y concer n is succeeded by a company
and the owner ship or beneficial inter est in the under taking of the fir m or the sole
pr opr ietar y concer n is tr ansfer r ed to the company, the deduction under sub-section (1)
in r espect of such under taking shall be allowed to the company, as the same would have
been allowed to such fir m or sole pr opr ietar y concer n, as the case may be, if the
r eor ganisation had not taken place:
Provided that,
(a) in the case of a fir m, the aggr egate of the shar eholding in the company of the
par tner s of the fir m is not less than fifty-one per cent of the total voting power in
the company and their shar eholding continues to be as such for the per iod for
which the company is eligible for deduction under this section;
(b) in the case of a sole pr opr ietar y concer n, the shar eholding of the sole pr opr ietor in
the company is not less than fifty-one per cent of the total voting power in the
company and his shar eholding continues to r emain as such for the per iod for which
the company is eligible for deduction under this section.
82. Pr ior to its omission, Explan ation 1, as amended by the Finance Act, 2001, w.e.f. 1-4-2001,
r ead as under :
which is tr ansmitted or expor ted fr om India to any place outside India
by any means;
(ii) conver tible for eign exchange means for eign exchange which is for
the time being tr eated by the Reser ve Bank of India as conver tible
for eign exchange for the pur poses of the For eign Exchange Regula-
tion Act, 1973 (46 of 1973), and any r ules made ther eunder or any
other cor r esponding law for the time being in for ce;
(iii) electr onic har dwar e technology par k means any par k set up in
accor dance with the Electr onic Har dwar e Technology Par k (EHTP)
Scheme notified
83a
by the Gover nment of India in the Ministr y of
Commer ce and Industr y;
(iv) expor t tur nover means the consider ation in r espect of expor t
84
[by
the under taking] of ar ticles or things or computer softwar e r eceived
in, or br ought into, India by the assessee in conver tible for eign
exchange in accor dance with sub-section (3), but does not include
fr eight, telecommunication char ges or insur ance attr ibutable to the
deliver y of the ar ticles or things or computer softwar e outside India
or expenses, if any, incur r ed in for eign exchange in pr oviding the
technical ser vices outside India;
(v) free trade zone means the Kandla Free Trade Zone and the Santacruz
Electr onics Expor t Pr ocessing Zone and includes any other fr ee tr ade
zone which the Centr al Gover nment may, by notification in the
Official Gazette,
85
specify for the pur poses of this section;
(vi) r elevant assessment year means any assessment year falling within
a per iod of ten consecutive assessment year s r efer r ed to in this
section;
(vii) softwar e technology par k means any par k set up in accor dance with
the Softwar e Technology Par k Scheme notified
83a
by the Gover nment
of India in the Ministr y of Commer ce and Industr y;
(viii) special economic zone means a zone which the Centr al Gover nment
may, by notification in the Official Gazette, specify as a special
economic zone for the pur poses of this section.]
S. 10A I.T. ACT, 1961 1.110
Explan ation 1.For the pur poses of this section, in the case of a company, wher e on the
last day of any pr evious year , the shar es of the company car r ying not less than fifty-one
per cent of the voting power ar e not beneficially held by per sons who held the shar es of
the company car r ying not less than fifty-one per cent of the voting power on the last day
of the year in which the under taking was set up, the company shall be pr esumed to have
tr ansfer r ed its owner ship or the beneficial inter est in the under taking :
Provided that nothing contained in this Explan ation shall apply to any change in the
shar eholding of the company as a r esult of
(a) its becoming a company in which the public ar e substantially inter ested; or
(b) disinvestment of its equity shar es by any ventur e capital company or ventur e
capital fund.
83. For notified Infor mation Technology enabled pr oducts or ser vices, see Taxmanns Master
83a. For notified Schemes, see Taxmanns Dir ect Taxes Manual, Vol. 3.
85. For notified Fr ee Tr ade Zones, see Taxmanns Master Guide to Income-tax Act.
1.111 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10AA
86
[Explan ation 3.For the r emoval of doubts, it is her eby declar ed that the
pr ofits and gains der ived fr om on site development of computer softwar e
(including ser vices for development of softwar e) outside India shall be deemed
to be the pr ofits and gains der ived fr om the expor t of computer softwar e outside
India.]
87
[Explan ation 4.For the pur poses of this section, manufactur e or pr oduce
shall include the cutting and polishing of pr ecious and semi-pr ecious stones.]
88
[Special provisions in respect of newly established Units in Special Economic
Zones.
10AA. (1) Su bject t o t he pr ovisions of t his sect ion, in compu t ing t he
total income of an assessee, being an entr epr eneur as r efer r ed to in clause
(j) of section 2
89
of the Special Economic Zones Act, 2005, fr om his Unit, who
begins to manufactur e or pr oduce ar ticles or things or pr ovide any ser vices
dur ing the pr evious year r elevant to any assessment year commencing on or
after the 1st day of Apr il, 2006, a deduction of
(i) hundr ed per cent of pr ofits and gains der ived fr om the expor t, of such
ar ticles or things or fr om ser vices for a per iod of five consecutive
assessment year s beginning with the assessment year r elevant to the
pr evious year in which the Unit begins to manufactur e or pr oduce
such ar ticles or things or pr ovide ser vices, as the case may be, and fifty
per cent of such pr ofits and gains for fur ther five assessment year s
and ther eafter ;
(ii) for the next five consecutive assessment year s, so much of the
amount not exceeding fifty per cent of the pr ofit as is debited to the
pr ofit and loss account of the pr evious year in r espect of which the
deduction is to be allowed and cr edited to a r eser ve account (to be
called the Special Economic Zone Re-investment Reser ve Account)
to be cr eated and utilized for the pur poses of the business of the
assessee in the manner laid down in sub-section (2).
(2) The deduction under clause (ii) of sub-section (1) shall be allowed only if the
(a) the amount cr edited to the Special Economic Zone Re-investment
Reser ve Account is to be utilised
(i) for the pur poses of acquir ing machiner y or plant which is fir st put
to use befor e the expir y of a per iod of thr ee year s following the
pr evious year in which the r eser ve was cr eated; and
(ii) until the acquisition of the machiner y or plant as afor esaid, for the
pur poses of the business of the under taking other than for
distr ibution by way of dividends or pr ofits or for r emittance
outside India as pr ofits or for the cr eation of any asset outside
India;
89. See Appendix.
(b) the par ticular s, as may be specified by the Centr al Boar d of Dir ect
Taxes in this behalf, under clause (b) of sub-section (1B) of section 10A
have been fur nished by the assessee in r espect of machiner y or
plant along with the r etur n of income for the assessment year
r elevant to the pr evious year in which such plant or machiner y was
fir st put to use.
(3) Wher e any amount cr edited to the Special Economic Zone Re-investment
Reser ve Account under clause (ii) of sub-section (1),
section (2), the amount so utilised; or
(b) has not been utilised befor e the expir y of the per iod specified in sub-
clause (i) of clause (a) of sub-section (2), the amount not so utilised,
so utilised; or
the per iod of thr ee year s specified in sub-clause (i) of clause (a) of sub-
section (2),
and shall be char ged to tax accor dingly :
Provided that wher e in computing the total income of the Unit for any assess-
ment year , its pr ofits and gains had not been included by application of the
pr ovisions of sub-section (7B) of section 10A, the under taking, being the Unit
shall be entitled to deduction r efer r ed to in this sub-section only for the
unexpir ed per iod of ten consecutive assessment year s and ther eafter it shall be
eligible for deduction fr om income as pr ovided in clause (ii) of sub-section (1).
Explan ation .For the r emoval of doubts, it is her eby declar ed that an under tak-
ing, being the Unit, which had alr eady availed, befor e the commencement of the
Special Economic Zones Act, 2005, the deductions r efer r ed to in section 10A for
ten consecutive assessment year s, such Unit shall not be eligible for deduction
fr om income under this section :
Provided further that wher e a Unit initially located in any fr ee tr ade zone or
expor t pr ocessing zone is subsequently located in a Special Economic Zone
by r eason of conver sion of such fr ee tr ade zone or expor t pr ocessing zone into
a Special Economic Zone, the per iod of ten consecutive assessment year s
r efer r ed to above shall be r eckoned fr om the assessment year r elevant to
the pr evious year in which the Unit began to manufactur e, or pr oduce or pr ocess
such ar ticles or things or ser vices in such fr ee tr ade zone or expor t pr ocessing
zone :
Provided also that wher e a Unit initially located in any fr ee tr ade zone or
expor t pr ocessing zone is subsequently located in a Special Economic Zone by
r eason of conver sion of such fr ee tr ade zone or expor t pr ocessing zone into a
Special Economic Zone and has completed the per iod of ten consecutive
assessment year s r efer r ed to above, it shall not be eligible for deduction fr om
income as pr ovided in clause (ii) of sub-section (1) with effect fr om the 1st day
of Apr il, 2006.
S. 10AA I.T. ACT, 1961 1.112
90
[(4) This section applies to any under taking, being the Unit, which fulfils all the
following conditions, namely:
(i) it has begun or begins to manufactur e or pr oduce ar ticles or things or
pr ovide ser vices dur ing the pr evious year r elevant to the assessment
year commencing on or after the 1st day of Apr il, 2006 in any Special
Economic Zone;
alr eady in existence:
taking, being the Unit, which is for med as a r esult of the r e-establish-
ment, r econstr uction or r evival by the assessee of the business of any
such under taking as is r efer r ed to in section 33B, in the cir cumstances
and within the per iod specified in that section;
(iii) it is not for med by the tr ansfer to a new business, of machiner y or
plant pr eviously used for any pur pose.
Explan ation .The pr ovisions of Explan ation s 1 and 2 to sub-section (3) of sec-
tion 80-IA shall apply for the pur poses of clause (iii) of this sub-section as they
apply for the pur poses of clause (ii) of that sub-section.]
(5) Wher e any under taking being the Unit which is entitled to the deduction
under this section is tr ansfer r ed, befor e the expir y of the per iod specified in this
section, to another under taking, being the Unit in a scheme of amalgamation or
demer ger ,
ating or the demer ged Unit, being the company for the pr evious year
in which the amalgamation or the demer ger takes place; and
(b) the pr ovisions of this section shall, as they would have applied to the
amalgamating or the demer ged Unit being the company as if the
amalgamation or demer ger had not taken place.
(6) Loss r efer r ed to in sub-section (1) of section 72 or sub-section (1) or sub-
section (3) of section 74, in so far as such loss r elates to the business of the
under taking, being the Unit shall be allowed to be car r ied for war d or set off.
(7) For the pur poses of sub-section (1), the pr ofits der ived fr om the expor t of
ar ticles or things or ser vices (including computer softwar e) shall be the amount
which bear s to the pr ofits of the business of the under taking, being the Unit, the
same pr opor tion as the expor t tur nover in r espect of such ar ticles or things or
ser vices bear s to the total tur nover of the business car r ied on by the assessee.
(8) The pr ovisions of sub-sections (5) and (6) of section 10A shall apply to the
ar ticles or things or ser vices r efer r ed to in sub-section (1) as if
(a) for the figur es, letter s and wor d 1st Apr il, 2001, the figur es, letter s
and wor d 1st Apr il, 2006 had been substituted;
90. Substituted by the Finance Act, 2007, w.r .e.f. 10-2-2006. Pr ior to its substitution, sub-
section (4) r ead as under :
(4) This section applies to any under taking being the Unit, which has begun or begins to
manufactur e or pr oduce ar ticles or things or ser vices dur ing the pr evious year r elevant
to the assessment year commencing on or after the 1st day of Apr il, 2006, in any Special
Economic Zone.
(b) for the wor d under taking, the wor ds under taking, being the Unit
had been substituted.
(i) expor t tur nover means the consider ation in r espect of expor t by the
under taking, being the Unit of ar ticles or things or ser vices r eceived
in, or br ought into, India by the assessee but does not include fr eight,
telecommunication char ges or insur ance attr ibutable to the deliver y
of the ar ticles or things outside India or expenses, if any, incur r ed in
for eign exchange in r ender ing of ser vices (including computer soft-
war e) outside India;
(ii) expor t in r elation to the Special Economic Zones means taking
goods or pr oviding ser vices out of India fr om a Special Economic
Zone by land, sea, air , or by any other mode, whether physical or
other wise;
(iii) manufactur e shall have the same meaning as assigned to it in clause
(r) of section 2 of the Special Economic Zones Act, 2005
91
;
(iv) r elevant assessment year means any assessment year falling within
a per iod of fifteen consecutive assessment year s r efer r ed to in this
section;
(v) Special Economic Zone and Unit shall have the same meanings as
assigned to them under clauses (za) and (zc)
91
of section 2 of the
Special Economic Zones Act, 2005.
Explan ation 2.For the r emoval of doubts, it is her eby declar ed that the
pr ofits and gains der ived fr om on site development of computer softwar e
(including ser vices for development of softwar e) outside India shall be deemed
to be the pr ofits and gains der ived fr om the expor t of computer softwar e outside
India.]
92
[Special provisions in respect of newly established hundred per cent export-
oriented undertakings
93
.
10B. (1) Subject to the pr ovisions of this section, a deduction of such pr ofits and
gains as ar e der ived by a hundr ed per cent expor t-or iented under taking
fr om the expor t of ar ticles or things or computer softwar e for a per iod of ten
S. 10B I.T. ACT, 1961 1.114
91. For text of section 2(r), (za) and (zc) of the Special Economic Zones Act, 2005, see Appendix.
92. Substituted by the Finance Act, 2000, w.e.f. 1-4-2001. Pr ior to its substitution, section 10B,
as inser ted by the Finance Act, 1988, w.e.f. 1-4-1989 and later on amended by the Finance
Act , 1993, w.r .e.f. 1-4-1991, Finance Act , 1994, w.e.f. 1-4-1994/ 1-4-1995, Income-t ax
(Second Amendment) Act, 1998, w.e.f. 1-4-1999 and Finance Act, 1999, w.e.f. 1-4-2000, r ead
as under :
10B. Special provision in respect of n ewly establish ed h un dred per cen t export-orien ted
un dertak in gs.(1) Subject to the pr ovisions of this section, any pr ofits and gains der ived
by an assessee fr om a hundr ed per cent expor t-or iented under taking (her eafter in this
section r efer r ed to as the under taking) to which this section applies shall not be included
in the total income of the assessee.
(Con td. on p. 1.115)
1.115 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10B
(2) This section applies to any under taking which fulfils all the following conditions,
namely :
(i) it manufactur es or pr oduces any ar ticle or thing;
(ia) in r elation to an under taking which begins to manufactur e or pr oduce any ar ticle
or thing on or after the 1st day of Apr il, 1994, its expor ts of such ar ticles and things
ar e not less than seventy-five per cent of the total sales ther eof dur ing the pr evious
year ;
(ii) it is not for med by the splitting up, or the r econstr uction, of a business alr eady in
existence :
Provided that this condition shall not apply in r espect of any under taking which is
for med as a r esult of the r e-establishment, r econstr uction or r evival by the assessee
of the business of any such industr ial under taking as is r efer r ed to in section 33B,
in the cir cumstances and within the per iod specified in that section;
(iii) it is not for med by the tr ansfer to a new business of machiner y or plant pr eviously
used for any pur pose.
Explan ation .The pr ovisions of Explan ation 1 and Explan ation 2 to sub-section (2) of
section 80-I shall apply for the pur poses of clause (iii) of this sub-section as they apply for
t he pur poses of clause (ii) of that sub-section.
(3) The pr ofits and gains r efer r ed to in sub-section (1) shall not be included in the total
income of the assessee in r espect of any ten consecutive assessment year s, beginning with
the assessment year r elevant to the pr evious year in which the under taking begins to
manufactur e or pr oduce ar ticles or things.
(4) Notwithstanding anything contained in any other pr ovision of this Act, in computing
the total income of the assessee of the pr evious year r elevant to the assessment year
immediately succeeding the last of the r elevant assessment year s, or of any pr evious year
r elevant to any subsequent assessment year ,
(i) section 32, section 32A, section 33 and clause (ix) of sub-section (1) of section 36 shall
apply as if ever y allowance or deduction r efer r ed to ther ein and r elating to or
allowable for any of the r elevant assessment year s, in r elation to any building,
machiner y, plant or fur nit ur e used for t he pur poses of t he business of t he
under taking in the pr evious year r elevant to such assessment year or any expendi-
tur e incur r ed for the pur poses of such business in such pr evious year had been
given full effect to for that assessment year itself and accor dingly sub-section (2) of
section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2)
of section 33 or the second pr oviso to clause (ix) of sub-section (1) of section 36, as
the case may be, shall not apply in r elation to any such allowance or deduction;
(ii) no loss r efer r ed to in sub-section (1) of section 72 or sub-section (1) or sub-section
(3) of section 74, in so far as such loss r elates to the business of the under taking, shall
be car r ied for war d or set off wher e such loss r elates to any of the r elevant
assessment year s;
(iii) no deduction shall be allowed under section 80HH or section 80HHA or section
80-I or section 80-IA or section 80-IB in r elation to the pr ofits and gains of the
under taking; and
(iv ) in computing the depr eciation allowance under section 32, the wr itten down value
of any asset used for the pur poses of the business of the under taking shall be
computed as if the assessee had claimed and been actually allowed the deduction
in r espect of depr eciation for each of the r elevant assessment year s.
(5) Wher e the under taking has begun to manufactur e or pr oduce ar ticles or things in any
pr evious year r elevant to the assessment year commencing befor e the 1st day of Apr il,
1989, the assessee may, at his option, befor e the due date for fur nishing the r etur n of his
income under sub-section (1) of section 139 for the assessment year commencing on the
1st day of Apr il, 1989, fur nish to the Assessing Officer a declar ation in wr iting that the
pr ovisions of sub-section (1) may be made applicable to him for any five consecutive
(Con td. on p. 1.116)
S. 10B I.T. ACT, 1961 1.116
consecutive assessment year s beginning with the assessment year r elevant to the
pr evious year in which the under taking begins to manufactur e or pr oduce
ar ticles or things or computer softwar e, as the case may be, shall be allowed fr om
the total income of the assessee :
assessment year , its pr ofits and gains had not been included by application of the
pr ovisions of this section as it stood immediately befor e its substitution by the
Finance Act, 2000, the under taking shall be entitled to the deduction r efer r ed to
in this sub-section only for the unexpir ed per iod of afor esaid ten consecutive
assessment year s :
94
[Provided
95
[further] that for the assessment year beginning on the 1st day of
Apr il, 2003, the deduction under this sub-section shall be ninety per cent of the
assessment year s falling within a per iod of eight year s beginning with the assessment year
commencing on the 1st day of Apr il, 1989, and if he does so, then, the pr ovisions of sub-
section (1) shall apply to him for each of such assessment year s and the pr ovisions of sub-
section (4) shall also apply in computing the total income of the assessee for the assessment
year immediately succeeding the last of such assessment year s and any subsequent
assessment year .
(6) The pr ovisions of sub-section (8) and sub-section (9) of section 80-I shall, so far as may
be, apply in r elation to the under taking r efer r ed to in this section as they apply for the
pur poses of the industr ial under taking r efer r ed to in section 80-I.
(7) Notwithstanding anything contained in the for egoing pr ovisions of this section, wher e
the assessee, befor e the due date for fur nishing the r etur n of his income under sub-section
(1) of section 139, fur nishes to the Assessing Officer a declar ation in wr iting that the
pr ovisions of this section may not be made applicable to him, the pr ovisions of this section
shall not apply to him for any of the r elevant assessment year s.
Explan ation . For the pur poses of this section,
(i) hundr ed per cent expor t-or iented under taking means an under taking which has
been appr oved as a hundr ed per cent expor t-or iented under taking by the Boar d
appointed in this behalf by the Centr al Gover nment in exer cise of the power s
confer r ed by section 14 of the Industr ies (Development and Regulation) Act, 1951
(65 of 1951), and the r ules made under that Act;
(ii) r elevant assessment year s means the ten consecutive assessment year s r efer r ed
to in sub-section (3);
(iii) manufactur e includes any
(a) pr ocess, or
(b) assembling, or
(c) r ecor ding of pr ogr ammes on any disc, tape, per for ated media or other
infor mation stor age device;
(iv ) pr oduce, in r elation to any ar ticle or thing r efer r ed to in clause (i) of sub-section
(2) includes pr oduction of computer pr ogr ammes.
93. See Cir cular No. 1/ 2005, dated 6-1-2005. For details, see Taxmanns Master Guide to
Income-tax Act.
94. Inser ted by the Finance Act, 2002, w.e.f. 1-4-2003. Ear lier the second pr oviso was omitted
by the Finance Act, 2001, w.e.f. 1-4-2002. Pr ior to omission, it r ead as under :
Provided further that the pr ofits and gains der ived fr om such domestic sales of ar ticles
or things or computer softwar e as do not exceed twenty-five per cent of the total sales shall
be deemed to be the pr ofits and gains der ived fr om the expor t of ar ticles or things or
computer softwar e:
95. Substituted for also by the Finance Act, 2006, w.e.f. 1-4-2006.
pr ofits and gains der ived by an under taking fr om the expor t of such ar ticles or
things or computer softwar e:]
Provided also that no deduction under this section shall be allowed to any
under taking for the assessment year beginning on the 1st day of Apr il,
95a
[2011]
and subsequent year s :
96
[Provided also that no deduction under this section shall be allowed to an
assessee who does not fur nish a r etur n of his income on or befor e the due date
specified under sub-section (1) of section 139.]
(2) This section applies to any under taking which fulfils all the following
(i) it manufactur es or pr oduces any ar ticles or things or computer
softwar e;
tion or r evival by the assessee of the business of any such under taking
as is r efer r ed to in section 33B, in the cir cumstances and within the
per iod specified in that section ;
Explan ation .The pr ovisions of Explan ation 1 and Explan ation 2 to sub-
section (2) of section 80-I shall apply for the pur poses of clause (iii) of this sub-
section as they apply for the pur poses of clause (ii) of that sub-section.
(3) This section applies to the under taking, if the sale pr oceeds of ar ticles or things
or computer softwar e expor ted out of India ar e r eceived in, or br ought into, India
by the assessee in conver tible for eign exchange, within a per iod of six months
fr om the end of the pr evious year or , within such fur ther per iod as the competent
Explan ation 1.For the pur poses of this sub-section, the expr ession competent
Explan ation 2.The sale pr oceeds r efer r ed to in this sub-section shall be deemed
to have been r eceived in India wher e such sale pr oceeds ar e cr edited to a
separ ate account maintained for the pur pose by the assessee with any bank
outside India with the appr oval of the Reser ve Bank of India.
97
[(4) For the pur poses of sub-section (1), the pr ofits der ived fr om expor t of
ar ticles or things or computer softwar e shall be the amount which bear s to the
95a. Substituted for 2010 by the Finance Act, 2008, w.e.f. 1-4-2008.
(4) For the pur poses of sub-section (1), the pr ofits der ived fr om expor t of ar ticles or things
or computer softwar e shall be the amount which bear s to the pr ofits of the business, the
same pr opor tion as the expor t tur nover in r espect of such ar ticles or things or computer
softwar e bear s to the total tur nover of the business car r ied on by the assessee.
S. 10B I.T. ACT, 1961 1.118
pr ofits of the business of the under taking, the same pr opor tion as the expor t
tur nover in r espect of such ar ticles or things or computer softwar e bear s to the
total tur nover of the business car r ied on by the under taking.]
(5) The deduction under sub-section (1) shall not be admissible for any assess-
ment year beginning on or after the 1st day of Apr il, 2001, unless the assessee
fur nishes in the pr escr ibed for m
98
, along with the r etur n of income, the r epor t of
an accountant, as defined in the Explan ation below sub-section (2) of section
288, cer tifying that the deduction has been cor r ectly claimed in accor dance with
the pr ovisions of this section.
computing the total income of the assessee of the pr evious year r elevant to the
assessment year immediately succeeding the last of the r elevant assessment
year s, or of any pr evious year , r elevant to any subsequent assessment year ,
(i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-
section (1) of section 36 shall apply as if ever y allowance or deduction
assessment year s
99
[ending befor e the 1st day of Apr il, 2001], in
r elation to any building, machiner y, plant or fur nitur e used for the
pur poses of the business of the under taking in the pr evious year
r elevant to such assessment year or any expenditur e incur r ed for the
pur poses of such business in such pr evious year had been given full
effect to for that assessment year itself and accor dingly sub-section
(2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii)
of sub-section (2) of section 33, sub-section (4) of section 35 or the
second pr oviso to clause (ix) of sub-section (1) of section 36, as the
case may be, shall not apply in r elation to any such allowance or
deduction;
business of the under taking, shall be car r ied for war d or set-off wher e
such loss r elates to any of the r elevant assessment year s
1
[ending
befor e the 1st day of Apr il, 2001];
or section 80-I or section 80-IA or section 80-IB in r elation to the
pr ofits and gains of the under taking; and
the under taking shall be computed as if the assessee had claimed and
been actually allowed the deduction in r espect of depr eciation for
each of the r elevant assessment year .
98. See r ule 16E and For m No. 56G.
1. Inser ted, ibid.
2
[(7A) Wher e any under taking of an Indian company which is entitled to the
specified in this section, to another Indian company in a scheme of amalgam-
ation or demer ger
amalgamated or r esulting company as they would have applied to the
amalgamating or the demer ged company if the amalgamation or the
demer ger had not taken place.]
section, wher e the assessee, befor e the due date for fur nishing the r etur n of
applicable to him, the pr ovisions of this section shall not apply to him for any of
the r elevant assessment year .
(9)
3
(9A)
4
Explan ation 1.
5
(Con td. on p. 1.120)
(9) Wher e dur ing any pr evious year , the owner ship or the beneficial inter est in the
under taking is tr ansfer r ed by any means, the deduction under sub-section (1) shall not be
allowed to the assessee for the assessment year r elevant to such pr evious year and the
subsequent year s.
4. Pr ior to its omission, sub-section (9A), as inser ted by the Finance Act, 2002, w.e.f. 1-4-2003,
r ead as under :
(9A) Not wit hst anding anyt hing cont ained in sub-sect ion (9), wher e as a r esult of
r eor ganisation of business, a fir m or a sole pr opr ietar y concer n is succeeded by a company
and the owner ship or beneficial inter est in the under taking of the fir m or the sole
pr opr ietar y concer n is tr ansfer r ed to the company, the deduction under sub-section (1)
in r espect of such under taking shall be allowed to the company, as the same would have
been allowed to such fir m or sole pr opr ietar y concer n, as the case may be, if the
r eor ganisation had not taken place:
Provided that,
(a) in the case of a fir m, the aggr egate of the shar eholding in the company of the
par tner s of the fir m is not less than fifty-one per cent of the total voting power in
the company and their shar eholding continues to be as such for the per iod for
which the company is eligible for deduction under this section;
(b) in the case of a sole pr opr ietar y concer n, the shar eholding of the sole pr opr ietor in
the company is not less than fifty-one per cent of the total voting power in the
company and his shar eholding continues to r emain as such for the per iod for which
the company is eligible for deduction under this section.
5. Pr ior to its omission, Explan ation 1, as amended by the Finance Act, 2001, w.e.f. 1-4-2001,
r ead as under :
(i) computer softwar e means
(a) any computer pr ogr amme r ecor ded on any disc, tape, per for ated
(b) any customized electr onic data or any pr oduct or ser vice of
similar natur e as may be notified
6
by the Boar d,
which is tr ansmitted or expor ted fr om India to any place outside India
by any means;
(ii) conver tible for eign exchange means for eign exchange which is for
tion Act, 1973 (46 of 1973), and any r ules made ther eunder or any
(iii) expor t tur nover means the consider ation in r espect of expor t
7
[by
the under taking] of ar ticles or things or computer softwar e r eceived
deliver y of the ar ticles or things or computer softwar e outside India
or expenses, if any, incur r ed in for eign exchange in pr oviding the
(iv) hundr ed per cent expor t-or iented under taking means an under tak-
ing which has been appr oved as a hundr ed per cent expor t-or iented
under taking by the Boar d appointed in this behalf by the Centr al
Gover nment in exer cise of the power s confer r ed by section 14
8
of the
Industr ies (Development and Regulation) Act, 1951 (65 of 1951), and
the r ules made under that Act;
(v) r elevant assessment year s means any assessment year s falling
within a per iod of ten consecutive assessment year s, r efer r ed to in this
section.]
S. 10B I.T. ACT, 1961 1.120
Explan ation 1.For the pur poses of this section, in the case of a company, wher e on the
last day of any pr evious year , the shar es of the company car r ying not less than fifty-one
per cent of the voting power ar e not beneficially held by per sons who held the shar es of
the company car r ying not less than fifty-one per cent of the voting power on the last day
of the year in which the under taking was set up, the company shall be pr esumed to have
tr ansfer r ed its owner ship or the beneficial inter est in the under taking :
Provided that nothing contained in this Explan ation shall apply to any change in the
shar eholding of the company as a r esult of
(a) its becoming a company in which the public ar e substantially inter ested; or
(b) disinvestment of its equity shar es by any ventur e capital company or ventur e
capital fund.
6. For notified Infor mation Technology enabled pr oducts or ser vices, see Taxmanns Master
8. For text of section 14 of the Industr ies (Development and Regulation) Act, 1951, see
Appendix.
9
[Explan ation 3.For the r emoval of doubts, it is her eby declar ed that the pr ofits
and gains der ived fr om on site development of computer softwar e (including
ser vices for development of softwar e) outside India shall be deemed to be the
pr ofits and gains der ived fr om the expor t of computer softwar e outside India.]
10
[Explan ation 4.For the pur poses of this section, manufactur e or pr oduce
shall include the cutting and polishing of pr ecious and semi-pr ecious stones.]
11
[Special provisions in respect of export of certain articles or things.
10BA. (1) Subject to the pr ovisions of this section, a deduction of such pr ofits
and gains as ar e der ived by an under taking fr om the expor t out of India
of eligible ar ticles or things, shall be allowed fr om the total income of the
assessee :
assessment year , deduction under section 10A or section 10B has been claimed,
the under taking shall not be entitled to the deduction under this section :
Provided further that no deduction under this section shall be allowed to any
under taking for the assessment year beginning on the 1st day of Apr il, 2010 and
subsequent year s.
(2) This section applies to any under taking which fulfils the following conditions,
namely :
(a) it manufactur es or pr oduces the eligible ar ticles or things without the
use of impor ted r aw mater ials;
(b) it is not for med by the splitting up, or the r econstr uction, of a business
tion or r evival by the assessee of the business of any such under taking
as is r efer r ed to in section 33B, in the cir cumstances and within the
per iod specified in that section;
(c) it is not for med by the tr ansfer to a new business of machiner y or plant
Explan ation .The pr ovisions of Explan ation 1 and Explan ation 2 to
sub-section (2) of section 80-I shall apply for the pur poses of this
clause as they apply for the pur poses of clause (ii) of sub-section (2)
of that section;
(d) ninety per cent or mor e of its sales dur ing the pr evious year r elevant
to the assessment year ar e by way of expor ts of the eligible ar ticles or
things;
(e) it employs twenty or mor e wor ker s dur ing the pr evious year in the
pr ocess of manufactur e or pr oduction.
(3) This section applies to the under taking, if the sale pr oceeds of the eligible
ar ticles or things expor ted out of India ar e r eceived in or br ought into, India by
1.121 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10BA
S. 10BA I.T. ACT, 1961 1.122
the assessee in conver tible for eign exchange, within a per iod of six months fr om
the end of the pr evious year or , within such fur ther per iod as the competent
Explan ation .For the pur poses of this sub-section, the expr ession competent
(4) For the pur poses of sub-section (1), the pr ofits der ived fr om expor t out of
India of the eligible ar ticles or things shall be the amount which bear s to the
pr ofits of the business of the under taking, the same pr opor tion as the expor t
tur nover in r espect of such ar ticles or things bear s to the total tur nover of the
business car r ied on by the under taking.
(5) The deduction under sub-section (1) shall not be admissible, unless the
assessee fur nishes in the pr escr ibed for m
12
, along with the r etur n of income, the
r epor t of an accountant, as defined in the Explan ation below sub-section (2) of
section 288, cer tifying that the deduction has been cor r ectly claimed in accor -
dance with the pr ovisions of this section.
(6) Notwithstanding anything contained in any other pr ovision of this Act, wher e
a deduction is allowed under this section in computing the total income of the
assessee, no deduction shall be allowed under any other section in r espect of its
expor t pr ofits.
Explan ation .For the pur poses of this section,
(a) conver tible for eign exchange means for eign exchange which is for
for eign exchange for the pur poses of the For eign Exchange Manage-
ment Act, 1999 (42 of 1999), and any r ules made ther eunder or any
(b) eligible ar ticles or things means all hand-made ar ticles or things,
which ar e of ar tistic value and which r equir es the use of wood as the
main r aw mater ial;
(c) expor t tur nover means the consider ation in r espect of expor t by the
under taking of eligible ar ticles or things r eceived in, or br ought into,
India by the assessee in conver tible for eign exchange in accor dance
with sub-section (3), but does not include fr eight, telecommunication
char ges or insur ance attr ibutable to the deliver y of the ar ticles or
things outside India;
(d) expor t out of India shall not include any tr ansaction by way of sale
or other wise, in a shop, empor ium or any other establishment situate
in India, not involving clear ance of any customs station
13
as defined
in the Customs Act, 1962 (52 of 1962).]
12. See r ule 16F and For m No. 56H.
13. For definition of Customs station, see footnote No. 99 on page 1.426 post.
14
[Meaning of computer programmes in certain cases.
10BB. The pr ofits and gains der ived by an under taking fr om the pr oduction of
computer pr ogr ammes under section 10B, as it stood pr ior to its substitu-
tion by section 7 of the Finance Act, 2000 (10 of 2000), shall be constr ued as if for
the wor ds computer pr ogr ammes, the wor ds computer pr ogr ammes or
pr ocessing or management of electr onic data had been substituted in that
section.]
15
[Special provision in respect of certain industrial undertakings in North-
Eastern Region.
10C. (1) Subject to the pr ovisions of this section, any pr ofits and gains der ived
by an assessee fr om an industr ial under taking, which has begun or begins
to manufactur e or pr oduce any ar ticle or thing on or after the 1st day of Apr il,
1998 in any Integr ated Infr astr uctur e Development Centr e or Industr ial Gr owth
Centr e located in the Nor th-Easter n Region (her eafter in this section r efer r ed to
as the industr ial under taking) shall not be included in the total income of the
assessee.
(2) This section applies to any industr ial under taking which fulfils all the
(i) it is not for med by the splitting up, or the r econstr uction of, a business
Provided that this condition shall not apply in r espect of any indus-
tr ial under taking which is for med as a r esult of the r e-establishment,
r econstr uction or r evival by the assessee of the business of any such
industr ial under taking as is r efer r ed to in section 33B, in the cir cum-
stances and within the per iod specified in that section ;
(ii) it is not for med by the tr ansfer to a new business of machiner y or plant
Explan ation .The pr ovisions of Explan ation 1 and Explan ation 2 to sub-section
(3) of section 80-IA shall apply for the pur poses of clause (ii) of this sub-section
as they apply for the pur poses of clause (ii) of that sub-section.
(3) The pr ofits and gains r efer r ed to in sub-section (1) shall not be included in the
total income of the assessee in r espect of ten consecutive assessment year s
industr ial under taking begins to manufactur e or pr oduce ar ticles or things.
computing the total income of the assessee of any pr evious year r elevant to any
subsequent assessment year ,
(i) section 32, section 35 and clause (ix) of sub-section (1) of section 36
shall apply as if deduction r efer r ed to ther ein and r elating to or
allowable for any of the r elevant assessment year s, in r elation to any
building, machiner y, plant or fur nitur e used for the pur poses of the
business of the industr ial under taking in the pr evious year r elevant to
such assessment year or any expenditur e incur r ed for the pur poses
of such business in such pr evious year had been given full effect to for
that assessment year itself and, accor dingly, sub-section (2) of section
1.123 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 10C
32, sub-section (4) of section 35 or the second pr oviso to clause (ix) of
sub-section (1) of section 36, as the case may be, shall not apply in
r elation to any such deduction;
business of the industr ial under taking, shall be car r ied for war d or set
off wher e such loss r elates to any of the r elevant assessment year s;
or section 80-I or section 80-IA or section 80-IB or section 80JJA in
r elation to the pr ofits and gains of the industr ial under takings; and
the industr ial under taking shall be computed as if the assessee had
claimed and been actually allowed the deduction in r espect of
depr eciation for each of the r elevant assessment year s.
so far as may be, apply in r elation to the industr ial under taking r efer r ed to in this
section as they apply for the pur poses of the industr ial under taking r efer r ed to
in section 80-IA or section 80-IB, as the case may be.
section, wher e the assessee befor e the due date for fur nishing the r etur n of his
applicable to him, the pr ovisions of this section shall not apply to him in any of
the r elevant assessment year s :
16
[Provided that no deduction under this section shall be allowed to any under -
taking for the assessment year beginning on the 1st day of Apr il, 2004 and
subsequent year s.]
(i) Integr ated Infr astr uctur e Development Centr e means such centr es
located in the States of the Nor th-Easter n Region, which the Centr al
Gover nment, may, by notification in the Official Gazette, specify
17
for
the pur poses of this section;
(ii) Industr ial Gr owth Centr e means such centr es located in the States
of the Nor th-Easter n Region, which the Centr al Gover nment may, by
notification in the Official Gazette, specify
17
section;
(iii) Nor th-Easter n Region means the r egion compr ising the States of
Ar unachal Pr adesh, Assam, Manipur , Meghalaya, Mizor am, Nagaland,
Sikkim and Tr ipur a;
(iv) r elevant assessment year s means the ten consecutive year s begin-
ning with the year in which the industr ial under taking begins to
manufactur e or pr oduce ar ticles or things.]
S. 10C I.T. ACT, 1961 1.124
17. For notified Integr ated Infr astr uctur e Development Centr e and Industr ial Gr owth
Centr e, see Taxmanns Master Guide to Income-tax Act.
1.125 CH. III - INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME S. 11
18
Income
19
from property held for charitable or religious purposes.
20
11. (1) Subject to the pr ovisions of sections 60 to 63, the following income
shall not be included in the total income of the pr evious year of the per son
in r eceipt of the income
21
[(a) income der ived fr om pr oper ty
19
held under tr ust wholly for char i-
table or r eligious pur poses, to the extent to which such income
19
is
applied
19
to such pur poses in India; and, wher e any such income
19
is
accumulated
19
or set apar t for application to such pur poses in India,
to the extent to which the income so accumulated or set apar t
22
is not
in excess of
23
[fifteen] per cent of the income fr om such pr oper ty;
(b) income der ived fr om pr oper ty held under tr ust in par t
22
only for such
pur poses, the tr ust having been cr eated befor e the commencement of
this Act, to the extent to which such income is applied to such pur poses
in India; and, wher e any such income is finally set apar t for application
to such pur poses in India, to the extent to which the income so set
apar t is not in excess of
23
[fifteen] per cent of the income fr om such
pr oper ty;
(c) income
24
[der ived] fr om pr oper ty held under tr ust
(i) cr eated on or after the 1st day of Apr il, 1952, for a char itable
pur pose which tends to pr omote inter national welfar e in which
India is inter ested, to the extent to which such income is applied
to such pur poses outside India, and
(ii) for char itable or r eligious pur poses, cr eated befor e the 1st day of
Apr il, 1952, to the extent to which such income is applied to such
pur poses outside India:
Provided that the Boar d, by gener al or special or der , has dir ected in
either case that it shall not be included in the total income of the
per son in r eceipt of such income;
18. Section 11, which was omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989, was r eintr oduced by the Dir ect Tax Laws (Amendment) Act, 1989, with effect
fr om the same date with modifications.
19. For the meaning of the ter ms/ expr essions income, pr oper ty, such income, applied,
accumulated or set apar t and in par t, see Taxmanns Dir ect Taxes Manual, Vol. 3.
No. 52, dated 30-12-1970, Cir cular No. 12-P (LXX-7 of 1968), dated 26-11-1968, Cir cular
No. 5-P (LXX-6 of 1968), dated 19-6-1968, Cir cular No. 29, dated 23-8-1968, Cir cular
No. 566, dated 17-7-1990, Cir cular No. 584, dated 13-11-1990; Instr uction No. 1132, dated
5-1-1978; r elevant extr acts fr om Official Minutes of Twelfth Meeting of Dir ect Taxes
Advisor y Committee (Centr al) held in New Delhi on 17-8-1968 and Cir cular No. 335, dated
21. Substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. Ear lier , clauses
(a) and (b) wer e amended by the Finance Act, 1970, w.e.f. 1-4-1971.
22. For the meaning of the ter ms/ expr essions income, pr oper ty, such income, applied,
accumulated or set apar t and in par t, see Taxmanns Dir ect Taxes Manual, Vol. 3.
23. Substituted for twenty-five by the Finance Act, 2002, w.e.f. 1-4-2003.
25
[(d) income in the for m of voluntar y contr ibutions made with a specific
dir ection that they shall for m par t of the cor pus of the tr ust or
institution.]
26
[Explan ation .For the pur poses of clauses (a) and (b),
(1) in computing the
27
[fifteen] per cent of the income which may be
accumulated or set apar t, any such voluntar y contr ibutions as ar e
r efer r ed to in section 12 shall be deemed to be par t of the income;
(2) if, in the pr evious year , the income applied to char itable or r eligious
pur poses in India falls shor t of
28
[eighty-five] per cent of the income
der ived dur ing that year fr om pr oper ty held under tr ust, or , as the
case may be, held under tr ust in par t, by any amount
(i) for the r eason that the whole or any par t of the income has not
been r eceived dur ing that year , or
(ii) for any other r eason,
then
(a) in the case r efer r ed to in sub-clause (i), so much of the income
applied to such pur poses in India dur ing the pr evious year in
which t he income is r eceived or dur ing t he pr evious year
immediately following as does not exceed the said amount, and
(b) in the case r efer r ed to in sub-clause (ii), so much of the income
applied to such pur poses in India dur ing the pr evious year
immediately following the pr evious year in which the income was
der ived as does not exceed the said amount,
may, at the option of the per son in r eceipt of the income (such option
to be exer cised in wr iting befor e the expir y of the time allowed under
sub-section (1)
29
[* * *] of section 139
30
[* * *] for fur nishing the r etur n
of income) be deemed to be income applied to such pur poses dur ing
the pr evious year in which the income was der ived; and the income
so deemed to have been applied shall not be taken into account in
calculating the amount of income applied to such pur poses, in the
case r efer r ed to in sub-clause (i), dur ing the pr evious year in which the
income is r eceived or dur ing the pr evious year immediately follow-
ing, as the case may be, and, in the case r efer r ed to in sub-clause (ii),
dur ing the pr evious year immediately following the pr evious year in
which the income was der ived.]
31
[(1A) For the pur poses of sub-section (1),
(a) wher e a capital asset, being pr oper ty held under tr ust wholly for
char itable or r eligious pur poses, is tr ansfer r ed and the whole or any
S. 11 I.T. ACT, 1961 1.126
26. Substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. Ear lier , the
Explan ation was also substituted by the Finance Act, 1970, w.e.f. 1-4-1971.
28. Substituted for seventy-five, ibid.
29. or sub-section (2) omitted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
30. , whether fixed or iginally or on extension omitted, ibid.
par t of the net consider ation is utilised for acquir ing another capital
asset to be so held, then, the capital gain ar ising fr om the tr ansfer shall
be deemed to have been applied to char itable or r eligious pur poses to
the extent specified her eunder , namely:
(i) wher e the whole of the net consider ation is utilised inacquir ing
the new capital asset, the whole of such capital gain ;
(ii) wher e only a par t of the net consider ation is utilised for acquir ing
the new capital asset, so much of such capital gain as is equal to
the amount, if any, by which the amount so utilised exceeds the
cost of the tr ansfer r ed asset;
(b) wher e a capital asset, being pr oper ty held under tr ust in par t only for
such pur poses, is tr ansfer r ed and the whole or any par t of the net
consider ation is utilised for acquir ing another capital asset to be so
held, then, the appr opr iate fr action of the capital gain ar ising fr om the
tr ansfer shall be deemed to have been applied to char itable or
r eligious pur poses to the extent specified her eunder , namely:
(i) wher e the whole of the net consider ation is utilised in acquir ing
the new capital asset, the whole of the appr opr iate fr action of
such capital gain;
(ii) in any other case, so much of the appr opr iate fr action of the
capital gain as is equal to the amount, if any, by which the
appr opr iate fr action of the amount utilised for acquir ing the new
asset exceeds the appr opr iate fr action of the cost of the tr ans-
fer r ed asset.
Explan ation .In this sub-section,
(i) appr opr iate fr action means the fr action which r epr esents the extent
to which the income der ived fr om the capital asset tr ansfer r ed was
immediately befor e such tr ansfer applicable to char itable or r eligious
pur poses;
(ii) cost of the tr ansfer r ed asset means the aggr egate of the cost of
acquisition (as ascer tained for the pur poses of sections 48 and 49) of
the capital asset which is the subject of the tr ansfer and the cost of any
impr ovement ther eto within the meaning assigned to that expr ession
in sub-clause (b) of clause (1) of section 55;
(iii) net consider ation means the full value of the consider ation r eceived
or accr uing as a r esult of the tr ansfer of the capital asset as r educed
by any expenditur e incur r ed wholly and exclusively in connection
with such tr ansfer .]
32
[(1B) Wher e any income in r espect of which an option is exer cised under clause
(2) of the Explan ation to sub-section (1) is not applied to char itable or r eligious
pur poses in India dur ing the per iod r efer r ed to in sub-clause (a) or , as the case
may be, sub-clause (b), of the said clause, then, such income shall be deemed to
be the income of the per son in r eceipt ther eof
(a) in the case r efer r ed to in sub-clause (i) of the said clause, of the
pr evious year immediately following the pr evious year in which the
income was r eceived; or
S. 11 I.T. ACT, 1961 1.128
(b) in the case r efer r ed to in sub-clause (ii) of the said clause, of the
pr evious year immediately following the pr evious year in which the
income was der ived.]
33
[(2)
34
[Wher e
35
[eighty-five] per cent of the income r efer r ed to in clause (a) or
clause (b) of sub-section (1) r ead with the Explan ation to that sub-section is not
applied, or is not deemed to have been applied, to char itable or r eligious pur poses
in India dur ing the pr evious year but is accumulated or set apar t, either in whole
or in par t, for application to such pur poses in India, such income so accumulated
or set apar t shall not be included in the total income of the pr evious year of the
per son in r eceipt of the income, pr ovided the following conditions ar e complied
with, namely:]
(a) such per son specifies, by notice in wr iting given to the
36
[Assessing]
Officer in the pr escr ibed
37
manner
38
, the pur pose for which the
income is being accumulated or set apar t and the per iod for which the
income is to be accumulated or set apar t, which shall in no case
exceed ten year s;
39
[(b) the money so accumulated
40
or set apar t is invested or deposited in the
for ms or modes specified in sub-section (5)]:]
41
[Provided that in computing the per iod of ten year s r efer r ed to in clause (a), the
per iod dur ing which the income could not be applied for the pur pose for which
it is so accumulated or set apar t, due to an or der or injunction of any cour t, shall
be excluded:]
42
[Provided further that in r espect of any income accumulated or set apar t on or
after the 1st day of Apr il, 2001, the pr ovisions of this sub-section shall have effect
as if for the wor ds ten year s at both the places wher e they occur , the wor ds five
year s had been substituted.]
43
[Explan ation .Any amount cr edited or paid, out of income r efer r ed to in
clause (a) or clause (b) of sub-section (1), r ead with the Explan ation to that sub-
section, which is not applied, but is accumulated or set apar t, to any tr ust or
institution r egister ed under section 12AA or to any fund or institution or tr ust or
34. Substituted for the por tion beginning with Wher e any income r efer r ed to in and ending
with ar e complied with, namely : by the Taxation Laws (Amendment) Act, 1975, w.e.f.
1-4-1976.
35. Substituted for seventy-five by the Finance Act, 2002, w.e.f. 1-4-2003.
1-4-1988.
37. See r ule 17 and For m No. 10 for notice of accumulation of income by char itable tr ust or
institution [to be fur nished befor e expir y of time allowed under section 139(1)].
38. For the meaning of expr ession in the pr escr ibed manner , see Taxmanns Dir ect Taxes
Manual, Vol. 3.
39. Substituted by the Finance Act, 1983, w.e.f. 1-4-1983. Or iginal clause (b) was ear lier
40. For the meaning of the expr ession the money so accumulated, see Taxmanns Dir ect
any univer sity or other educational institution or any hospital or other medical
institution r efer r ed to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-
clause (via) of clause (23C) of section 10, shall not be tr eated as application of
income for char it able or r eligious pur poses, eit her dur ing t he per iod of
accumulation or ther eafter .]
44
[(3) Any income r efer r ed to in sub-section (2) which
(a) is applied to pur poses other than char itable or r eligious pur poses as
afor esaid or ceases to be accumulated or set apar t for application
ther eto, or
45
[(b) ceases to r emain invested or deposited in any of the for ms or modes
specified in sub-section (5), or ]
(c) is not utilised
46
for the pur pose for which it is so accumulated or set
apar t dur ing the per iod r efer r ed to in clause (a) of that sub-section or
in the year immediately following the expir y ther eof,
47
[(d) is cr edited or paid to any tr ust or institution r egister ed under section
12AA or to any fund or institution or tr ust or any univer sity or other
r efer r ed to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or
sub-clause (via) of clause (23C) of section 10,]
shall be deemed to be the income of such per son of the pr evious year in which
it is so applied or ceases to be so accumulated or set apar t or ceases to r emain
so invested or deposited or
47
[cr edited or paid or ], as the case may be, of the
pr evious year immediately following the expir y of the per iod afor esaid.]
48
[(3A) Notwithstanding anything contained in sub-section (3), wher e due to
cir cumstances beyond the contr ol of the per son in r eceipt of the income, any
income invested or deposited in accor dance with the pr ovisions of clause (b) of
sub-section (2) cannot be applied for the pur pose for which it was accumulated
or set apar t, the
49
[Assessing] Officer may, on an application made to him in this
behalf, allow such per son to apply such income for such other char itable or
r eligious pur pose in India as is specified in the application by such per son and as
is in confor mity with the objects of the tr ust; and ther eupon the pr ovisions of sub-
section (3) shall apply as if the pur pose specified by such per son in the application
under this sub-section wer e a pur pose specified in the notice given to the
49
[Assessing] Officer under clause (a) of sub-section (2):]
50
[Provided that the Assessing Officer shall not allow application of such income
by way of payment or cr edit made for the pur poses r efer r ed to in clause (d) of
sub-section (3) of section 11 :]
46. For the meaning of the ter m utilised, see Taxmanns Dir ect Taxes Manual, Vol. 3.
1-4-1988.
51
[Provided further that in case the tr ust or institution, which has invested or
deposited its income in accor dance with the pr ovisions of clause (b) of sub-
section (2), is dissolved, the Assessing Officer may allow application of such
income for the pur poses r efer r ed to in clause (d) of sub-section (3) in the year in
which such tr ust or institution was dissolved.]
(4) For the pur poses of this section pr oper ty held under tr ust includes a
business under taking so held, and wher e a claim is made that the income of any
such under taking shall not be included in the total income of the per sons in
r eceipt ther eof, the
52
[Assessing] Officer shall have power to deter mine the
income of such under taking in accor dance with the pr ovisions of this Act r elating
to assessment; and wher e any income so deter mined is in excess of the income
as shown in the accounts of the under taking, such excess shall be deemed to be
applied to pur poses other than char itable or r eligious pur poses
53
[* * *].
54
[(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A)
shall not apply in r elation to any income of a tr ust or an institution, being pr ofits
and gains of business, unless the business is incidental to the attainment of the
objectives of the tr ust or , as the case may be, institution, and separ ate books of
account ar e maintained by such tr ust or institution in r espect of such business.]
55
[
56
(5) The for ms and modes of investing or depositing the money r efer r ed to in
clause (b) of sub-section (2) shall be the following, namely :
(i) investment in savings cer tificates as defined in clause (c) of section 2
57
of the Gover nment Savings Cer tificates Act, 1959 (46 of 1959), and
any other secur ities or cer tificates issued by the Centr al Gover nment
under the Small Savings Schemes of that Gover nment;
(ii) deposit in any account with the Post Office Savings Bank;
(iii) deposit in any account with a scheduled bank or a co-oper ative
society engaged in car r ying on the business of banking (including a
co-oper ative land mor tgage bank or a co-oper ative land development
bank).
Explan ation .In this clause, scheduled bank means the State Bank
of India constituted under the State Bank of India Act, 1955 (23 of
1955), a subsidiar y bank as defined in the State Bank of India
(Subsidiar y Banks) Act, 1959 (38 of 1959), a cor r esponding new bank
constituted under section 3 of the Banking Companies (Acquisition
S. 11 I.T. ACT, 1961 1.130
1-4-1988.
53. and accor dingly char geable to tax within the meaning of sub-section (3) omitted by the
Finance Act, 1970, w.e.f. 1-4-1971.
54. Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Ear lier , sub-section (4A) was
Income-tax Act.
57. Clause (c) of section 2 of the Gover nment Savings Cer tificates Act, 1959, defines savings
cer tificate as under :
(c) savings cer tificate means a savings cer tificate to which this Act applies.
Section 1(3) pr ovides that the Act would apply to such class of savings cer tificates as the
Centr al Gover nment specifies by notification in the Official Gazette.
and Tr ansfer of Under takings) Act, 1970 (5 of 1970), or under section
3 of the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1980 (40 of 1980), or any other bank being a bank included in the
Second Schedule to the Reser ve Bank of India Act, 1934 (2 of 1934);
(iv) investment in units of the Unit Tr ust of India established under the
Unit Tr ust of India Act, 1963 (52 of 1963);
(v) investment in any secur ity for money cr eated and issued by the
Centr al Gover nment or a State Gover nment;
(vi) investment in debentur es issued by, or on behalf of, any company or
cor por ation both the pr incipal wher eof and the inter est wher eon ar e
fully and unconditionally guar anteed by the Centr al Gover nment or
by a State Gover nment;
(vii) investment or deposit in any
58
[public sector company]:
59
[Provided that wher e an investment or deposit in any public sector
company has been made and such public sector company ceases to
be a public sector company,
(A) such investment made in the shar es of such company shall be
deemed to be an investment made under this clause for a per iod
of thr ee year s fr om the date on which such public sector company
ceases to be a public sector company;
(B) such other investment or deposit shall be deemed to be an
investment or deposit made under this clause for the per iod up to
the date on which such investment or deposit becomes r epayable
by such company;]
(viii) deposits with or investment in any bonds issued by a financial
cor por ation which is engaged in pr oviding long-ter m finance for
industr ial development in India and
60
[which is eligible for deduction
under clause (viii) of sub-section (1) of section 36];
(ix) deposits with or investment in any bonds issued by a public company
for med and r egister ed in India with the main object of car r ying on the
business of pr oviding long-ter m finance for constr uction or pur chase
of houses in India for r esidential pur poses and
60
[which is eligible for
deduction under clause (viii) of sub-section (1) of section 36];
61
[(ixa) deposits with or investment in any bonds issued by a public company
for med and r egister ed in India with the main object of car r ying on the
business of pr oviding long-ter m finance for ur ban infr astr uctur e in
India.
(a) long-ter m finance means any loan or advance wher e the ter ms
under which moneys ar e loaned or advanced pr ovide for r epay-
ment along with inter est ther eof dur ing a per iod of not less than
five year s;
58. Substituted for Gover nment company as defined in section 617 of the Companies Act,
1956 (1 of 1956) by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
60. Substituted for which is appr oved by the Centr al Gover nment for the pur poses of clause
(viii) of sub-section (1) of section 36 by the Finance Act, 2000, w.e.f. 1-4-2000.
S. 12 I.T. ACT, 1961 1.132
(b) public company
62
shall have the meaning assigned to it in
section 3 of the Companies Act, 1956 (1 of 1956);
(c) ur ban infr astr uctur e means a pr oject for pr oviding potable
water supply, sanitation and sewer age, dr ainage, solid waste
management, r oads, br idges and flyover s or ur ban tr anspor t;]
(x) investment in immovable pr oper ty.
Explan ation .Immovable pr oper ty does not include any machi-
ner y or plant (other than machiner y or plant installed in a building for
the convenient occupation of the building) even though attached to,
or per manently fastened to, anything attached to the ear th;]
63
[(xi) deposits with the Industr ial Development Bank of India established
under the Industrial Development Bank of India Act, 1964 (18 of 1964);]
64
[(xii) any ot her for m or mode of invest ment or deposit as may be
pr escr ibed.
65
]
66
[Income of trusts or institutions from contributions.
67
12.
68
[(1)]
69
Any voluntar y contr ibutions r eceived by a tr ust cr eated wholly for
char itable or r eligious pur poses or by an institution established wholly for
62. For definition of public company under clause (iv) of section 3(1) of the Companies Act,
1956, see Appendix.
65. Rule 17C specifies the following other modes: (1) Investments in units issued under any
scheme of mutual fund r efer r ed to in section 10(23D); (2) Any tr ansfer of deposits to Public
Account of India; (3) Deposits made with an author ity constituted in India by or under any
law enacted either for the pur pose of dealing with and satisfying the need for housing
accommodation or for the pur pose of planning, development or impr ovement of cities,
towns and villages, or for both; (4) investment by way of acquir ing equity shar es of a
depositor y; (5) Investment made, on or after 26-11-1999, by a r ecognised stock exchange
r efer r ed to in clause (f ) of section 2 of the Secur ities Contr acts (Regulation) Act, 1956
(her eafter r efer r ed to as investor ) in the equity shar e capital of a company (her eafter
r efer r ed t o as invest ee)(a) which is engaged in dealing wit h secur it ies or mainly
associated with the secur ities mar ket; (b) whose main object is to acquir e the member ship
of another r ecognised stock exchange for the sole pur pose of facilitating the member s of
the investor to tr ade on the said stock exchange thr ough the investee in accor dance with
the dir ections or guidelines issued under the Secur ities and Exchange Boar d of India Act,
1992 by the Secur ities and Exchange Boar d of India established under section 3 of that
Act; and (c) in which at least fifty-one per cent of equity shar es ar e held by the investor and
the balance equity shar es ar e held by member s of such investor ; and (6) Investment made
on or after 1-3-2007 by way of acquir ing equity shar es of an incubatee by an incubator .
The ter m incubatee shall mean such incubatee as may be notified by the Gover nment of
India in the Ministr y of Science and Technology. The ter m incubator shall mean such
Technology Business Incubator or Science and Technology Entr epr eneur ship Par k as
may be notified by the Gover nment of India in the Ministr y of Science and Technology.
66. Reintr oduced by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Ear lier ,
section 12 was omitted by the Dir ect Tax Laws (Amendment) Act, 1987, with effect fr om
the same date. Or iginal section 12 was substituted by the Finance Act, 1972, w.e.f. 1-4-1973.
Income-tax Act.
68. Section 12 r enumber ed as section 12(1) by the Finance Act, 2000, w.e.f. 1-4-2001.
such pur poses (not being contr ibutions made with a specific dir ection that they
shall for m par t of the cor pus of the tr ust or institution) shall for the pur poses of
section 11 be deemed to be income der ived fr om pr oper ty held under tr ust
wholly for char itable or r eligious pur poses and the pr ovisions of that section and
section 13 shall apply accor dingly.]
70
[(2) The value of any ser vices, being medical or educational ser vices, made
available by any char itable or r eligious tr ust r unning a hospital or medical
institution or an educational institution, to any per son r efer r ed to in clause (a) or
clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13,
shall be deemed to be income of such tr ust or institution der ived fr om pr oper ty
held under tr ust wholly for char itable or r eligious pur poses dur ing the pr evious
year in which such ser vices ar e so pr ovided and shall be char geable to income-
tax notwithstanding the pr ovisions of sub-section (1) of section 11.
Explan ation .For the pur poses of this sub-section, the expr ession value shall
be the value of any benefit or facility gr anted or pr ovided fr ee of cost or at
concessional r ate to any per son r efer r ed to in clause (a) or clause (b) or clause
(c) or clause (cc) or clause (d) of sub-section (3) of section 13.]
71
[(3) Notwithstanding anything contained in section 11, any amount of donation
r eceived by the tr ust or institution in ter ms of clause (d) of sub-section (2) of
section 80G
72
[in r espect of which accounts of income and expenditur e have not
been r ender ed to the author ity pr escr ibed under clause (v) of sub-section (5C) of
that section, in the manner specified in that clause, or ] which has been utilised
for pur poses other than pr oviding r elief to the victims of ear thquake in Gujar at
or which r emains unutilised in ter ms of sub-section (5C) of section 80G and not
tr ansfer r ed to the Pr ime Minister s National Relief Fund on or befor e the 31st day
of Mar ch,
73
[2004] shall be deemed to be the income of the pr evious year and shall
accor dingly be char ged to tax.]
74
[
75
[Conditions for applicability of sections 11 and 12.]
76
12A.
77
[(1)]
78
The pr ovisions of section 11 and section 12 shall not apply in
r elation to the income of any tr ust or institution unless the following
conditions ar e fulfilled, namely:
73. Substituted for 2003 by the Finance Act, 2003, w.r .e.f. 3-2-2001. Ear lier 2003 was
74. Reintr oduced by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Ear lier ,
section 12A was omitted by the Dir ect Tax Laws (Amendment) Act, 1987, with effect fr om
the same date. Or iginal section 12A was inser ted by the Finance Act, 1972, w.e.f. 1-4-1973.
75. Substituted for the heading Con dition s as to registration of trusts, etc. by the Finance Act,
2007, w.e.f. 1-6-2007.
76. See Cir cular No. 143, dated 20-8-1974 and CBDT Instr uction, dated 9-2-1978. For details,
see Taxmanns Master Guide to Income-tax Act.
S. 12A I.T. ACT, 1961 1.134
(a) the per son in r eceipt of the income has made an application for
r egistr ation of the tr ust or institution in the pr escr ibed for m
79
and in
the pr escr ibed manner to the
80
[***] Commissioner befor e the 1st day
of July, 1973, or befor e the expir y of a per iod of one year fr om the date
of the cr eation of the tr ust or the establishment of the institution,
81
[whichever is later and such tr ust or institution is r egister ed under
section 12AA] :
82
[Provided that wher e an application for r egistr ation of the tr ust or
institution is made after the expir y of the per iod afor esaid, the
pr ovisions of sections 11 and 12 shall apply in r elation to the income
of such tr ust or institution,
(i) fr om the date of the cr eation of the tr ust or the establishment of
the institution if the
83
[***] Commissioner is, for r easons to be
r ecor ded in wr iting, satisfied that the per son in r eceipt of the
income was pr evented fr om making the application befor e the
expir y of the per iod
84
afor esaid for sufficient r easons;
(ii) fr om the 1st day of the financial year in which the application is
made, if the
85
[***] Commissioner is not so satisfied:]
86
[Provided further that the pr ovisions of this clause shall not apply in
r elation to any application made on or after the 1st day of June, 2007;]
86
[(aa) the per son in r eceipt of the income has made an application for
r egistr ation of the tr ust or institution on or after the 1st day of June,
79. See r ule 17A and For m No. 10A for for m of application for r egistr ation of char itable/
r eligious tr ust, and the necessar y accompanying documents, viz., 1. Or iginal copy of
instr ument cr eating the tr ust/ institution, i.e., tr ust deed, with one copy ther eof, wher e
tr ust/ institution is cr eated under an instr ument. Cer tified copy in lieu of or iginal copy of
tr ust deed can also be accepted by the Commissioner . 2. Documents evidencing the
cr eation of tr ust/ institution, with one copy ther eof, wher e tr ust/ institution is cr eated
other wise than under an instr ument. 3. Wher e the tr ust/ institution has been in existence
dur ing any year (s) pr ior to financial year in which application for r egistr ation is made, the
application should be accompanied by two copies of accounts of tr ust/ institution r elating
to pr ior year or year s (not being mor e than 3 year s immediately pr eceding the year in
which application is made) for which such accounts have been made up.
80. Wor ds Chief Commissioner or omitted by the Finance Act, 1999, w.e.f. 1-6-1999. Ear lier
the quoted wor ds wer e inser ted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1988.
81. Substituted for whichever is later by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
82. Substituted for the following by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991:
Provided that the Chief Commissioner or Commissioner may, in his discr etion, admit an
application for the r egistr ation of any tr ust or institution after the expir y of the per iod
afor esaid;
1-4-1988.
84. For the meaning of the expr ession befor e the expir y of the per iod, see Taxmanns Dir ect
1-4-1988.
2007 in the pr escr ibed for m and manner to the Commissioner and
such tr ust or institution is r egister ed under section 12AA;]
(b) wher e the total income of the tr ust or institution as computed under
this Act without giving effect to
87
[the pr ovisions of section 11 and
section 12 exceeds the maximum amount which is not char geable to
income-tax in any pr evious year ], the accounts of the tr ust or institu-
tion for that year have been audited by an accountant as defined in
the Explan ation below sub-section (2) of section 288 and the per son
in r eceipt of the income fur nishes along with the r etur n of income for
the r elevant assessment year the r epor t of such audit in the pr es-
cr ibed for m
88
duly signed and ver ified by such accountant and setting
for th such par ticular s as may be pr escr ibed.]
(c)
89
[***]
90
[(2) Wher e an application has been made on or after the 1st day of June, 2007,
the pr ovisions of sections 11 and 12 shall apply in r elation to the income of such
tr ust or institution fr om the assessment year immediately following the financial
year in which such application is made.]
91
[Procedure for registration.
12AA. (1) The
92
[***] Commissioner , on r eceipt of an application for r egistr ation
of a tr ust or institution made under clause (a)
90
[or clause (aa) of sub-
section (1)] of section 12A, shall
(a) call for such documents or infor mation fr om the tr ust or institution
as he thinks necessar y in or der to satisfy himself about the genuine-
ness of activities of the tr ust or institution and may also make such
inquir ies as he may deem necessar y in this behalf; and
(b) after satisfying himself about the objects of the tr ust or institution and
the genuineness of its activities, he
(i) shall pass an or der in wr iting r egister ing the tr ust or institution;
(ii) shall, if he is not so satisfied, pass an or der in wr iting r efusing to
r egister the tr ust or institution,
87. Substituted for the pr ovisions of section 11 and section 12 exceeds fifty thousand r upees
in any pr evious year by the Taxation Laws (Amendment) Act, 2006, w.r .e.f. 1-4-2006.
Ear lier the quoted wor ds wer e amended by the Finance Act, 1994, w.e.f. 1-4-1995.
88. See r ule 17B and For m No. 10B for audit r epor t in case of tr ust/ institution.
89. Omitted by the Finance Act, 2002, w.e.f. 1-4-2002. Pr ior to its omission, clause (c) as inser ted
by the Finance Act, 2001, w.e.f. 1-4-2002, r ead as under :
(c) wher e the total income of the tr ust or institution as computed under this Act
without giving effect to the pr ovisions of sections 11 and 12 exceeds one cr or e
r upees in any pr evious year , the tr ust or institution
(i) publishes its accounts in a local newspaper , befor e the due date for fur nish-
ing the r etur n of income under sub-section (4A) of section 139; and
(ii) fur nishes a copy of such newspaper along with such r etur n.
the quoted wor ds wer e inser ted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
and a copy of such or der shall be sent to the applicant :
Provided that no or der under sub-clause (ii) shall be passed unless the applicant
has been given a r easonable oppor tunity of being hear d.
93
[(1A) All applications, pending befor e the Chief Commissioner on which no
or der has been passed under clause (b) of sub-section (1) befor e the 1st day of
June, 1999, shall stand tr ansfer r ed on that day to the Commissioner and the
Commissioner may pr oceed with such applications under that sub-section fr om
the stage at which they wer e on that day.]
(2) Ever y or der gr anting or r efusing r egistr ation under clause (b) of sub-section
(1) shall be passed befor e the expir y of six months fr om the end of the month in
which the application was r eceived under clause (a)
93a
[or clause (aa) of sub-
section (1)] of section 12A.]
94
[(3) Wher e a tr ust or an institution has been gr anted r egistr ation under clause
(b) of sub-section (1) and subsequently the Commissioner is satisfied that the
activities of such tr ust or institution ar e not genuine or ar e not being car r ied
out in accor dance with the objects of the tr ust or institution, as the case may be,
he shall pass an or der in wr iting cancelling the r egistr ation of such tr ust
or institution:
Provided that no or der under this sub-section shall be passed unless such tr ust
or institution has been given a r easonable oppor tunity of being hear d.]
95
[Section 11 not to apply in certain cases.
96
13. (1) Nothing contained in section 11
97
[or section 12] shall oper ate so as to
exclude fr om the total income of the pr evious year of the per son in r eceipt
ther eof
(a) any par t of the
98
income fr om the pr oper ty held under a tr ust for
pr ivate r eligious pur poses which does not enur e for the benefit of the
public;
(b) in the case of a tr ust for char itable pur poses or a char itable institution
cr eated or established after the commencement of this Act, any
income ther eof if the tr ust or institution is cr eated or established for
the benefit of any par ticular r eligious community or caste;
(bb)
99
[* * *]
S. 13 I.T. ACT, 1961 1.136
date. Or iginal section 13 was substituted by the Finance Act, 1970, w.e.f. 1-4-1971 and pr ior
to its substitution, it was amended by the Finance Act, 1966, w.e.f. 1-4-1966 and the Finance
Act, 1963, w.r .e.f. 1-4-1962.
Income-tax Act.
98. For the meaning of the ter m income, see Taxmanns Dir ect Taxes Manual, Vol. 3.
99. Omitted by the Finance Act, 1983, w.e.f. 1-4-1984. Or iginal clause (bb), was inser ted by the
Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1977.
(c) in the case of a tr ust for char itable or r eligious pur poses or a
char itable or r eligious institution, any income ther eof
(i) if such tr ust or institution has been cr eated or established after
the commencement of this Act and under the ter ms of the tr ust
or the r ules gover ning the institution, any par t of such income
enur es, or
(ii) if any par t of such income or any pr oper ty of the tr ust or the
inst it ut ion (whenever cr eat ed or est ablished) is dur ing t he
pr evious year used or applied,
dir ectly or indir ectly for the benefit of any per son r efer r ed to in
sub-section (3) :
Provided that in the case of a tr ust or institution cr eated or established
befor e the commencement of this Act, the pr ovisions of sub-clause (ii)
shall not apply to any use or application, whether dir ectly or indi-
r ectly, of any par t of such income or any pr oper ty of the tr ust or
institution for the benefit of any per son r efer r ed to in sub-section (3),
if such use or application is by way of compliance with a mandator y
ter m of the tr ust or a mandator y r ule gover ning the institution :
Provided further that in the case of a tr ust for r eligious pur poses or
a r eligious institution (whenever cr eated or established) or a tr ust for
char itable pur poses or a char itable institution cr eated or established
befor e the commencement of this Act, the pr ovisions of sub-clause (ii)
shall not apply to any use or application, whether dir ectly or indi-
r ectly, of any par t of such income or any pr oper ty of the tr ust or
institution for the benefit of any per son r efer r ed to in sub-section (3)
in so far as such use or application r elates to any per iod befor e the 1st
day of June, 1970;
1
[(d)
2
in the case of a tr ust for char itable or r eligious pur poses or a
char itable or r eligious institution, any income ther eof, if for any
per iod dur ing the pr evious year
(i) any funds
3
of the tr ust or institution ar e invested
3
or deposited
3
after the 28th day of Febr uar y, 1983 other wise than in any one or
mor e of the for ms or modes specified in sub-section (5) of section
11; or
(ii) any funds
3
of the tr ust or institution invested
3
or deposited
3
befor e
the 1st day of Mar ch, 1983 other wise than in any one or mor e of
the for ms or modes specified in sub-section (5) of section 11
continue to r emain so invested or deposited after the 30th day of
November , 1983; or
1. Substituted by the Finance Act, 1983, w.e.f. 1-4-1983. Or iginal clause was inser ted by the
Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1977. It was later on amended by the
Finance (No. 2) Act, 1977, w.e.f. 1-4-1978 and by the Finance Act, 1982, w.e.f. 1-4-1982.
Income-tax Act.
3. For the meaning of the ter ms funds, investments, and deposits see Taxmanns Dir ect
4
[(iii) any shar es in a company, other than
(A) shar es in a public sector company ;
(B) shar es pr escr ibed as a for m or mode of investment under
clause (xii) of sub-section (5) of section 11,
ar e held by the tr ust or institution after the 30th day of November ,
1983:]
Provided that nothing in this clause shall apply in r elation to
(i) any assets held by the tr ust or institution wher e such assets for m
par t of the cor pus of the tr ust or institution as on the 1st day of
June, 1973
5
[***];
6
[(ia) any accr etion to the shar es, for ming par t of the cor pus mentioned
in clause (i), by way of bonus shar es allotted to the tr ust or
institution;]
(ii) any assets (being debentur es issued by, or on behalf of, any
company or cor por ation) acquir ed by the tr ust or institution
befor e the 1st day of Mar ch, 1983;
7
[(iia) any asset, not being an investment or deposit in any of the for ms
or modes specified in sub-section (5) of section 11, wher e such
asset is not held by the tr ust or institution, other wise than in any
of the for ms or modes specified in sub-section (5) of section 11,
after the expir y of one year fr om the end of the pr evious year in
which such asset is acquir ed or the 31st day of Mar ch,
8
[1993],
whichever is later ;]
(iii) any funds r epr esenting the pr ofits and gains of business, being
pr ofits and gains of any pr evious year r elevant to the assessment
year commencing on the 1st day of Apr il, 1984 or any subsequent
assessment year .
Explan ation .Wher e the tr ust or institution has any other income in
addition to pr ofits and gains of business, the pr ovisions of clause (iii)
of this pr oviso shall not apply unless the tr ust or institution maintains
separ ate books of account in r espect of such business.]
9
[Explan ation .For the pur poses of sub-clause (ii) of clause (c), in deter mining
whether any par t of the income or any pr oper ty of any tr ust or institution is
S. 13 I.T. ACT, 1961 1.138
4. Substituted by the Finance Act, 2007, w.r .e.f. 1-4-1999. Pr ior to its substitution, sub-clause
(iii) r ead as under :
(iii) any shar es in a company not being a Gover nment company as defined in section 617
of the Companies Act, 1956 (1 of 1956), or a cor por ation established by or under a
Centr al, State or Pr ovincial Act ar e held by the tr ust or institution after the 30th day
of November , 1983:
5. Wor ds and such assets wer e not pur chased by the tr ust or institution or acquir ed by it
by conver sion of, or in exchange for , any other asset omitted by the Finance Act, 1992,
w.r .e.f. 1-4-1983.
6. Inser ted, ibid.
dur ing the pr evious year used or applied, dir ectly or indir ectly, for the benefit
of any per son r efer r ed to in sub-section (3), in so far as such use or application
r elates to any per iod befor e the 1st day of July, 1972, no r egar d shall be had to
the amendments made to this section by section 7 [other than sub-clause (ii) of
clause (a) ther eof] of the Finance Act, 1972.]
(2) Without pr ejudice to the gener ality of the pr ovisions of clause (c)
10
[and clause
(d)] of sub-section (1), the income or the pr oper ty
11
of the tr ust or institution or
any par t of such income or pr oper ty shall, for the pur poses of that clause, be
deemed to have been used or applied for the benefit of a per son r efer r ed to in
sub-section (3),
(a) if any par t of the income or pr oper ty
11
of the tr ust or institution is, or
continues to be, lent
11
to any per son r efer r ed to in sub-section (3) for
any per iod dur ing the pr evious year without either adequate secur ity
or adequate inter est or both;
(b) if any land, building or other pr oper ty
11
of the tr ust or institution is, or
continues to be, made available for the use of any per son r efer r ed to
in sub-section (3), for any per iod dur ing the pr evious year without
char ging adequate r ent or other compensation;
(c) if any amount is paid by way of salar y, allowance or other wise dur ing
the pr evious year to any per son r efer r ed to in sub-section (3) out of
the r esour ces of the tr ust or institution for ser vices r ender ed by that
per son to such tr ust or institution and the amount so paid is in excess
of what may be r easonably paid for such ser vices;
(d) if the ser vices of the tr ust or institution ar e made available to any
per son r efer r ed to in sub-section (3) dur ing the pr evious year without
adequate r emuner ation or other compensation;
(e) if any shar e, secur ity or other pr oper ty is pur chased by or on behalf
of the tr ust or institution fr om any per son r efer r ed to in sub-section
(3) dur ing the pr evious year for consider ation which is mor e than
adequate;
(f) if any shar e, secur ity or other pr oper ty is sold by or on behalf of the
tr ust or institution to any per son r efer r ed to in sub-section (3) dur ing
the pr evious year for consider ation which is less than adequate;
12
[(g) if any income or pr oper ty of the tr ust or institution is diver ted dur ing
the pr evious year in favour of any per son r efer r ed to in sub-section
(3):
Provided that this clause shall not apply wher e the income, or the
value of the pr oper ty or , as the case may be, the aggr egate of the
income and the value of the pr oper ty, so diver ted does not exceed one
thousand r upees;]
11. For the meaning of the ter ms pr oper ty and lent, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
(h) if any funds
13
of the tr ust or institution ar e, or continue to r emain,
invested
13
for any per iod dur ing the pr evious year (not being a per iod
befor e the 1st day of Januar y, 1971), in any concer n
13
in which any
per son r efer r ed to in sub-section (3) has a substantial inter est.
(3) The per sons r efer r ed to in clause (c) of sub-section (1) and sub-section (2) ar e
the following, namely :
(a) the author of the tr ust or the founder of the institution
13
;
(b) any per son who has made a substantial contr ibution to the tr ust or
institution,
14
[that is to say, any per son whose total contr ibution up to
the end of the r elevant pr evious year exceeds
15
[fifty] thousand
r upees];
(c) wher e such author , founder or per son is a Hindu undivided family, a
member of the family;
16
[(cc) any tr ustee of the tr ust or manager (by whatever name called) of the
institution;]
(d) any r elative of any such author , founder , per son,
17
[member , tr ustee
or manager ] as afor esaid;
(e) any concer n in which any of the per sons r efer r ed to in clauses (a), (b),
(c)
18
[, (cc)] and (d) has a substantial inter est.
(4) Notwithstanding anything contained in clause (c) of sub-section (1)
19
[but
without pr ejudice to the pr ovisions contained in clause (d) of that sub-section],
in a case wher e the aggr egate of the funds of the tr ust or institution invested in
a concer n in which any per son r efer r ed to in sub-section (3) has a substantial
inter est, does not exceed five per cent of the capital
20
of that concer n, the
exemption under section 11
21
[or section 12] shall not be denied in r elation to any
income other than the income ar ising to the tr ust or the institution fr om such
investment, by r eason only that the
22
[funds] of the tr ust or the institution have
been invested in a concer n in which such per son has a substantial inter est.
23
[(5) Notwithstanding anything contained in clause (d) of sub-section (1), wher e
any assets (being debentur es issued by, or on behalf of, any company or cor por a-
S. 13 I.T. ACT, 1961 1.140
13. For the meaning of the ter ms/ expr essions funds, founder , invest, any concer n and
institution, see Taxmanns Dir ect Taxes Manual, Vol. 3.
15. Substituted for twenty-five by the Finance Act, 1994, w.e.f. 1-4-1995. Ear lier , twenty-
five was substituted for five by the Taxation Laws (Amendment) Act, 1984, w.e.f.
1-4-1985.
17. Substituted for or member , ibid.
20. For the meaning of the ter m capital, see Taxmanns Dir ect Taxes Manual, Vol. 3.
22. Substituted for moneys by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971.
23. Inser ted by the Finance (No. 2) Act, 1991, w.r .e.f. 1-4-1983. Or iginal sub-section (5) was
inser ted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 and omitted by the
Finance Act, 1983, w.e.f. 1-4-1983.
tion) ar e acquir ed by the tr ust or institution after the 28th day of Febr uar y, 1983
but befor e the 25th day of July, 1991, the exemption under section 11 or section
12 shall not be denied in r elation to any income other than the income ar ising to
the tr ust or the institution fr om such assets, by r eason only that the funds of the
tr ust or the institution have been invested in such assets if such funds do not
continue to r emain so invested in such assets after the 31st day of Mar ch, 1992.]
24
[(6) Notwithstanding anything contained in sub-section (1) or sub-section (2),
but without pr ejudice to the pr ovisions contained in sub-section (2) of section 12,
in the case of a char itable or r eligious tr ust r unning an educational institution or
a medical institution or a hospital, the exemption under section 11 or section 12
shall not be denied in r elation to any income, other than the income r efer r ed to
in sub-section (2) of section 12, by r eason only that such tr ust has pr ovided
educational or medical facilities to per sons r efer r ed to in clause (a) or clause (b)
or clause (c) or clause (cc) or clause (d) of sub-section (3).]
25
[(7) Nothing contained in section 11 or section 12 shall oper ate so as to exclude
fr om the total income of the pr evious year of the per son in r eceipt ther eof, any
anonymous donation r efer r ed to in section 115BBC on which tax is payable in
accor dance with the pr ovisions of that section.]
26
[Explan ation 1.For the pur poses of sections 11, 12, 12A and this section, tr ust
includes any other legal obligation and for the pur poses of this section r elative,
in r elation to an individual, means
(i) spouse of the individual;
(ii) br other or sister of the individual;
(iii) br other or sister of the spouse of the individual;
(iv) any lineal ascendant or descendant of the individual;
(v) any lineal ascendant or descendant of the spouse of the individual;
(vi) spouse of a per son r efer r ed to in sub-clause (ii), sub-clause (iii), sub-
clause (iv) or sub-clause (v);
(vii) any lineal descendant of a br other or sister of either the individual or
of the spouse of the individual.]
Explan ation 2.A tr ust or institution cr eated or established for the benefit of
Scheduled Castes, backwar d classes, Scheduled Tr ibes or women and childr en
shall not be deemed to be a tr ust or institution cr eated or established for the
benefit of a r eligious community or caste within the meaning of clause (b) of sub-
section (1).
Explan ation 3.For the pur poses of this section, a per son shall be deemed to
have a substantial inter est in a concer n,
(i) in a case wher e the concer n is a company, if its shar es (not being
shar es entitled to a fixed r ate of dividend whether with or without a
24. Inser ted by the Finance Act, 2000, w.e.f. 1-4-2001. Ear lier sub-section (6) was omitted by
the Finance Act, 1983, w.e.f. 1-4-1983. Or iginal sub-section (6) was inser ted by the Taxation
Laws (Amendment) Act, 1975, w.e.f. 1-4-1977.
S. 13A I.T. ACT, 1961 1.142
fur ther r ight to par ticipate in pr ofits) car r ying not less than twenty per
cent of the voting power ar e, at any time dur ing the pr evious year ,
owned beneficially by such per son or par tly by such per son and par tly
by one or mor e of the other per sons r efer r ed to in sub-section (3);
(ii) in the case of any other concer n, if such per son is entitled, or such
per son and one or mor e of the other per sons r efer r ed to in sub-section
(3) ar e entitled in the aggr egate, at any time dur ing the pr evious year ,
to not less than twenty per cent of the pr ofits of such concer n.]
27
[Special provision relating to incomes of political parties.
13A. Any income of a political par ty which is char geable under the head
28
[***]
Income fr om house pr oper ty or Income fr om other sour ces or
29
[Capital
gains or ] any income by way of voluntar y contr ibutions r eceived by a political
par ty fr om any per son shall not be included in the total income of the pr evious
year of such political par ty :
Provided that
(a) such political par ty keeps and maintains such books of account and
other documents as would enable the
30
[Assessing] Officer to pr oper ly
deduce its income ther efr om;
(b) in r espect of each such voluntar y contr ibution in excess of
31
[twenty]
thousand r upees, such political par ty keeps and maintains a r ecor d of
such contr ibution and the name and addr ess of the per son who has
made such contr ibution; and
(c) the accounts of such political par ty ar e audited by an accountant as
defined in the Explan ation below sub-section (2) of section 288 :
32
[Provided further that if the tr easur er of such political par ty or any other per son
author ised by that political par ty in this behalf fails to submit a r epor t under sub-
section (3) of section 29C of the Repr esentation of the People Act, 1951 (43 of
1951) for a financial year , no exemption under this section shall be available for
that political par ty for such financial year .]
33
[Explan ation .For the pur poses of this section, political par ty means a
political par ty r egister ed under section 29A of the Repr esentation of the People
Act, 1951 (43 of 1951).]
28. Inter est on secur ities , omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
1-4-1988.
31. Substituted for ten by the Election and Other Related Laws (Amendment) Act, 2003,
w.e.f. 11-9-2003.
32. Inser ted by the Election and Other Related Laws (Amendment) Act, 2003, w.e.f. 11-9-2003.
33. Substituted, ibid. Pr ior to its substitution, Explan ation r ead as under :
Explan ation .For the pur poses of this section, political par ty means an association or
body of individual citizens of India r egister ed with the Election Commission of India as a
political par ty under par agr aph 3 of the Election Symbols (Reser vation and Allotment)
Or der , 1968, and includes a political par ty deemed to be r egister ed with that Commission
under the pr oviso to sub-par agr aph (2) of that par agr aph.
CHAPTER I V
COMPUTATION OF TOTAL INCOME
Heads of in com e
Heads of income.
34
14. Save as other wise pr ovided by this Act, all income shall, for the pur poses
of char ge of income-tax and computation of total income, be classified
under the following heads of income :
A.Salar ies.
B.
35
[***]
C.Income fr om house pr oper ty.
D.Pr ofits and gains of business or pr ofession.
E.Capital gains.
F.Income fr om other sour ces.
36
[Expenditure incurred in relation to income not includible in total income
37
.
14A.
38
[(1)] For the pur poses of computing the total income under this Chapter ,
no deduction shall be allowed in r espect of expenditur e incur r ed by the
assessee in r elation to income which does not for m par t of the total income under
this Act.]
38
[(2) The Assessing Officer shall deter mine the amount of expenditur e incur r ed
in r elation to such income which does not for m par t of the total income under
this Act in accor dance with such method as may be pr escr ibed, if the Assessing
Officer , having r egar d to the accounts of the assessee, is not satisfied with the
cor r ectness of the claim of the assessee in r espect of such expenditur e in r elation
to income which does not for m par t of the total income under this Act.
(3) The pr ovisions of sub-section (2) shall also apply in r elation to a case wher e
an assessee claims that no expenditur e has been incur r ed by him in r elation to
income which does not for m par t of the total income under this Act :]
39
[Provided that nothing contained in this section shall empower the Assessing
Officer either to r eassess under section 147 or pass an or der enhancing the
assessment or r educing a r efund alr eady made or other wise incr easing the
liability of the assessee under section 154, for any assessment year beginning on
or befor e the 1st day of Apr il, 2001.]
1.143 CH. IV - COMPUTATION OF TOTAL INCOME S. 14A
35. B.In terest on securities omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
37. See also Cir cular No. 11/ 2001, dated 23-7-2001. For details, see Taxmanns Master Guide
to Income-tax Act.
A.Salaries
Salaries.
40
15.
41
The following income shall be char geable to income-tax under the head
Salar ies
(a) any salar y due
42
fr om an employer or a for mer employer to an
assessee in the pr evious year , whether paid
42
or not;
(b) any salar y paid
42
or allowed
42
to him in the pr evious year by or on
behalf of an employer or a for mer employer though not due or befor e
it became due to him;
(c) any ar r ear s of salar y paid or allowed to him in the pr evious year by
or on behalf of an employer or a for mer employer , if not char ged to
income-tax for any ear lier pr evious year .
43
[Explan ation 1].For the r emoval of doubts, it is her eby declar ed that wher e
any salar y paid in advance is included in the total income of any per son for any
pr evious year it shall not be included again in the total income of the per son when
the salar y becomes due.
44
[Explan ation 2.Any salar y, bonus, commission or r emuner ation, by whatever
name called, due to, or r eceived by, a par tner of a fir m fr om the fir m shall not
be r egar ded as salar y for the pur poses of this section.]
Deductions from salaries.
45
16. The income char geable under the head Salar ies shall be computed after
making the following deductions, namely :
(i)
46
[***]
S. 16 I.T. ACT, 1961 1.144
(Con td. on p. 1.145)
40. See also Cir cular No. 2(LVIII-32)-D of 1966, dated 21-2-1966, Cir cular No. 293, dated
10-2-1981, Letter [F. No. 45/ 118/ 66-ITJ], dated 21-8-1967, Cir cular No. 309, dated 3-7-1981,
Letter No. 35/ 1/ 65-IT(B), dated 5-11-1965, Cir cular No. 312, dated 31-8-1981 and Letter
F. No. 40/ 29/ 67-IT(A-I), dated 22-5-1967. For details, see Taxmanns Master Guide to
Income-tax Act.
42. For the meaning of the ter ms due, paid and allowed, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
43. Exist ing Explan ation r enumber ed as Explan ation 1 by the Finance Act, 1992, w.e.f.
1-4-1993.
44. Inser ted, ibid. Ear lier Explan ation 2 was inser ted and omitted by the Dir ect Tax Laws
(Amendment) Act, 1987/ 1989, w.e.f. 1-4-1989.
46. Omitted by the Finance Act, 2005, w.e.f. 1-4-2006. Pr ior to its omission, clause (i) as
substituted by the Finance Act, 2001, w.e.f. 1-4-2002 and Finance Act, 2003, w.e.f. 1-4-2004,
r ead as under :
(i) in the case of an assessee whose income fr om salar y, befor e allowing a deduction
under this clause,
(A) does not exceed five lakh r upees, a deduction of a sum equal to for ty per cent
of the salar y or thir ty thousand r upees, whichever is less;
(B) exceeds five lakh r upees, a deduction of a sum of twenty thousand r upees;
Ear lier clause (i) was amended by the Finance Act, 1974, w.e.f. 1-4-1975, Finance (No. 2)
Act, 1980, w.e.f. 1-4-1981, Finance Act, 1981, w.e.f. 1-4-1982, Finance Act, 1982, w.e.f.
47
[(ii) a deduction in r espect of any allowance in the natur e of an enter tain-
ment allowance specifically gr anted by an employer to the assessee
who is in r eceipt of a salar y fr om the Gover nment, a sum equal to one-
fifth of his salar y (exclusive of any allowance, benefit or other
per quisite) or five thousand r upees, whichever is less;]
48
[(iii) a deduction of any sum paid by the assessee on account of a tax on
employment within the meaning of clause (2) of ar ticle 276
49
of the
Constitution, leviable by or under any law.]
(iv)
50
[***]
(v)
51
[***]
Salary, perquisite and profits in lieu of salary defined.
52
17.
53
For the pur poses of sections 15 and 16 and of this section,
(1) salar y
54
includes
54
(i) wages;
(ii) any annuity or pension;
(iii) any gr atuity
54
;
(iv) any fees
54
, commissions, per quisites or pr ofits in lieu of or in
addition to any salar y or wages;
(v) any advance of salar y;
1.145 CH. IV - COMPUTATION OF TOTAL INCOME FROM SALARIES S. 17
1-4-1983, Finance Act, 1983, w.e.f. 1-4-1984, Taxation Laws (Amendment) Act, 1984, w.r .e.f.
1-4-1975, Finance Act, 1985, w.e.f. 1-4-1986, Finance Act, 1986, w.e.f. 1-4-1987, Finance Act,
1988, w.e.f. 1-4-1989, Finance Act, 1989, w.e.f. 1-4-1990, Finance Act, 1992, w.e.f. 1-4-1993,
Finance Act, 1993, w.e.f. 1-4-1994, Finance (No. 2) Act, 1996, w.e.f. 1-4-1997, Finance Act,
1997, w.e.f. 1-4-1998 and Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
47. Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Ear lier clause (ia) was inser ted by the
Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and clause (ii) was amended by the Finance
(No. 2) Act, 1980, w.e.f. 1-4-1981, Finance Act, 1997, w.e.f. 1-4-1998 and Finance (No. 2) Act,
1998, w.e.f. 1-4-1999.
48. Inser ted by the Finance Act, 1989, w.e.f. 1-4-1990. Ear lier , it was omitted by the Finance
Act, 1974, w.e.f. 1-4-1975.
49. Ar ticle 276(2) of the Constitution r eads as under :
276. (2) The total amount payable in r espect of any one per son to the State or to any one
municipality, distr ict boar d, local boar d or other local author ity in the State by way of
taxes on pr ofessions, tr ades, callings and employments shall not exceed two thousand and
five hundr ed r upees per annum.
50. Omitted by the Finance Act, 1974, w.e.f. 1-4-1975. Ear lier , clause (iv) was substituted/
amended by the Finance Act, 1968, w.e.f. 1-4-1968, the Finance Act, 1969, w.e.f. 1-4-1970,
the Finance Act, 1970, w.e.f. 1-4-1971 and the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.
52. See also Cir cular No. 9/ 2003, dated 18-11-2003, Cir cular No. 603, dated 6-6-1991 and
Cir cular No. 710, dated 24-7-1995. For details, see Taxmanns Master Guide to Income-tax
Act .
54. For the meaning of the ter ms/ expr essions salar y, includes, fee . . . in addition to any
salar y and any gr atuity, see Taxmanns Dir ect Taxes Manual, Vol. 3.
55
[(va) any payment r eceived by an employee in r espect of any per iod of
leave not availed of by him;]
(vi) the annual accr etion to the balance at the cr edit of an employee
par ticipating in a r ecognised pr ovident fund, to the extent to
which it is char geable to tax under r ule 6 of Par t A of the Four th
Schedule;
(vii) the aggr egate of all sums that ar e compr ised in the tr ansfer r ed
balance as r efer r ed to in sub-r ule (2) of r ule 11 of Par t A of the
Four th Schedule of an employee par ticipating in a r ecognised
pr ovident fund, to the extent to which it is char geable to tax under
sub-r ule (4) ther eof; and
56
[(viii) the contr ibution made by the Centr al Gover nment
57
[or any other
employer ] in the pr evious year , to the account of an employee
under a pension scheme r efer r ed to in section 80CCD;]
58
(2) per quisite includes
59
(i) the value of r ent-fr ee accommodation pr ovided to the assessee
by his employer ;
(ii) the value of any concession in the matter of r ent
60
r especting any
accommodation pr ovided to the assessee by his employer ;
61
[Explan ation 1.For the pur poses of this sub-clause, conces-
sion in the matter of r ent shall be deemed to have been pr ovided
if,
62
[(a) in a case wher e an unfur nished accommodation is pr o-
vided by any employer other than the Centr al Gover nment
or any State Gover nment and
S. 17(2) I.T. ACT, 1961 1.146
58. See r ule 3.
59. In ter ms of section 10A of the Salar ies and Allowances of Minister s Act, 1952/ Salar ies and
Allowances of Officer s of Par liament Act , 1953 and sect ion 9A of t he Salar y and
Allowances of Leader s of Opposition in Par liament Act, 1977, value of r ent-fr ee fur nished
r esidence (including maintenance ther eof) pr ovided to a minister / an officer of Par lia-
ment and a Leader of the Opposition is not to be included in the computation of his income
char geable to tax under the head Salar ies.
60. For the meaning of ter m r ent, see Taxmanns Dir ect Taxes Manual, Vol. 3.
62. Substituted, ibid., w.r .e.f. 1-4-2006. Clause (a) of Explan ation 1 to section 17(2)(ii), as
applicable for the per iod 1-4-2002 to 31-3-2006 (i.e., assessment year s 2002-03 to 2005-06),
r ead as under :
(a) in a case wher e an unfur nished accommodation is pr ovided by any employer other
than the Centr al Gover nment or any State Gover nment and
(i) the accommodation is owned by the employer , the value of the accommoda-
tion deter mined at the r ate of ten per cent of salar y in cities having population
exceeding four lakhs as per 1991 census and seven and one-half per cent of
salar y in other cities, in r espect of the per iod dur ing which the said accom-
(Con td. on p. 1.147)
(i) the accommodation is owned by the employer , the
value of the accommodation deter mined at the speci-
fied r ate in r espect of the per iod dur ing which the said
accommodation was occupied by the assessee dur ing
the pr evious year exceeds the r ent r ecover able fr om,
or payable by, the assessee;
(ii) the accommodation is taken on lease or r ent by the
employer , the value of the accommodation being the
actual amount of lease r ental paid or payable by the
employer or fifteen per cent of salar y, whichever is
lower , in r espect of the per iod dur ing which the said
accommodation was occupied by the assessee dur ing
the pr evious year exceeds the r ent r ecover able fr om,
or payable by, the assessee;]
(b) in a case wher e a fur nished accommodation is pr ovided by
the Centr al Gover nment or any State Gover nment, the
licence fee deter mined by the Centr al Gover nment or any
State Gover nment in r espect of the accommodation in
accor dance with the r ules fr amed by such Gover nment as
incr eased by the value of fur nitur e and fixtur es in r espect
of the per iod dur ing which the said accommodation was
occupied by the assessee dur ing the pr evious year , ex-
ceeds the aggr egate of the r ent r ecover able fr om, or
payable by, the assessee and any char ges paid or payable
for the fur nitur e and fixtur es by the assessee;
(c) in a case wher e a fur nished accommodation is pr ovided by
an employer other than Centr al Gover nment or any State
Gover nment and
(i) the accommodation is owned by the employer , the
value of the accommodation deter mined under
sub-clause (i) of clause (a) as incr eased by the value
of the fur nitur e and fixtur es in r espect of the per iod
dur ing which the said accommodation was occu-
pied by the assessee dur ing the pr evious year ,
exceeds the r ent r ecover able fr om, or payable by,
the assessee;
(ii) the accommodation is taken on lease or r ent by the
employer , the value of the accommodation deter -
mined under sub-clause (ii) of clause (a) as in-
1.147 CH. IV - COMPUTATION OF TOTAL INCOME FROM SALARIES S. 17(2)
modation was occupied by the assessee dur ing the pr evious year , exceeds the
r ent r ecover able fr om, or payable by, the assessee;
(ii) the accommodation is taken on lease or r ent by the employer , the value of the
accommodation being the actual amount of lease r ental paid or payable by
the employer or ten per cent of salar y, whichever is lower , in r espect of the
per iod dur ing which the said accommodation was occupied by the assessee
dur ing the pr evious year , exceeds the r ent r ecover able fr om, or payable by,
the assessee;
cr eased by the value of the fur nitur e and fixtur es in
r espect of the per iod dur ing which the said accom-
modation was occupied by the assessee dur ing the
pr evious year , exceeds the r ent r ecover able fr om,
or payable by, the assessee;
(d) in a case wher e the accommodation is pr ovided by the
employer in a hotel (except wher e the assessee is pr ovided
such accommodation for a per iod not exceeding in aggr e-
gate fifteen days on his tr ansfer fr om one place to an-
other ), the value of the accommodation deter mined at the
r ate of twenty-four per cent of salar y paid or payable for
the pr evious year or the actual char ges paid or payable to
such hotel, whichever is lower , for the per iod dur ing which
such accommodation is pr ovided, exceeds the r ent r ecov-
er able fr om, or payable by, the assessee.
Explan ation 2.For the pur poses of this sub-clause, value of
fur nitur e and fixtur e shall be ten per cent per annum of the cost
of fur nitur e (including television sets, r adio sets, r efr iger ator s,
other household appliances, air -conditioning plant or equipment
or other similar appliances or gadgets) or if such fur nitur e is hir ed
fr om a thir d par ty, the actual hir e char ges payable for the same
as r educed by any char ges paid or payable for the same by the
assessee dur ing the pr evious year .
Explan ation 3.For the pur poses of this sub-clause, salar y
includes the pay, allowances, bonus or commission payable
monthly or other wise or any monetar y payment, by whatever
name called, fr om one or mor e employer s, as the case may be, but
does not include the following, namely:
(a) dear ness allowance or dear ness pay unless it enter s into the
computation of super annuation or r etir ement benefits of the
employee concer ned;
(b) employer s contr ibution to the pr ovident fund account of the
employee;
(c) allowances which ar e exempted fr om the payment of tax;
(d) value of the per quisites specified in this clause;
(e) any payment or expenditur e specifically excluded under the
pr oviso to this clause.]
63
[Explan ation 4.For the pur poses of this sub-clause, specified
r ate shall be
(i) fifteen per cent of salar y in cities having population exceed-
ing twenty-five lakhs as per 2001 census;
(ii) ten per cent of salar y in cities having population exceeding
ten lakhs but not exceeding twenty-five lakhs as per 2001
census; and
(iii) seven and one-half per cent of salar y in any other place;]
S. 17(2) I.T. ACT, 1961 1.148
(iii) the value of any benefit or amenity gr anted or pr ovided fr ee of
cost or at concessional r ate in any of the following cases
(a) by a company to an employee who is a dir ector ther eof;
(b) by a company to an employee being a per son who has a
substantial inter est in the company;
(c) by any employer (including a company) to an employee to
whom the pr ovisions of par agr aphs (a) and (b) of this sub-
clause do not apply and whose income
64
[under the head
Salar ies (whether due fr om, or paid or allowed by, one or
mor e employer s), exclusive of the value of all benefits or
amenities not pr ovided for by way of monetar y payment,
exceeds
65
[fifty] thousand r upees:]
66
[***]
67
[Explan ation .For the r emoval of doubts, it is her eby declar ed
that the use of any vehicle pr ovided by a company or an employer
for jour ney by the assessee fr om his r esidence to his office or
other place of wor k, or fr om such office or place to his r esidence,
shall not be r egar ded as a benefit or amenity gr anted or pr ovided
to him fr ee of cost or at concessional r ate for the pur poses of this
sub-clause;]
(iiia)
68
[***]
(iv) any sum paid by the employer in r espect of any obligation which,
but for such payment, would have been payable by the assessee;
(v) any sum payable by the employer , whether dir ectly or thr ough a
fund, other than a r ecognised pr ovident fund or an appr oved
super annuation fund
69
[or a Deposit-linked Insur ance Fund
established under section 3G of the Coal Mines Pr ovident Fund
and Miscellaneous Pr ovisions Act, 1948 (46 of 1948), or , as the
case may be, section 6C of the Employees Pr ovident Funds and
Miscellaneous Pr ovisions Act, 1952 (19 of 1952)], to effect an
64. Substituted for under the head Salar ies, exclusive of the value of all benefits or
amenities not pr ovided for by way of monetar y payment, exceeds eighteen thousand
r upees; by the Finance Act, 1985, w.e.f. 1-4-1986.
65. Substituted for twenty-four by the Finance Act, 2001, w.e.f. 1-4-2002.
66. Omitted by the Finance Act, 2007, w.e.f. 1-4-2008. Pr ior its omission, pr oviso, as, inser ted
by the Finance Act, 2000, w.e.f. 1-4-2001, and later on amended by the Finance Act, 2001,
w.e.f. 1-4-2001 r ead as under :
Provided that nothing contained in this sub-clause shall apply to the value of any benefit
pr ovided by a company fr ee of cost or at a concessional r ate to its employees by way of
allotment of shar es, debentur es or war r ants dir ectly or indir ectly under any Employees
Stock Option Plan or Scheme of the company offer ed to such employees in accor dance
with the guidelines issued in this behalf by the Centr al Gover nment*.
*See Notification No. SO 1021(E), dated 11-10-2001 for Guidelines r egar ding Employees
Stock Option Plan or Scheme.
68. Omitted by the Finance Act, 2000, w.e.f. 1-4-2001. Ear lier , sub-clause (iiia), was inser ted by
69. Inser ted by the Labour Pr ovident Fund Laws (Amendment) Act, 1976, w.e.f. 1-8-1976.
assur ance on the life of the assessee or to effect a contr act for an
annuity; and
70
[(vi) the value of any other fr inge benefit or amenity
71
(excluding the
fr inge benefits char geable to tax under Chapter XII-H)
71
as may
be pr escr ibed
72
:]
73
[Provided that nothing in this clause shall apply to,
(i) the value of any medical tr eatment pr ovided to an employee or
any member of his family in any hospital maintained by the
employer ;
74
[(ii) any sum paid by the employer in r espect of any expenditur e
actually incur r ed by the employee on his medical tr eatment or
tr eatment of any member of his family
(a) in any hospital maintained by the Gover nment or any local
author ity or any other hospital appr oved
75
by the Gover n-
ment for the pur poses of medical tr eatment of its employees;
(b) in r espect of the pr escr ibed diseases
76
or ailments, in any
hospital appr oved by the Chief Commissioner having r egar d
to the pr escr ibed guidelines
77
:
Provided that, in a case falling in sub-clause (b), the employee
shall attach with his r etur n of income a cer tificate fr om the
hospital specifying the disease or ailment for which medical
tr eatment was r equir ed and the r eceipt for the amount paid to the
hospital;]
(iii) any por tion of the pr emium paid by an employer in r elation to an
employee, to effect or to keep in for ce an insur ance on the health
of such employee under any scheme appr oved by the Centr al
Gover nment
78
[or the Insur ance Regulator y and Development
Author ity established under sub-section (1) of section 3 of the
Insur ance Regulator y and Development Author ity Act, 1999 (41
of 1999),] for the pur poses of clause (ib) of sub-section (1) of
section 36;
S. 17(2) I.T. ACT, 1961 1.150
(vi), as inser ted by the Finance Act, 2001, w.e.f. 1-4-2002, r ead as under :
(vi) the value of any other fr inge benefit or amenity as may be pr escr ibed.
71. For meaning of expr ession fr inge benefit or amenity, and as may be pr escr ibed
72. See r ule 3.
74. Substituted by the Finance Act, 1994, w.r .e.f. 1-4-1993. Pr ior to its substitution, clause (ii)
was substituted by the Finance Act, 1992, w.e.f. 1-4-1993.
75. For list of hospitals r ecognised under the Centr al Gover nment Health Scheme vide
Cir cular No. 603, dated 6-6-1991, see Taxmanns Master Guide to Income-tax Act.
76. See r ule 3A(2) for pr escr ibed diseases.
77. See r ule 3A(1) for conditions to be fulfilled by a hospital to obtain Chief Commissioner s
appr oval.
(iv) any sum paid by the employer in r espect of any pr emium paid by
the employee to effect or to keep in for ce an insur ance on his
health or the health of any member of his family under any
scheme appr oved by the Centr al Gover nment
78a
[or the Insur ance
Regulator y and Development Author ity established under sub-
section (1) of section 3 of the Insur ance Regulator y and Develop-
ment Author ity Act, 1999 (41 of 1999),] for the pur poses of section
80D;
(v) any sum paid by the employer in r espect of any expenditur e
actually incur r ed by the employee on his medical tr eatment or
tr eatment of any member of his family [other than the tr eatment
r efer r ed to in clauses (i) and (ii)]; so, however , that such sum does
not exceed
79
[fifteen] thousand r upees in the pr evious year ;
(vi) any expenditur e incur r ed by the employer on
(1) medical tr eatment of the employee, or any member of the
family of such employee, outside India;
(2) tr avel
80
[and] stay abr oad of the employee or any member of
the family of such employee for medical tr eatment;
(3) tr avel and stay abr oad of one attendant who accompanies
the patient in connection with such tr eatment,
81
[subject to the condition that
(A) the expenditur e on medical tr eatment and stay abr oad shall
be excluded fr om per quisite only to the extent per mitted by
the Reser ve Bank of India; and
(B) the expenditur e on tr avel shall be excluded fr om per quisite
only in the case of an employee whose gr oss total income, as
computed befor e including ther ein the said expenditur e,
does not exceed two lakh r upees;]
(vii) any sum paid by the employer in r espect of any expenditur e
actually incur r ed by the employee for any of the pur poses
specified in clause (vi) subject to the conditions specified in or
under that clause :
82
[Provided further that for the assessment year beginning on the 1st
day of Apr il, 2002, nothing contained in this clause shall apply to any
employee whose income under the head Salar ies (whether due
fr om, or paid or allowed by, one or mor e employer s) exclusive of the
value of all per quisites not pr ovided for by way of monetar y payment,
does not exceed one lakh r upees.]
Explan ation .For the pur poses of clause (2),
79. Substituted for ten by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
80. Substituted for or by the Finance Act, 1993, w.e.f. 1-4-1993.
81. Substituted, ibid. Pr ior to its substitution, it was amended by the Finance Act, 1992, w.e.f.
1-4-1993.
(i) hospital includes a dispensar y or a clinic
83
[or a nur sing home];
(ii) family, in r elation to an individual, shall have the same meaning
as in clause (5) of section 10; and
(iii) gr oss total income shall have the same meaning as in clause (5)
of section 80B;]
84
[* * *]
85
(3) pr ofits
86
in lieu of salar y includes
(i) the amount of any compensation
86
due to or r eceived by an
assessee fr om his employer or for mer employer at or in connec-
tion with the ter mination of his employment or the modification
of the ter ms and conditions r elating ther eto;
(ii) any payment (other than any payment r efer r ed to in clause (10)
87
[, clause (10A)]
88
[, clause (10B)], clause (11),
89
[clause (12)
90
[, clause (13)] or clause (13A)] of section 10), due to or r eceived
by an assessee fr om an employer or a for mer employer or fr om
a pr ovident or other fund
91
[* * *], to the extent to which it does not
consist of contr ibutions by the assessee or
92
[inter est on such
contr ibutions or any sum r eceived under a Keyman insur ance
policy including the sum allocated by way of bonus on such
policy.
Keyman insur ance policy shall have the meaning assigned to it
in clause (10D) of section 10;]
93
[(iii) any amount due to or r eceived, whether in lump sum or other -
wise, by any assessee fr om any per son
(A) befor e his joining any employment with that per son; or
(B) after cessation of his employment with that per son.]
S. 17(3) I.T. ACT, 1961 1.152
84. Sub-clause (vi) along with consequential amendments in sub-clauses (iv) and (v), omitted
by the Finance Act, 1985, w.e.f. 1-4-1985. Or iginal sub-clause was inser ted by the Taxation
Laws (Amendment) Act, 1984, w.e.f. 1-4-1985. Amendment thus never came into oper ation.
85. See also Letter F. No. 35/ 26/ 64-IT(B), dated 25-5-1964. For details, see Taxmanns Master
86. For the meaning of the ter ms pr ofits and compensation, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
89. Subst it ut ed for or clause (12) by t he Dir ect Taxes (Amendment ) Act , 1964, w.e.f.
6-10-1964.
91. Wor ds (not being an appr oved super annuation fund) omitted, ibid.
92. Substituted for inter est on such contr ibutions by the Finance (No. 2) Act, 1996, w.e.f.
1-10-1996.
1.153 CH. IV - COMPUTATION OF TOTAL INCOME FROM HOUSE PROPERTY S. 23
94
[***]
C.In com e f rom h ouse property
Income from house property.
95
22.
96
The annual value of pr oper ty consisting of any buildings
97
or lands appur -
tenant
97
ther eto of which the assessee is the owner
97
, other than such
por tions of such pr oper ty as he may occupy
97
for the pur poses of any business
or pr ofession car r ied on by him the pr ofits of which ar e char geable to income-
tax, shall be char geable to income-tax under the head Income fr om house
pr oper ty.
98
[Annual value how determined.
23. (1) For the pur poses of section 22, the annual value of any pr oper ty shall be
deemed to be
(a) the sum for which the pr oper ty might r easonably be expected to let
fr om year to year ; or
(b) wher e the pr oper ty or any par t of the pr oper ty is let and the actual
r ent r eceived or r eceivable
99
by the owner in r espect ther eof is in
94. Sub-heading B.In terest on securities and sections 18 to 21 omitted by the Finance Act,
1988, w.e.f. 1-4-1989. Pr ior to their omission, sub-heading and section 18 wer e amended
by the Finance Act, 1965, w.e.f. 1-4-1965 and the Finance Act, 1988, w.e.f. 1-4-1988. Sections
19 and 20 wer e amended by the Finance Act, 1979, w.e.f. 1-4-1980.
95. See also Cir cular No. 9, dated 25-3-1969 and Cir cular No. 2(XLVIII-2), dated 13-6-1955. For
97. For t he meaning of t he t er ms building, appur t enant , owner and occupy, see
98. Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Pr ior to its substitution, section 23,
as amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967, Finance Act, 1968, w.e.f.
1-4-1969, Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, Taxation Laws (Amend-
ment) Act, 1975, w.e.f. 1-4-1976, Finance Act, 1978, w.e.f. 1-4-1979, Finance Act, 1982, w.e.f.
1-4-1983, Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985/ 1-4-1984, Finance Act,
1986, w.e.f. 1-4-1987 and Finance Act, 1992, w.e.f. 1-4-1993, r ead as under :
23. An n ual value h ow determin ed.(1) For the pur poses of section 22, the annual value
of any pr oper ty shall be deemed to be
(a) the sum for which the pr oper ty might r easonably be expected to let fr om year to
year ; or
(b) wher e the pr oper ty is let and the annual r ent r eceived or r eceivable by the owner
in r espect ther eof is in excess of the sum r efer r ed to in clause (a), the amount so
r eceived or r eceivable :
Provided that wher e the pr oper ty is in the occupation of a tenant, the taxes levied by any
local author ity in r espect of the pr oper ty shall, to the extent such taxes ar e bor ne by the
owner , be deducted (ir r espective of the pr evious year in which the liability to pay such
taxes was incur r ed by the owner accor ding to the method of accounting r egular ly
employed by him) in deter mining the annual value of the pr oper ty of that pr evious year
in which such taxes ar e actually paid by him :
Provided further that the annual value as deter mined under this sub-section shall,
(a) in the case of a building compr ising one or mor e r esidential units, the er ection of
which is begun after the 1st day of Apr il, 1961, and completed befor e the 1st day of
Apr il, 1970, for a per iod of thr ee year s fr om the date of completion of the building,
be r educed by a sum equal to the aggr egate of
(Con td. on p. 1.154)
S. 23 I.T. ACT, 1961 1.154
(i) in r espect of any r esidential unit whose annual value as so deter mined does
not exceed six hundr ed r upees, the amount of such annual value;
(ii) in r espect of any r esidential unit whose annual value as so deter mined
exceeds six hundr ed r upees, an amount of six hundr ed r upees;
(b) in the case of a building compr ising one or mor e r esidential units, the er ection of
which is begun after the 1st day of Apr il, 1961, and completed after the 31st day of
Mar ch, 1970, but befor e the 1st day of Apr il, 1978, for a per iod of five year s fr om
the date of completion of the building, be r educed by a sum equal to the aggr egate
of
not exceed one thousand two hundr ed r upees, the amount of such annual
value;
exceeds one thousand two hundr ed r upees, an amount of one thousand two
hundr ed r upees;
(c) in the case of a building compr ising one or mor e r esidential units, the er ection of
which is completed after the 31st day of Mar ch, 1978, but befor e the 1st day of Apr il,
1982, for a per iod of five year s fr om the date of completion of the building, be
r educed by a sum equal to the aggr egate of
not exceed two thousand four hundr ed r upees, the amount of such annual
value;
exceeds two thousand four hundr ed r upees, an amount of two thousand four
hundr ed r upees;
(d ) in the case of a building compr ising one or mor e r esidential units, the er ection of
which is completed after the 31st day of Mar ch, 1982 but befor e the 1st day of Apr il,
1992, for a per iod of five year s fr om the date of completion of the building, be
r educed by a sum equal to the aggr egate of
not exceed thr ee thousand six hundr ed r upees, the amount of such annual
value ;
exceeds thr ee thousand six hundr ed r upees, an amount of thr ee thousand six
hundr ed r upees.
Explan ation 1.For the pur poses of this sub-section, annual r ent means
(a) in a case wher e the pr oper ty is let thr oughout the pr evious year , the actual r ent
r eceived or r eceivable by the owner in r espect of such year ; and
(b) in any other case, the amount which bear s the same pr opor tion to the amount of
the actual r ent r eceived or r eceivable by the owner for the per iod for which the
pr oper ty is let, as the per iod of twelve months bear s to such per iod.
Explan ation 2.For the r emoval of doubts, it is her eby declar ed that wher e a deduction
in r espect of any taxes r efer r ed to in the fir st pr oviso to this sub-section is allowed in
deter mining the annual value of the pr oper ty in r espect of any pr evious year (being a
pr evious year r elevant to the assessment year commencing on the 1st day of Apr il, 1984
or any ear lier assessment year ), no deduction shall be allowed under the fir st pr oviso in
deter mining the annual value of the pr oper ty in r espect of the pr evious year in which such
taxes ar e actually paid by the owner .
(2) Wher e the pr oper ty consists of
(a) a house or par t of a house in the occupation of the owner for the pur poses of his
own r esidence,
(Con td. on p. 1.155)
excess of the sum r efer r ed to in clause (a), the amount so r eceived or
r eceivable; or
(c) wher e the pr oper ty or any par t of the pr oper ty is let and was vacant
dur ing the whole or any par t of the pr evious year and owing to such
vacancy the actual r ent r eceived or r eceivable by the owner in r espect
ther eof is less than the sum r efer r ed to in clause (a), the amount so
r eceived or r eceivable :
Provided t hat t he t axes levied
1
by any local aut hor it y in r espect of t he
pr oper ty shall be deducted (ir r espective of the pr evious year in which the liability
to pay such taxes was incur r ed by the owner accor ding to the method of
accounting r egular ly employed by him) in deter mining the annual value of the
pr oper ty of that pr evious year in which such taxes ar e actually paid by him.
(i) which is not actually let dur ing any par t of the pr evious year and no other
benefit ther efr om is der ived by the owner , the annual value of such house or
par t of the house shall be taken to be n il ;
(ii) which is let dur ing any par t or par ts of the pr evious year , that par t of the
annual value (annual value being deter mined in the same manner as if the
pr oper ty had been let) which is pr opor tionate to the per iod dur ing which the
pr oper ty is in the occupation of the owner for the pur poses of his own
r esidence, or , as the case may be, wher e such pr oper ty is let out in par ts, that
por tion of the annual value appr opr iate to any par t which was occupied by
the owner for his own r esidence, which is pr opor tionate to the per iod dur ing
which such par t is wholly occupied by him for his own r esidence shall be
deducted in deter mining the annual value.
Explan ation .The deduction under this sub-clause shall be made ir r espec-
tive of whether the per iod dur ing which the pr oper ty or , as the case may be,
par t of the pr oper ty was used for the r esidence of the owner pr ecedes or
follows the per iod dur ing which it is let;
(b) mor e than one house in the occupation of the owner for the pur poses of his own
r esidence, the pr ovisions of clause (a) shall apply only in r espect of one of such
houses, which the assessee may, at his option, specify in this behalf;
(c) mor e than one house and such houses ar e in the occupation of the owner for the
pur poses of his own r esidence, the annual value of the house or houses, other than
the house in r espect of which the assessee has exer cised an option under clause (b),
shall be deter mined under sub-section (1) as if such house or houses had been let.
Explan ation .Wher e any such r esidential unit as is r efer r ed to in the second pr oviso to
sub-section (1) is in the occupation of the owner for the pur poses of his own r esidence,
nothing contained in that pr oviso shall apply in computing the annual value of that
r esidential unit.
(2A) [***]
(3) Wher e the pr oper ty r efer r ed to in sub-section (2) consists of one r esidential house only
and it cannot actually be occupied by the owner by r eason of the fact that owing to his
employment, business or pr ofession car r ied on at any other place, he has to r eside at that
other place in a building not belonging to him, the annual value of such house shall be
taken to be n il :
Provided that the following conditions ar e fulfilled, namely :
(i) such house is not actually let, and
(ii) no other benefit ther efr om is der ived by the owner .
99. For the meaning of the ter m r eceivable, see Taxmanns Dir ect Taxes Manual, Vol. 3.
1. For the meaning of the ter m levied, see Taxmanns Dir ect Taxes Manual, Vol. 3.
S. 24 I.T. ACT, 1961 1.156
Explan ation .For the pur poses of clause (b) or clause (c) of this sub-section, the
amount of actual r ent r eceived or r eceivable by the owner shall not include,
subject to such r ules
2
as may be made in this behalf, the amount of r ent which
the owner cannot r ealise.
(2) Wher e the pr oper ty consists of a house or par t of a house which
(a) is in the occupation of the owner for the pur poses of his own
r esidence; or
(b) cannot actually be occupied by the owner by r eason of the fact that
owing to his employment, business or pr ofession car r ied on at any
other place, he has to r eside at that other place in a building not
belonging to him,
the annual value of such house or par t of the house shall be taken to be n il.
(3) The pr ovisions of sub-section (2) shall not apply if
(a) the house or par t of the house is actually let dur ing the whole or any
par t of the pr evious year ; or
(b) any other benefit ther efr om is der ived by the owner .
(4) Wher e the pr oper ty r efer r ed to in sub-section (2) consists of mor e than one
house
(a) the pr ovisions of that sub-section shall apply only in r espect of one of
such houses, which the assessee may, at his option, specify in this
behalf;
(b) the annual value of the house or houses, other than the house in
r espect of which the assessee has exer cised an option under clause (a),
shall be deter mined under sub-section (1) as if such house or houses
had been let.]
3
[Deductions from income from house property.
24. Income char geable under the head Income fr om house pr oper ty shall be
computed after making the following deductions, namely:
(a) a sum equal to thir ty per cent of the annual value;
(b) wher e the pr oper ty has been acquir ed, constr ucted, r epair ed, r e-
newed or r econstr ucted with bor r owed capital, the amount of any
inter est payable on such capital:
2. See r ule 4.
as amended by the Finance Act, 1968, w.e.f. 1-4-1969, Finance (No. 2) Act, 1977, w.e.f.
1992, w.e.f. 1-4-1993, Finance Act, 1994, w.e.f. 1-4-1995, Finance (No. 2) Act, 1996, w.e.f.
1-4-1997/ w.r .e.f. 1-4-1995, Finance (No. 2) Act, 1998, w.e.f. 1-4-1999, Finance Act, 1999,
w.e.f. 1-4-2000 and Finance Act, 2000, w.e.f. 1-4-2001, r ead as under :
24. Deduction s from in com e from h ouse property.(1) Income char geable under the head
Income fr om house pr oper ty shall, subject to the pr ovisions of sub-section (2), be
computed after making the following deductions, namely:
(Con td. on p. 1.157)
Provided that in r espect of pr oper ty r efer r ed to in sub-section (2) of
section 23, the amount of deduction shall not exceed thir ty thousand
r upees :
Provided further that wher e the pr oper ty r efer r ed to in the fir st
pr oviso is acquir ed or constr ucted with capital bor r owed on or after
the 1st day of Apr il, 1999 and such acquisition or constr uction is
(i) in r espect of r epair s of, and collection of r ent fr om, the pr oper ty, a sum equal to one-
four th of the annual value;
(ii) the amount of any pr emium paid to insur e the pr oper ty against r isk of damage or
destr uction ;
(iii) [***]
(iv ) wher e the pr oper ty is subject to an annual char ge (not being a char ge cr eated by
the assessee voluntar ily or a capital char ge), the amount of such char ge ;
(v) wher e the pr oper ty is subject to a gr ound r ent, the amount of such gr ound r ent ;
(vi) wher e the pr oper ty has been acquir ed, constr ucted, r epair ed, r enewed or r econ-
str ucted with bor r owed capital, the amount of any inter est payable on such capital.
Explan ation .Wher e the pr oper ty has been acquir ed or constr ucted with bor -
r owed capital, the inter est, if any, payable on such capital for the per iod pr ior to the
pr evious year in which the pr oper ty has been acquir ed or constr ucted, as r educed
by any par t ther eof allowed as a deduction under any other pr ovision of this Act,
shall be deducted under this clause in equal instalments for the said pr evious year
and for each of the four immediately succeeding pr evious year s;
(vii) any sums paid on account of land r evenue or any other tax levied by the State
Gover nment in r espect of the pr oper ty;
(viii) [***]
(ix) wher e the pr oper ty is let and was vacant dur ing a par t of the year , that par t of the
annual value which is pr opor tionate to the per iod dur ing which the pr oper ty is
wholly unoccupied or , wher e the pr oper ty is let out in par ts, that por tion of the
annual value appr opr iate to any vacant par t, which is pr opor tionate to the per iod
dur ing which such par t is wholly unoccupied.
Explan ation .The deduct ion under t his clause shall be made ir r espect ive of
whether the per iod dur ing which the pr oper ty or , as the case may be, par t of the
pr oper ty was vacant pr ecedes or follows the per iod dur ing which it is let;
(x) subject to such r ules as may be made in this behalf, the amount in r espect of r ent
fr om pr oper ty let to a tenant which the assessee cannot r ealise.
(2) No deduction shall be allowed under sub-section (1) in r espect of pr oper ty of the natur e
r efer r ed to in sub-clause (i) of clause (a) of sub-section (2), or sub-section (3) of section 23 :
Provided that nothing in this sub-section shall apply to the allowance of a deduction under
clause (vi) of sub-section (1) of an amount not exceeding thir ty thousand r upees in r espect
of the pr oper ty of the natur e r efer r ed to in sub-clause (i) of clause (a) of sub-section (2)
of section 23 or sub-section (3) of section 23 :
Provided further that wher e the pr oper ty is acquir ed or constr ucted with capital bor -
r owed on or after the 1st day of Apr il, 1999 and such acquisition or constr uction is
completed befor e the 1st day of Apr il, 2003, the pr ovisions of the fir st pr oviso shall have
effect as if for the wor ds thir ty thousand r upees, the wor ds one lakh r upees had been
subst it ut ed.
(3) The total amount deductible under sub-section (1) in r espect of pr oper ty of the natur e
r efer r ed to in sub-clause (ii) of clause (a) of sub-section (2) of section 23 shall not exceed
the annual value of the pr oper ty as deter mined under that section.
S. 25A I.T. ACT, 1961 1.158
completed
4
[within thr ee year s fr om the end of the financial year in
which capital was bor r owed], the amount of deduction under this
clause shall not exceed one lakh fifty thousand r upees.
Explan ation .Wher e the pr oper ty has been acquir ed or constr ucted
with bor r owed capital, the inter est, if any, payable on such capital
bor r owed for the per iod pr ior to the pr evious year in which the
pr oper ty has been acquir ed or constr ucted, as r educed by any par t
ther eof allowed as deduction under any other pr ovision of this Act,
shall be deducted under this clause in equal instalments for the said
pr evious year and for each of the four immediately succeeding
pr evious year s:]
5
[Provided also that no deduction shall be made under the second
pr oviso unless the assessee fur nishes a cer tificate, fr om the per son to
whom any inter est is payable on the capital bor r owed, specifying the
amount of inter est payable by the assessee for the pur pose of such
acquisition or constr uction of the pr oper ty, or , conver sion of the
whole or any par t of the capital bor r owed which r emains to be r epaid
as a new loan.
Explan ation .For the pur poses of this pr oviso, the expr ession new
loan means the whole or any par t of a loan taken by the assessee
subsequent to the capital bor r owed, for the pur pose of r epayment of
such capital.]
Amounts not deductible from income from house property.
25. Not wit hst anding anyt hing cont ained in sect ion 24, any
6
[***] int er est
char geable under this Act which is payable outside India (not being inter est
on a loan issued for public subscr iption befor e the 1st day of Apr il, 1938), on
which tax has not been paid or deducted under Chapter XVII-B and in r espect
of which ther e is no per son in India who may be tr eated as an agent under section
163 shall not be deducted in computing the income char geable under the head
Income fr om house pr oper ty.
7
[Special provision for cases where unrealised rent allowed as deduction is
realised subsequently.
25A. Wher e a deduction has been made under clause (x) of sub-section (1) of
section 24
8
[as it stood immediately befor e its substitution by the Finance
Act, 2001] in the assessment for any year in r espect of r ent fr om pr oper ty let to
a tenant which the assessee cannot r ealise and subsequently dur ing any pr evious
year the assessee has r ealised any amount in r espect of such r ent, the amount so
4. Substituted for befor e the 1st day of Apr il, 2003 by the Finance Act, 2002, w.e.f. 1-4-2003.
5. Inser ted, ibid.
6. Wor ds annual char ge or omitted by the Finance Act, 2001, w.e.f. 1-4-2002.
r ealised shall be deemed to be income char geable under the head Income fr om
house pr oper ty and accor dingly char ged to income-tax (without making any
deduction under section 23 or section 24
9
[as it stood immediately befor e its
substitution by the Finance Act, 2001]) as the income of that pr evious year ,
whether the assessee is the owner of that pr oper ty in that year or not.]
9
[Unrealised rent received subsequently to be charged to income-tax.
25AA. Wher e the assessee cannot r ealise r ent fr om a pr oper ty let to a tenant
and subsequently the assessee has r ealised any amount in r espect of
such r ent, the amount so r ealised shall be deemed to be income char geable under
the head Income fr om house pr oper ty and accor dingly char ged to income-tax
as the income of that pr evious year in which such r ent is r ealised whether or not
the assessee is the owner of that pr oper ty in that pr evious year .]
10
[Special provision for arrears of rent received.
25B. Wher e the assessee
(a) is the owner of any pr oper ty consisting of any buildings or lands
appur tenant ther eto which has been let to a tenant; and
(b) has r eceived any amount, by way of ar r ear s of r ent fr om such
pr oper ty, not char ged to income-tax for any pr evious year ,
the amount so r eceived, after deducting
11
[a sum equal to thir ty per cent of such
amount], shall be deemed to be the income char geable under the head Income
fr om house pr oper ty and accor dingly char ged to income-tax as the income of
that pr evious year in which such r ent is r eceived, whether the assessee is the
owner of that pr oper ty in that year or not.]
Property owned by co-owners.
12
26.
13
Wher e pr oper ty consisting of buildings or buildings and lands appur -
tenant ther eto is owned by two or mor e per sons and their r espective shar es
ar e definite and ascer tainable, such per sons shall not in r espect of such pr oper ty
be assessed as an association of per sons, but the shar e of each such per son in the
income fr om the pr oper ty as computed in accor dance with sections 22 to 25 shall
be included in his total income.
14
[Explan ation .For the pur poses of this section, in applying the pr ovisions of
sub-section (2) of section 23 for computing the shar e of each such per son as is
r efer r ed to in this section, such shar e shall be computed, as if each such per son
is individually entitled to the r elief pr ovided in that sub-section.]
11. Substituted for a sum equal to one-four th of such amount for r epair s of, and collection
of r ent fr om, the pr oper ty by the Finance Act, 2001, w.e.f. 1-4-2002.
12. See also Letter F. No. 45/ 230/ 63-ITJ, dated 22-2-1965. For details, see Taxmanns Master
Owner of house property, annual charge, etc., defined.
15
27. For the pur poses of sections 22 to 26
(i) an individual who tr ansfer s other wise than for adequate consider a-
tion any house pr oper ty to his or her spouse, not being a tr ansfer in
connection with an agr eement to live apar t, or to a minor child not
being a mar r ied daughter , shall be deemed to be the owner of the
house pr oper ty so tr ansfer r ed;
(ii) the holder of an impar tible estate shall be deemed to be the individual
owner of all the pr oper ties compr ised in the estate ;
16
[(iii) a member of a co-oper ative society, company or other association of
per sons to whom a building or par t ther eof is allotted or leased under
a house building scheme of the society, company or association, as the
case may be, shall be deemed to be the owner of that building or par t
ther eof ;
(iiia) a per son who is allowed to take or r etain possession of any building
or par t ther eof in par t per for mance of a contr act of the natur e
r efer r ed to in
17
section 53A of the Tr ansfer of Pr oper ty Act, 1882 (4 of
1882), shall be deemed to be the owner of that building or par t
ther eof ;
(iiib) a per son who acquir es any r ights (excluding any r ights by way of a
lease fr om month to month or for a per iod not exceeding one year ) in
or with r espect to any building or par t ther eof, by vir tue of any such
tr ansaction as is r efer r ed to in clause (f) of section 269UA, shall be
deemed to be the owner of that building or par t ther eof;]
(iv)
18
[***]
(v)
18
[***]
(vi) taxes levied by a local author ity in r espect of any pr oper ty shall be
deemed to include ser vice taxes levied by the local author ity in
r espect of the pr oper ty.
S. 27 I.T. ACT, 1961 1.160
17. For text of section 53A of the Tr ansfer of Pr oper ty Act, 1882, see Appendix.
18. Clauses (iv) and (v) omitted by the Finance Act, 2001, w.e.f. 1-4-2002. Pr ior to their
omission, clauses (iv) and (v) r ead as under :
(iv ) annual char ge means a char ge to secur e an annual liability, but does not include
any tax in r espect of pr oper ty or income fr om pr oper ty imposed by a local author ity,
or the Centr al or a State Gover nment ;
(v) capital char ge means a char ge to secur e the dischar ge of a liability of a capital
natur e ;
D.Profits an d gain s of busin ess or profession
Profits and gains of business or profession.
19
28.
20
The following income shall be char geable to income-tax under the head
Pr ofits and gains of business or pr ofession,
(i) the pr ofits and gains
21
of any business or pr ofession
21
which was
car r ied on by the assessee at any time dur ing the pr evious year ;
(ii) any compensation
21
or other payment due to
21
or r eceived by
21
,
(a) any per son, by whatever name called, managing the whole or
substantially the whole of the affair s of an Indian company, at or
in connection with the ter mination of his management or the
modification of the ter ms and conditions r elating ther eto;
(b) any per son, by whatever name called, managing the whole or
substantially the whole of the affair s in India of any other
company, at or in connection with the ter mination of his office or
the modification of the ter ms and conditions r elating ther eto ;
(c) any per son, by whatever name called, holding an agency in
India for any par t of the activities r elating to the business of any
other per son, at or in connection with the ter mination of the
agency or the modification of the ter ms and conditions r elating
ther eto ;
22
[(d) any per son, for or in connection with the vesting in the Gover n-
ment, or in any cor por ation owned or contr olled by the Gover n-
ment, under any law for the time being in for ce, of the manage-
ment of any pr oper ty or business ;]
(iii) income der ived by a tr ade, pr ofessional or similar
23
association fr om
specific ser vices
23
per for med for its member s ;
24
[(iiia) pr ofits on sale of a licence gr anted under the Impor ts (Contr ol) Or der ,
1955, made under the Impor ts and Expor ts (Contr ol) Act, 1947 (18 of
1947) ;]
1.161 CH. IV - COMPUTATION OF BUSINESS INCOME S. 28
19. See also Pr ess Note, dated 9-10-1952, issued by the Ministr y of Finance, Instr uction
No. 971 [F.No. 228/ 12/ 76-IT (A-II)], dated 8-7-1976, Cir cular No. 1 (XLVII-12), dated
16-1-1962, Cir cular No. 35-D(XLVII-20), dated 24-11-1965, Cir cular No. 25, SIA Ser ies,
dated 20-10-1975, Cir cular No. 599, dated 24-4-1991, Cir cular No. 665, dated 5-10-1993,
Cir cular No. 742, dated 2-5-1996 (as amended by Cir cular No. 765, dated 15-4-1998); Letter
da t ed 12-3-1996, Cir cu la r No. 787, da t ed 10-2-2000; Cir cu la r No. 6/ 2001, da t ed
5-3-2001, Cir cular No. 2/ 2002, dated 15-2-2002, Cir cular No. 4/ 2004, dated 13-5-2004 and
Cir cular No. 4/ 2007, dated 15-6-2007. For details, see Taxmanns Master Guide to Income-
tax Act.
21. For the meaning of the ter ms/ expr essions pr ofits and gains, pr ofession, compensa-
tion, due to and r eceived by, see Taxmanns Dir ect Taxes Manual, Vol. 3.
23. For the meaning of the ter ms/ expr essions similar and specific ser vices, see Taxmanns
25
[(iiib) cash assistance (by whatever name called) r eceived or r eceivable by
any per son against expor ts under any scheme of the Gover nment of
India ;]
26
[(iiic) any duty of customs or excise r e-paid or r e-payable as dr awback to
any per son against expor ts under the Customs and Centr al Excise
Duties Dr awback Rules, 1971 ;]
27
[(iiid) any pr ofit on the tr ansfer of the Duty Entitlement Pass Book Scheme,
being the Duty Remission Scheme under the expor t and impor t policy
for mulated and announced under section 5 of the For eign Tr ade
(Development and Regulation) Act, 1992 (22 of 1992);]
28
[(iiie) any pr ofit on the tr ansfer of the Duty Fr ee Replenishment Cer tificate,
being the Duty Remission Scheme under the expor t and impor t policy
for mulated and announced under section 5 of the For eign Tr ade
(Development and Regulation) Act, 1992 (22 of 1992) ;]
29
[(iv) the value of any benefit or per quisite, whether conver tible into money
or not, ar ising fr om business or the exer cise of a pr ofession ;]
30
[(v) any inter est, salar y, bonus, commission or r emuner ation, bywhatever
name called, due to, or r eceived by, a par tner of a fir m fr om such
fir m:
Provided that wher e any inter est, salar y, bonus, commission or
r emuner ation, by whatever name called, or any par t ther eof has not
been allowed to be deducted under clause (b) of section 40, the
income under this clause shall be adjusted to the extent of the amount
not so allowed to be deducted ;]
31
[(va) any sum, whether r eceived or r eceivable, in cash or kind, under an
agr eement for
(a) not car r ying out any activity in r elation to any business; or
(b) not shar ing any know-how, pat ent , copyr ight , t r ade-mar k,
licence, fr anchise or any other business or commer cial r ight of
similar natur e or infor mation or technique likely to assist in the
manufactur e or pr ocessing of goods or pr ovision for ser vices:
Provided that sub-clause (a) shall not apply to
(i) any sum, whether r eceived or r eceivable, in cash or kind, on
account of tr ansfer of the r ight to manufactur e, pr oduce or
pr ocess any ar ticle or thing or r ight to car r y on any business,
which is char geable under the head Capital gains;
S. 28 I.T. ACT, 1961 1.162
30. Inser ted by the Finance Act, 1992, w.e.f. 1-4-1993. Ear lier clause (v) was inser ted by the
Dir ect Tax Laws (Amdt.) Act, 1987, w.e.f. 1-4-1989 and was omitted by the Dir ect Tax Laws
(Amdt.) Act, 1989, with effect fr om the same date.
(ii) any sum r eceived as compensation, fr om the multilater al fund of
the Montr eal Pr otocol on Substances that Deplete the Ozone
layer under the United Nations Envir onment Pr ogr amme, in
accor dance with the ter ms of agr eement enter ed into with the
Gover nment of India.
(i) agr eement includes any ar r angement or under standing or
action in concer t,
(A) whether or not such ar r angement, under standing or action is
for mal or in wr iting; or
(B) whether or not such ar r angement, under standing or action
is intended to be enfor ceable by legal pr oceedings;
(ii) ser vice means ser vice of any descr ipt ion which is made
available to potential user s and includes the pr ovision of ser vices
in connection with business of any industr ial or commer cial
natur e such as accounting, banking, communication, conveying
of news or infor mation, adver tising, enter tainment, amusement,
education, financing, insur ance, chit funds, r eal estate, constr uc-
tion, tr anspor t, stor age, pr ocessing, supply of electr ical or other
ener gy, boar ding and lodging;]
32
[(vi) any sum r eceived under a Keyman insur ance policy including the
sum allocated by way of bonus on such policy.
Explan ation .For the purposes of this clause, the expression Keyman
insur ance policy shall have the meaning assigned to it in clause (10D)
of section 10.]
Explan ation 1.[Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f.
1-4-1989.]
Explan ation 2.Wher e speculative tr ansactions car r ied on by an assessee ar e of
such a natur e as to constitute a business, the business (her einafter r efer r ed to as
speculation business) shall be deemed to be distinct and separ ate fr om any
other business.
Income from profits and gains of business or profession, how computed.
29.
33
The income r efer r ed to in section 28 shall be computed in accor dance
with the pr ovisions contained in sections 30 to
34
[43D].
Rent, rates, taxes, repairs and insurance for buildings.
33
30. In r espect of r ent, r ates, taxes, r epair s and insur ance for pr emises, used for
the pur poses of the business or pr ofession, the following deductions shall
be allowed
34. Substituted for 43C by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Ear lier 43C was
substituted for 43B by the Finance Act, 1988, w.e.f. 1-4-1988, 43B was substituted for
43A by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and 43A was
substituted for 43 by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
(a) wher e the pr emises ar e occupied by the assessee
(i) as a tenant, the r ent paid for such pr emises ; and fur ther if he has
under taken to bear the cost of r epair s to the pr emises, the amount
paid on account of such r epair s ;
(ii) other wise than as a tenant, the amount paid by him on account
of cur r ent r epair s
35
to the pr emises ;
(b) any sums paid on account of land r evenue, local r ates or municipal
taxes ;
(c) the amount of any pr emium paid in r espect of insur ance against r isk
of damage or destr uction of the pr emises.
36
[Explan ation .For the r emoval of doubts, it is her eby declar ed that the amount
paid on account of the cost of r epair s r efer r ed to in sub-clause (i), and the amount
paid on account of cur r ent r epair s r efer r ed to in sub-clause (ii), of clause (a), shall
not include any expenditur e in the natur e of capital expenditur e.]
Repairs and insurance of machinery, plant and furniture.
37
31.
38
In r espect of r epair s and insur ance of machiner y, plant or fur nitur e used
for the pur poses of the business or pr ofession, the following deductions
shall be allowed
(i) the amount paid on account of cur r ent r epair s
39
ther eto ;
(ii) the amount of any pr emium paid in r espect of insur ance against r isk
of damage or destr uction ther eof.
40
[Explan ation .For the r emoval of doubts, it is her eby declar ed that the amount
paid on account of cur r ent r epair s shall not include any expenditur e in the natur e
of capital expenditur e.]
Depreciation.
41
32. (1)
42
[In r espect of depr eciation of
S. 32 I.T. ACT, 1961 1.164
35. For the meaning of the expr ession cur r ent r epair s, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
37. See also Cir cular No. 26-D(XLVI-22), dated 10-10-1966. For details, see Taxmanns Master
39. For the meaning of the expr ession cur r ent r epair s, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
41. See also Cir cular No. 9, dated 23-3-1943, Cir cular No. 29-D(XIX-14), dated 31-8-1965, Letter
[F.No. 10/ 14/ 66-IT(A-I)], dated 12-12-1966, Cir cular No. 14 of 1955, dated 11-4-1955,
Cir cular No. 609, dated 29-7-1991, Cir cular No. 622, dated 6-1-1992, Cir cular No. 652, dated
42. Substituted for the opening por tion beginning with the wor ds In r espect of depr eciation
of buildings, machiner y, plant or fur nitur e owned, wholly or par tly, and ending with the
wor ds and figur es section 34, be allowed by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999. Pr ior to its substitution, the quoted por tion, as amended by the Finance (No. 2)
Act, 1996, w.e.f. 1-4-1997, r ead as under :
In r espect of depr eciation of buildings, machiner y, plant or fur nitur e owned, wholly or
par tly, by the assessee and used for the pur poses of the business or pr ofession, the
following deductions shall, subject to the pr ovisions of section 34, be allowed
(i) buildings
43
, machiner y
43
, plant or fur nitur e, being tangible assets;
(ii) know-how, patents, copyr ights, tr ade mar ks, licences, fr anchises or
any other business or commer cial r ights of similar natur e, being
intangible assets acquir ed on or after the 1st day of Apr il, 1998,
owned
43
, wholly or par tly, by the assessee
43
and used for the pur poses of the
business
43
or pr ofession, the following deductions shall be allowed]
44
[(i) in the case of assets of an under taking engaged in gener ation or
gener ation and distr ibution of power , such per centage on the actual
cost ther eof to the assessee as may be pr escr ibed
45
;]
(ii)
46
[in the case of any block of assets, such per centage on the wr itten
down value ther eof as may be pr escr ibed
47
:]
48
[***]
49
[Provided
50
[***] that no deduction shall be allowed under this
clause in r espect of
(a) any motor car manufactur ed outside India, wher e such motor
car is acquir ed by the assessee after the 28th day of Febr uar y,
1975
51
[but befor e the 1st day of Apr il, 2001], unless it is used
(i) in a business of r unning it on hir e for tour ists ; or
(ii) out side India in his business or pr ofession in anot her
countr y; and
43. For t he meaning of t he t er ms/ expr essions buildings, machiner y, owned by t he
assessee and used for the pur poses of the business, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
44. Inser ted by the Income-tax (Amendment) Act, 1998, w.e.f. 1-4-1998. Ear lier , or iginal clause
(i) was substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 and later
on omitted by the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986,
w.e.f. 1-4-1988.
45. See r ule 5(1A) and Appendix IA.
46. Substituted for in the case of buildings, machiner y, plant or fur nitur e, other than ships
cover ed by clause (i), such per centage on the wr itten down value ther eof as may in any
case or class of cases be pr escr ibed : by the Taxation Laws (Amendment and Miscella-
neous Pr ovisions) Act, 1986, w.e.f. 1-4-1988.
47. See r ule 5(1) and Appendix I of Income-tax Rules.
48. Fir st pr oviso omitted by the Finance Act, 1995, w.e.f. 1-4-1996. Pr ior to its omission, fir st
pr oviso, as inser ted by the Finance Act, 1966, w.e.f. 1-4-1966 and amended by the Finance
Provided that wher e the actual cost of any machiner y or plant does not exceed five
thousand r upees, the actual cost ther eof shall be allowed as a deduction in r espect of the
pr evious year in which such machiner y or plant is fir st put to use by the assessee for the
pur poses of his business or pr ofession :
49. Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Pr ior to its substitution,
second pr oviso was inser ted by the Finance Act, 1975, w.e.f. 1-4-1975 and amended by the
Taxation Laws (Amendment and Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1988.
50. Wor d fur ther omitted by the Finance Act, 1995, w.e.f. 1-4-1996.
S. 32 I.T. ACT, 1961 1.166
(b) any machiner y or plant if the actual cost ther eof is allowed as a
deduction in one or mor e year s under an agr eement enter ed into
by the Centr al Gover nment under section 42 :]
52
[Provided further that wher e an asset r efer r ed to in clause ( i) or
clause (ii)
53
[or clause (iia)], as the case may be, is acquir ed by the
assessee dur ing the pr evious year and is put to use for the pur poses
of business or pr ofession for a per iod of less than one hundr ed and
eighty days in that pr evious year , the deduction under this sub-section
in r espect of such asset shall be r estr icted to fifty per cent of the
amount calculated at the per centage pr escr ibed for an asset under
clause (i) or clause (ii)
53
[or clause (iia)], as the case may be : ]
54
[Provided also that wher e an asset being commer cial vehicle is
acquir ed by the assessee on or after the 1st day of October , 1998 but
befor e the 1st day of Apr il, 1999 and is put to use befor e the 1st day
of Apr il, 1999 for the pur poses of business or pr ofession, the deduc-
tion in r espect of such asset shall be allowed on such per centage on
the wr itten down value ther eof as may be pr escr ibed.
Explan ation .For the pur poses of this pr oviso,
(a) the expression commercial vehicle means heavy goods vehicle,
heavy passenger motor vehicle, light motor vehicle, medium
goods vehicle and medium passenger motor vehicle but does
not include maxi-cab, motor -cab, tr actor and r oad-r oller ;
(b) the expr essions heavy goods vehicle
55
, heavy passenger motor
vehicle
55
, light motor vehicle
55
, medium goods vehicle
55
,
medium passenger mot or vehicle
55
, maxi-cab
55
, mot or -
cab
55
, tr actor
55
and r oad r oller

shall have the meanings
52. Subst it ut ed by t he Income-t ax (Amendment ) Act , 1998, w.e.f. 1-4-1998. Pr ior t o it s
substitution, second pr oviso, as inser ted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992
and later on amended by the Finance Act, 1995, w.e.f. 1-4-1996, r ead as under :
Provided further that wher e any asset falling within a block of assets is acquir ed by the
assessee dur ing the pr evious year and is put to use for the pur poses of business or
pr ofession for a per iod of less than one hundr ed and eighty days in that pr evious year , the
deduction under this clause in r espect of such asset shall be r estr icted to fifty per cent of
the amount calculated at the per centage pr escr ibed under this clause in the case of block
of assets compr ising such asset :
54. Inser ted by the Income-tax (Second Amendment) Act, 1998, w.e.f. 1-4-1999.
55. Clauses (17), (21), (23), (24) and (44) of section 2 of the Motor Vehicles Act, 1988, define
heavy passenger motor vehicle, light motor vehicle, medium goods vehicle, medium
passenger motor vehicle and tr actor , r espectively, as follows :
(17) heavy passenger mot or vehiclemeans any public ser vice vehicle or pr ivat e
ser vice vehicle or educational institution bus or omnibus the gr oss vehicle weight
of any of which, or a motor car the unladen weight of which, exceeds 12,000
kilogr ams;
** ** **
(Con td. on p. 1.167)
r espectively as assigned to them in section 2 of the Motor Vehicles
Act, 1988 (59 of 1988):]
56
[Provided also that, in r espect of the pr evious year r elevant to the
assessment year commencing on the 1st day of Apr il, 1991, the
deduction in r elation to any block of assets under this clause shall, in
the case of a company, be r estr icted to seventy-five per cent of the
amount calculated at the per centage, on the wr itten down value of
such assets, pr escr ibed under this Act immediately befor e the com-
mencement of the Taxation Laws (Amendment) Act, 1991:]
57
[Provided also that the aggr egate deduction, in r espect of depr e-
ciation of buildings, machiner y, plant or fur nitur e, being tangible
assets or know-how, patents, copyr ights, tr ademar ks, licences, fr an-
chises or any other business or commer cial r ights of similar natur e,
being intangible assets allowable to the pr edecessor and the succes-
sor in the case of succession r efer r ed to in clause (xiii) and clause (xiv)
of section 47 or section 170 or to the amalgamating company and the
amalgamated company in the case of amalgamation, or to the
demerged company and the resulting company in the case of demerger,
(21) light motor vehiclemeans a tr anspor t vehicle or omnibus the gr oss vehicle weight
of either of which or a motor car or tr actor or r oad r oller the unladen weight of any
of which, does not exceed 7,500 kilogr ams;
** ** **
(23) medium goods vehiclemeans any goods car r iage other than a light motor vehicle
or a heavy goods vehicle;
(24) medium passenger motor vehicle means any public ser vice vehicle or pr ivate
ser vice vehicle, or educational institution bus other than a motor cycle, invalid
car r iage, light motor vehicle or heavy passenger motor vehicle;
** ** **
(44) tr actor means a motor vehicle which is not itself constr ucted to car r y any load
(other than equipment used for the pur pose of pr opulsion); but excludes a r oad-
r oller ;
For definitions of maxi-cab and motor -cab, see footnote 85 on p. 1.568 post.
57. Fifth pr oviso substituted by the Finance Act, 1999, w.e.f. 1-4-2000. Pr ior to its substitution,
fifth pr oviso, as inser ted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and later on
amended by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999, r ead as under :
Provided also that the aggr egate deduction, in r espect of depr eciation of buildings,
machiner y, plant or fur nitur e, being tangible asset or know-how, patents, copyr ights,
tr ade mar ks, licences, fr anchises or any other business or commer cial r ights of similar
natur e, being intangible assets allowable to the pr edecessor and the successor in the case
of succession, r efer r ed to in clause (xiii) and clause (xiv) of section 47 or section 170 or the
amalgamating company and the amalgamated company in the case of amalgamation, as
the case may be, shall not exceed in any pr evious year the deduction calculated at the
pr escr ibed r ates as if the succession or the amalgamation had not taken place, and such
deduct ion shall be appor t ioned bet ween t he pr edecessor and t he successor , or t he
amalgamating company and the amalgamated company, as the case may be, in the r atio
of the number of days for which the assets wer e used by them.
as the case may be, shall not exceed in any pr evious year the
deduction calculated at the pr escr ibed r ates as if the succession or the
amalgamation or the demer ger , as the case may be, had not taken
place, and such deduction shall be appor tioned between the pr ede-
cessor and the successor , or the amalgamating company and the
amalgamated company, or the demer ged company and the r esulting
company, as the case may be, in the r atio of the number of days for
which the assets wer e used by them.]
58
[Explan ation 1.Wher e the business or pr ofession of the assessee is
car r ied on in a building not owned by him but in r espect of which the
assessee holds a lease or other r ight of occupancy and any capital
expenditur e is incur r ed by the assessee for the pur poses of the
business or pr ofession on the constr uction of any str uctur e or doing
of any wor k in or in r elation to, and by way of r enovation or extension
of, or impr ovement to, the building, then, the pr ovisions of this clause
shall apply as if the said str uctur e or wor k is a building owned by the
assessee.
Explan ation 2.For the pur poses of this
59
[sub-section] wr itten
down value of the block of assets shall have the same meaning as in
clause *(c) of sub-section (6) of section 43.]
60
[Explan ation 3.For the pur poses of this sub-section, the expr es-
sions assets and block of assets shall mean
(a) tangible assets, being buildings, machiner y, plant or fur nitur e;
(b) intangible assets, being know-how, patents, copyr ights, tr ade
mar ks, licences, fr anchises or any other business or commer cial
r ights of similar natur e.
Explan ation 4.For the pur poses of this sub-section, the expr ession
know-how means any industr ial infor mation or technique likely to
assist in the manufactur e or pr ocessing of goods or in the wor king of
a mine, oil-well or other sour ces of miner al deposits (including
sear ching for discover y or testing of deposits for the winning of
access ther eto).
61
that the pr ovisions of this sub-section shall apply whether or not the
assessee has claimed the deduction in r espect of depr eciation in
computing his total income;]
S. 32 I.T. ACT, 1961 1.168
58. Inser ted by the Taxation Laws (Amendment and Miscellaneous Pr ovisions) Act, 1986,
w.e.f. 1-4-1988.
59. Substituted for clause by the Finance Act, 2002, w.e.f. 1-4-2003.
*Should be r ead as sub-clause.
Should be r ead as clause.
62
[(iia) in the case of any new machiner y or plant (other than ships and
air cr aft), which has been acquir ed and installed after the 31st day of
Mar ch, 2005, by an assessee engaged in the business of manufactur e
or pr oduction of any ar ticle or thing, a fur ther sum equal to twenty per
cent of the actual cost of such machiner y or plant shall be allowed as
deduction under clause (ii) :
62. Substituted by the Finance Act, 2005, w.e.f. 1-4-2006. Clause (iia), was or iginally inser ted
by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981 and omitted by the Taxation Laws
(Amendment and Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1988. Pr ior to its substi-
tution, clause (iia) as inser ted by the Finance (No. 2) Act, 2002, w.e.f. 1-4-2003 and amended
by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005, r ead as under :
(iia) in the case of any new machiner y or plant (other than ships and air cr aft), which has
been acquir ed and installed after the 31st day of Mar ch, 2002, by an assessee
engaged in the business of manufactur e or pr oduction of any ar ticle or thing, a
fur ther sum equal to fifteen per cent of the actual cost of such machiner y or plant
shall be allowed as deduction under clause (ii) :
Provided that such fur ther deduction of fifteen per cent shall be allowed to
(A) a new indust r ial under t aking dur ing any pr evious year in which such
under taking begins to manufactur e or pr oduce any ar ticle or thing on or
after the 1st day of Apr il, 2002; or
(B) any industr ial under taking existing befor e the 1st day of Apr il, 2002, dur ing
any pr evious year in which it achieves the substantial expansion by way of
incr ease in installed capacity by not less than ten per cent:
Provided further that no deduction shall be allowed in r espect of
(a) any machiner y or plant which, befor e its installation by the assessee, was
used either within or outside India by any other per son; or
(b) any machiner y or plant installed in any office pr emises or any r esidential
accommodation, including accommodation in the natur e of a guest house;
or
(c) any office appliances or r oad tr anspor t vehicles; or
(d) any machiner y or plant, the whole of the actual cost of which is allowed as
a deduction (whether by way of depr eciation or other wise) in computing the
income char geable under the head Pr ofits and gains of business or pr ofes-
sion of any one pr evious year :
Provided also that no deduction shall be allowed under clause (A) or , as the case
may be, clause (B), of the fir st pr oviso unless the assessee fur nishes the details of
machiner y or plant and incr ease in the installed capacity of pr oduction in such
for m, as may be pr escr ibed along with the r etur n of income, and the r epor t of an
accountant, as defined in the Explan ation below sub-section (2) of section 288
cer tifying that the deduction has been cor r ectly claimed in accor dance with the
pr ovisions of this clause.
(1) new industr ial under taking means an under taking which is not for med,
(a) by the splitting up, or the r econstr uction, of a business alr eady in
existence; or
(b) by the tr ansfer to a new business of machiner y or plant pr eviously used
for any pur pose;
(2) installed capacity means the capacity of pr oduction as existing on the 31st
See r ule 5A and For m No. 3AA.
S. 32 I.T. ACT, 1961 1.170
Provided that no deduction shall be allowed in r espect of
(A) any machiner y or plant which, befor e its installation by the
assessee, was used either within or outside India by any other
per son; or
(B) any machiner y or plant installed in any office pr emises or any
r esidential accommodation, including accommodation in the
natur e of a guest-house; or
(C) any office appliances or r oad tr anspor t vehicles; or
(D) any machiner y or plant, the whole of the actual cost of which is
allowed as a deduction (whether by way of depr eciation or
other wise) in computing the income char geable under the head
Pr ofits and gains of business or pr ofession of any one pr evious
year ;]
63
[(iii) in the case of any building, machiner y, plant or fur nitur e in r espect of
which depr eciation is claimed and allowed under clause (i) and which
is sold, discar ded, demolished or destr oyed in the pr evious year (other
than the pr evious year in which it is fir st br ought into use), the amount
by which the moneys payable in r espect of such building, machiner y,
plant or fur nitur e, together with the amount of scr ap value, if any, fall
shor t of the wr itten down value ther eof :
Provided that such deficiency is actually wr itten off in the books of
the assessee.
(1) moneys payable in r espect of any building, machiner y, plant or
fur nitur e includes
(a) any insur ance, salvage or compensation moneys payable in
r espect ther eof;
(b) wher e the building, machiner y, plant or fur nitur e is sold, the
pr ice for which it is sold,
so, however , that wher e the actual cost of a motor car is, in
accor dance with the pr oviso to clause (1) of section 43, taken to
be twenty-five thousand r upees, the moneys payable in r espect of
such motor car shall be taken to be a sum which bear s to the
amount for which the motor car is sold or , as the case may be, the
amount of any insur ance, salvage or compensation moneys
payable in r espect ther eof (including the amount of scr ap value,
if any) the same pr opor tion as the amount of twenty-five thou-
sand r upees bear s to the actual cost of the motor car to the
assessee as it would have been computed befor e applying the said
pr oviso;
(2) sold includes a tr ansfer by way of exchange or a compulsor y
acquisition under any law for the time being in for ce but does not
63. Inser ted by the Finance (No. 2) Act, 1998, w.r .e.f. 1-4-1998. Ear lier , or iginal clause (iii) was
amended by the Finance Act, 1966, w.e.f. 1-4-1966 and the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967 and later on omitted by the Taxation Laws (Amendment and Miscellaneous
Pr ovisions) Act, 1986, w.e.f. 1-4-1988.
include a tr ansfer , in a scheme of amalgamation, of any asset by
the amalgamating company to the amalgamated company wher e
the amalgamated company is
64
[an Indian company or in a
scheme of amalgamation of a banking company, as r efer r ed to in
clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of
1949) with a banking institution as r efer r ed to in sub-section (15)
of section 45 of the said Act, sanctioned and br ought into for ce by
the Centr al Gover nment under sub-section (7) of section 45 of
that Act
65
, of any asset by the banking company to the banking
institution.]]
(iv)
66
[***]
(v)
67
[***]
(vi)
68
[***]
(1A)
69
[***]
70
[(2) Wher e, in the assessment of the assessee, full effect cannot be given to any
allowance under sub-section (1) in any pr evious year , owing to ther e being no
64. Substituted for an Indian company by the Finance Act, 2005, w.e.f. 1-4-2005.
65. For text of section 5(c) of the Banking Regulation Act, 1949, see footnote No. 84 on page
1.239 an te. For text of section 45 of the Banking Regulation Act, 1949, see Appendix.
66. Clause (iv) was omitted by the Taxation Laws (Amendment & Miscellaneous Pr ovisions)
Act, 1986, w.e.f. 1-4-1988. Or iginal clause (iv) was amended by the Finance Act, 1983, w.e.f.
1-4-1984, the Finance Act, 1978, w.e.f. 1-4-1979, the Finance Act, 1976, w.e.f. 1-4-1977 and
67. Clause (v) was omitted by the Taxation Laws (Amendment & Miscellaneous Pr ovisions)
Act, 1986, w.e.f. 1-4-1988. Or iginal clause (v) was inser ted by the Finance (No. 2) Act, 1967,
w.e.f. 1-4-1968 and later amended by the Finance Act, 1983, w.e.f. 1-4-1984.
68. Clause (vi) was omitted by the Taxation Laws (Amendment and Miscellaneous Pr ovisions)
Act, 1986, w.e.f. 1-4-1988. Or iginal clause (vi) was inser ted by the Dir ect Taxes (Amend-
ment) Act, 1974, w.e.f. 1-4-1975 and later amended by the Finance Act, 1976, w.e.f. 1-4-1976.
69. Sub-sect ion (1A) was omit t ed by t he Taxat ion Laws (Amendment & Miscellaneous
Pr ovisions) Act , 1986, w.e.f. 1-4-1988. Or iginal sub-sect ion (1A) was inser t ed by t he
(2), as amended by the Taxation Laws (Amendment and Miscellaneous Pr ovisions) Act,
1986, w.e.f. 1-4-1988, Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and Finance
Act, 1992, w.e.f. 1-4-1993, substituted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and
fur ther amended by the Finance Act, 2000, w.e.f. 1-4-2001, r ead as under :
(2) Wher e in the assessment of the assessee full effect cannot be given to any allowance
under clause (ii) of sub-section (1) in any pr evious year owing to ther e being no pr ofits
or gains char geable for that pr evious year or owing to the pr ofits or gains being less than
the allowance, then, the allowance or the par t of allowance to which effect has not been
given (her einafter r efer r ed to as unabsor bed depr eciation allowance), as the case may
be,
(i) shall be set off against the pr ofits and gains, if any, of any business or pr ofession
car r ied on by him and assessable for that assessment year ;
(ii) if the unabsor bed depr eciation allowance cannot be wholly set off under clause (i),
the amount not so set off shall be set off fr om the income under any other head, if
any, assessable for that assessment year ;
(Con td. on p. 1.172)
pr ofits or gains char geable for that pr evious year
71
, or owing to the pr ofits or
gains char geable being less than the allowance, then, subject to the pr ovisions of
sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or
the par t of the allowance to which effect has not been given, as the case may be,
shall be added to the amount of the allowance for depr eciation for the following
pr evious year and deemed to be par t of that allowance, or if ther e is no such
allowance for that pr evious year , be deemed to be the allowance for that
pr evious year , and so on for the succeeding pr evious year s.]
72
[Investment allowance.
73
74
32A. (1) In r espect of a ship or an air cr aft or machiner y or plant specified in
sub-section (2), which is owned by the assessee and is wholly used for the
pur poses of the business
75
car r ied on by him, ther e shall, in accor dance with and
subject to the pr ovisions of this section, be allowed a deduction, in r espect of the
pr evious year in which the ship or air cr aft was acquir ed or the machiner y or
plant was installed
75
or , if the ship, air cr aft, machiner y or plant is fir st put to use
in the immediately succeeding pr evious year , then, in r espect of that pr evious
year , of a sum by way of investment allowance equal to twenty-five per cent of
the actual cost of the ship, air cr aft, machiner y or plant to the assessee :
S. 32A I.T. ACT, 1961 1.172
(iii) if the unabsor bed depr eciation allowance cannot be wholly set off under clause (i)
and clause (ii), the amount of allowance not so set off shall be car r ied for war d to
the following assessment year and
(a) it shall be set off against the pr ofits and gains, if any, of any business or
pr ofession car r ied on by him and assessable for that assessment year ;
(b) if the unabsor bed depr eciation allowance cannot be wholly so set off, the
amount of unabsor bed depr eciation allowance not so set off shall be car r ied
for war d to the following assessment year not being mor e than eight assess-
ment year s immediately succeeding the assessment year for which the
afor esaid allowance was fir st computed :
Provided that the time limit of eight assessment year s specified in sub-clause (b) shall not
apply in the case of a company for the assessment year beginning with the assessment
year r elevant to the pr evious year in which the said company has become a sick
industr ial company under sub-section (1) of section 17 of the Sick Industr ial Companies
(Special Pr ovisions) Act, 1985 (1 of 1986) and ending with the assessment year r elevant
to the pr evious year in which the entir e net wor th of such company becomes equal to
or exceeds the accumulated losses.
Explan ation . For the pur poses of this clause, net wor th shall have the meaning
assigned to it in clause (ga) of sub-section (1) of section 3

of the Sick Industr ial Companies
(Special Pr ovisions) Act, 1985 (1 of 1986).
71. For the meaning of the expr ession no pr ofits or gains char geable for that pr evious year ,
73. Vide Notification No. SO 233(E), dated 19-3-1990, no investment allowance shall be
allowed in r espect of any new ship or air cr aft acquir ed or any new machiner y or plant
installed after 31-3-1990.
No. 314, dated 17-9-1981 and PIB Pr ess Release, dated 23-10-1989.
75. For the meaning of the ter ms/ expr essions wholly used for the pur poses of the business
and installed, see Taxmanns Dir ect Taxes Manual, Vol. 3.
1.173 CH. IV - COMPUTATION OF BUSINESS INCOME S. 32A
76
[Provided that in r espect of a ship or an air cr aft or machiner y or plant specified
in sub-section (8B), this sub-section shall have effect as if for the wor ds twenty-
five per cent, the wor ds twenty per cent had been substituted :]
Provided
76
[further] that no deduction shall be allowed under this section in
r espect of
(a) any machiner y or plant installed in any office pr emises or any
r esidential accommodation, including any accommodation in the
natur e of a guest house ;
(b) any office appliances or r oad tr anspor t vehicles ;
(c) any ship, machiner y or plant in r espect of which the deduction by way
of development r ebate is allowable under section 33 ; and
(d) any machiner y or plant, the whole of the actual cost of which is
allowed as a deduction (whether by way of depr eciation or other wise)
in computing the income char geable under the head Pr ofits and
gains of business or pr ofession of any one pr evious year .
76
[Explan ation .For the pur poses of this sub-section, actual cost means the
actual cost of the ship, air cr aft, machiner y or plant to the assessee as r educed by
that par t of such cost which has been met out of the amount r eleased to the
assessee under sub-section (6) of section 32AB.]
(2) The ship or air cr aft or machiner y or plant r efer r ed to in sub-section (1) shall
be the following, namely :
(a) a new ship or new air cr aft acquir ed after the 31st day of Mar ch, 1976,
by an assessee engaged in the business of oper ation of ships or
air cr aft;
(b) any new machiner y or plant installed after the 31st day of Mar ch,
1976,
(i) for the pur poses of business of gener ation or distr ibution of
electr icity or any other for m of power ; or
77
[(ii) in a small-scale industr ial under taking
78
for the pur poses of
business of manufactur e
78
or pr oduction
78
of any ar ticle or
thing
78
; or
(iii) in any other industr ial under taking
78
for the pur poses of business
of constr uction, manufactur e
78
or pr oduction
78
of any ar ticle or
thing, not being an ar ticle or thing
78
specified in the list in the
Eleventh Schedule :]
79
[Provided that nothing contained in clauses (a) and (b) shall apply in
r elation to,
(i) a new ship or new air cr aft acquir ed, or
(ii) any new machiner y or plant installed,
78. For t he meaning of t he t er ms/ expr essions indust r ial under t aking, manufact ur e,
pr oduction and ar ticle or thing, see Taxmanns Dir ect Taxes Manual, Vol. 3.
after the 31st day of Mar ch, 1987 but befor e the 1st day of Apr il, 1988,
unless such ship or air cr aft is acquir ed or such machiner y or plant is
installed in the cir cumstances specified in clause (a) of sub-section
(8B) and the assessee fur nishes evidence to the satisfaction of the
Assessing Officer as specified in that clause ;]
80
[(c) any new machiner y or plant installed after the 31st day of Mar ch,
1983, but befor e the
81
[1st day of Apr il, 1987], for the pur poses of
business of r epair s to ocean-going vessels or other power ed cr aft if
the business is car r ied on by an Indian company and the business so
car r ied on is for the time being appr oved
82
clause by the Centr al Gover nment.]
Explan ation .For the pur poses of this sub-section and
83
[sub-sections (2B)
84
[, (2C)] and (4)],
85
[(1)(a) new ship or new air cr aft includes a ship or air cr aft which befor e
the date of acquisition by the assessee was used by any other per son,
if it was not at any time pr evious to the date of such acquisition owned
by any per son r esident in India ;
(b) new machiner y or plant includes machiner y or plant which befor e
its installation by the assessee was used outside India by any other
per son, if the following conditions ar e fulfilled, namely :
(i) such machiner y or plant was not, at any time pr evious to the date
of such installation by the assessee, used in India ;
(ii) such machiner y or plant is impor ted into India fr om any countr y
outside India ; and
(iii) no deduction on account of depr eciation in r espect of such
machiner y or plant has been allowed or is allowable under the
pr ovisions of the Indian Income-tax Act, 1922 (11 of 1922), or this
Act in computing the total income of any per son for any per iod
pr ior to the date of the installation of the machiner y or plant by
the assessee,]
(2) an industr ial under taking shall be deemed to be a small-scale indus-
tr ial under taking, if the aggr egate value of the machiner y and plant
(other than tools, jigs, dies and moulds) installed, as on the last day of
the pr evious year , for the pur poses of the business of the under taking
86
[does not exceed,
S. 32A I.T. ACT, 1961 1.174
81. Substituted for 1st day of Apr il, 1988 by the Finance Act, 1986, w.e.f. 1-4-1987.
82. For appr oved company, see Taxmanns Dir ect Taxes Cir cular s.
83. Substituted for sub-section (4) by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
w.e.f. 1-4-1988.
86. Substituted for does not exceed ten lakh r upees by the Finance Act, 1981, w.e.f. 1-4-1981.
87
[(i) in a case wher e the pr evious year ends befor e the 1st day of
August, 1980, ten lakh r upees ;
(ii) in a case wher e the pr evious year ends after the 31st day of July,
1980, but befor e the 18th day of Mar ch, 1985, twenty lakh r upees;
and
(iii) in a case wher e the pr evious year ends after the 17th day of
Mar ch, 1985, thir ty-five lakh r upees,]]
and for this pur pose the value of any machiner y or plant shall be,
(a) in the case of any machiner y or plant owned by the assessee, the
actual cost ther eof to the assessee ; and
(b) in the case of any machiner y or plant hir ed by the assessee, the
actual cost ther eof as in the case of the owner of such machiner y
or plant.
88
[(2A) The deduction under sub-section (1) shall not be denied in r espect of any
machiner y or plant installed and used mainly for the pur poses of business of
constr uction, manufactur e or pr oduction of any ar ticle or thing, not being an
ar ticle or thing specified in the list in the Eleventh Schedule, by r eason only that
such machiner y or plant is also used for the pur poses of business of constr uction,
manufactur e or pr oduction of any ar ticle or thing specified in the said list.]
88
[(2B) Wher e any new machiner y or plant is installed after the 30th day of June,
1977, but befor e the 1st day of Apr il,
89
[1987], for the pur poses of business of
manufactur e or pr oduction of any ar ticle or thing and such ar ticle or thing
(a) is manufactur ed or pr oduced by using any technology (including any
pr ocess) or other know-how developed in, or
(b) is an ar ticle or thing invented in,
a labor ator y owned or financed by the Gover nment, or a labor ator y
owned by a public sector company or a Univer sity or by an institution
r ecognised in this behalf by the pr escr ibed author ity,
90
the pr ovisions of sub-section (1) shall have effect in r elation to such machiner y
or plant as if for the wor ds twenty-five per cent, the wor ds thir ty-five per cent
had been substituted, if the following conditions ar e fulfilled, namely :
(i) the r ight to use such technology (including any pr ocess) or other
know-how or to manufactur e or pr oduce such ar ticle or thing has
been acquir ed fr om the owner of such labor ator y or any per son
der iving title fr om such owner ;
(ii) the assessee fur nishes, along with his r etur n of income for the
assessment year for which the deduction is claimed, a cer tificate fr om
the pr escr ibed author ity
90
to the effect that such ar ticle or thing is
90. The pr escr ibed aut hor it y under r ule 5AA is Secr et ar y, Depar t ment of Scient ific &
Industr ial Resear ch, Gover nment of India.
S. 32A I.T. ACT, 1961 1.176
manufactur ed or pr oduced by using such technology (including any
pr ocess) or other know-how developed in such labor ator y or is an
ar ticle or thing invented in such labor ator y ; and
(iii) the machiner y or plant is not used for the pur pose of business of
manufactur e or pr oduction of any ar ticle or thing specified in the list
in the Eleventh Schedule.
Explan ation .For the pur poses of this sub-section,
(a) labor ator y financed by the Gover nment means a labor ator y owned
by any body [including a society r egister ed under the Societies
Registr ation Act, 1860 (21 of 1860)] and financed wholly or mainly by
the Gover nment;
(b)
91
[***]
(c) Univer sity means a Univer sity established or incor por ated by or
under a Centr al, State or Pr ovincial Act and includes an institution
declar ed under section 3 of the Univer sity Gr ants Commission Act,
1956 (3 of 1956) to be a Univer sity for the pur poses of that Act.]
92
[(2C) Wher e any new machiner y or plant, being machiner y or plant which
would assist in contr ol of pollution or pr otection of envir onment and which has
been notified
93
in this behalf by the Centr al Gover nment in the Official Gazette,
is installed after the 31st day of May, 1983
94
[but befor e the 1st day of Apr il,
1987], in any industr ial under taking r efer r ed to in sub-clause (i) or sub-clause
(ii) or sub-clause (iii) of clause (b) of sub-section (2), the pr ovisions of sub-
section (1) shall have effect in r elation to such machiner y or plant as if for the
wor ds t went y-five per cent , t he wor ds t hir t y-five per cent had been
substituted.]
(3) Wher e the total income of the assessee assessable for the assessment year
r elevant to the pr evious year in which the ship or air cr aft was acquir ed or the
machiner y or plant was installed, or , as the case may be, the immediately
succeeding pr evious year (the total income for this pur pose being computed
after deduction of the allowances under section 33 and section 33A, but without
making any deduction under sub-section (1) of this section or any deduction
under Chapter VI-A) is n il or is less than the full amount of the investment
allowance,
(i) the sum to be allowed by way of investment allowance for that
assessment year under sub-section (1) shall be only such amount as
is sufficient to r educe the said total income to n il ; and
(ii) the amount of the investment allowance, to the extent to which it has
not been allowed as afor esaid, shall be car r ied for war d to the
following assessment year , and the investment allowance to be
allowed for the following assessment year shall be such amount as is
93. See Notification No. SO 555(E), dated 1-8-1984. For details, see Taxmanns Dir ect Taxes
Cir cular s.
sufficient to r educe the total income of the assessee assessable for
that assessment year , computed in the manner afor esaid, to n il, and
the balance of the investment allowance, if any, still outstanding shall
be car r ied for war d to the following assessment year and so on, so,
however , that no por tion of the investment allowance shall be car r ied
for war d for mor e than eight assessment year s immediately succeed-
ing the assessment year r elevant to the pr evious year in which the ship
or air cr aft was acquir ed or the machiner y or plant was installed or ,
as the case may be, the immediately succeeding pr evious year .
Explan ation .Wher e for any assessment year , investment allowance is to be
allowed in accor dance with the pr ovisions of this sub-section in r espect of any
ship or air cr aft acquir ed or any machiner y or plant installed in mor e than one
pr evious year , and the total income of the assessee assessable for that assessment
year (the total income for this pur pose being computed after deduction of the
allowances under section 33 and section 33A, but without making any deduction
under sub-section (1) of this section or any deduction under Chapter VI-A) is less
than the aggr egate of the amounts due to be allowed in r espect of the assets
afor esaid for that assessment year , the following pr ocedur e shall be followed,
namely :
(a) the allowance under clause (ii) shall be made befor e any allowance
under clause (i) is made; and
(b) wher e an allowance has to be made under clause (ii) in r espect of
amounts car r ied for war d fr om mor e than one assessment year , the
amount car r ied for war d fr om an ear lier assessment year shall be
allowed befor e any amount car r ied for war d fr om a later assessment
year .
(4) The deduction under sub-section (1) shall be allowed only if the following
conditions ar e fulfilled, namely :
(i) the par ticular s pr escr ibed in this behalf have been fur nished by the
assessee in r espect of the ship or air cr aft or machiner y or plant;
(ii) an amount equal to seventy-five per cent of the investment allowance
to be actually allowed is debited to the pr ofit and loss account of
95
[any
pr evious year in r espect of which the deduction is to be allowed under
sub-section (3) or any ear lier pr evious year (being a pr evious year not
ear lier than the year in which the ship or air cr aft was acquir ed or the
machiner y or plant was installed or the ship, air cr aft, machiner y or
plant was fir st put to use)] and cr edited to a r eser ve account (to be
called the Investment Allowance Reser ve Account) to be utilised
(a) for the pur poses of acquir ing, befor e the expir y of a per iod of ten
year s next following the pr evious year in which the ship or
air cr aft was acquir ed or the machiner y or plant was installed, a
new ship or a new air cr aft or new machiner y or plant [other than
machiner y or plant of the natur e r efer r ed to in clauses (a), (b) and
95. Substituted for the pr evious year in r espect of which the deduction is to be allowed by
the Finance Act, 1990, w.r .e.f. 1-4-1976.
(d) of the
96
[second] pr oviso to sub-section (1)] for the pur poses of
the business of the under taking; and
(b) until the acquisition of a new ship or a new air cr aft or new
machiner y or plant as afor esaid, for the pur poses of the business
of the under taking other than for distr ibution by way of dividends
or pr ofits or for r emittance outside India as pr ofits or for the
cr eation of any asset outside India:
Provided that this clause shall have effect in r espect of a ship as if for
the wor d seventy-five, the wor d fifty had been substituted.
Explan ation .Wher e the amount debited to the pr ofit and loss account and
cr edited to the Investment Allowance Reser ve Account under this sub-section is
not less than the amount r equir ed to be so cr edited on the basis of the amount
of deduction in r espect of investment allowance claimed in the r etur n made by
the assessee under section 139, but a higher deduction in r espect of the
investment allowance is admissible on the basis of the total income as pr oposed
to be computed by the
97
[Assessing] Officer under section 143, the
97
[Assessing]
Officer shall, by notice in wr iting in this behalf, allow the assessee an oppor tunity
to cr edit within the time specified in the notice or within such fur ther time as the
97
[Assessing] Officer may allow, a fur ther amount to the Investment Allowance
Reser ve Account out of the pr ofits and gains of the pr evious year in which such
notice is ser ved on the assessee or of the immediately pr eceding pr evious year ,
if the accounts for that year have not been made up; and, if the assessee cr edits
any fur ther amount to such account within the time afor esaid, the amount so
cr edited shall be deemed to have been cr edited to the Investment Allowance
Reser ve Account of the pr evious year in which the deduction is admissible and
such amount shall not be taken into account in deter mining the adequacy of the
r eser ve r equir ed to be cr eated by the assessee in r espect of the pr evious year in
which such fur ther cr edit is made:
Provided that such oppor tunity shall not be allowed by the
97
[Assessing] Officer
in a case wher e the differ ence in the total income as pr oposed to be computed
by him and the total income as r etur ned by the assessee ar ises out of the
application of the pr oviso to sub-section (1) of section 145 or sub-section (2)
of that section or the omission by the assessee to disclose his income fully and
tr uly.
(5) Any allowance made under this section in r espect of any ship, air cr aft,
machiner y or plant shall be deemed to have been wr ongly made for the pur poses
of this Act
(a) if the ship, air cr aft, machiner y or plant is sold or other wise tr ansfer r ed
by the assessee to any per son at any time befor e the expir y of eight
year s fr om the end of the pr evious year in which it was acquir ed or
installed; or
S. 32A I.T. ACT, 1961 1.178
1-4-1988.
(b) if at any time befor e the expir y of ten year s fr om the end of the
pr evious year in which the ship or air cr aft was acquir ed or the
machiner y or plant was installed, the assessee does not utilise
the amount cr edited to the r eser ve account under sub-section (4) for
the pur poses of acquir ing a new ship or a new air cr aft or new
machiner y or plant [other than machiner y or plant of the natur e
r efer r ed to in clauses (a), (b) and (d) of the
98
[second] pr oviso to sub-
section (1)] for the pur poses of the business of the under taking; or
(c) if at any time befor e the expir y of the ten year s afor esaid, the assessee
utilises the amount cr edited to the r eser ve account under sub-section
(4) for distr ibution by way of dividends or pr ofits or for r emittance
outside India as pr ofits or for the cr eation of any assets outside India
or for any other pur pose which is not a pur pose of the business of the
under taking,
and the pr ovisions of sub-section (4A) of section 155 shall apply accor dingly:
Provided that nothing in clause (a) shall apply
(i) wher e the ship, air cr aft, machiner y or plant is sold or other wise
tr ansfer r ed by the assessee to the Gover nment, a local author ity, a
cor por ation established by a Centr al, State or Pr ovincial Act or a
99
Gover nment company as defined in section 617 of the Companies
Act, 1956 (1 of 1956); or
(ii) wher e the sale or tr ansfer of the ship, air cr aft, machiner y or plant is
made in connection with the amalgamation or succession, r efer r ed to
in sub-section (6) or sub-section (7).
(6) Wher e, in a scheme of amalgamation, the amalgamating company sells or
other wise tr ansfer s to the amalgamated company any ship, air cr aft, machiner y
or plant, in r espect of which investment allowance has been allowed to the
amalgamating company under sub-section (1),
(a) the amalgamated company shall continue to fulfil the conditions
mentioned in sub-section (4) in r espect of the r eser ve cr eated by the
amalgamating company and in r espect of the per iod within which
such ship, air cr aft, machiner y or plant shall not be sold or other wise
tr ansfer r ed and in default of any of these conditions, the pr ovisions
of sub-section (4A) of section 155 shall apply to the amalgamated
company as they would have applied to the amalgamating company
had it committed the default; and
(b) the balance of investment allowance, if any, still outstanding to the
amalgamating company in r espect of such ship, air cr aft, machiner y
or plant, shall be allowed to the amalgamated company in accor dance
with the pr ovisions of sub-section (3), so, however , that the total
per iod for which the balance of investment allowance shall be car r ied
for war d in the assessments of the amalgamating company and the
amalgamated company shall not exceed the per iod of eight year s
99. For definition of Gover nment company, see footnote 63 on p. 1.22 an te.
S. 32A I.T. ACT, 1961 1.180
specified in sub-section (3) and the amalgamated company shall be
tr eated as the assessee in r espect of such ship, air cr aft, machiner y or
plant for the pur poses of this section.
(7) Wher e a fir m is succeeded to by a company in the business car r ied on by it
as a r esult of which the fir m sells or other wise tr ansfer s to the company any ship,
air cr aft, machiner y or plant, the pr ovisions of clauses (a) and (b) of sub-section
(6) shall, so far as may be, apply to the fir m and the company.
Explan ation .The pr ovisions of this sub-section shall apply only wher e
(i) all the pr oper ty of the fir m r elating to the business immediately
befor e the succession becomes the pr oper ty of the company;
(ii) all the liabilities of the fir m r elating to the business immediately
befor e the succession become the liabilities of the company; and
(iii) all the shar eholder s of the company wer e par tner s of the fir m
immediately befor e the succession.
(8) The Centr al Gover nment, if it consider s necessar y or expedient so to do, may,
by notification in the Official Gazette, dir ect that the deduction allowable under
this section shall not be allowed in r espect of any ship or air cr aft acquir ed or any
machiner y or plant installed after such date
1
[***] as may be specified ther ein.
2
[(8A) The Centr al Gover nment, if it consider s necessar y or expedient so to do,
may, by notification in the Official Gazette, omit any ar ticle or thing fr om the list
of ar ticles or things specified in the Eleventh Schedule.]
3
[(8B) Notwithstanding anything contained in sub-section (8) or the notification
of the Gover nment of India in the Ministr y of Finance (Depar tment of Revenue)
No. GSR 870(E), dated the 12th June, 1986, issued ther eunder , the pr ovisions of
this section shall apply in r espect of,
(a) (i) a new ship or new air cr aft acquir ed after the 31st day of Mar ch,
1987 but befor e the 1st day of Apr il, 1988, if the assessee fur nishes
evidence to the satisfaction of the Assessing Officer that he had,
befor e the 12th day of June, 1986, enter ed into a contr act for the
pur chase of such ship or air cr aft with the builder or manu-
factur er or owner ther eof, as the case may be;
(ii) any new machiner y or plant installed after the 31st day of Mar ch,
1987 but befor e the 1st day of Apr il, 1988, if the assessee fur nishes
evidence to the satisfaction of the Assessing Officer that befor e
the 12th day of June, 1986, he had pur chased such machiner y or
plant or had enter ed into a contr act for the pur chase of such
machiner y or plant with the manufactur er or owner of, or a
dealer in, such machiner y or plant, or had, wher e such machiner y
or plant has been manufactur ed in an under taking owned by the
assessee, taken steps for the manufactur e of such machiner y or
plant:
1. not being ear lier than thr ee year s fr om the date of such notification, omitted by the
Finance Act, 1986, w.e.f. 1-4-1986.
3. Substituted for sub-section (8B) by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989. Ear lier sub-section (8B) was inser ted by the Finance Act, 1986, w.e.f. 1-4-1987.
Provided that nothing contained in sub-section (1) shall entitle the
assessee to claim deduction in r espect of a ship or air cr aft or
machiner y or plant r efer r ed to in this clause in any pr evious year
except the pr evious year r elevant to the assessment year com-
mencing on the 1st day of Apr il, 1989;
(b) a new ship or new air cr aft acquir ed or any new machiner y or plant
installed after the 31st day of Mar ch, 1988, but befor e such date as the
Centr al Gover nment, if it consider s necessar y or expedient so to do,
may, by notification in the Official Gazette
4
, specify in this behalf.
(8C) Subject to the pr ovisions of clause (ii) of sub-section (3), wher e a deduction
has been allowed to an assessee under sub-section (1) in any assessment year , no
deduction shall be allowed to the assessee under section 32AB in the said
assessment year (her einafter r efer r ed to as the initial assessment year ) and a
block of fur ther per iod of four year s beginning with the assessment year
immediately succeeding the initial assessment year .]
(9) [Om itted by th e Fin an ce Act, 1990, w.r.e.f. 1-4-1976.]
5
[Investment deposit account.
32AB. (1) Subject to the other pr ovisions of this section, wher e an assessee,
whose total income includes income char geable to tax under the head
Pr ofits and gains of business or pr ofession, has, out of such income,
(a) deposited any amount in an account (her eafter in this section r e-
fer r ed to as deposit account) maintained by him with the Develop-
ment Bank befor e the expir y of six months fr om the end of the
pr evious year or befor e fur nishing the r etur n of his income, which-
ever is ear lier ; or
(b) utilised any amount dur ing the pr evious year for the pur chase of any
new ship, new air cr aft, new machiner y or plant, without depositing
any amount in the deposit account under clause (a),
in accor dance with, and for the pur poses specified in, a scheme
6
(her eafter in this
section r efer r ed to as the scheme) to be fr amed by the Centr al Gover nment, or
if the assessee is car r ying on the business of gr owing and manufactur ing tea in
India, to be appr oved in this behalf by the Tea Boar d, the assessee shall be allowed
a deduction
7
[(such deduction being allowed befor e the loss, if any, br ought
for war d fr om ear lier year s is set off under section 72)] of
(i) a sum equal to the amount, or the aggr egate of the amounts, so
deposited and any amount so utilised; or
(ii) a sum equal to twenty per cent of the pr ofits of
8
[***] business or
pr ofession as computed in the accounts of the assessee audited in
accor dance with sub-section (5),
whichever is less :
1.181 CH. IV - COMPUTATION OF BUSINESS INCOME S. 32AB
4. See footnote 73 on page 1.172 an te.
6. Investment Deposit Account Scheme, 1986 is the scheme fr amed by the Gover nment
under sub-section (1). For details of the Scheme, see Taxmanns Dir ect Taxes Cir cular s.
8. Wor d eligible omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
S. 32AB I.T. ACT, 1961 1.182
9
[Provided that wher e such assessee is a fir m, or any association of per sons or any
body of individuals, the deduction under this section shall not be allowed in the
computation of the income of any par tner , or as the case may be, any member
of such fir m, association of per sons or body of individuals:]
10
[Provided further that no such deduction shall be allowed in r elation to the
assessment year commencing on the 1st day of Apr il, 1991, or any subsequent
assessment year .]
(2) For the pur poses of this section,
(i)
11
[***]
12
[(ii) new ship or new air cr aft includes a ship or air cr aft which befor e
the date of acquisition by the assessee was used by any other per son,
if it was not at any time pr evious to the date of such acquisition owned
by any per son r esident in India;
(iii) new machiner y or plant includes machiner y or plant which befor e
its installation by the assessee was used outside India by any other
per son, if the following conditions ar e fulfilled, namely :
(a) such machiner y or plant was not, at any time pr evious to the date
of such installation by the assessee, used in India;
(b) such machiner y or plant is impor ted into India fr om any countr y
outside India; and
(c) no deduction on account of depr eciation in r espect of such
machiner y or plant has been allowed or is allowable under this
Act in computing the total income of any per son for any per iod
pr ior to the date of the installation of the machiner y or plant by
the assessee;
(iv) Tea Boar d means the Tea Boar d established under section 4 of the
Tea Act, 1953 (29 of 1953).]
(3)
13
[The pr ofits of business or pr ofession of an assessee for the pur poses of sub-
section (1) shall] be an amount ar r ived at after deducting an amount equal to the
depr eciation computed in accor dance with the pr ovisions of sub-section (1) of
section 32 fr om the amounts of pr ofits computed in accor dance with the
r equir ements of
14
Par ts II and III of the
15
[Schedule VI] to the Companies Act,
1956 (1 of 1956),
16
[as incr eased by the aggr egate of
(i) the amount of depr eciation;
13. Substituted for the por tion beginning with the wor ds The pr ofits of eligible business or
pr ofession and ending with the wor ds eligible business or pr ofession ar e maintained, by
14. For text of Par ts II and III of Schedule VI to the Companies Act, 1956, see Appendix.
15. Substituted for Sixth Schedule by the Finance Act, 1989, w.e.f. 1-4-1991.
16. Substituted for as incr eased by an amount equal to the depr eciation, if any, debited in the
audited pr ofit and loss account; and by the Finance Act, 1987, w.e.f. 1-4-1987.
(ii) the amount of income-tax paid or payable, and pr ovision ther efor ;
(iii) the amount of sur tax paid or payable under the Companies (Pr ofits)
Sur tax Act, 1964 (7 of 1964);
(iv) the amounts car r ied to any r eser ves, by whatever name called;
(v) the amount or amounts set aside to pr ovisions made for meeting
liabilities, other than ascer tained liabilities;
(vi) the amount by way of pr ovision for losses of subsidiar y companies;
and
(vii) the amount or amounts of dividends paid or pr oposed,
if any debited to the pr ofit and loss account; and as r educed by any amount or
amounts withdr awn fr om r eser ves or pr ovisions, if such amounts ar e cr edited
to the pr ofit and loss account
17
[***].]
18
[***]
(4) No deduction under sub-section (1) shall be allowed in r espect of any amount
utilised for the pur chase of
(a) any machiner y or plant to be installed in any office pr emises or
natur e of a guest-house;
(b) any office appliances (not being computer s);
(c) any r oad tr anspor t vehicles;
(d) any machiner y or plant, the whole of the actual cost of which is
gains of business or pr ofession of any one pr evious year ;
19
[(e) any new machiner y or plant to be installed in an industr ial under tak-
ing, other than a small-scale industr ial under taking, as defined in
section 80HHA, for the pur poses of business of constr uction, manu-
factur e or pr oduction of any ar ticle or thing specified in the list in the
Eleventh Schedule.]
(5) The deduction under sub-section (1) shall not be admissible unless the
accounts of the business or pr ofession of the assessee for the pr evious year
r elevant to the assessment year for which the deduction is claimed have been
audited by an accountant as defined in the Explan ation below sub-section (2) of
section 288 and the assessee fur nishes, along with his r etur n of income, the
r epor t of such audit in the pr escr ibed for m
20
duly signed and ver ified by such
accountant:
Provided that in a case wher e the assessee is r equir ed by or under any other law
to get his accounts audited, it shall be sufficient compliance with the pr ovisions
of this sub-section if such assessee gets the accounts of such business or
pr ofession audited under such law and fur nishes the r epor t of the audit as
17. and omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
18. Omitted, ibid.
20. See r ule 5AB and For m No. 3AAA for audit r epor t r equir ed under section 32AB(5).
r equir ed under such other law and a fur ther r epor t in the for m pr escr ibed under
this sub-section.
21
[(5A) Any amount standing to the cr edit of the assessee in the deposit account
shall not be allowed to be withdr awn befor e the expir y of a per iod of five year s
fr om the date of deposit except for the pur poses specified in the scheme
22
[or ] in
the cir cumstances specified below :
(a) closur e of business;
(b) death of an assessee;
(c) par tition of a Hindu undivided family;
(d) dissolution of a fir m;
(e) liquidation of a company.]
23
[Explan ation .For the r emoval of doubts, it is her eby declar ed that nothing
contained in this sub-section shall affect the oper ation of the pr ovisions of sub-
section (5AA) or sub-section (6) in r elation to any withdr awals made fr om the
deposit account either befor e or after the expir y of a per iod of five year s fr om
the date of deposit.]
23
[(5AA) Wher e any amount, standing to the cr edit of the assessee in the deposit
account , is wit hdr awn dur ing any pr evious year by t he assessee in t he
cir cumstance specified in clause (a) or clause (d) of sub-section (5A), the whole
of such amount shall be deemed to be the pr ofits and gains of business or
pr ofession of that pr evious year and shall accor dingly be char geable to income-
tax as the income of that pr evious year , as if the business had not closed or , as
the case may be, the fir m had not been dissolved.]
24
[(5B) Wher e any amount standing to the cr edit of the assessee in the deposit
account is utilised by the assessee for the pur poses of any expenditur e in
connection with the
25
[***] business or pr ofession in accor dance with the scheme,
such expenditur e shall not be allowed in computing the income char geable
under the head Pr ofits and gains of business or pr ofession.]
(6) Wher e any amount, standing to the cr edit of the assessee in the deposit
account, r eleased dur ing any pr evious year by the Development Bank for being
utilised by the assessee for the pur poses specified in the scheme or at the closur e
of the account
26
[[in cir cumstances other than the cir cumstances specified in
clauses (b), (c) and (e) of sub-section (5A)]], is not utilised in accor dance with
27
[, and within the time specified in,] the scheme, either wholly or in par t,
28
[***]
the whole of such amount or , as the case may be, par t ther eof which is not so
utilised shall be deemed to be the pr ofits and gains of business or pr ofession of
S. 32AB I.T. ACT, 1961 1.184
22. Substituted for and by the Finance Act, 1989, w.r .e.f. 1-4-1987.
25. eligible omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
28. within that pr evious year omitted, ibid.
that pr evious year and shall accor dingly be char geable to income-tax as the
income of that pr evious year .
(7) Wher e any asset acquir ed in accor dance with the scheme is sold or other wise
tr ansfer r ed in any pr evious year by the assessee to any per son at any time befor e
the expir y of eight year s fr om the end of the pr evious year in which it was
acquir ed, such par t of the cost of such asset as is r elatable to the deductions
allowed under sub-section (1) shall be deemed to be the pr ofits and gains of
business or pr ofession of the pr evious year in which the asset is sold or other wise
tr ansfer r ed and shall accor dingly be char geable to income-tax as the income of
that pr evious year :
Provided that nothing in this sub-section shall apply
(i) wher e the asset is sold or other wise tr ansfer r ed by the assessee to
Gover nment, a local author ity, a cor por ation established by or under
a Centr al, State or Pr ovincial Act or a
29
Gover nment company as
defined in section 617 of the Companies Act, 1956 (1 of 1956); or
(ii) wher e the sale or tr ansfer of the asset is made in connection with the
succession of a fir m by a company in the business or pr ofession
car r ied on by the fir m as a r esult of which the fir m sells or other wise
tr ansfer s to the company any asset and the scheme continues to apply
to the company in the manner applicable to the fir m.
Explan ation .The pr ovisions of clause (ii) of the pr oviso shall apply only wher e
(i) all the pr oper ties of the fir m r elating to the business or pr ofession
immediately befor e the succession become the pr oper ties of the
company;
(ii) all the liabilities of the fir m r elating to the business or pr ofession
immediately befor e the succession become the liabilities of the
company; and
(8) The Centr al Gover nment may, if it consider s it necessar y or expedient so to
do, by notification in the Official Gazette, omit any ar ticle or thing fr om the list
of ar ticles or things specified in the Eleventh Schedule.
(9) The Centr al Gover nment may, after making such inquir y as it may think fit,
dir ect, by notification in the Official Gazette, that the pr ovisions of this section
shall not apply to any class of assessees, with effect fr om such date as it may
specify in the notification.
30
[(10) Wher e a deduction has been allowed to an assessee under this section in
any assessment year , no deduction shall be allowed to the assessee under sub-
section (1) of section 32A in the said assessment year (her einafter r efer r ed to as
the initial assessment year ) and a block of fur ther per iod of four year s beginning
with the assessment year immediately succeeding the initial assessment year ].
Explan ation .In this section,
(a) computer s does not include calculating machines and calculating
devices;
(b) Development Bank means
(i) in the case of an assessee car r ying on business of gr owing and
manufactur ing tea in India, the National Bank for Agr icultur e
and Rur al Development established under section 3 of the
National Bank for Agr icultur e and Rur al Development Act, 1981
(61 of 1981);
(ii) in the case of other assessees, the Industr ial Development Bank
of India established under the Industr ial Development Bank of
India Act, 1964 (18 of 1964) and includes such bank or institution
as may be specified in the scheme in this behalf.]
Development rebate.
33.
31
[(1)(a) In r espect of a new ship
32
or new machiner y or plant (other than
office appliances or r oad tr anspor t vehicles) which is owned by the assessee
and is wholly used for the pur poses of the business car r ied on by him, ther e shall,
in accor dance with and subject to the pr ovisions of this section and of section 34,
be allowed a deduction, in r espect of the pr evious year in which the ship was
acquir ed or the machiner y or plant was installed or , if the ship, machiner y or
plant is fir st put to use in the immediately succeeding pr evious year , then, in
r espect of that pr evious year , a sum by way of development r ebate as specified
in clause (b).
(b) The sum r efer r ed to in clause (a) shall be
(A) in the case of a ship, for ty per cent of the actual cost ther eof to the
assessee;
(B) in the case of machiner y or plant,
(i) wher e the machiner y or plant is installed for the pur poses of
business of constr uction, manufactur e or pr oduction of any one
or mor e of the ar ticles or things specified in the list in the Fifth
Schedule,
(a) thir ty-five per cent of the actual cost of the machiner y or
plant to the assessee, wher e it is installed befor e the 1st day
of Apr il, 1970, and
(b) twenty-five per cent of such cost, wher e it is installed after the
31st day of Mar ch, 1970;
(ii) wher e the machiner y or plant is installed after the 31st day of
Mar ch, 1967, by an assessee being an Indian company in pr emises
used by it as a hotel and such hotel is for the time being appr oved
in this behalf by the Centr al Gover nment,
S. 33 I.T. ACT, 1961 1.186
31. Substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Sub-section (1) was fir st
amended by the Income-tax (Amendment) Act, 1963, w.e.f. 1-4-1963 and then by the
Finance Act, 1965, and by the Finance (No. 2) Act, 1965, w.e.f. 1-4-1965.
32. For the meaning of the ter m ship, see Taxmanns Dir ect Taxes Manual, Vol. 3.
(iii) wher e the machiner y or plant is installed after the 31st day of
Mar ch, 1967, being an asset r epr esenting expenditur e of a capital
natur e on scientific r esear ch r elated to the business car r ied on by
the assessee,
(iv) in any other case,
(a) twenty per cent of the actual cost of the machiner y or plant
to the assessee, wher e it is installed befor e the 1st day of Apr il,
1970, and
(b) fifteen per cent of such cost, wher e it is installed after the 31st
day of Mar ch, 1970.]
33
[
34
(1A)(a) An assessee who, after the 31st day of Mar ch, 1964, acquir es any ship
which befor e the date of acquisition by him was used by any other per son shall,
subject to the pr ovisions of section 34, also be allowed as a deduction a sum by
way of development r ebate at such r ate or r ates as may be pr escr ibed, pr ovided
that the following conditions ar e fulfilled, namely :
(i) such ship was not pr evious to the date of such acquisition owned at
any time by any per son r esident in India;
(ii) such ship is wholly used for the pur poses of the business car r ied on
by the assessee; and
(iii) such other conditions as may be pr escr ibed.
(b) An assessee who installs any machiner y or plant (other than office appliances
or r oad tr anspor t vehicles) which befor e such installation by the assessee was
used outside India by any other per son shall, subject to the pr ovisions of section
34, also be allowed as a deduction a sum by way of development r ebate at such
r ate or r ates as may be pr escr ibed, pr ovided that the following conditions ar e
fulfilled, namely :
(i) such machiner y or plant was not used in India at any time pr evious
to the date of such installation by the assessee;
(ii) it is impor ted in India by the assessee fr om any countr y outside India;
(iii) no deduction on account of depr eciation or development r ebate in
r espect of such machiner y or plant has been allowed or is allowable
34. See r ule 5B.
under the pr ovisions of the Indian Income-tax Act, 1922 (11 of 1922),
or this Act in computing the total income of any per son for any per iod
pr ior to the date of the installation of the machiner y or plant by the
assessee;
(iv) such machiner y or plant is wholly used for the pur poses of the
business car r ied on by the assessee; and
(v) such other conditions as may be pr escr ibed.
(c) The development r ebate under this sub-section shall be allowed as a deduc-
tion in r espect of the pr evious year in which the ship was acquir ed or the
machiner y or plant was installed or , if the ship, machiner y or plant is fir st put to
use in the immediately succeeding pr evious year , then, in r espect of that pr evious
year .]
(2) In the case of a ship acquir ed or machiner y or plant installed after the 31st day
of December , 1957, wher e the total income of the assessee assessable for the
assessment year r elevant to the pr evious year in which the ship was acquir ed or
the machiner y or plant installed or the immediately succeeding pr evious year , as
the case may be (the total income for this pur pose being computed without
making any allowance under sub-section (1)
35
[or sub-section (1A)]
36
[of this
section or sub-section (1) of section 33A]
37
[or any deduction under Chapter
VI-A
38
[***]]) is n il or is less than the full amount of the development r ebate
calculated at the r ate applicable ther eto under
39
[sub-section (1) or sub-section
(1A), as the case may be],
(i) the sum to be allowed by way of development r ebate for that
assessment year under sub-section (1)
40
[or sub-section (1A)] shall be
only such amount as is sufficient to r educe the said total income to
n il; and
(ii) the amount of the development r ebate, to the extent to which it has
not been allowed as afor esaid, shall be car r ied for war d to the
following assessment year , and the development r ebate to be allowed
for the following assessment year shall be such amount as is sufficient
to r educe the total income of the assessee assessable for that assess-
ment year , computed in the manner afor esaid, to n il, and the balance
of the development r ebate, if any, still outstanding shall be car r ied
for war d to the following assessment year and so on, so however , that
no por tion of the development r ebate shall be car r ied for war d for
mor e than eight assessment year s immediately succeeding the
assessment year r elevant to the pr evious year in which the ship was
acquir ed or the machiner y or plant installed or the immediately
succeeding pr evious year , as the case may be.
S. 33 I.T. ACT, 1961 1.188
38. or section 280-O omitted by the Finance Act, 1988, w.e.f. 1-4-1988.
39. Substituted for that sub-section by the Finance Act, 1964, w.e.f. 1-4-1964.
Explan ation .Wher e for any assessment year development r ebate is to be
allowed in accor dance with the pr ovisions of sub-section (2) in r espect of ships
acquir ed or machiner y or plant installed in mor e than one pr evious year , and the
total income of the assessee assessable for that assessment year (the total income
for this pur pose being computed without making any allowance under sub-
section (1)
41
42
[of this section or sub-section (1) of section
33A]
43
[or any deduction under Chapter VI-A
44
[***]]) is less than the aggr egate of
the amounts due to be allowed in r espect of the assets afor esaid for that
assessment year , the following pr ocedur e shall be followed, namely :
(i) the allowance under clause (ii) of sub-section (2) shall be made befor e
any allowance under clause (i) of that sub-section is made; and
(ii) wher e an allowance has to be made under clause (ii) of sub-section (2)
in r espect of amounts car r ied for war d fr om mor e than one assess-
ment year , the amount car r ied for war d fr om an ear lier assessment
year shall be allowed befor e any amount car r ied for war d fr om a later
assessment year .
45
[(3) Wher e, in a scheme of amalgamation, the amalgamating company sells or
other wise tr ansfer s to the amalgamated company any ship, machiner y or plant
in r espect of which development r ebate has been allowed to the amalgamating
company under sub-section (1) or sub-section (1A),
mentioned in sub-section (3) of section 34 in r espect of the r eser ve
cr eated by the amalgamating company and in r espect of the per iod
within which such ship, machiner y or plant shall not be sold or
other wise tr ansfer r ed and in default of any of these conditions, the
pr ovisions of sub-section (5) of section 155 shall apply to the amal-
gamated company as they would have applied to the amalgamating
company had it committed the default; and
(b) the balance of development r ebate, if any, still outstanding to the
amalgamating company in r espect of such ship, machiner y or plant
shall be allowed to the amalgamated company in accor dance with the
pr ovisions of sub-section (2), so, however , that the total per iod for
which the balance of development r ebate shall be car r ied for war d in
the assessments of the amalgamating company and the amalgamated
company shall not exceed the per iod of eight year s specified in sub-
section (2) and the amalgamated company shall be tr eated as the
assessee in r espect of such ship, machiner y or plant for the pur poses
of this section and section 34.]
45. Substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. Sub-section (3) was fir st
amended by the Finance Act, 1964, w.e.f. 1-4-1964 and then by the Finance Act, 1966, w.e.f.
1-4-1966.
S. 33 I.T. ACT, 1961 1.190
as a r esult of which the fir m sells or other wise tr ansfer s to the company any ship,
machiner y or plant, the pr ovisions of clauses (a) and (b) of sub-section (3) shall,
so far as may be, apply to the fir m and the company.
Explan ation .The pr ovisions of this clause shall apply only wher e
(i) all the pr oper ty of the fir m r elating to the business immediately
befor e the succession becomes the pr oper ty of the company;
(ii) all the liabilities of the fir m r elating to the business immediately
befor e the succession become the liabilities of the company; and
46
[(5) The Centr al Gover nment, if it consider s it necessar y or expedient so to do,
47
in the Official Gazette, dir ect that the deduction allowable
under this section shall not be allowed in r espect of a ship acquir ed or machiner y
or plant installed after such date, not being ear lier than thr ee year s fr om the date
of such notification, as may be specified ther ein.]
48
[(6) Notwithstanding anything contained in the for egoing pr ovisions of this
section, no deduction by way of development r ebate shall be allowed in r espect
of any machiner y or plant installed after the 31st day of Mar ch, 1965, in any office
pr emises or any r esidential accommodation, including any accommodation in
the natur e of a guest-house:]
49
[Provided that the pr ovisions of this sub-section shall not apply in the case of an
assessee being an Indian company, in r espect of any machiner y or plant installed
by it in pr emises used by it as a hotel, wher e the hotel is for the time being
appr oved in this behalf by the Centr al Gover nment.]
47. In ter ms of Notification No. SO 2167, dated 28-5-1971 issued under sub-section (5) of
section 33, the gr ant of development r ebate has been discontinued in r espect of ships
acquir ed or machiner y or plant installed after 31-5-1974. However , section 16 of the
Finance Act, 1974, as amended by section 30 of the Finance Act, 1975, has made an
independent pr ovision for the continuance of development r ebate for a limited per iod in
cer tain cases. As a r esult gr ant of the r ebate was continued, subject to cer tain conditions,
for limited per iod, i.e., fr om 1-6-1974 to 31-5-1977 in r espect of
(a) ship which was acquir ed after 31-5-1974 but befor e 1-1-1977;
(b) any machiner y or plant [other than mentioned in (c) below] which was installed
after 31-5-1974 but befor e 1-6-1975; and
(c) coal-fir ed equipment or any machiner y or plant for conver ting oil-fir ed equipment
into coal-fir ed equipment which was installed after 31-5-1974 but befor e 1-6-1977.
See Taxmanns Dir ect Taxes Cir cular s.
50
[Development allowance.
51
33A. (1) In r espect of planting of tea bushes on any land in India owned by an
assessee who car r ies on business of gr owing and manufactur ing tea in
India, a sum by way of development allowance equivalent to
(i) wher e tea bushes have been planted on any land not planted at any
time with tea bushes or on any land which had been pr eviously
abandoned,
52
[fifty] per cent of the actual cost of planting; and
(ii) wher e tea bushes ar e planted in r eplacement of tea bushes that have
died or have become per manently useless on any land alr eady
planted,
53
[thir ty] per cent of the actual cost of planting,
shall, subject to the pr ovisions of this section, be allowed as a deduction
54
[in the
manner specified her eunder , namely :
(a) the amount of the development allowance shall, in the fir st instance,
be computed with r efer ence to that por tion of the actual cost of
planting which is incur r ed dur ing the pr evious year in which the land
is pr epar ed for planting or r eplanting, as the case may be, and in the
pr evious year next following, and the amount so computed shall be
allowed as a deduction in r espect of such pr evious year next follow-
ing; and
(b) ther eafter , the development allowance shall again be computed with
r efer ence to the actual cost of planting, and if the sum so computed
exceeds the amount allowed as a deduction under clause (a), the
amount of the excess shall be allowed as a deduction in r espect of the
thir d succeeding pr evious year next following the pr evious year in
which the land has been pr epar ed for planting or r eplanting, as the
case may be :]
55
[Provided that no deduction under clause (i) shall be allowed unless the planting
has commenced after the 31st day of Mar ch, 1965, and been completed befor e
the 1st day of Apr il, 1990 :
Provided further that no deduction shall be allowed under clause (ii) unless the
planting has commenced after the 31st day of Mar ch, 1965, and been completed
befor e the 1st day of Apr il, 1970.]
(2) Wher e the total income of the assessee assessable for the assessment year
r elevant to
56
[the pr evious year in r espect of which the deduction is r equir ed to
Income-tax Act.
52. Substituted for for ty by the Finance Act, 1966, w.e.f. 1-4-1966.
53. Substituted for twenty, ibid.
54. Substituted for in r espect of the thir d succeeding pr evious year next following the
pr evious year in which the land is pr epar ed for planting or r eplanting, as the case may be
56. Substituted for the thir d succeeding pr evious year next following the pr evious year in
which the land has been pr epar ed by the Finance Act, 1966, w.e.f. 1-4-1966.
be allowed under sub-section (1)]
57
[(the total income for this pur pose being
computed after deduction of the allowance under sub-section (1) or sub-section
(1A) or clause (ii) of sub-section (2) of section 33, but without making any
deduction under sub-section (1) of this section or any deduction under Chapter
VI-A
58
[***])] is n il or is less than the full amount of the development allowance
calculated at the r ates
59
[and in the manner ] specified in sub-section (1)
(i) the sum to be allowed by way of development allowance for that
assessment year under sub-section (1) shall be only such amount as
is sufficient to r educe the said total income to n il; and
(ii) the amount of the development allowance, to the extent to which it
has not been allowed as afor esaid, shall be car r ied for war d to the
following assessment year , and the development allowance to be
allowed for the following assessment year shall be such amount as is
sufficient to r educe the total income of the assessee assessable for
that assessment year , computed in the manner afor esaid, to n il, and
the balance of the development allowance, if any, still outstanding
shall be car r ied for war d to the following assessment year and so on,
so, however , that no por tion of the development allowance shall be
car r ied for war d for mor e than eight assessment year s immediately
succeeding the assessment year in which the deduction was fir st
allowable.
Explan ation .Wher e for any assessment year development allowance is to be
allowed in accor dance with the pr ovisions of sub-section (2) in r espect of mor e
than one pr evious year , and the total income of the assessee assessable for that
assessment year
60
[(the total income for this pur pose being computed after
deduction of the allowance under sub-section (1) or sub-section (1A) or clause (ii)
of sub-section (2) of section 33, but without making any deduction under sub-
section (1) of this section or any deduction under Chapter VI-A
61
[***])] is less than
the amount of the development allowance due to be made in r espect of that
assessment year , the following pr ocedur e shall be followed, namely :
(i) the allowance under clause (ii) of sub-section (2) of this section shall
be made befor e any allowance under clause (i) of that sub-section is
made; and
(ii) wher e an allowance has to be made under clause (ii) of sub-section (2)
of this section in r espect of amounts car r ied for war d fr om mor e than
one assessment year , the amount car r ied for war d fr om an ear lier
S. 33A I.T. ACT, 1961 1.192
57. Substituted for (the total income for this pur pose being computed after making the
allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of
section 33 but without making any allowance under sub-section (1) of this section) by the
60. Substituted for (the total income for this pur pose being computed after making the
allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of
section 33 but without making any allowance under sub-section (1) of this section) by the
assessment year shall be allowed befor e any amount car r ied for war d
fr om a later assessment year .
(3) The deduction under sub-section (1) shall be allowed only if the following
(i) the par ticular s pr escr ibed
62
in this behalf have been fur nished by the
assessee;
(ii) an amount equal to seventy-five per cent of the development allow-
ance to be actually allowed is debited to the pr ofit and loss account
of the r elevant pr evious year and cr edited to a r eser ve account to be
utilised by the assessee dur ing a per iod of eight year s next following
for the pur poses of the business of the under taking, other than
(a) for distr ibution by way of dividends or pr ofits; or
(b) for r emittance outside India as pr ofits or for the cr eation of any
asset outside India; and
(iii) such other conditions as may be pr escr ibed.
(4) If any such land is sold or other wise tr ansfer r ed by the assessee to any
per son at any time befor e the expir y of eight year s fr om the end of the pr evious
year in which the deduction under sub-section (1) was allowed, any allowance
under this section shall be deemed to have been wr ongly made for the pur poses
of this Act, and the pr ovisions of sub-section (5A) of section 155 shall apply
accor dingly :
Provided that this sub-section shall not apply
(i) wher e the land is sold or other wise tr ansfer r ed by the assessee to the
Gover nment, a local author ity, a cor por ation established by a Centr al,
State or Pr ovincial Act, or a
63
Gover nment company as defined in
section 617 of the Companies Act, 1956 (1 of 1956); or
(ii) wher e the sale or tr ansfer of the land is made in connection with the
amalgamation or succession r efer r ed to in sub-section (5) or sub-
section (6).
64
other wise tr ansfer s to the amalgamated company any land in r espect of which
development allowance has been allowed to the amalgamating company under
sub-section (1),
mentioned in sub-section (3) in r espect of the r eser ve cr eated by the
amalgamating company and in r espect of the per iod within which
such land shall not be sold or other wise tr ansfer r ed and in default of
any of these conditions, the pr ovisions of sub-section (5A) of section
155 shall apply to the amalgamated company as they would have
applied to the amalgamating company had it committed the default;
and
62. See r ule 8A and For m Nos. 4, 5 and 5A.
(b) the balance of development allowance, if any, still outstanding to the
amalgamating company in r espect of such land shall be allowed to the
amalgamated company in accor dance with the pr ovisions of sub-
section (2), so, however , that the total per iod for which the balance of
development allowance shall be car r ied for war d in the assessments
of the amalgamating company and the amalgamated company shall
not exceed the per iod of eight year s specified in sub-section (2) and
the amalgamated company shall be tr eated as the assessee in r espect
of such land for the pur poses of this section.]
as a r esult of which the fir m sells or other wise tr ansfer s to the company any land
on which development allowance has been allowed, the pr ovisions of clauses (a)
and (b) of sub-section (5) shall, so far as may be, apply to the fir m and the
company.
Explan ation .The pr ovisions of this sub-section shall apply if the conditions laid
down in the Explan ation to sub-section (4) of section 33 ar e fulfilled.
(7) For the pur poses of this section, actual cost of planting means the aggr e-
gate of
(i) the cost of pr epar ing the land;
(ii) the cost of seeds, cutting and nur ser ies;
(iii) the cost of planting and r eplanting; and
(iv) the cost of upkeep ther eof for the pr evious year in which the land has
been pr epar ed and the thr ee successive pr evious year s next following
such pr evious year ,
r educed by that por tion of the cost, if any, as has been met dir ectly or indir ectly
by any other per son or author ity:
65
[Provided that wher e such cost exceeds
(i) for ty thousand r upees per hectar e in r espect of land situate in a hilly
ar ea compr ised in the distr ict of Dar jeeling; or
(ii) thir ty-five thousand r upees per hectar e in r espect of land situate in a
hilly ar ea compr ised in an ar ea other than the distr ict of Dar jeeling; or
(iii) thir ty thousand r upees per hectar e in any other ar ea,
then, the excess shall be ignor ed.
Explan ation .For the pur poses of this pr oviso, distr ict of Dar jeeling means the
distr ict of Dar jeeling as on the 28th day of Febr uar y, 1981, being the date of
intr oduction of the Finance Bill, 1981, in the House of the People.]
(8) The Boar d may, having r egar d to the elevation and topogr aphy, by gener al or
special or der , declar e any ar eas to be
66
hilly ar eas for the pur poses of this section
and such or der shall not be questioned befor e any cour t of law or any
other author ity.
S. 33A I.T. ACT, 1961 1.194
66. For notified hilly ar eas, see Taxmanns Master Guide to Income-tax Act.
67
[Explan ation .For the pur poses of this section, an assessee having a leasehold
or other r ight of occupancy in any land shall be deemed to own such land and
wher e the assessee tr ansfer s such r ight, he shall be deemed to have sold or
other wise tr ansfer r ed such land.]
68
[Tea development account
69
[, coffee development account and rubber deve-
lopment account].
33AB. (1) Wher e an assessee car r ying on business of gr owing and manufac-
tur ing tea
69
[or coffee or r ubber ] in India has, befor e the expir y of six
months fr om the end of the pr evious year or befor e
69
[the due date of ] fur nishing
the r etur n of his income,
70
[whichever is ear lier ,
(a) deposited with the National Bank any amount or amounts in an
account (her eafter in this section r efer r ed to as the special account)
maintained by the assessee with that Bank in accor dance with, and
for t h e pu r poses specified in , a sch eme (h er ea ft er in t h is
sectionr efer r ed to as the scheme) appr oved in this behalf by the Tea
Boar d
71
[or the Coffee Boar d or the Rubber Boar d ] ; or
(b)
72
[deposited any amount in an account (her eafter in this section
r efer r ed to as the Deposit Account) opened by the assessee in
accor dance with, and for the pur poses specified in, a scheme fr amed
by the Tea Boar d or the Coffee Boar d or the Rubber Boar d, as the case
may be (her eafter in this section r efer r ed to as the deposit scheme),
with the pr evious appr oval of the Centr al Gover nment,]
the assessee shall, subject to the pr ovisions of this section,] be allowed a
deduction (such deduction being allowed befor e the loss, if any, br ought for war d
fr om ear lier year s is set off under section 72) of
(a) a sum equal to the amount or the aggr egate of the amounts so
deposited ; or
68. Substituted by the Finance Act, 1990, w.e.f. 1-4-1991. Pr ior to its substitution, section 33AB
was inser ted by the Finance Act, 1985, w.e.f. 1-4-1986 and later amended by the Finance
Act, 1987, w.e.f. 1-4-1988.
70. Substituted for wor ds beginning with whichever is ear lier , deposited with the National
Bank and ending with the assessee shall, subject to the pr ovisions of this section, by the
Finance Act, 1994, w.e.f. 1-4-1995.
72. Substituted for the por tion beginning with the wor ds deposited any amount and ending
with the wor ds appr oval of the Centr al Gover nment, by the Finance Act, 2003, w.e.f.
1-4-2004. Pr ior to its substitution, the quoted por tion r ead as under :
deposited any amount in an account (her eafter in this section r efer r ed to as the Tea
Deposit Account) opened by the assessee in accor dance with, and for the pur poses
specified in, a scheme fr amed by the Tea Boar d (her eafter in this section r efer r ed to as the
deposit scheme) with the pr evious appr oval of the Centr al Gover nment,
(b) a sum equal to
73
[for ty] per cent of the pr ofits of such business
(computed under the head Pr ofits and gains of business or pr ofes-
sion befor e making any deduction under this section),
whichever is less :
Provided that wher e such assessee is a fir m, or any association of per sons or any
computation of the income of any par tner , or as the case may be, any member
of such fir m, association of per sons or body of individuals :
Provided further that wher e any deduction, in r espect of any amount deposited
in the special account
74
[, or in the
75
[***] Deposit Account], has been allowed
under this sub-section in any pr evious year , no deduction shall be allowed in
r espect of such amount in any other pr evious year .
accounts of such business of the assessee for the pr evious year r elevant to the
assessment year for which the deduction is claimed have been audited by an
accountant as defined in the Explan ation below sub-section (2) of section 288
and the assessee fur nishes, along with his r etur n of income, the r epor t of such
audit in the pr escr ibed for m
76
duly signed and ver ified by such accountant :
of this sub-section if such assessee gets the accounts of such business audited
under such law and fur nishes the r epor t of the audit as r equir ed under such other
law and a fur ther r epor t in the for m pr escr ibed under this sub-section.
(3) Any amount standing to the cr edit of the assessee in
77
[the special account or
the
78
[***] Deposit Account shall not be allowed to be withdr awn except for the
pur poses specified in the scheme or , as the case may be, in the deposit scheme]
or in the cir cumstances specified below :
(a) closur e of business ;
(b) death of an assessee ;
(c) par tition of a Hindu undivided family ;
(d) dissolution of a fir m ;
(e) liquidation of a company.
79
[(4) Notwithstanding anything contained in sub-section (3), wher e any amount
standing to the cr edit of the assessee in the special account or in the Deposit
Account is r eleased dur ing any pr evious year by the National Bank or withdr awn
S. 33AB I.T. ACT, 1961 1.196
73. Substituted for twenty by the Finance Act, 2001, w.e.f. 1-4-2002.
75. Wor d Tea omitted by the Finance Act, 2003, w.e.f. 1-4-2004.
76. See r ule 5AC and For m No. 3AC for audit r epor t r equir ed under section 33AB(2).
77. Substituted for the special account shall not be allowed to be withdr awn except for the
pur poses specified in the scheme by the Finance Act, 1994, w.e.f. 1-4-1995.
(Con td. on p. 1.197)
by the assessee fr om the Deposit Account, and such amount is utilised for the
pur chase of
(c) any machiner y or plant, the whole of the actual cost of which is
(d) any new machiner y or plant to be installed in an industr ial under tak-
ing for the pur poses of business of constr uction, manufactur e or
pr oduction of any ar ticle or thing specified in the list in the Eleventh
Schedule,
the whole of such amount so utilised shall be deemed to be the pr ofits and gains
of business of that pr evious year and shall accor dingly be char geable to income-
tax as the income of that pr evious year .]
(5) Wher e any amount, standing to the cr edit of the assessee in the special
account
80
[or in the
81
[***] Deposit Account], is withdr awn dur ing any pr evious
year by the assessee in the cir cumstance specified in clause (a) or clause (d) of
sub-section (3), the whole of such amount shall be deemed to be the pr ofits and
gains of business or pr ofession of that pr evious year and shall accor dingly be
char geable to income-tax as the income of that pr evious year , as if the business
had not closed or , as the case may be, the fir m had not been dissolved.
(6) Wher e any amount standing to the cr edit of the assessee in the special account
82
[or in the
81
[***] Deposit Account] is utilised by the assessee for the pur poses of
any expenditur e in connection with such business in accor dance with the
scheme
82
[or the deposit scheme], such expenditur e shall not be allowed in
computing the income char geable under the head Pr ofits and gains of business
or pr ofession.
(4) Notwithstanding anything contained in sub-section (3), no deduction under sub-
section (1) shall be allowed in r espect of any amount utilised for the pur chase of
(a) any machiner y or plant t o be inst alled in any office pr emises or r esident ial
accommodation, including any accommodation in the natur e of a guest-house ;
(b) any office appliances (not being computer s) ;
(c) any machiner y or plant, the whole of the actual cost of which is allowed as a
deduction (whether by way of depr eciation or other wise) in computing the income
char geable under the head Pr ofits and gains of business or pr ofession of any one
pr evious year ;
(d) any new machiner y or plant to be installed in an industr ial under taking for the
pur poses of business of constr uction, manufactur e or pr oduction of any ar ticle or
thing specified in the list in the Eleventh Schedule.
account
82a
[or in the
83
[***] Deposit Account], which is r eleased dur ing any
pr evious year by the National Bank
82a
[or which is withdr awn by the assessee
fr om the
83
[***] Deposit Account] for being utilised by the assessee for the
pur poses of such business in accor dance with the scheme
82a
[or the deposit
scheme] is not so utilised, either wholly or in par t, within that pr evious year , the
whole of such amount or , as the case may be, par t ther eof which is not so utilised
shall be deemed to be pr ofits and gains of business and accor dingly char geable
to income-tax as the income of that pr evious year :
Provided that this sub-section shall not apply in a case wher e such amount is
r eleased dur ing any pr evious year at the closur e of the account in cir cumstances
specified in clauses (b), (c) and (e) of sub-section (3).
(8) Wher e any asset acquir ed in accor dance with the scheme
82a
[or the deposit
scheme] is sold or other wise tr ansfer r ed in any pr evious year by the assessee to
any per son at any time befor e the expir y of eight year s fr om the end of the
pr evious year in which it was acquir ed, such par t of the cost of such asset as is
r elatable to the deduction allowed under sub-section (1) shall be deemed to be
the pr ofits and gains of business or pr ofession of the pr evious year in which the
asset is sold or other wise tr ansfer r ed and shall accor dingly be char geable to
income-tax as the income of that pr evious year :
a Centr al, State or Pr ovincial Act or a Gover nment company
84
as
defined in section 617 of the Companies Act, 1956 (1 of 1956) ; or
tr ansfer s to the company any asset and the scheme
85
[or the deposit
scheme] continues to apply to the company in the manner applicable
to the fir m.
Explan ation .The pr ovisions of clause (ii) of the pr oviso shall apply only
wher e
company ;
company ; and
S. 33AB I.T. ACT, 1961 1.198
1.199 CH. IV - COMPUTATION OF BUSINESS INCOME S. 33ABA
this section shall not be allowed after such date as may be specified ther ein.
86
[(a) Coffee Boar d means the Coffee Boar d constituted under section 4
of the Coffee Act, 1942 (7 of 1942);
(aa) National Bank means the National Bank for Agr icultur e and Rur al
Development established under section 3 of the National Bank for
Agr icultur e and Rur al Development Act, 1981 (61 of 1981);
(ab) Rubber Boar d means the Rubber Boar d constituted under sub-
section (1) of section 4 of the Rubber Act, 1947 (24 of 1947);]
(b) Tea Boar d means the Tea Boar d established under section 4 of the
Tea Act, 1953 (29 of 1953).]
87
[Site Restoration Fund.
88
33ABA. (1) Wher e an assessee is car r ying on business consisting of the
pr ospecting for , or extr action or pr oduction of, petr oleum or natur al
gas or both in India and in r elation to which the Centr al Gover nment has enter ed
into an agr eement with such assessee for such business, has befor e the end of the
pr evious year
(a) deposited with the State Bank of India any amount or amounts in an
account (her eafter in this section r efer r ed to as the special account)
maintained by the assessee with that Bank in accor dance with, and
for the pur poses specified in, a scheme (her eafter in this section
r efer r ed to as the scheme) appr oved in this behalf by the Gover nment
of India in the Ministr y of Petr oleum and Natur al Gas; or
(b) deposited any amount in an account (her eafter in this section r e-
fer r ed to as the Site Restor ation Account) opened by the assessee in
accor dance with, and for the pur poses specified in, a scheme fr amed
by the Ministr y r efer r ed to in clause (a) (her eafter in this section
r efer r ed to as the deposit scheme),
the assessee shall, subject to the pr ovisions of this section, be allowed a deduction
(such deduction being allowed befor e the loss, if any, br ought for war d fr om
ear lier year s is set off under section 72) of
(i) a sum equal to the amount or the aggr egate of the amounts so
deposited; or
(ii) a sum equal to twenty per cent of the pr ofits of such business
(computed under the head Pr ofits and gains of business or pr ofes-
sion befor e making any deduction under this section),
whichever is less :
86. Clauses (a), (aa) and (ab) substituted for clause (a) by the Finance Act, 2003, w.e.f. 1-4-2004.
Pr ior t o it s subst it ut ion, clause (a) r ead as under :
(a) National Bank means the National Bank for Agr icultur e and Rur al Development
est ablished under sect ion 3 of t he Nat ional Bank for Agr icult ur e and Rur al
Development Act, 1981 (61 of 1981) ;
88. See Site Restor ation Fund Scheme, 1999. For details, see Taxmanns Income-tax Rules.
Provided that wher e such assessee is a fir m, or any association of per sons or any
computation of the income of any par tner or , as the case may be, any member
of such fir m, association of per sons or body of individuals :
Provided further that wher e any deduction, in r espect of any amount deposited
in the special account, or in the Site Restor ation Account, has been allowed under
this sub-section in any pr evious year , no deduction shall be allowed in r espect of
such amount in any other pr evious year :
Provided also that any amount cr edited in the special account or the Site
Restor ation Account by way of inter est shall be deemed to be a deposit.
accounts of such business of the assessee for the pr evious year r elevant to the
assessment year for which the deduction is claimed have been audited by an
89
duly signed and ver ified by such accountant :
of this sub-section if such assessee gets the accounts of such business audited
under such law and fur nishes the r epor t of the audit as r equir ed under such other
law and a fur ther r epor t in the for m pr escr ibed under this sub-section.
(3) Any amount standing to the cr edit of the assessee in the special account or the
Site Restor ation Account shall not be allowed to be withdr awn except for the
pur poses specified in the scheme or , as the case may be, in the deposit scheme.
(4) Notwithstanding anything contained in sub-section (3), no deduction under
sub-section (1) shall be allowed in r espect of any amount utilised for the pur chase
of
(c) any machiner y or plant, the whole of the actual cost of which is
(d) any new machiner y or plant to be installed in an industr ial under tak-
ing for the pur poses of business of constr uction, manufactur e or
pr oduction of any ar ticle or thing specified in the list in the Eleventh
Schedule.
or in the Site Restor ation Account is withdr awn on closur e of the account dur ing
any pr evious year by the assessee, the amount so withdr awn fr om the account,
as r educed by the amount, if any, payable to the Centr al Gover nment by way of
S. 33ABA I.T. ACT, 1961 1.200
89. See r ule 5AD and For m No. 3AD.
pr ofit or pr oduction shar e as pr ovided in the agr eement r efer r ed to in section 42,
shall be deemed to be the pr ofits and gains of business or pr ofession of that
pr evious year and shall accor dingly be char geable to income-tax as the income
of that pr evious year .
Explan ation .Wher e any amount is withdr awn on closur e of the account in a
pr evious year in which the business car r ied on by the assessee is no longer in
existence, the pr ovisions of this sub-section shall apply as if the business is in
existence in that pr evious year .
or in the Site Restor ation Account is utilised by the assessee for the pur poses of
any expenditur e in connection with such business in accor dance with the
scheme or the deposit scheme, such expenditur e shall not be allowed in
or pr ofession.
account or in the Site Restor ation Account, which is r eleased dur ing any pr evious
year by the State Bank of India or which is withdr awn by the assessee fr om the
Site Restor ation Account for being utilised by the assessee for the pur poses of
such business in accor dance with the scheme or the deposit scheme is not so
utilised, either wholly or in par t, within that pr evious year , the whole of such
amount or , as the case may be, par t ther eof which is not so utilised shall be
deemed to be pr ofits and gains of business and accor dingly char geable to
income-tax as the income of that pr evious year .
90
[***]
(8) Wher e any asset acquir ed in accor dance with the scheme or the deposit
scheme is sold or other wise tr ansfer r ed in any pr evious year by the assessee to
any per son at any time befor e the expir y of eight year s fr om the end of the
pr evious year in which it was acquir ed, such par t of the cost of such asset as is
r elatable to the deduction allowed under sub-section (1) shall be deemed to be
the pr ofits and gains of business or pr ofession of the pr evious year in which the
asset is sold or other wise tr ansfer r ed and shall accor dingly be char geable to
income-tax as the income of that pr evious year :
a Centr al, State or Pr ovincial Act or a Gover nment company
91
as
defined in section 617 of the Companies Act, 1956 (1 of 1956); or
tr ansfer s to the company any asset and the scheme or the deposit
1.201 CH. IV - COMPUTATION OF BUSINESS INCOME S. 33ABA
90. Pr oviso omitted by the Finance Act, 1999, w.e.f. 1-4-1999. Ear lier , pr oviso was inser ted by
the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
scheme continues to apply to the company in the manner applicable
to the fir m.
Explan ation .The pr ovisions of clause (ii) of the pr oviso shall apply only
wher e
company;
company; and
(9) The Centr al Gover nment may, if it consider s necessar y or expedient so to do,
this section shall not be allowed after such date as may be specified ther ein.
(a) State Bank of India means the State Bank of India constituted under
the State Bank of India Act, 1955 (23 of 1955);
(b) the expr ession amount standing to the cr edit of the assessee in the
special account or the Site Restor ation Account includes inter est
accr ued to such accounts.]
92
[Reserves for shipping business.
33AC. (1)
93
[In the case of an assessee, being a Gover nment company or a public
company for med and r egister ed in India with the main object of car r ying
on the business of oper ation of ships, ther e shall, in accor dance with and subject
to the pr ovisions of this section, be allowed a deduction of an amount not
exceeding fifty per cent of pr ofits der ived fr om the business of oper ation of ships
(computed under the head Pr ofits and gains of business or pr ofession and
befor e making any deduction under this section), as is debited to the pr ofit and
loss account of the pr evious year in r espect of which the deduction is to be
allowed and cr edited to a r eser ve account, to be utilised in the manner laid down
in sub-section (2) :]
S. 33AC I.T. ACT, 1961 1.202
93. Substituted for the por tion beginning with the wor ds In the case of an assessee and
ending with the wor ds manner laid down in sub-section (2) : by the Finance Act, 1995,
w.e.f. 1-4-1996. Pr ior to substitution, the quoted por tion, as amended by the Finance Act,
1992, w.e.f. 1-4-1993, r ead as under :
In the case of an assessee, being a Gover nment company or a public company for med and
r egister ed in India with the main object of car r ying on the business of oper ation of ships,
ther e shall, in accor dance with and subject to the pr ovisions of this section, be allowed a
deduction of an amount, not exceeding the total income (computed befor e making any
deduction under this section and Chapter VI-A), as is debited to the pr ofit and loss account
of the pr evious year in r espect of which the deduction is to be allowed and cr edited to a
r eser ve account to be utilised in the manner laid down in sub-section (2) :
94
[Provided that wher e the aggr egate of the amounts car r ied to such r eser ve
account fr om time to time exceeds twice the aggr egate of the amounts of the
paid-up shar e capital, the gener al r eser ves and amount cr edited to the shar e
pr emium account of the assessee, no allowance under this sub-section shall be
made in r espect of such excess :]
95
[Provided further that for five assessment year s commencing on or after the
1st day of Apr il, 2001 and ending befor e the 1st day of Apr il, 2006, the pr ovisions
of this sub-section shall have effect as if for the wor ds an amount not exceeding
fifty per cent of pr ofits, the wor ds an amount not exceeding the pr ofits had
been substituted:]
96
[Provided also that no deduction shall be allowed under this section for any
assessment year commencing on or after the 1st day of Apr il, 2005.]
(2) The amount cr edited to the r eser ve account under sub-section (1) shall be
utilised by the assessee befor e the expir y of a per iod of eight year s next following
the pr evious year in which the amount was cr edited
(a) for acquir ing a new ship for t he pur poses of t he business of
the assessee; and
(b) until the acquisition of a new ship, for the pur poses of the business of
the assessee other than for distr ibution by way of dividends or pr ofits
or for r emittance outside India as pr ofits or for the cr eation of any
asset outside India.
(3) Wher e any amount cr edited to the r eser ve account under sub-section (1),
(a) has been utilised for any pur pose other than that r efer r ed to in clause
(a) or clause (b) of sub-section (2), the amount so utilised ; or
(b) has not been utilised for the pur pose specified in clause (a) of sub-
section (2), the amount not so utilised ; or
(c) has been utilised for the pur pose of acquir ing a new ship as specified
in clause (a) of sub-section (2), but such ship is sold or other wise
tr ansfer r ed
97
[, other than in any scheme of demer ger ] by the asses-
see to any per son at any time befor e the expir y of
98
[thr ee] year s fr om
the end of the pr evious year in which it was acquir ed, the amount so
utilised in acquir ing the ship,
1.203 CH. IV - COMPUTATION OF BUSINESS INCOME S. 33AC
94. Substituted by the Finance Act, 2002, w.e.f. 1-4-2003. Pr ior to its substitution, fir st pr oviso
r ead as under :
Provided that wher e the aggr egate of the amounts car r ied to such r eser ve account fr om
time to time exceeds twice the amount of the paid-up shar e capital (excluding the amounts
capitalised fr om r eser ves) of the assessee, no allowance under this sub-section shall be
made in r espect of such excess.
98. Substituted for eight by the Finance Act, 2003, w.e.f. 1-4-2004.
so utilised ; or
the per iod of eight year s specified in sub-section (2) ; or
(iii) in a case r efer r ed to in clause (c), in the year in which the sale or
tr ansfer took place,
and shall be char ged to tax accor dingly.
99
[(4) Wher e the ship is sold or other wise tr ansfer r ed (other than in any scheme
of demer ger ) after the expir y of the per iod specified in clause (c) of sub-section
(3) and the sale pr oceeds ar e not utilised for the pur pose of acquir ing a new ship
within a per iod of one year fr om the end of the pr evious year in which such sale
or tr ansfer took place,
1
[so much of such sale pr oceeds which r epr esent the
amount cr edited to the r eser ve account and utilised for the pur poses mentioned
in clause (c) of sub-section (3)] shall be deemed to be the pr ofits of the assessment
year immediately following the pr evious year in which the ship is sold or
tr ansfer r ed.]
(a)
2
public company shall have the meaning assigned to it in section 3
of the Companies Act, 1956 (1 of 1956) ;
3
[(aa)
4
Gover nment company shall have the meaning assigned to it in
section 617 of the Companies Act, 1956 (1 of 1956) ;]
(b) new ship shall have the same meaning as in clause (ii) of sub-section
(2) of section 32AB.]
5
[Rehabilitation allowance.
33B. Wher e the business of any industr ial under taking car r ied on in India is
discontinued in any pr evious year by r eason of extensive damage to, or
destr uction of, any building, machiner y, plant or fur nitur e owned by the assessee
and used for the pur poses of such business as a dir ect r esult of
(i) flood, typhoon, hur r icane, cyclone, ear thquake or other convulsion of
natur e ; or
(ii) r iot or civil distur bance ; or
(iii) accidental fir e or explosion ; or
(iv) action by an enemy or action taken in combating an enemy (whether
with or without a declar ation of war ),
S. 33B I.T. ACT, 1961 1.204
1. Substituted for such sale pr oceeds by the Finance Act, 2005, w.r .e.f. 1-4-2004.
2. For definition of public company under clause (iv) of section 3(1) of the Companies Act,
1956, see Appendix.
4. For definition of Gover nment company, see footnote 63 on page 1.22 an te.
and, ther eafter , at any time befor e the expir y of thr ee year s fr om the end of such
pr evious year , the business is r e-established, r econstr ucted or r evived by the
assessee, he shall, in r espect of the pr evious year in which the business is so
r e-established, r econstr ucted or r evived, be allowed a deduction of a sum by
way of r ehabilitation allowance equivalent to sixty per cent of the amount of
the deduction allowable to him under clause (iii) of sub-section (1) of section
32 in r espect of the building, machiner y, plant or fur nitur e so damaged or
destr oyed:
6
[Provided that no deduction under this section shall be allowed in r elation to the
assessment year commencing on the 1st day of Apr il, 1985, or any subsequent
assessment year .]
Explan ation .In this section, industr ial under taking means any under taking
which is mainly engaged in the business of gener ation or distr ibution of
electr icity or any other for m of power or in the constr uction of ships or in the
manufactur e or pr ocessing of goods or in mining.]
Conditions for depreciation allowance and development rebate.
34. (1)
7
[***]
(2)
8
[***]
(3)(a) The deduction r efer r ed to in section 33 shall not be allowed unless an
amount equal to seventy-five per cent of the development r ebate to be actually
allowed is debited to the pr ofit and loss account of
9
[any pr evious year in
r espect of which the deduction is to be allowed under sub-section (2) of that
section or any ear lier pr evious year (being a pr evious year not ear lier than the
year in which the ship was acquir ed or the machiner y or plant was installed or
the ship, machiner y or plant was fir st put to use)] and cr edited to a r eser ve
account to be utilised by the assessee dur ing a per iod of eight year s next
following for the pur poses of the business of the under taking, other than
(i) for distr ibution by way of dividends or pr ofits ; or
(ii) for r emittance outside India as pr ofits or for the cr eation of any asset
outside India :
Provided that this clause shall not apply wher e the assessee is a company, being
a licensee within the meaning of the Electr icity (Supply) Act, 1948 (54 of 1948)
10
,
or wher e the ship has been acquir ed or the machiner y or plant has been installed
befor e the 1st day of Januar y, 1958 :
7. Omitted by the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f.
1-4-1988. Or iginal sub-section (1) was amended by the Taxation Laws (Amendment) Act,
1970, w.e.f. 1-4-1971.
1-4-1988. Or iginal sub-section (2) was amended by the Finance Act, 1965, w.e.f. 1-4-1965,
the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967, the Taxation Laws (Amendment) Act, 1970,
w.e.f. 1-4-1971, the Dir ect Taxes (Amendment) Act, 1974, w.e.f. 1-4-1975 and the Finance
(No. 2) Act, 1980, w.e.f. 1-4-1981.
9. Substituted for the r elevant pr evious year by the Finance Act, 1990, w.r .e.f. 1-4-1962.
10. For the meaning of the expr ession a licensee within the meaning of the Electr icity
(Supply) Act, 1948 (54 of 1948), see Taxmanns Dir ect Taxes Manual, Vol. 3.
S. 34A I.T. ACT, 1961 1.206
11
[Provided further that wher e a ship has been acquir ed after the 28th day of
Febr uar y, 1966, this clause shall have effect in r espect of such ship as if for the
wor ds seventy-five, the wor d fifty had been substituted.]
Explan ation .[Om itted by th e Fin an ce Act, 1990, w.r.e.f. 1-4-1962. Earlier, it was
in serted by th e Fin an ce Act, 1966, w.r.e.f. 1-4-1962.]
(b) If any ship, machiner y or plant is sold or other wise tr ansfer r ed by the assessee
to any per son at any time befor e the expir y of eight year s fr om the end of the
pr evious year in which it was acquir ed or installed, any allowance made under
section 33 or under the cor r esponding pr ovisions of the Indian Income-tax Act,
1922 (11 of 1922), in r espect of that ship, machiner y or plant shall be deemed to
have been wr ongly made for the pur poses of this Act, and the pr ovisions of sub-
section (5) of section 155 shall apply accor dingly :
Provided that this clause shall not apply
(i) wher e the ship has been acquir ed or the machiner y or plant has been
installed befor e the 1st day of Januar y, 1958 ; or
(ii) wher e the ship, machiner y or plant is sold or other wise tr ansfer r ed by
the assessee to the Gover nment, a local author ity, a cor por ation
established by a Centr al, State or Pr ovincial Act or a
12
Gover nment
company as defined in section 617 of the Companies Act, 1956 (1 of
1956) ; or
(iii) wher e the sale or tr ansfer of the ship, machiner y or plant is made in
connection with the amalgamation or succession, r efer r ed to in sub-
section (3) or sub-section (4) of section 33.
13
[Restriction on unabsorbed depreciation and unabsorbed investment allow-
ance for limited period in case of certain domestic companies.
34A. (1) In computing the pr ofits and gains of the business of a domestic
company in r elation to the pr evious year r elevant to the assessment year
commencing on the 1st day of Apr il, 1992, wher e effect is to be given to the
unabsor bed depr eciation allowance or unabsor bed investment allowance or
both in r elation to any pr evious year r elevant to the assessment year commenc-
ing on or befor e the 1st day of Apr il, 1991, the deduction shall be r estr icted to two-
thir d of such allowance or allowances and the balance,
(a) wher e it r elates to depr eciation allowance, be added to the depr ecia-
tion allowance for the pr evious year r elevant to the assessment year
commencing on the 1st day of Apr il, 1993 and be deemed to be par t
of that allowance or if ther e is no such allowance for that pr evious
year , be deemed to be the allowance for that pr evious year and so on
for the succeeding pr evious year s ;
(b) wher e it r elates to investment allowance, be car r ied for war d to the
assessment year commencing on the 1st day of Apr il, 1993 and the
balance of the investment allowance, if any, still outstanding shall be
car r ied for war d to the following assessment year and wher e the
per iod of eight year s has expir ed befor e the por tion of such balance
is adjusted, the said per iod shall be extended beyond eight year s till
such time the por tion of the said balance is absor bed in the pr ofits and
gains of the business of the domestic company.
(2) For the assessment year commencing on the 1st day of Apr il, 1992, the
pr ovisions of sub-section (2) of section 32 and sub-section (3) of section 32A shall
apply to the extent such pr ovisions ar e not inconsistent with the pr ovisions of
sub-section (1) of this section.
(3) Nothing contained in sub-section (1) shall apply wher e the amount of
unabsor bed depr eciation allowance or of the unabsor bed investment allowance,
as the case may be, or the aggr egate amount of such allowances in the case of
a domestic company is less than one lakh r upees.
(4) Nothing contained in sections 234B and 234C shall apply to any shor tfall in the
payment of any tax due on the assessed tax or , as the case may be, r etur ned
income wher e such shor tfall is on account of r estr icting the amount of depr ecia-
tion allowance or investment allowance under this section and the assessee has
paid the amount of shor tfall befor e fur nishing the r etur n of income under sub-
section (1) of section 139.]
14
[Expenditure on scientific research.
15
35. (1) In r espect of expenditur e on scientific r esear ch, the following deduc-
tions shall be allowed
(i) any expenditur e (not being in the natur e of capital expenditur e) laid
out or expended on scientific r esear ch r elated to the
16
business.
17
[Explan ation .Wher e any such expenditur e has been laid out or
expended befor e the commencement of the business (not being
expenditur e laid out or expended befor e the 1st day of Apr il, 1973) on
payment of any salar y [as defined in Explan ation 2
18
below sub-
section (5) of section 40A] to an employee engaged in such scientific
r esear ch or on the pur chase of mater ials used in such scientific
r esear ch, the aggr egate of the expenditur e so laid out or expended
within the thr ee year s immediately pr eceding the commencement of
14. Reintr oduced with modification by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989. Ear lier section 35 was omitted by the Dir ect Tax Laws (Amendment) Act, 1987,
with effect fr om the same date.
15. See also Cir cular No. 778, dated 20-8-1999 and Pr ess Note, dated 5-6-1982, issued by the
Ministr y of Finance (Depar tment of Revenue). For details, see Taxmanns Master Guide
to Income-tax Act. For r elevant case laws, see Taxmanns Master Guide to Income-tax Act.
16. For the meaning of the ter m business, see Taxmanns Dir ect Taxes Manual, Vol. 3.
18. Section 40A(5) has now been omitted. Explan ation 2(a) to section 40A(5) defined salar y
as under :
Explan ation 2.In this sub-section,
(a) salar y has the meaning assigned to it in clause (1) r ead with clause (3) of section
17 subject to the following modifications, namely :
(1) in the said clause (1), the wor d per quisites occur r ing in sub-clause (iv) and
t he whole of sub-clause (vii) shall be omitted;
(2) in the said clause (3), the r efer ences to assessee shall be constr ued as
r efer ences to employee or for mer employee and the r efer ences to his
employer or for mer employer and an employer or a for mer employer shall
be constr ued as r efer ences to the assessee;
(b) ** ** **
the business shall, to the extent it is cer tified by the pr escr ibed
author ity
19
to have been laid out or expended on such scientific
r esear ch, be deemed to have been laid out or expended in the pr evious
year in which the business is commenced ;]
20
(ii)
21
[an amount equal to one and one-four th times of any sum paid] to
a scientific r esear ch association which has as its object the under tak-
ing of scientific r esear ch or to a univer sity, college or other institution
to be used for scientific r esear ch :
22
[Provided that such association, univer sity, college or other institu-
tion for the pur poses of this clause
(A) is for the time being appr oved, in accor dance with the guidelines,
in the manner and subject to such conditions as may be pr es-
cr ibed; and
(B) such association, univer sity, college or other institution is speci-
fied as such, by notification
23
in the Official Gazette, by the Centr al
Gover nment;]
The following clause (iia) shall be inserted after clause (ii) of sub-
section (1) of section 35 by the Finance Act, 2008, w.e.f. 1-4-2009 :
(iia) an am oun t equal to on e an d on e-fourth tim es of an y sum paid to a
com pan y to be used by it for scien tific research :
Provided th at such com pan y
(A) is registered in In dia,
(B) h as as its m ain object th e scien tific research an d developm en t,
(C) is, for th e purposes of th is clause, for th e tim e bein g approved by
th e prescribed auth ority in th e prescribed m an n er, an d
(D) fulfils such oth er con dition s as m ay be prescribed;
24
[
25
(iii)
26
[an amount equal to one and one-four th times of any sum paid] to
a univer sity, college or other institution to be used for r esear ch in
social science or statistical r esear ch :
S. 35 I.T. ACT, 1961 1.208
19. See r ule 6(1). The pr escr ibed author ity under r ule 6(1) is Dir ector Gener al (Income-tax
Exemptions) in concur r ence with Secr etar y, Depar tment of Scientific and Industr ial
Resear ch, Gover nment of India.
20. See r ules 5C, 5D and 5E and For m Nos. 3CF-I and 3CF-II.
21. Substituted for any sum paid by the Finance Act, 1999, w.e.f. 1-4-2000.
22. Substituted by the Taxation Laws (Amendment) Act, 2006, w.r .e.f. 1-4-2006. Pr ior to its
substitution, pr oviso, as amended by the Finance Act, 1999, w.e.f. 1-4-2000 and Dir ect Tax
Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, r ead as under :
Provided that such association, univer sity, college or institution is for the time being
appr oved for the pur poses of this clause by the Centr al Gover nment by notification in
the Official Gazette;
23. For complet e list of appr oved scient ific r esear ch univer sit y/ inst it ut ions, et c., under
this clause, see Taxmanns Dir ect Taxes Cir cular s & Taxmanns Year ly Tax Digest &
Refer encer .
24. Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Pr ior to substitution, clause
(iii) was amended by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
25. See r ules 5C, 5D and 5E and For m Nos. 3CF-I and 3CF-II.
26. Substituted for any sum paid by the Finance Act, 1999, w.e.f. 1-4-2000.
27
[Provided that such univer sity, college or other institution for the
pur poses of this clause
(A) is for the time being appr oved, in accor dance with the guidelines,
in the manner and subject to such conditions as may be pr es-
cr ibed; and
(B) such univer sity, college or other institution is specified as such, by
notification
28
in the Official Gazette, by the Centr al Gover nment.]
29
[Explan ation .The deduction, to which the assessee is entitled in
r espect of any sum paid to a scientific r esear ch association, univer -
sity, college or other institution to which clause (ii) or clause (iii)
applies, shall not be denied mer ely on the gr ound that, subsequent to
the payment of such sum by the assessee, the appr oval gr anted to the
association, univer sity, college or other institution r efer r ed to in
clause (ii) or clause (iii) has been withdr awn;]
(iv) in r espect of any expenditur e of a capital natur e on scientific r esear ch
r elated to the business car r ied on by the assessee, such deduction as
may be admissible under the pr ovisions of sub-section (2) :
30
[Provided that the scientific r esear ch association, univer sity, college or other
institution r efer r ed to in clause (ii) or clause (iii) shall make an application in the
pr escr ibed for m and manner to the
31
[Centr al Gover nment] for the pur pose of
gr ant of appr oval, or continuance ther eof, under clause (ii) or , as the case may
be, clause (iii) :
Provided further that the
31
[Centr al Gover nment] may, befor e gr anting appr oval
under clause (ii) or clause (iii), call for such documents (including audited annual
accounts) or infor mation fr om the scientific r esear ch association, univer sity,
college or other institution as it thinks necessar y in or der to satisfy itself about
the genuineness of the activities of the scientific r esear ch association, univer sity,
college or other institution and that
32
[Gover nment] may also make such
inquir ies as it may deem necessar y in this behalf :
Provided also that any
33
[notification issued, by the Centr al Gover nment under
clause (ii) or clause (iii), befor e the date on which the Taxation Laws (Amend-
ment) Bill, 2006 r eceives the assent of the Pr esident, shall, at any one time, have
27. Substituted by the Taxation Laws (Amendment) Act, 2006, w.r .e.f. 1-4-2006. Pr ior to its
substitution, pr oviso, as amended by the Finance Act, 1999, w.e.f. 1-4-2000, r ead as under :
Provided that such univer sity, college or institution is for the time being appr oved for the
pur poses of this clause by the Centr al Gover nment by notification in the Official Gazette;
28. For complete list of appr oved social science or statistical r esear ch univer sity/ institutions,
etc., under this clause, see Taxmanns Dir ect Taxes Cir cular s & Taxmanns Year ly Tax
Digest & Refer encer .
31. Substituted for pr escr ibed author ity by the Finance Act, 1999, w.e.f. 1-4-2000.
32. Su bst it u t ed for au t hor it y by t he Taxat ion Laws (Amendment ) Act , 2006, w.r .e.f.
1-4-2006.
33. Substituted for notification issued by the Centr al Gover nment under clause (ii) or clause
(iii) shall, at any one time, have effect for such assessment year or year s, not exceeding
thr ee assessment year s by the Taxation Laws (Amendment) Act, 2006, w.r .e.f. 1-4-2006.
Ear lier the pr oviso was amended by the Finance Act, 1999, w.e.f. 1-4-2000.
13-7-2006.
effect for such assessment year or year s, not exceeding thr ee assessment year s]
(including an assessment year or year s commencing befor e the date on which
such notification is issued) as may be specified in the notification:]
34
[Provided also that wher e an application under the fir st pr oviso is made on or
after the date on which the Taxation Laws (Amendment) Bill, 2006 r eceives the
assent of the Pr esident, ever y notification under clause (ii) or clause (iii) shall be
issued or an or der r ejecting the application shall be passed within the per iod of
twelve months fr om the end of the month in which such application was r eceived
by the Centr al Gover nment.]
(2) For the pur poses of clause (iv) of sub-section (1),
35
[(i) in a case wher e such capital expenditur e is incur r ed befor e the 1st day
of Apr il, 1967, one-fifth of the capital expenditur e incur r ed in any
pr evious year shall be deducted for that pr evious year ; and the
balance of the expenditur e shall be deducted in equal instalments for
each of the four immediately succeeding pr evious year s ;
(ia) in a case wher e such capital expenditur e is incur r ed after the 31st day
of Mar ch, 1967, the whole of such capital expenditur e incur r ed in any
pr evious year
36
shall be deducted for that pr evious year :]
37
[Provided that no deduction shall be admissible under this clause in
r espect of any expenditur e incur r ed on the acquisition of any land,
whether the land is acquir ed as such or as par t of any pr oper ty, after
the 29th day of Febr uar y, 1984.]
38
[Explan ation 1].Wher e any capital expenditur e has been incur r ed
befor e the commencement of the business, the aggr egate of the
expenditur e so incur r ed within the thr ee year s immediately pr eced-
ing the commencement of the business shall be deemed to have been
incur r ed in the pr evious year in which the business is commenced.
37
[Explan ation 2.For the pur poses of this clause,
(a) land includes any inter est in land ; and
(b) the acquisition of any land shall be deemed to have been made by
the assessee on the date on which the instr ument of tr ansfer of
such land to him has been r egister ed under the Registr ation Act,
1908 (16 of 1908), or wher e he has taken or r etained the posses-
sion of such land or any par t ther eof in par t per for mance of a
contr act of the natur e r efer r ed to in section 53A
39
of the Tr ansfer
of Pr oper ty Act, 1882 (4 of 1882), the date on which he has so taken
or r etained possession of such land or par t ;]
(ii) notwithstanding anything contained in clause (i), wher e an asset
r epr esenting expenditur e of a capital natur e
40
[incur r ed befor e the
S. 35 I.T. ACT, 1961 1.210
35. Subst it ut ed for clause (i) by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
36. For the meaning of the expr ession incur r ed in any pr evious year , see Taxmanns Dir ect
38. Existing Explan ation r enumber ed as Explan ation 1, ibid.
39. For text of section 53A of the Tr ansfer of Pr oper ty Act, see Appendix.
13-7-2006.
1st day of Apr il, 1967,] ceases to be used in a pr evious year for
scientific r esear ch r elated to the business and the value of the asset
at the time of the cessation, together with the aggr egate of deductions
alr eady allowed under clause (i) falls shor t of the said expenditur e,
then
(a) ther e shall be allowed a deduction for that pr evious year of an
amount equal to such deficiency, and
(b) no deduction shall be allowed under that clause for that pr evious
year or for any subsequent pr evious year ;
(iii) if the asset mentioned in clause (ii) is sold, without having been used
for other pur poses, in the year of cessation, the sale pr ice shall be
taken to be the value of the asset at the time of the cessation ; and if
the asset is sold, without having been used for other pur poses, in a
pr evious year subsequent to the year of cessation, and the sale pr ice
falls shor t of the value of the asset taken into account at the time of
cessation, an amount equal to the deficiency shall be allowed as a
deduction for the pr evious year in which the sale took place ;
(iv) wher e a deduction is allowed for any pr evious year under this section
in r espect of expenditur e r epr esented wholly or par tly by an asset, no
deduction shall be allowed under
41
[clause (ii) of sub-section (1)] of
section 32 for the same
42
[or any other ] pr evious year in r espect of
that asset ;
(v) wher e the asset
43
[mentioned in clause (ii)] is used in the business after
it ceases to be used for scientific r esear ch r elated to that business,
depr eciation shall be admissible under
44
[clause (ii) of sub-section (1)]
of section 32.
45
[(2A)
46
Wher e
47
[, befor e the 1st day of Mar ch, 1984,] the assessee pays any sum
48
[(being any sum paid with a specific dir ection that the sum shall not be used for
the acquisition of any land or building or constr uction of any building)] to a
scientific r esear ch association or univer sity or college or other institution
r efer r ed to in clause (ii) of sub-section (1)
49
[or to a public sector company] to be
used for scientific r esear ch under taken under a pr ogr amme appr oved in this
behalf by the pr escr ibed author ity
50
having r egar d to the social, economic and
industr ial needs of India, then,
41. Subst it ut ed for clauses (i), (ii), (iia), (iii) and (iv) of sub-section (1) or under sub-section
(1A) by the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f.
1-4-1988.
44. Subst it ut ed for clauses (i), (ii) and (iii) of sub-sect ion (1) by t he Taxat ion Laws
(Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1988.
46. For guidelines for appr oval of scientific r esear ch pr ogr ammes and list of appr oved
pr ogr ammes, see Taxmanns Dir ect Taxes Cir cular s.
50. See r ule 6(1). See also footnote No. 19 on page 1.208.
(a) ther e shall be allowed a deduction of a sum equal to one and one-thir d
times the sum so paid ; and
(b) no deduction in r espect of such sum shall be allowed under clause (ii)
of sub-section (1) for the same or any other assessment year .]
51
[Explan ation .For the pur poses of this sub-section, public sector company
shall have the same meaning as in clause (b) of the Explan ation below sub-section
(2B) of section 32A.]
52
[(2AA)
53
Wher e the assessee pays any sum to a National Labor ator y
54
[or a
55
[Univer sity or an Indian Institute of Technology or a specified per son] with a
specific dir ection that the said sum shall be used for scientific r esear ch under -
taken under a pr ogr amme appr oved in this behalf by the pr escr ibed author ity
56
,
then
(a) ther e shall be allowed a deduction of a sum equal to one and one-
four th times the sum so paid ; and
(b) no deduction in r espect of such sum shall be allowed under any other
pr ovision of this Act :
57
[Provided that the pr escr ibed author ity shall, befor e gr anting appr oval, satisfy
itself about the feasibility of car r ying out the scientific r esear ch and shall submit
its r epor t to the Dir ector Gener al in such for m as may be pr escr ibed.
58
]
S. 35 I.T. ACT, 1961 1.212
53. See r ule 6(1A), 6(3), 6(5), 6(6) and 6(7) and For m Nos. 3CG to 3CJ. The pr ocedur e laid down
by r ule 6 is, in ter alia, as follows :
n Pr escr ibed author ity is Head of National Labor ator y, Univer sity or IIT and in case of
specified per son, the Pr incipal Scientific Adviser to the Gover nment of India.
n The application for appr oval is to be made by the sponsor in For m No. 3CG.
n The National Labor ator y, Univer sity or Indian Institute of Technology, etc., shall
issue a r eceipt of payment for car r ying out an appr oved pr ogr amme of scientific
r esear ch, in For m No. 3CI.
n The pr escr ibed author ity will gr ant appr oval only if the conditions mentioned in sub-
r ule (7) of r ule 6 ar e satisfied.
55. Substituted for Univer sity or an Indian Institute of Technology by the Finance Act, 2001,
w.e.f. 1-4-2002.
56. See foot not e No. 53 (supra).
57. Substituted for the following pr ovisos by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996.
Pr ior to their substitution, the said pr ovisos, as amended by the Finance Act, 1994, w.e.f.
Provided that ever y National Labor ator y or Univer sity or Indian Institute of Technology
desir ous of obtaining appr oval under this sub-section shall make an application in the
pr escr ibed for m and manner to the pr escr ibed author ity :
Provided further that the pr escr ibed author ity may, befor e gr anting appr oval, call for such
documents or infor mation fr om the National Labor ator y or the Univer sity or the Indian
Institute of Technology as it thinks necessar y in or der to satisfy itself about the genuine-
ness of the activities r elating to scientific r esear ch of such Labor ator y or Univer sity or
Institute, as the case may be.
58. See r ule 6(7)(b) and For m No. 3CJ.
59
[Explan ation 1.The deduction, to which the assessee is entitled in r espect
of any sum paid to a National Labor ator y, Univer sity, Indian Institute of
Technology or a specified per son for the appr oved pr ogr amme r efer r ed to in this
sub-section, shall not be denied mer ely on the gr ound that, subsequent to the
payment of such sum by the assessee, the appr oval gr anted to,
(a) such Labor ator y, or specified per son has been withdr awn; or
(b) the pr ogr amme, under taken by the National Labor ator y, Univer sity,
Indian Institute of Technology or specified per son, has been with-
dr awn.]
60
[Explan ation
61
[2].For the pur poses of this section,
(a) National Labor ator y means a scientific labor ator y functioning at
the national level under the aegis of the Indian Council of Agr icultur al
Resear ch, the Indian Council of Medical Resear ch, the Council of
Scient ific and Indust r ial Resear ch, t he Defence Resear ch and
Development Or ganisat ion, t he Depar t ment of Elect r onics, t he
Depar tment of Bio-Technology or the Depar tment of Atomic Ener gy
and which is appr oved as a National Labor ator y by the pr escr ibed
author ity in such manner as may be pr escr ibed ;
(b) Univer sity shall have the same meaning as in Explan ation to clause
(ix) of section 47 ;
(c) Indian Institute of Technology shall have the same meaning as that
of Institute in clause (g) of section 3
62
of the Institutes of Technology
Act, 1961 (59 of 1961)];
63
[(d) specified per son means such per son as is appr oved by the pr es-
cr ibed author ity.]
64
[(2AB)(1) Wher e a company engaged in the business of
65
[bio-technology or in
the business of ] manufactur e or pr oduction of any dr ugs, phar maceuticals,
electr onic equipments, computer s, telecommunication equipments, chemicals
or any other ar ticle or thing notified
66
by the Boar d incur s any expenditur e on
scientific r esear ch (not being expenditur e in the natur e of cost of any land or
building) on in-house r esear ch and development facility as appr oved by the
60. Subst it ut ed by t he Finance Act , 1994, w.e.f. 1-4-1995. Pr ior t o it s subst it ut ion, t he
Explan ation , as inser ted by the Finance Act, 1993, w.e.f. 1-4-1994, r ead as under :
Explan ation .For t he pur poses of t his sub-sect ion, Nat ional Labor at or y means a
scientific labor ator y functioning at the national level under the aegis of the Indian Council
of Agr icultur al Resear ch, the Indian Council of Medical Resear ch or the Council of
Scientific and Industr ial Resear ch and which is appr oved as a National Labor ator y by the
pr escr ibed author ity in such manner as may be pr escr ibed.
61. Renumber ed as Explan ation 2 by the Taxation Laws (Amendment) Act, 2006, w.r .e.f.
1-4-2006.
62. For definition of Institute, see footnote 66 on p. 1.56 an te.
64. Inser ted by the Finance Act, 1997, w.e.f. 1-4-1998. See r ule 6(1B), (4), (5A) and (7A) and
For m Nos. 3CK to 3CM.
66. For notified ar ticle or thing, see Taxmanns Master Guide to Income-tax Act.
pr escr ibed author ity
67
, then, ther e shall be allowed a deduction of
68
[a sum equal
to one and one-half times of the expenditur e] so incur r ed.
69
[Explan ation .For the pur poses of this clause, expenditur e on scientific
r esear ch, in r elation to dr ugs and phar maceuticals, shall include expenditur e
incur r ed on clinical dr ug tr ial, obtaining appr oval fr om any r egulator y author ity
under any Centr al, State or Pr ovincial Act and filing an application for a patent
under the Patents Act, 1970 (39 of 1970).]
(2) No deduction shall be allowed in r espect of the expenditur e mentioned in
clause (1) under any other pr ovision of this Act.
(3) No company shall be entitled for deduction under clause (1) unless it enter s
into an agr eement with the pr escr ibed author ity for co-oper ation in such
r esear ch and development facility and for audit of the accounts maintained for
that facility.
(4) The pr escr ibed author ity shall submit its r epor t in r elation to the appr oval of
the said facility to the Dir ector Gener al in such for m and within such time as may
be pr escr ibed.]
70
[(5) No deduction shall be allowed in r espect of the expenditur e r efer r ed to in
clause (1) which is incur r ed after the 31st day of Mar ch,
71
[2012].
The following clause ( 6) shall be inserted after clause (5) of sub-section (2AB) of
section 35 by the Finance Act, 2008, w.e.f. 1-4-2009 :
(6) No deduction sh all be allowed to a com pan y approved un der sub-clause (C) of
clause (iia) of sub-section (1) in respect of th e expen diture referred to in clause (1)
wh ich is in curred after th e 31st day of March , 2008.
72
[(2B)(a) Wher e
73
[, befor e the 1st day of Mar ch, 1984,] an assessee has incur r ed
any expenditur e (not being in the natur e of capital expenditur e incur r ed on the
acquisition of any land or building or constr uction of any building) on scientific
r esear ch under taken under a pr ogr amme appr oved in this behalf by the
pr escr ibed author ity having r egar d to the social, economic and industr ial needs
of India, he shall, subject to the pr ovisions of this sub-section, be allowed a
deduction of a sum equal to one and one-four th times the amount of the
expenditur e cer tified by the pr escr ibed author ity to have been so incur r ed
dur ing the pr evious year .
S. 35 I.T. ACT, 1961 1.214
67. Pr escr ibed aut hor it y is Secr et ar y, Depar t ment of Scient ific & Indust r ial Resear ch,
68. Substituted for a sum equal to one and one-four th times of the expenditur e by the
Finance Act, 2000, w.e.f. 1-4-2001.
substituted for 2005 by the Finance Act, 2005, w.e.f. 1-4-2006 and 2005 was substituted
for 2000 by the Finance Act, 1999, w.e.f. 1-4-2000.
For guidelines for appr oval of scientific r esear ch pr ogr ammes under this sub-section, see
(b) Wher e a deduction has been allowed under clause (a) for any pr evious year
in r espect of any expenditur e, no deduction in r espect of such expenditur e shall
be allowed under clause (i) of sub-section (1) or clause (ia) of sub-section (2) for
the same or any other pr evious year .
(c) Wher e a deduction is allowed for any pr evious year under this sub-section in
r espect of expenditur e r epr esented wholly or par tly by an asset, no deduction
shall be allowed in r espect of that asset under
74
section 32 for the same or any subsequent pr evious year .
(d) Any deduction made under this sub-section in r espect of any expenditur e on
scientific r esear ch in excess of the expenditur e actually incur r ed shall be
deemed to have been wr ongly made for the pur poses of this Act if the assessee
fails to fur nish within one year of the per iod allowed by the pr escr ibed author ity
for completion of the pr ogr amme, a cer tificate of its completion obtained fr om
that author ity, and the pr ovisions of sub-section (5B) of section 155 shall apply
accor dingly.]
75
[(3) If any question ar ises under this section as to whether , and if so, to what
extent, any activity constitutes or constituted, or any asset is or was being used
for , scientific r esear ch, the Boar d shall r efer the question to
(a) the Centr al Gover nment, when such question r elates to any activity
under clauses (ii) and (iii) of sub-section (1), and its decision shall be
final;
(b) the pr escr ibed author ity
76
, when such question r elates to any activity
other than the activity specified in clause (a), whose decision shall be
final.]
(4) The pr ovisions of sub-section (2) of section 32 shall apply in r elation to
deductions allowable under clause (iv) of sub-section (1) as they apply in r elation
to deductions allowable in r espect of depr eciation.
77
other wise tr ansfer s to the amalgamated company (being an Indian company)
any asset r epr esenting expenditur e of a capital natur e on scientific r esear ch,
(i) the amalgamating company shall not be allowed the deduction under
clause (ii) or clause (iii) of sub-section (2); and
(ii) the pr ovisions of this section shall, as far as may be, apply to the
amalgamated company as they would have applied to the amalga-
mating company if the latter had not so sold or other wise tr ansfer r ed
the asset.]]
74. Subst it ut ed for clauses (i), (ii), (iia) and (iii) of sub-section (1) or under sub-section (1A)
by t he Taxat ion Laws (Amendment & Miscellaneou s Pr ovisions) Act , 1986, w.e.f.
1-4-1988.
(3) If any question ar ises under this section as to whether , and if so, to what extent, any
activity constitutes or constituted, or any asset is or was being used for , scientific r esear ch,
the Boar d shall r efer the question to the pr escr ibed author ity, whose decision shall be
final.
76. See r ule 6.
78
[Expenditure on acquisition of patent rights or copyrights.
35A. (1) In r espect of any expenditur e of a capital natur e incur r ed after the
28th day of Febr uar y, 1966
79
[but befor e the 1st day of Apr il, 1998], on the
acquisition of patent r ights or copyr ights (her eafter , in this section, r efer r ed to as
r ights) used for the pur poses of the business, ther e shall, subject to and in
accor dance with the pr ovisions of this section, be allowed for each of the r elevant
pr evious year s, a deduction equal to the appr opr iate fr action of the amount of
such expenditur e.
(i) r elevant pr evious year s means the four teen pr evious year s begin-
ning with the pr evious year in which such expenditur e is incur r ed or ,
wher e such expenditur e is incur r ed befor e the commencement of the
business, the four teen pr evious year s beginning with the pr evious
year in which the business commenced :
Provided that wher e the r ights commenced, that is to say, became
effective, in any year pr ior to the pr evious year in which expenditur e
on the acquisition ther eof was incur r ed by the assessee, this clause
shall have effect with the substitution for the r efer ence to four teen
year s of a r efer ence to four teen year s less the number of complete
year s which, when the r ights ar e acquir ed by the assessee, have
elapsed since the commencement ther eof, and if four teen year s have
elapsed as afor esaid, of a r efer ence to one year ;
(ii) appr opr iate fr action means the fr action the numer ator of which is
one and the denominator of which is the number of the r elevant
pr evious year s.
(2) Wher e the r ights come to an end without being subsequently r evived or
wher e the whole or any par t of the r ights is sold and the pr oceeds of the sale (so
far as they consist of capital sums) ar e not less than the cost of acquisition
ther eof r emaining unallowed, no deduction under sub-section (1) shall be
allowed in r espect of the pr evious year in which the r ights come to an end or , as
the case may be, the whole or any par t of the r ights is sold or in r espect of any
subsequent pr evious year .
(3) Wher e the r ights either come to an end without being subsequently r evived
or ar e sold in their entir ety and the pr oceeds of the sale (so far as they consist of
capital sums) ar e less than the cost of acquisition ther eof r emaining unallowed,
a deduction equal to such cost r emaining unallowed or , as the case may be, such
cost r emaining unallowed as r educed by the pr oceeds of the sale, shall be allowed
in r espect of the pr evious year in which the r ights come to an end, or , as the case
may be, ar e sold.
(4) Wher e the whole or any par t of the r ights is sold and the pr oceeds of the sale
(so far as they consist of capital sums) exceed the amount of the cost of
S. 35A I.T. ACT, 1961 1.216
78. Inser ted by the Finance Act, 1966, w.e.f. 1-4-1966. For r elevant case laws, see Taxmanns
acquisition ther eof r emaining unallowed, so much of the excess as does not
exceed the differ ence between the cost of acquisition of the r ights and the
amount of such cost r emaining unallowed shall be char geable to income-tax as
income of the business of the pr evious year in which the whole or any par t of the
r ights is sold.
Explan ation .Wher e the whole or any par t of the r ights is sold in a pr evious year
in which the business is no longer in existence, the pr ovisions of this sub-section
shall apply as if the business is in existence in that pr evious year .
(5) Wher e a par t of the r ights is sold and sub-section (4) does not apply, the
amount of the deduction to be allowed under sub-section (1) shall be ar r ived at
by
(a) subtr acting the pr oceeds of the sale (so far as they consist of capital
sums) fr om the amount of the cost of acquisition of the r ights
r emaining unallowed; and
(b) dividing the r emainder by the number of r elevant pr evious year s
which have not expir ed at the beginning of the pr evious year dur ing
which the r ights ar e sold.]
80
other wise tr ansfer s the r ights to the amalgamated company (being an Indian
company),
(i) the pr ovisions of sub-sections (3) and (4) shall not apply in the case of
the amalgamating company; and
mating company if the latter had not so sold or other wise tr ansfer r ed
the r ights.]
81
[(7) Wher e in a scheme of demer ger , the demer ged company sells or other wise
tr ansfer s the r ights to the r esulting company (being an Indian company),
(i) the pr ovisions of sub-sections (3) and (4) shall not apply in the case of
the demer ged company; and
r esulting company as they would have applied to the demer ged
company, if the latter had not sold or other wise tr ansfer r ed the
r ights.]
82
[Expenditure on know-how.
35AB. (1) Subject to the pr ovisions of sub-section (2), wher e the assessee has
paid in any pr evious year
83
[r elevant to the assessment year commencing
on or befor e the 1st day of Apr il, 1998] any lump sum consider ation for
acquir ing
84
any know-how for use for the pur poses of his business, one-sixth of
84. For the meaning of ter m acquir ing, see Taxmanns Dir ect Taxes Manual, Vol. 3.
the amount so paid shall be deducted in computing the pr ofits and gains of the
business for that pr evious year , and the balance amount shall be deducted in
equal instalments for each of the five immediately succeeding pr evious year s.
(2) Wher e the know-how r efer r ed to in sub-section (1) is developed in a
labor ator y, univer sity or institution r efer r ed to in sub-section (2B) of section 32A,
one-thir d of the said lump sum consider ation paid in the pr evious year by the
assessee shall be deducted in computing the pr ofits and gains of the business for
that year , and the balance amount shall be deducted in equal instalments for
each of the two immediately succeeding pr evious year s.
85
[(3) Where there is a transfer of an undertaking under a scheme of amalgamation
or demer ger and the amalgamating or the demer ged company is entitled to a
deduction under this section, then, the amalgamated company or the r esulting
company, as the case may be, shall be entitled to claim deduction under this
section in r espect of such under taking to the same extent and in r espect of the
r esidual per iod as it would have been allowable to the amalgamating company
or the demer ged company, as the case may be, had such amalgamation or
demer ger not taken place.]
Explan ation .For the pur poses of this section, know-how means any industr ial
infor mation or technique likely to assist in the manufactur e or pr ocessing of
goods or in the wor king of a mine, oil well or other sour ces of miner al deposits
(including the sear ching for , discover y or testing of deposits or the winning of
access ther eto).]
86
[Expenditure for obtaining licence to operate telecommunication services.
35ABB. (1) In r espect of any expenditur e, being in the natur e of capital expendi-
tur e, incur r ed for acquir ing any r ight to oper ate telecommunication
ser vices
87
[eit her befor e t he commencement of t he business t o oper at e
telecommunication ser vices or ther eafter at any time dur ing any pr evious year ]
and for which payment has actually been made to obtain a licence, ther e shall,
subject to and in accor dance with the pr ovisions of this section, be allowed for
each of the r elevant pr evious year s, a deduction equal to the appr opr iate fr action
of the amount of such expenditur e.
88
[(i) r elevant pr evious year s means,
(A) in a case wher e the licence fee is actually paid befor e the
commencement of the business to oper ate telecommunication
ser vices, the pr evious year s beginning with the pr evious year in
which such business commenced;
S. 35ABB I.T. ACT, 1961 1.218
88. Substituted by the Finance Act, 1999, w.r .e.f. 1-4-1996. Pr ior to its substitution, clause (i),
(i) r elevant pr evious year s means the pr evious year s beginning with the pr evious
year in which the licence fee is actually paid and the subsequent pr evious year or
year s dur ing which the licence, for which the fee is paid, shall be in for ce;
(B) in any other case, the pr evious year s beginning with the pr evious
year in which the licence fee is actually paid,
and the subsequent pr evious year or year s dur ing which the licence,
for which the fee is paid, shall be in for ce;]
(ii) appr opr iate fr action means the fr action the numer ator of which is
one and the denominator of which is the total number of the r elevant
pr evious year s;
(iii) payment has actually been made means the actual payment of
expenditur e ir r espective of the pr evious year in which the liability for
the expenditur e was incur r ed accor ding to the method of accounting
r egular ly employed by the assessee.
(2) Wher e the licence is tr ansfer r ed and the pr oceeds of the tr ansfer (so far as
they consist of capital sums) ar e less than the expenditur e incur r ed r emaining
unallowed, a deduction equal to such expenditur e r emaining unallowed, as
r educed by the pr oceeds of the tr ansfer , shall be allowed in r espect of the
pr evious year in which the licence is tr ansfer r ed.
(3) Wher e the whole or any par t of the licence is tr ansfer r ed and the pr oceeds of
the tr ansfer (so far as they consist of capital sums) exceed the amount of the
expenditur e incur r ed r emaining unallowed, so much of the excess as does not
exceed the differ ence between the expenditur e incur r ed to obtain the licence
and the amount of such expenditur e r emaining unallowed shall be char geable
to income-tax as pr ofits and gains of the business in the pr evious year in which
the licence has been tr ansfer r ed.
Explan ation .Wher e the licence is tr ansfer r ed in a pr evious year in which the
business is no longer in existence, the pr ovisions of this sub-section shall apply
as if the business is in existence in that pr evious year .
(4) Wher e the whole or any par t of the licence is tr ansfer r ed and the pr oceeds of
the tr ansfer (so far as they consist of capital sums) ar e not less than the amount
of expenditur e incur r ed r emaining unallowed, no deduction for such expendi-
tur e shall be allowed under sub-section (1) in r espect of the pr evious year in
which the licence is tr ansfer r ed or in r espect of any subsequent pr evious year or
year s.
(5) Wher e a par t of the licence is tr ansfer r ed in a pr evious year and sub-section
(3) does not apply, the deduction to be allowed under sub-section (1) for
expenditur e incur r ed r emaining unallowed shall be ar r ived at by
(a) subtr acting the pr oceeds of tr ansfer (so far as they consist of capital
sums) fr om the expenditur e r emaining unallowed; and
(b) dividing the r emainder by the number of r elevant pr evious year s
which have not expir ed at the beginning of the pr evious year dur ing
which the licence is tr ansfer r ed.
(6) Wher e, in a scheme of amalgamation, the amalgamating company sells or
other wise tr ansfer s the licence to the amalgamated company (being an Indian
company),
(i) the pr ovisions of sub-sections (2), (3) and (4) shall not apply in the case
of the amalgamating company; and
1.219 CH. IV - COMPUTATION OF BUSINESS INCOME S. 35ABB
mating company if the latter had not tr ansfer r ed the licence.]
89
[(7) Wher e, in a scheme of demer ger , the demer ged company sells or other wise
tr ansfer s the licence to the r esulting company (being an Indian company),
(i) the pr ovisions of sub-sections (2), (3) and (4) shall not apply in the case
of the demer ged company; and
company if the latter had not tr ansfer r ed the licence.]
90
[(8) Wher e a deduction for any pr evious year under sub-section (1) is claimed
and allowed in r espect of any expenditur e r efer r ed to in that sub-section, no
deduction shall be allowed under sub-section (1) of section 32 for the same
pr evious year or any subsequent pr evious year .]
91
[Expendit ur e on eligible pr oj ect s or schemes.
92
35AC. (1) Wher e an assessee incur s any expenditur e by way of payment of any
sum to a public sector company or a local author ity or to an association
or institution appr oved
93
by the National Committee
94
for car r ying out any
eligible pr oject or scheme, the assessee shall, subject to the pr ovisions of this
section, be allowed a deduction of the amount of such expenditur e incur r ed
dur ing the pr evious year :
Provided that a company may, for claiming the deduction under this sub-section,
incur expenditur e either by way of payment of any sum as afor esaid or dir ectly
on the eligible pr oject or scheme.
(2) The deduction under sub-section (1) shall not be allowed unless the assessee
fur nishes along with his r etur n of income a cer tificate
95
(a) wher e the payment is to a public sector company or a local author ity
or an association or institution r efer r ed to in sub-section (1), fr om
such public sector company or local author ity or , as the case may be,
association or institution;
S. 35AC I.T. ACT, 1961 1.220
92. See r ules 11F to 11-O and For m Nos. 58A and 58B for Rules r elating to National
Committee for Pr omotion of Social and Economic Welfar e.
93. The pr escr ibed author ity under r ule 11L is Secr etar y to National Committee for Pr omo-
tion of Social and Economic Welfar e, Depar tment of Revenue, Gover nment of India. See
r ule 11L for for m of application (in two sets) to be submitted for appr oval of association/
institution or for r ecommendation of pr oject/ scheme.
94. For constitution of National Committee for Pr omotion of Social and Economic Welfar e
and appoint ment of member s t her eof, see Taxmanns Dir ect Taxes Cir cu lar s and
Taxmanns Year ly Tax Digest & Refer encer .
95. See r ule 11-O(1) and For m No. 58A for cer tificate of expenditur e by way of payment qua
eligible pr ojects/ schemes fr om public sector company/ local author ity, etc.
96
(b) in any other case, fr om an accountant, as defined in the Explan ation
below sub-section (2) of section 288,
in such for m, manner and containing such par ticular s (including par ticular s
r elating to the pr ogr ess in the wor k r elating to the eligible pr oject or scheme
dur ing the pr evious year ) as may be pr escr ibed.
97
[Explan ation .The deduction, to which the assessee is entitled in r espect of any
sum paid to a public sector company or a local author ity or to an association or
institution for car r ying out the eligible pr oject or scheme r efer r ed to in this
section applies, shall not be denied mer ely on the gr ound that subsequent to the
payment of such sum by the assessee,
(a) the appr oval gr anted to such association or institution has been
withdr awn; or
(b) the notification notifying the eligible pr oject or scheme car r ied out by
the public sector company or local author ity or association or institu-
tion has been withdr awn.]
(3) Wher e a deduction under this section is claimed and allowed for any
assessment year in r espect of any expenditur e r efer r ed to in sub-section (1),
deduction shall not be allowed in r espect of such expenditur e under any other
pr ovision of this Act for the same or any other assessment year .
98
[(4) Wher e an association or institution is appr oved by the National Committee
under sub-section (1), and subsequently
(i) that Committee is satisfied that the pr oject or the scheme is not being
car r ied on in accor dance with all or any of the conditions subject to
which appr oval was gr anted; or
(ii) such association or institution, to which appr oval has been gr anted,
has not fur nished to the National Committee, after the end of each
1.221 CH. IV - COMPUTATION OF BUSINESS INCOME S. 35AC
96. See r ule 11-O(2) and For m No. 58B for cer tificate of payment/ expenditur e dir ectly
incur r ed by company qua eligible pr ojects/ schemes fr om char ter ed accountant.
98. Substituted by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004. Pr ior to their substitution,
sub-sections (4) and (5), as inser ted by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996, r ead
as under :
(4) Wher e an association or institution is appr oved by the National Committee under sub-
section (1), and subsequently that Committee is satisfied that the pr oject or the scheme is
not being car r ied on in accor dance with all or any of the conditions subject to which
appr oval was gr anted, it may, at any time, after giving a r easonable oppor tunity of showing
cause against t he pr oposed wit hdr awal t o t he concer ned associat ion or inst it ut ion,
withdr aw the appr oval.
(5) Wher e any pr oject or scheme has been notified as an eligible pr oject or scheme under
clause (b) of the Explan ation and subsequently the National Committee is satisfied that the
pr oject or the scheme is not being car r ied out in accor dance with all or any of the
conditions subject to which such pr oject or scheme was notified, such notification may
be withdr awn in the same manner in which it was issued:
Provided that a r easonable oppor tunity of showing cause against the pr oposed with-
dr awal shall be given by the National Committee to the concer ned association, institution,
public sector company or the local author ity, as the case may be.
financial year , a r epor t in such for m and setting for th such par ticular s
and within such time as may be pr escr ibed
99
,
the National Committee may, at any time, after giving a r easonable oppor tunity
of showing cause against the pr oposed withdr awal to the concer ned association
or institution, withdr aw the appr oval:
Provided that a copy of the or der withdr awing the appr oval shall be for war ded
by the National Committee to the Assessing Officer having jur isdiction over the
concer ned association or institution.
(5) Wher e any pr oject or scheme has been notified as an eligible pr oject or
scheme under clause (b) of the Explan ation , and subsequently
(i) the National Committee is satisfied that the pr oject or the scheme is
not being car r ied on in accor dance with all or any of the conditions
subject to which such pr oject or scheme was notified; or
(ii) a r epor t in r espect of such eligible pr oject or scheme has not been
fur nished after the end of each financial year , in such for m and
setting for th such par ticular s and within such time as may be
pr escr ibed
1
,
such notification may be withdr awn in the same manner in which it was issued:
Provided that a r easonable oppor tunity of showing cause against the pr oposed
withdr awal shall be given by the National Committee to the concer ned associa-
tion, institution, public sector company or local author ity, as the case may be:
Provided further that a copy of the notification by which the notification of the
eligible pr oject or scheme is withdr awn shall be for war ded to the Assessing
Officer having jur isdiction over the concer ned association, institution, public
sector company or local author ity, as the case may be, car r ying on such eligible
pr oject or scheme.]
2
[(6) Notwithstanding anything contained in any other pr ovision of this Act,
wher e
(i) the appr oval of the National Committee, gr anted to an association or
institution, is withdr awn under sub-section (4) or the notification in
r espect of eligible pr oject or scheme is withdr awn in the case of a
public sector company or local author ity or an association or institu-
tion under sub-section (5); or
(ii) a company has claimed deduction under the pr oviso to sub-section (1)
in r espect of any expenditur e incur r ed dir ectly on the eligible pr oject
or scheme and the appr oval for such pr oject or scheme is withdr awn
by the National Committee under sub-section (5),
the total amount of the payment r eceived by the public sector company or the
local author ity or the association or the institution, as the case may be, in r espect
S. 35AC I.T. ACT, 1961 1.222
99. See r ule 11MA and For m No. 58C.
1. See r ule 11MAA and For m No. 58D.
of which such company or author ity or association or institution has fur nished
a cer tificate r efer r ed to in clause (a) of sub-section (2) or the deduction claimed
by a company under the pr oviso to sub-section (1) shall be deemed to be the
income of such company or author ity or association or institution, as the case
may be, for the pr evious year in which such appr oval or notification is withdr awn
and tax shall be char ged on such income at the maximum mar ginal r ate in for ce
for that year .]
(a) National Committee means the Committee constituted by the
Centr al Gover nment, fr om amongst per sons of eminence in public
life, in accor dance with the r ules made under this Act;
(b) eligible pr oject or scheme means such pr oject or scheme for
pr omoting the social and economic welfar e of, or the uplift of, the
public as the Centr al Gover nment may, by notification in the Official
Gazette, specify
3
in this behalf on the r ecommendations of the
National Committee.]
Export markets development allowance.
35B.
4
[Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, as am en ded
by th e Direct Tax Laws (Am en dm en t) Act, 1989, w.e.f. 1-4-1989. Origin al
section 35B was in serted by th e Fin an ce Act, 1968, w.e.f. 1-4-1968.]
Agricultural development allowance.
35C.
5
[Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, as am en ded by
th e Direct Tax Laws (Amen dmen t) Act, 1989, w.e.f. 1-4-1989. Origin al section
35C was in serted by th e Fin an ce Act, 1968, w.e.f. 1-4-1968.]
Rural development allowance.
35CC.
6
[Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, as am en ded by
th e Direct Tax Laws (Am en dm en t) Act, 1989, w.e.f. 1-4-1989. Origin al
section 35CC was in serted by th e Fin an ce (No. 2) Act, 1977, w.e.f. 1-9-1977.]
1.223 CH. IV - COMPUTATION OF BUSINESS INCOME S. 35CC
3. For notified eligible pr ojects and schemes, see Taxmanns Dir ect Taxes Cir cular s and
Taxmanns Year ly Tax Digest & Refer encer .
4. Pr ior to its omission, section 35B was amended by the Finance Act, 1973, with r etr ospec-
tive effect fr om 1-4-1968, Dir ect Taxes (Amendment) Act, 1974, with r etr ospective effect
fr om 1-4-1973, Finance Act, 1978, w.e.f. 1-4-1978, Finance Act, 1979, w.e.f. 1-4-1980,
Finance (No. 2) Act, 1980, w.e.f. 1-4-1981 and Finance Act, 1983, w.e.f. 1-4-1983.
5. Pr ior to its omission, section 35C was amended by the Taxation Laws (Amendment)
Act, 1975, w.e.f. 1-4-1976, Finance Act, 1983, w.e.f. 1-4-1984 and Finance Act, 1984, w.e.f.
1-4-1984.
6. Pr ior to its omission, section 35CC was amended by the Finance Act, 1983, w.e.f. 1-4-1983
and Finance Act, 1985, w.e.f. 17-3-1985.
7
[Expenditure by way of payment to associations and institutions for carrying out
rural development programmes.
8
35CCA.
9
[(1) Wher e an assessee incur s any expenditur e by way of payment
of any sum
(a) to an association or institution, which has as its object the under taking
of any pr ogr amme of r ur al development, to be used for car r ying out
any pr ogr amme of r ur al development appr oved by the pr escr ibed
author ity
10
; or
(b) to an association or institution, which has as its object the tr aining
of per sons for implementing pr ogr ammes of r ur al development;
11
[or]
11
[(c) to a r ur al development fund set up and notified
12
by the Centr al
Gover nment in this
13
[behalf; or ]
S. 35CCA I.T. ACT, 1961 1.224
7. Reintr oduced by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Section
35CCA was ear lier omitted by the Dir ect Tax Laws (Amendment) Act, 1987, with effect
fr om the same date. Or iginal section 35CCA was inser ted by the Finance Act, 1978, w.e.f.
1-6-1978.
For guidelines for appr oval of pr ogr ammes of r ur al development, see Taxmanns Dir ect
Taxes Cir cular s.
10. The pr escr ibed author ity under r ule 6AAA to appr ove the pr ogr amme of r ur al develop-
ment shall be the Committee consisting of the following, namely :
(a) The Chief Commissioner or Commissioner of Income-tax who exer cises jur isdic-
tion over the State or , as the case may be, the Union ter r itor y in which the
pr ogr amme of r ur al development is to be car r ied out - Ch airm an ;
(b) An officer not below the r ank of a Secr etar y to the Gover nment of the State or , as
the case may be, the Union ter r itor y in which the pr ogr amme of r ur al development
is to be car r ied out - Mem ber.
The pr escr ibed author ity to appr ove an association or institution shall be the Committee
consisting of the following, namely:
(a) The Chief Commissioner or Commissioner of Income-tax, who exer cises jur isdic-
tion over the State or , as the case may be, the Union ter r itor y in which the pr incipal
office of the association or institution is situated - Ch airm an ;
(b) An Officer not below the r ank of a Secr etar y to the Gover nment of the State or , as
the case may be, the Union ter r itor y in which the pr incipal office of the association
or institution is situated - Member .
Wher e two or mor e Commissioner s exer cise jur isdiction over the State or , as the case may
be, the Union ter r itor y, the Boar d may, by notification in the Official Gazette, empower the
Chief Commissioner or Commissioner specified in this behalf to be the Chair man of the
Commit t ee.
See also Taxmanns Master Guide to Income-tax Act for r elevant notifications.
12. National Fund for Rur al Development has since been notified. For details, see Taxmanns
13. Substituted for behalf, by the Finance Act, 1995, w.e.f. 1-4-1996.
14
[(d) to the National Ur ban Pover ty Er adication Fund set up and notified
by the Centr al Gover nment in this behalf,]
the assessee shall, subject to the pr ovisions of sub-section (2), be allowed a
deduction of the amount of such expenditur e incur r ed dur ing the pr evious
year .]
15
[(2) The deduction under clause (a) of sub-section (1) shall not be allowed in
r espect of expenditur e by way of payment of any sum to any association or
institution r efer r ed to in the said clause unless the assessee fur nishes a cer tificate
fr om such association or institution to the effect that
(a) the pr ogr amme of r ur al development had been appr oved by the
pr escr ibed author ity befor e the 1st day of Mar ch, 1983; and
(b) wher e such payment is made after the 28th day of Febr uar y, 1983,
such pr ogr amme involves wor k by way of constr uction of any
building or other str uctur e (whether for use as a dispensar y, school,
tr aining or welfar e centr e, wor kshop or for any other pur pose) or the
laying of any r oad or the constr uction or bor ing of a well or tube-well
or the installation of any plant or machiner y, and such wor k has
commenced befor e the 1st day of Mar ch, 1983.]
16
[(2A) The deduction under clause (b) of sub-section (1) shall not be allowed in
r espect of expenditur e by way of payment of any sum to any association or
institution unless the assessee fur nishes a cer tificate fr om such association or
institution to the effect that
(a) the pr escr ibed author ity had appr oved the association or institution
befor e the 1st day of Mar ch, 1983; and
(b) the tr aining of per sons for implementing any pr ogr amme of r ur al
development had been star ted by the association or institution befor e
the 1st day of Mar ch, 1983.]
17
[Explan ation .The deduction, to which the assessee is entitled in r espect of any
sum paid to an association or institution for car r ying out the pr ogr amme of r ur al
development r efer r ed to in sub-section (1), shall not be denied mer ely on the
gr ound that subsequent to the payment of such sum by the assessee, the appr oval
gr anted to such pr ogr amme of r ur al development, or as the case may be, to the
association or institution has been withdr awn.]
18
[(2B) No cer tificate of the natur e r efer r ed to in sub-section (2) or sub-section
(2A) shall be issued by any association or institution unless such association or
institution has obtained fr om the pr escr ibed author ity author isation in wr iting
to issue cer tificates of such natur e.]
1.225 CH. IV - COMPUTATION OF BUSINESS INCOME S. 35CCA
15. Substituted by the Finance Act, 1983, w.e.f. 1-4-1983. Ear lier , it was amended by the
Finance Act, 1979, w.e.f. 1-6-1979.
Explan ation .For the pur poses of this section, pr ogr amme of r ur al develop-
ment shall have the meaning assigned to it in the Explan ation to sub-section (1)
of section 35CC.
deduction shall not be allowed in r espect of such expenditur e under section 35C
or section 35CC or section 80G or any other pr ovision of this Act for the same or
any other assessment year .]
19
[Expenditure by way of payment to associations and institutions for carrying
out programmes of conservation of natural resources.
35CCB.
20
[(1) Wher e an assessee incur s any expenditur e
21
[on or befor e the 31st
day of Mar ch, 2002] by way of payment of any sum
(a) to an association or institution, which has as its object the under taking
of any pr ogr amme of conser vation of natur al r esour ces or of affor e-
station, to be used for car r ying out any pr ogr amme of conser vation
of natur al r esour ces or affor estation appr oved
22
by the pr escr ibed
author ity
23
; or
(b) to such fund for affor estation as may be notified by the Centr al
Gover nment,
the assessee shall, subject to the pr ovisions of sub-section (2), be allowed a
deduction of the amount of such expenditur e incur r ed dur ing the pr evious year .]
(2) The deduction under
24
[clause (a) of] sub-section (1) shall not be allowed with
r espect to expenditur e by way of payment of any sum to any association or
institution, unless such association or institution is for the time being appr oved
in this behalf by the pr escr ibed author ity
25
:
Provided that the pr escr ibed author ity shall not gr ant such appr oval for mor e
than thr ee year s at a time.
deduction shall not be allowed in r espect of such expenditur e under any other
pr ovision of this Act for the same or any other assessment year .]
S. 35CCB I.T. ACT, 1961 1.226
date. Or iginal section 35CCB was inser ted by the Finance Act, 1982, w.e.f. 1-6-1982.
22. For list of appr oved associations or institutions, see Taxmanns Master Guide to Income-
tax Act.
23. The pr escr ibed author ity under r ule 6AAC is Secr etar y, Depar tment of Envir onment,
25. See r ule 6AAC. The pr escr ibed aut hor it y is Secr et ar y, Depar t ment of Envir onment ,
26
[Amortisation of certain preliminary expenses.
27
35D. (1) Wher e an assessee, being an Indian company or a per son (other than
a company) who is r esident in India, incur s, after the 31st day of Mar ch,
1970, any expenditur e specified in sub-section (2),
(i) befor e the commencement of his business, or
(ii) after the commencement of his business, in connection with the
extension of his
27a
[in dustrial] under taking or in connection with his
setting up a new
27a
[in dustrial] unit,
the assessee shall, in accor dance with and subject to the pr ovisions of this section,
be allowed a deduction of an amount equal to one-tenth of such expenditur e for
each of the ten successive pr evious year s beginning with the pr evious year in
which the business commences or , as the case may be, the pr evious year in which
the extension of the
27a
[in dustrial] under taking is completed or the new
27a
[in dustrial] unit commences pr oduction or oper ation :
28
[Provided that wher e an assessee incur s after the 31st day of Mar ch, 1998, any
expenditur e specified in sub-section (2), the pr ovisions of this sub-section shall
have effect as if for the wor ds an amount equal to one-tenth of such expenditur e
for each of the ten successive pr evious year s, the wor ds an amount equal to
one-fifth of such expenditur e for each of the five successive pr evious year s had
been substituted.]
(2) The expenditur e r efer r ed to in sub-section (1) shall be the expenditur e
specified in any one or mor e of the following clauses, namely :
(a) expenditur e in connection with
(i) pr epar ation of feasibility r epor t;
(ii) pr epar ation of pr oject r epor t;
(iii) conducting mar ket sur vey or any other sur vey necessar y for the
business of the assessee;
(iv) engineer ing ser vices r elating to the business of the assessee :
Provided that the wor k in connection with the pr epar ation of the
feasibility r epor t or the pr oject r epor t or the conducting of mar ket
sur vey or of any other sur vey or the engineer ing ser vices r efer r ed to
in this clause is car r ied out by the assessee himself or by a concer n
which is for the time being appr oved
29
in this behalf by the Boar d;
(b) legal char ges for dr afting any agr eement between the assessee and
any other per son for any pur pose r elating to the setting up or conduct
of the business of the assessee;
(c) wher e the assessee is a company, also expenditur e
(i) by way of legal char ges for dr afting the Memor andum and
Ar ticles of Association of the company;
1.227 CH. IV - COMPUTATION OF BUSINESS INCOME S. 35D
27a. Wor d industr ial shall be omitted by the Finance Act, 2008, w.e.f. 1-4-2009.
29. For list of appr oved concer ns, see Taxmanns Master Guide to Income-tax Act.
S. 35D I.T. ACT, 1961 1.228
(ii) on pr inting of the Memor andum and Ar ticles of Association;
(iii) by way of fees for r egister ing the company under the pr ovisions
(iv) in connection with the issue, for public subscr iption, of shar es in
or debentur es of the company, being under wr iting commission,
br oker age and char ges for dr afting, typing, pr inting and adver -
tisement of the pr ospectus;
(d) such other items of expenditur e (not being expenditur e eligible for
any allowance or deduction under any other pr ovision of this Act) as
may be pr escr ibed.
(3) Wher e the aggr egate amount of the expenditur e r efer r ed to in sub-section
(2) exceeds an amount calculated at two and one-half per cent
(a) of the cost of the pr oject, or
(b) wher e the assessee is an Indian company, at the option of the
company, of the capital employed in the business of the company,
the excess shall be ignor ed for the pur pose of computing the deduction allowable
under sub-section (1) :
30
[Provided that wher e the aggr egate amount of expenditur e r efer r ed to in sub-
section (2) is incur r ed after the 31st day of Mar ch, 1998, the pr ovisions of this sub-
section shall have effect as if for the wor ds two and one-half per cent, the wor ds
five per cent had been substituted.]
Explan ation .In this sub-section
(a) cost of the pr oject means
(i) in a case r efer r ed to in clause (i) of sub-section (1), the actual cost
of t he fixed asset s, being land, buildings, leaseholds, plant ,
machiner y, fur nitur e, fittings and r ailway sidings (including
expenditur e on development of land and buildings), which ar e
shown in the books of the assessee as on the last day of the
pr evious year in which the business of the assessee commences;
(ii) in a case r efer r ed to in clause (ii) of sub-section (1), the actual cost
of t he fixed asset s, being land, buildings, leaseholds, plant ,
machiner y, fur nitur e, fittings and r ailway sidings (including
expenditur e on development of land and buildings), which ar e
shown in the books of the assessee as on the last day of the
pr evious year in which the extension of the
30a
[in dustrial] under -
taking is completed or , as the case may be, the new
30a
[in dustrial]
unit commences pr oduction or oper ation, in so far as such fixed
assets have been acquir ed or developed in connection with
theextension of the
30a
[in dustrial] under taking or the setting up
of the new
30a
[in dustrial] unit of the assessee;
30a. Wor d industr ial shall be omitted by the Finance Act, 2008, w.e.f. 1-4-2009.
(b) capital employed in the business of the company means
(i) in a case r efer r ed to in clause (i) of sub-section (1), the aggr egate
of the issued shar e capital, debentur es and long-ter m bor r owings
as on the last day of the pr evious year in which the business of the
company commences;
(ii) in a case r efer r ed to in clause (ii) of sub-section (1), the aggr egate
of the issued shar e capital, debentur es and long-ter m bor r owings
as on the last day of the pr evious year in which the extension of
the
30b
[in dustrial] under taking is completed or , as the case may
be, the new
30b
[in dustrial] unit commences pr oduction or oper a-
tion, in so far as such capital, debentur es and long-ter m bor r ow-
ings have been issued or obtained in connection with the exten-
sion of the
30b
[in dustrial] under taking or the setting up of the new
30b
[in dustrial] unit of the company;
(c) long-ter m bor r owings means
(i) any moneys bor r owed by the company fr om Gover nment or the
Industr ial Finance Cor por ation of India or the Industr ial Cr edit
and Investment Cor por ation of India or any other financial
institution
31
[which is eligible for deduction under clause (viii) of
sub-section (1) of section 36] or any banking institution (not being
a financial institution r efer r ed to above), or
(ii) any moneys bor r owed or debt incur r ed by it in a for eign countr y
in r espect of the pur chase outside India of capital plant and
machiner y, wher e the ter ms under which such moneys ar e
bor r owed or the debt is incur r ed pr ovide for the r epayment
ther eof dur ing a per iod of not less than seven year s.
(4) Wher e the assessee is a per son other than a company or a co-oper ative society,
no deduction shall be admissible under sub-section (1) unless the accounts of the
assessee for the year or year s in which the expenditur e specified in sub-section
(2) is incur r ed have been audited by an accountant as defined in the Explan ation
below sub-section (2) of section 288, and the assessee fur nishes, along with his
r etur n of income for the fir st year in which the deduction under this section is
claimed, the r epor t of such audit in the pr escr ibed for m
32
duly signed and ver ified
by such accountant and setting for th such par ticular s as may be pr escr ibed.
(5) Wher e the under taking of an Indian company which is entitled to the
deduction under sub-section (1) is tr ansfer r ed, befor e the expir y of the per iod of
ten year s specified in sub-section (1), to another Indian company in a scheme of
amalgamation,
(i) no deduction shall be admissible under sub-section (1) in the case of
the amalgamating company for the pr evious year in which the
amalgamation takes place; and
30b. Wor d industr ial shall be omitted by the Finance Act, 2008, w.e.f. 1-4-2009.
31. Substituted for which is for the time being appr oved by the Centr al Gover nment for the
pur poses of clause (viii) of sub-section (1) of section 36 by the Finance Act, 2000, w.e.f.
1-4-2000.
32. See r ule 6AB and For m No. 3AE for audit r epor t to be filed by assessee other than company
or a co-oper ative society under section 35D(4).
S. 35DDA I.T. ACT, 1961 1.230
mating company if the amalgamation had not taken place.
33
[(5A) Wher e the under taking of an Indian company which is entitled to the
deduction under sub-section (1) is tr ansfer r ed, befor e the expir y of the per iod
specified in sub-section (1), to another company in a scheme of demer ger ,
the demer ged company for the pr evious year in which the demer ger
takes place; and
r esulting company, as they would have applied to the demer ged
company, if the demer ger had not taken place.]
assessment year in r espect of any expenditur e specified in sub-section (2), the
expenditur e in r espect of which deduction is so allowed shall not qualify for
deduction under any other pr ovision of this Act for the same or any other
assessment year .]
33
[Amortisation of expenditure in case of amalgamation or demerger.
35DD. (1) Wher e an assessee, being an Indian company, incur s any expenditur e,
on or after the 1st day of Apr il, 1999, wholly and exclusively for the
pur poses of amalgamation or demer ger of an under taking, the assessee shall be
allowed a deduction of an amount equal to one-fifth of such expenditur e for each
of the five successive pr evious year s beginning with the pr evious year in which
the amalgamation or demer ger takes place.
(2) No deduction shall be allowed in r espect of the expenditur e mentioned in sub-
section (1) under any other pr ovision of this Act.]
34
[Amortisation of expenditure incurred under voluntary retirement scheme.
35DDA. (1) Wher e an assessee incur s any expenditur e in any pr evious year
by way of payment of any sum to an employee
35
[in connection with]
his voluntar y r etir ement, in accor dance with any scheme or schemes of voluntar y
r etir ement, one-fifth of the amount so paid shall be deducted in computing the
pr ofits and gains of the business for that pr evious year , and the balance shall be
deducted in equal instalments for each of the four immediately succeeding
pr evious year s.
36
[(2) Wher e the assessee, being an Indian company, is entitled to the deduction
under sub-section (1) and the under taking of such Indian company entitled to the
deduction under sub-section (1) is tr ansfer r ed, befor e the expir y of the per iod
35. Substituted for at the time of by the Finance Act, 2005, w.r .e.f. 1-4-2004.
36. Sub-sections (2) to (6) substituted for sub-section (2) by the Finance Act, 2002, w.r .e.f.
1-4-2001. Pr ior to its substitution, sub-section (2) r ead as under :
(2) No deduction shall be allowed in r espect of the expenditur e mentioned in sub-section
(1) under any other pr ovision of this Act.
specified in that sub-section, to another Indian company in a scheme of
amalgamation, the pr ovisions of this section shall, as far as may be, apply to the
amalgamated company as they would have applied to the amalgamating company
if the amalgamation had not taken place.
(3) Wher e the under taking of an Indian company entitled to the deduction under
sub-section (1) is tr ansfer r ed, befor e the expir y of the per iod specified in that sub-
section, to another company in a scheme of demer ger , the pr ovisions of this
section shall, as far as may be, apply to the r esulting company, as they would have
applied to the demer ged company, if the demer ger had not taken place.
(4) Wher e ther e has been r eor ganisation of business, wher eby a fir m is succeeded
by a company fulfilling the conditions laid down in clause (xiii) of section 47 or
a pr opr ietar y concer n is succeeded by a company fulfilling the conditions laid
down in clause (xiv) of section 47, the pr ovisions of this section shall, as far as may
be, apply to the successor company, as they would have applied to the fir m or the
pr opr ietar y concer n, if r eor ganisation of business had not taken place.
section (1) in the case of the amalgamating company r efer r ed to in sub-section
(2), in the case of demer ged company r efer r ed to in sub-section (3) and in the case
of a fir m or pr opr ietar y concer n r efer r ed to in sub-section (4) of this section, for
the pr evious year in which amalgamation, demer ger or succession, as the case
may be, takes place.
section (1) under any other pr ovision of this Act.]]
37
[Deduction for expenditure on prospecting, etc., for certain minerals.
35E. (1) Wher e an assessee, being an Indian company or a per son (other than a
company) who is r esident in India, is engaged in any oper ations r elating to
pr ospecting for , or extr action or pr oduction of, any miner al and incur s, after the
31st day of Mar ch, 1970, any expenditur e specified in sub-section (2), the
assessee shall, in accor dance with and subject to the pr ovisions of this section, be
allowed for each one of the r elevant pr evious year s a deduction of an amount
equal to one-tenth of the amount of such expenditur e.
(2) The expenditur e r efer r ed to in sub-section (1) is that incur r ed by the assessee
after the date specified in that sub-section at any time dur ing the year of
commer cial pr oduction and any one or mor e of the four year s immediately
pr eceding that year , wholly and exclusively on any oper ations r elating to
pr ospecting for any miner al or gr oup of associated miner als specified in Par t A
or Par t B, r espectively, of the Seventh Schedule or on the development of a mine
or other natur al deposit of any such miner al or gr oup of associated miner als :
Provided that ther e shall be excluded fr om such expenditur e any por tion ther eof
which is met dir ectly or indir ectly by any other per son or author ity and any
sale, salvage, compensation or insur ance moneys r ealised by the assessee in
r espect of any pr oper ty or r ights br ought into existence as a r esult of the
expenditur e.
1.231 CH. IV - COMPUTATION OF BUSINESS INCOME S. 35E
(3) Any expenditur e
(i) on the acquisition of the site of the sour ce of any miner al or gr oup of
associated miner als r efer r ed to in sub-section (2) or of any r ights in or
over such site;
(ii) on the acquisition of the deposits of such miner al or gr oup of
associated miner als or of any r ights in or over such deposits; or
(iii) of a capital natur e in r espect of any building, machiner y, plant or
fur nitur e for which allowance by way of depr eciation is admissible
under section 32,
shall not be deemed to be expenditur e incur r ed by the assessee for any of the
pur poses specified in sub-section (2).
(4) The deduction to be allowed under sub-section (1) for any r elevant pr evious
year shall be
(a) an amount equal to one-tenth of the expenditur e specified in sub-
sect ion (2) (such one-t ent h being her eaft er in t his sub-sect ion
r efer r ed to as the instalment); or
(b) such amount as is sufficient to r educe to n il the income (as computed
befor e making the deduction under this section) of that pr evious year
ar ising fr om the commer cial exploitation [whether or not such
commer cial exploitation is as a r esult of the oper ations or develop-
ment r efer r ed to in sub-section (2)] of any mine or other natur al
deposit of the miner al or any one or mor e of the miner als in a gr oupof
associated miner als as afor esaid in r espect of which the expenditur e
was incur r ed,
whichever amount is less :
Provided that the amount of the instalment r elating to any r elevant pr evious
year , to the extent to which it r emains unallowed, shall be car r ied for war d and
added to the instalment r elating to the pr evious year next following and deemed
to be par t of that instalment, and so on, for succeeding pr evious year s, so,
however , that no par t of any instalment shall be car r ied for war d beyond the
tenth pr evious year as r eckoned fr om the year of commer cial pr oduction.
(a) oper ation r elating to pr ospecting means any oper ation under taken
for the pur poses of explor ing, locating or pr oving deposits of any
miner al, and includes any such oper at ion which pr oves t o be
infr uctuous or abor tive;
(b) year of commer cial pr oduction means the pr evious year in which as
a r esult of any oper ation r elating to pr ospecting, commer cial pr oduc-
tion of any miner al or any one or mor e of the miner als in a gr oup of
associated miner als specified in Par t A or Par t B, r espectively, of the
Seventh Schedule, commences;
(c) r elevant pr evious year s means the ten pr evious year s beginning
with the year of commer cial pr oduction.
no deduction shall be admissible under sub-section (1) unless the accounts of the
S. 35E I.T. ACT, 1961 1.232
assessee for the year or year s in which the expenditur e specified in sub-section
(2) is incur r ed have been audited by an accountant as defined in the Explan ation
below sub-section (2) of section 288, and the assessee fur nishes, along with
his r etur n of income for the fir st year in which the deduction under this section
is claimed, the r epor t of such audit in the pr escr ibed for m
38
duly signed and
ver ified by such accountant and setting for th such par ticular s as may be
pr escr ibed.
(7) Wher e the under taking of an Indian company which is entitled to the
amalgamation
the amalgamating company for the pr evious year in which the
amalgamation takes place; and
mating company if the amalgamation had not taken place.
39
[(7A) Wher e the under taking of an Indian company which is entitled to the
demer ger ,
the demer ged company for the pr evious year in which the demer ger
takes place; and
company, if the demer ger had not taken place.]
assessment year in r espect of any expenditur e specified in sub-section (2), the
expenditur e in r espect of which deduction is so allowed shall not qualify for
deduction under any other pr ovision of this Act for the same or any other
assessment year .]
Other deductions.
40
36. (1) The deductions pr ovided for in the following clauses shall be allowed
in r espect of the matter s dealt with ther ein, in computing the income
r efer r ed to in section 28
38. See r ule 6AB and For m No. 3AE for audit r epor t to be filed by assessee other than company
or co-oper ative society under section 35E(6).
40. See also Cir cular No. 4-P(LVIII-30), dated 25-11-1965, Cir cular No. 44(3)-IT/ 49, dated
12-2-1949, Cir cular No. 110, dated 13-4-1973, Letter [F. No. 44/ 13/ 64-ITJ], dated 6-9-1964,
Let t er [F. No. 216/ 6/ 77-IT(A-II)], dat ed 7-6-1978, Cir cular No. 403, dat ed 5-12-1984,
Cir cular No. 30(XLVII-18), dated 30-11-1964, Cir cular No. 14, dated 23-4-1969, Extr acts
fr om Minutes (Item 31) of Ninth Meeting of DTAC held on 5-11-1966, Cir cular No. 20, dated
13-6-1969, Ext r a c t s of In st r u c t ion No. 370 [F. No. 205/ 15/ 71-IT(A-II)], d a t e d
13-1-1972 and Letter [F. No. 10/ 66/ 61-IT(A-I)], dated 16-1-1962. For details, see Taxmanns
41
(i) the amount of any pr emium paid in r espect of insur ance against r isk
of damage
42
or destr uction
42
of stocks or stor es
42
used for the pur poses
of the business or pr ofession;
43
[(ia) the amount of any pr emium paid by a feder al milk co-oper ative
society to effect or to keep in for ce an insur ance on the life of the cattle
owned by a member of a co-oper ative society, being a pr imar y society
engaged in supplying milk r aised by its member s to such feder al milk
co-oper ative society;]
44
[(ib) the amount of any pr emium
45
[paid by an y m ode of paym en t oth er
th an cash ] by the assessee as an employer to effect or to keep in for ce
an insur ance on the health of his employees under a scheme fr amed
in this behalf by
(A) the Gener al Insur ance Cor por ation of India for med under section
9 of the Gener al Insur ance Business (Nationalisation) Act, 1972
(57 of 1972) and appr oved by the Centr al Gover nment; or
(B) any other insur er and appr oved by the Insur ance Regulator y and
Development Author ity established under sub-section (1) of sec-
tion 3 of the Insur ance Regulator y and Development Author ity
Act, 1999 (41 of 1999);]
46
(ii) any sum paid to an employee as bonus or commission
47
for ser vices
r ender ed, wher e such sum would not have been payable to him as
pr ofits or dividend if it had not been paid as bonus or commission;
48
[* * *]
49
[* * *]
S. 36 I.T. ACT, 1961 1.234
42. For the meaning of the ter ms/ expr essions damage, destr uction and stocks or stor es,
44. Substituted by the Finance Act, 2006, w.e.f. 1-4-2007. Pr ior to its substitution, clause (ib),
as inser ted by the Income-tax (Amendment) Act, 1986, w.e.f. 1-4-1987, r ead as under :
(ib) the amount of any pr emium paid by cheque by the assessee as an employer to effect
or to keep in for ce an insur ance on the health of his employees under a scheme
fr amed in this behalf by the Gener al Insur ance Cor por ation of India for med under
section 9 of the Gener al Insur ance Business (Nationalisation) Act, 1972 (57 of 1972)
and appr oved by the Centr al Gover nment.
45. Substituted for paid by cheque by the Finance Act, 2007, w.e.f. 1-4-2008.
47. For the meaning of the ter m commission, see Taxmanns Dir ect Taxes Manual, Vol. 3.
48. Fir st pr oviso omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Pr ior
to its omission, fir st pr oviso was inser ted by the Payment of Bonus (Amendment) Act, 1976,
with r etr ospective effect fr om 25-9-1975.
49. Second pr oviso omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
Pr ior to its omission, second pr oviso was substituted by the Payment of Bonus (Amend-
ment) Act, 1976, with r etr ospective effect fr om 25-9-1975.
(iia)
50
51
(iii) the amount of the inter est
52
paid in r espect of capital
52
bor r owed for
the pur poses of the business
52
or pr ofession :
53
[Provided that any amount of the inter est paid, in r espect of capital
bor r owed for acquisition of an asset for extension of existing business
or pr ofession (whether capitalised in the books of account or not); for
any period beginning from the date on which the capital was borrowed
for acquisition of the asset till the date on which such asset was fir st
put to use, shall not be allowed as deduction.]
Explan ation .Recur r ing subscr iptions paid per iodically by shar e-
holder s, or subscr iber s in Mutual Benefit Societies which fulfil such
conditions as may be pr escr ibed, shall be deemed to be capital
bor r owed within the meaning of this clause;
54
[(iiia) the pro rata amount of discount on a zer o coupon bond having r egar d
to the per iod of life of such bond calculated in the manner as may be
pr escr ibed
55
.
50. Pr ior to its omission, clause (iia), as inser ted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981
and later on amended by the Finance Act, 1984, w.e.f. 1-4-1984 and the Dir ect Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988, r ead as under :
(iia) a sum equal to one and one-thir d times the amount of the expenditur e incur r ed on
payment of any salar y for any per iod of employment befor e the 1st day of Mar ch,
1984 to an employee who, as at the end of the pr evious year ,
(a) is totally blind, or
(b) is subject to or suffer s fr om a per manent physical disability (other than
blindness) which has the effect of r educing substantially his capacity to
engage in a gainful employment or occupation :
Provided that the assessee pr oduces befor e the Assessing Officer , in r espect of the
fir st assessment year for which deduction is claimed in r elation to each such
employee under this clause,
(i) in a case r efer r ed t o in sub-clause (a), a cer tificate as to his total blindness
fr om a r egister ed medical pr actitioner being an oculist; and
(ii) in a case r efer r ed to in sub-clause (b), a cer tificate as to the per manent
physical disabilit y r efer r ed t o in t he said sub-clause fr om a r egist er ed
medical pr actitioner :
Provided further that nothing contained in this clause shall apply in the case of an
employee whose income in the pr evious year char geable under the head Salar ies
exceeds twenty thousand r upees.
Explan ation 1.In this clause, salar y includes the pay, allowances, bonus or
commission payable monthly or other wise.
Explan ation 2.For the r emoval of doubts, it is her eby declar ed that wher e a
deduction under this clause is allowed for any assessment year in r espect of any
expenditur e, deduction shall not be allowed in r espect of such expenditur e under
any other pr ovision of this Act for the same or any other assessment year ;
52. For the meaning of the ter ms inter est, capital and for the pur pose of the business, see
55. See r ules 8B and 8C and For m No. 5B.
Explan ation .For the pur poses of this clause, the expr essions
(i) discount means the differ ence between the amount r eceived or
r eceivable by the infr astr uctur e capital company or infr astr uc-
tur e capital fund or public sector company issuing the bond and
the amount payable by such company or fund or public sector
company on matur ity or r edemption of such bond;
(ii) per iod of life of the bond means the per iod commencing fr om
the date of issue of the bond and ending on the date of the
matur ity or r edemption of such bond;
(iii)
56
[***]]
57
(iv)
58
any sum paid
59
by the assessee as an employer by way of contr ibu-
tion towar ds a r ecognised pr ovident fund or an appr oved super an-
nuation fund, subject to such limits as may be pr escr ibed for the
pur pose of r ecognising the pr ovident fund or appr oving the super an-
nuation fund, as the case may be; and subject to such
60
conditions as
the Boar d may think fit to specify in cases wher e the contr ibutions ar e
not in the natur e of annual contr ibutions of fixed amounts or annual
contr ibutions fixed on some definite basis by r efer ence to the income
char geable under the head Salar ies or to the contr ibutions or to the
number of member s of the fund;
61
(v)
62
any sum paid

by the assessee as an employer by way of contr ibution
towar ds an appr oved gr atuity fund cr eated by him for the exclusive
benefit of his employees under an ir r evocable tr ust;
63
[(va) any sum r eceived by the assessee fr om any of his employees to which
the pr ovisions of sub-clause (x) of clause (24) of section 2 apply, if
such sum is cr edited by the assessee to the employees account in the
r elevant fund or funds on or befor e the due date.
Explan ation .For the pur poses of this clause, due date means the
date by which the assessee is r equir ed as an employer to cr edit
an employees cont r ibut ion t o t he employees account in t he
r elevant fund under any Act, r ule, or der or notification issued ther e-
under or under any standing or der , awar d, contr act of ser vice or
other wise;]
S. 36 I.T. ACT, 1961 1.236
56. Omitted by the Finance Act, 2006, w.e.f. 1-4-2006. Pr ior to its omission, clause (iii) r ead as
under :
(iii) infr astr uctur e capital company and infr astr uctur e capital fund shall have the
same meanings r espectively assigned to them in clauses (a) and (b) of Explan ation
1 t o clause (23G) of section 10;
58. See r ules 75, 87 and 88.
59. For the meaning of the expr ession any sum paid, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
60. For conditions specified by the Boar d, see Taxmanns Master Guide to Income-tax Act. See
also CIT v. Sirpur Paper Mills [1999] 103 Taxman 352 (SC).
61. See r ules 103 and 104.
64
(vi) in r espect of animals which have been used for the pur poses of the
business or pr ofession other wise than as stock-in-tr ade and have died
or become per manently useless for such pur poses, the differ ence
between the actual cost to the assessee of the animals and the
amount, if any, r ealised in r espect of the car casses or animals;
64
(vii) subject to the pr ovisions of sub-section (2), the amount of
65
[any
66
bad
debt or par t ther eof
66
which is wr itten off as ir r ecover able in the
accounts of the assessee for the pr evious year ]:
67
[Provided that in the case of
68
[an assessee] to which clause (viia)
applies, the amount of the deduction r elating to any such debt or par t
ther eof shall be limited to the amount by which such debt or par t
ther eof exceeds the cr edit balance in the pr ovision for bad and
doubtful debts account made under that clause.]
69
[Explan ation .For the pur poses of this clause, any bad debt or par t
ther eof wr itten off as ir r ecover able in the accounts of the assessee
shall not include any pr ovision for bad and doubtful debts made in the
accounts of the assessee;]
70
[(viia)
71
[
72
in r espect of any pr ovision for bad and doubtful debts made by
(a) a scheduled bank [not being
73
[* * *] a bank incor por ated by
or u nder t he laws of a cou nt r y ou t side India] or a non-
scheduled bank
74
[or a co-oper ative bank other than a pr imar y
65. Substituted for any debt, or par t ther eof, which is established to have become a bad debt
in t h e pr eviou s yea r b y t h e Dir ect Ta x La ws (Amen d men t ) Act , 1987, w.e.f.
1-4-1989.
66. For the meaning of the ter ms bad debt and any debt or par t ther eof, see Taxmanns
68. Substituted for a bank by the Finance Act, 1997, w.r .e.f. 1-4-1992.
71. Substituted by the Income-tax (Amendment) Act, 1986, w.e.f. 1-4-1987. Ear lier , above
opening par a of clause (viia) was substituted by the Finance Act, 1985, w.e.f. 1-4-1985. It
was also amended by the Finance Act, 1982, w.e.f. 1-4-1983.
72. Rule 6ABA pr ovides that the aggr egate aver age advances made by the r ur al br anches of
a scheduled bank shall be computed in the following manner , namely:
(a) the amounts of advances made by each r ur al br anch as outstanding at the end of the
last day of each month compr ised in the pr evious year shall be aggr egated separ ately;
(b) the sum so ar r ived at in the case of each such br anch shall be divided by the number
of months for which the outstanding advances have been taken into account for the
pur poses of clause (a);
(c) the aggr egate of the sums so ar r ived at in r espect of each of the r ur al br anches shall
be the aggr egate aver age advances made by the r ur al br anches of the scheduled
bank.
73. Wor ds a bank appr oved by the Centr al Gover nment for the pur poses of clause (viiia) or
omitted by the Finance Act, 1994, w.e.f. 1-4-1995.
S. 36 I.T. ACT, 1961 1.238
agr icultur al cr edit society or a pr imar y co-oper ative agr icultur al
and r ur al development bank], an amount
75
[not exceeding seven
and one-half per cent] of the total income (computed befor e
making any deduction under this clause and Chapter VIA) and an
amount not exceeding
76
[ten] per cent of the aggr egate aver age
advances made by the r ur al br anches of such bank computed in
the pr escr ibed manner :
77
[Provided that a scheduled bank or a non-scheduled bank
r efer r ed to in this sub-clause shall, at its option, be allowed in
any of the r elevant assessment year s, deduction in r espect of
any pr ovision made by it for any assets classified by the Reser ve
Bank of India as doubtful assets or loss assets in accor dance with
t he gu idelines issu ed by it in t his behalf, for an amou nt
not exceeding five per cent of the amount of such assets shown
in the books of account of the bank on the last day of the pr evious
year :]
78
[Provided further that for the r elevant assessment year s com-
mencing on or after the 1st day of Apr il, 2003 and ending befor e
the 1st day of Apr il, 2005, the pr ovisions of the fir st pr oviso shall
have effect as if for the wor ds five per cent, the wor ds ten per
cent had been substituted :]
79
[Provided also that a scheduled bank or a non-scheduled bank
r efer r ed to in this sub-clause shall, at its option, be allowed a
fur ther deduction in excess of the limits specified in the for egoing
pr ovisions, for an amount not exceeding the income der ived fr om
r edemption of secur ities in accor dance with a scheme fr amed by
the Centr al Gover nment:
Provided also that no deduction shall be allowed under the thir d
pr oviso unless such income has been disclosed in the r etur n of
income under the head Pr ofits and gains of business or pr ofes-
sion. ]
80
[Explan ation .For the pur poses of this sub-clause, r elevant
assessment year s means the five consecutive assessment year s
commencing on or after the 1st day of Apr il, 2000 and ending
befor e the 1st day of Apr il, 2005;]
(b) a bank, being a bank incor por ated by or under the laws of a
countr y outside India, an amount not exceeding five per cent of
the total income (computed befor e making any deduction under
this clause and Chapter VIA);]
75. Substituted for not exceeding five per cent by the Finance Act, 2002, w.e.f. 1-4-2003.
76. Subst it ut ed for four by t he Finance Act , 1994, w.e.f. 1-4-1995. Ear lier four was
substituted for two by the Finance Act, 1993, w.e.f. 1-4-1994.
81
[(c) a public financial institution or a State financial cor por ation or a
State industr ial investment cor por ation, an amount not exceed-
ing five per cent of the total income (computed befor e making
any deduction under this clause and Chapter VI-A) :]
82
[Provided that a public financial institution or a State financial
cor por ation or a State industr ial investment cor por ation r efer r ed
to in this sub-clause shall, at its option, be allowed in any of the two
consecutive assessment year s commencing on or after the 1st
day of Apr il, 2003 and ending befor e the 1st day of Apr il, 2005,
deduction in r espect of any pr ovision made by it for any assets
classified by the Reser ve Bank of India as doubtful assets or loss
assets in accor dance with the guidelines issued by it in this behalf,
of an amount not exceeding ten per cent of the amount of such
assets shown in the books of account of such institution or
cor por ation, as the case may be, on the last day of the pr evious
year .]
83
[(i) non-scheduled bank means a
84
banking company as defined in
1949), which is not a scheduled bank;]
85
[(ia)] r ur al br anch means a br anch of a scheduled bank
86
[or a non-
scheduled bank] situated in a place which has a population of not
mor e than ten thousand accor ding to the last pr eceding census of
which the r elevant figur es have been published befor e the fir st
day of the pr evious year ;
87
[(ii) scheduled bank means the State Bank of India constituted
under the State Bank of India Act, 1955 (23 of 1955), a subsidiar y
bank as defined in the State Bank of India (Subsidiar y Banks)
Act, 1959 (38 of 1959), a cor r esponding new bank constituted
under section 3 of the Banking Companies (Acquisition and
Tr ansfer of Under takings) Act, 1970 (5 of 1970), or under section
3 of the Banking Companies (Acquisition and Tr ansfer of Under -
84. Section 5(c) of the Banking Regulation Act, 1949, defines banking company as follows :
(c) banking company means any company which tr ansacts the business of bankingin
India.
Explan ation .Any company which is engaged in the manufactur e of goods or
car r ies on any tr ade and which accepts deposits of money fr om the public mer ely
for the pur pose of financing its business as such manufactur er or tr ader shall not
be deemed to tr ansact the business of banking within the meaning of this clause;
85. Reletter ed by the Finance Act, 1982, w.e.f. 1-4-1983.
87. Substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Ear lier it was
takings) Act, 1980 (40 of 1980), or any other bank being a bank
included in the Second Schedule to the Reser ve Bank of India Act,
1934 (2 of 1934)
88
[***];]
89
[(iii) public financial institution shall have the meaning assigned to it
in section 4A
90
(iv) State financial cor por ation means a financial cor por ation
established under section 3 or section 3A or an institution notified
under section 46 of the State Financial Cor por ations Act, 1951 (63
of 1951);
(v) State industr ial investment cor por ation means a Gover nment
company
91
within the meaning of section 617 of the Companies
Act, 1956 (1 of 1956), engaged in the business of pr oviding long-
ter m finance for industr ial pr ojects and
92
[eligible for deduction
under clause (viii) of this sub-section];]
93
[(vi) co-oper ative bank, pr imar y agr icultur al cr edit society and
pr imar y co-oper ative agr icultur al and r ur al development bank
shall have the meanings r espectively assigned to them in the
Explan ation to sub-section (4) of section 80P;]
94
[(viii) in respect of an y special reserve created an d m ain tain ed by a specified
en tity, an am oun t n ot exceedin g twen ty per cen t of th e profits derived
from eligible busin ess com puted un der th e h ead Profits an d gain s of
busin ess or profession (before m ak in g an y deduction un der th is
clause) carried to such reserve accoun t:
S. 36 I.T. ACT, 1961 1.240
88. Wor ds , but does not include a co-oper ative bank omitted by the Finance Act, 2007, w.e.f.
1-4-2007.
Appendix.
92. Substituted for appr oved by the Centr al Gover nment under clause (viii) of t his sub-
section by the Finance Act, 2000, w.e.f. 1-4-2000.
94. Substituted by the Finance Act, 2007, w.e.f. 1-4-2008. Pr ior to its substitution, clause (viii),
as amended by the Finance Act, 1966, w.e.f. 1-4-1966, Finance (No. 2) Act, 1967, w.e.f. 1-4-
1968, Finance Act, 1970, w.r .e.f. 1-4-1966, Finance (No. 2) Act, 1971, w.e.f. 1-4-1972, Finance
Act, 1974, w.e.f. 1-4-1975, Finance Act, 1979, w.e.f. 1-4-1980, Finance Act, 1981, w.e.f. 1-4-
1982, Finance Act, 1985, w.e.f. 1-4-1985, Finance (No. 2) Act, 1991, w.r .e.f. 1-4-1987, Finance
Act, 1992, w.r .e.f. 1-4-1987, Finance Act, 1995, w.e.f. 1-4-1996, Finance (No. 2) Act, 1996,
w.r .e.f. 1-4-1996/ 1-4-1997, Finance Act, 1997, w.e.f. 1-4-1998, Finance Act, 1999, w.e.f. 1-4-
2000 and Finance Act, 2006, w.e.f. 1-4-2007, r ead as under :
(viii) in r espect of any special r eser ve cr eated and maintained by a financial cor por ation
which is engaged in pr oviding long-ter m finance for industr ial or agr icultur al
development or development of infr astr uctur e facility in India or by a public
company for med and r egister ed in India with the main object of car r ying on the
business of pr oviding long-ter m finance for constr uction or pur chase of houses in
India for r esidential pur poses, an amount not exceeding for ty per cent of the pr ofits
der ived fr om such business of pr oviding long-ter m finance (computed under the
head Pr ofits and gains of business or pr ofession befor e making any deduction
under this clause) car r ied to such r eser ve account:
(Con td. on p. 1.241)
Provided th at wh ere th e aggregate of th e am oun ts carried to such
reserve accoun t from tim e to tim e exceeds twice th e am oun t of th e
paid up sh are capital an d of th e gen eral reserves of th e specified
en tity, n o allowan ce un der th is clause sh all be m ade in respect of such
excess.
Explanation.In th is clause,
(a) specified en titym ean s,
(i) a fin an cial corporation specified in section 4A of th e Com pa-
n ies Act, 1956 (1 of 1956)
95
;
(ii) a fin an cial corporation wh ich is a public sector com pan y;
(iii) a ban k in g com pan y;
(iv) a co-operative ban k oth er th an a prim ary agricultural credit
society or a prim ary co-operative agricultural an d rural devel-
opm en t ban k ;
(v) a h ousin g f in an ce com pan y; an d
(vi) an y oth er fin an cial corporation in cludin g a public com pan y;
(b) eligible busin essm ean s,
(i) in respect of th e specified en tity referred to in sub-clause (i) or
sub-clause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a),
th e busin ess of providin g lon g-term fin an ce for in dustrial or
agricultural developm en t or developm en t of in frastructure
facility in In dia or con struction or purch ase of h ouses in In dia
for residen tial purposes;
Provided that wher e the aggr egate of the amounts car r ied to such r eser ve account
fr om time to time exceeds twice the amount of the paid-up shar e capital and of the
gener al r eser ves of the cor por ation or , as the case may be, the company, no
allowance under this clause shall be made in r espect of such excess.
Explan ation .In this clause,
(a) financial cor por ation shall include a public company and a Gover nment
company;
(b) public company shall have the meaning assigned to it in section 3 of the
Companies Act, 1956 (1 of 1956);
(c) Gover nment company shall have the meaning assigned to it in section 617
(d) infr astr uctur e facility means
(i) an infr astr uctur e facility as defined in the Explan ation t o clause (i) of
sub-section (4) of section 80-IA, or any other public facility of a similar
natur e as may be notified by the Boar d in this behalf in the Official
Gazette and which fulfils the conditions as may be pr escr ibed;
(ii) an under taking r efer r ed to in clause (ii) or clause (iii) or clause (iv) of
sub-section (4) of section 80-IA; and
(iii) an under taking r efer r ed to in sub-section (10) of section 80-IB;
(e) long-ter m finance means any loan or advance wher e the ter ms under which
moneys ar e loaned or advanced pr ovide for r epayment along with inter est
ther eof dur ing a per iod of not less than five year s;
95. For text of section 4A of the Companies Act, 1956, See Appendix.
S. 36 I.T. ACT, 1961 1.242
(ii) in respect of th e specified en tity referred to in sub-clause (v) of
clause (a), th e busin ess of providin g lon g-term fin an ce for th e
con struction or purch ase of h ouses in In dia for residen tial
purposes; an d
(iii) in respect of th e specified en tity referred to in sub-clause (vi)
of clause (a), th e busin ess of providin g lon g-term fin an ce for
developm en t of in frastructure facility in In dia;
(c) ban k in g com pan y m ean s a com pan y to wh ich th e Ban k in g
Regulation Act, 1949 (10 of 1949) applies an d in cludes an y ban k
or ban k in g in stitution referred to in section 51 of th at Act;
(d) co-operative ban k , prim ary agricultural credit society an d
prim ary co-operative agricultural an d rural developm en t ban k
sh all h ave th e m ean in gs respectively assign ed to th em in th e
Explanation to sub-section (4) of section 80P;
(e) h ousin g fin an ce com pan ym ean s a public com pan y form ed or
registered in In dia with th e main object of carryin g on th e busin ess
of providin g lon g-term fin an ce for con struction or purch ase of
h ouses in In dia for residen tial purposes;
(f)
96
public compan ysh all h ave th e mean in g assign ed to it in section
3 of th e Com pan ies Act, 1956(1 of 1956) ;
(g) in frastructure facilitym ean s
(i) an in frastructure facility as defin ed in th e Explanation to
clause (i) of sub-section (4) of section 80-IA, or an y oth er public
facility of a sim ilar n ature as m ay be n otified
97
by th e Board in
th is beh alf in th e Official Gazette an d wh ich fulfils th e
con dition s as m ay be prescribed
98
;
(ii) an un dertak in g referred to in clause (ii) or clause (iii) or clause
(iv) or clause (vi) of sub-section (4) of section 80-IA; an d
(iii) an un dertak in g referred to in sub-section (10) of section 80-IB;
(h) lon g-term f in an cem ean s an y loan or advan ce wh ere th e term s
un der wh ich m on eys are loan ed or advan ced provide for repay-
m en t alon g with in terest th ereof durin g a period of n ot less th an
five years;]
(viiia)
99
[* * *]
96. For definition of public company, see Appendix.
97. For notified infr astr uctur e facilities, see Taxmanns Master Guide to Income-tax Act.
98. See r ule 6ABAA.
99. Omitted by the Finance Act, 1994, w.e.f. 1-4-1995. Pr ior to its omission, clause (viiia), as
inser ted by the Finance Act, 1982, w.e.f. 1-4-1983 and later on amended by the Finance Act,
1985, w.e.f. 1-4-1985, r ead as under :
(viiia) in r espect of any special r eser ve cr eated by a scheduled bank (other than a bank
incor por ated by or under the laws of a countr y outside India) which is engaged in
banking oper ations outside India, an amount not exceeding for ty per cent of the
t ot al income (comput ed befor e making any deduct ion under t his clause and
Chapter VI-A) car r ied to such r eser ve account :
(Con td. on p. 1.243)
1
[(ix) any expenditur e bon a fide incur r ed by a company for the pur pose of
pr omoting family planning amongst its employees :
Provided that wher e such expenditur e or any par t ther eof is of a
capital natur e, one-fifth of such expenditur e shall be deducted for the
pr evious year in which it was incur r ed; and the balance ther eof shall
be deducted in equal instalments for each of the four immediately
succeeding pr evious year s :
Provided further that the pr ovisions of sub-section (2) of section 32
and of sub-section (2) of section 72 shall apply in r elation to deduc-
tions allowable under this clause as they apply in r elation to deduc-
tions allowable in r espect of depr eciation :
Provided further that the pr ovisions of clauses (ii), (iii), (iv) and (v) of
sub-section (2)
2
[and sub-section (5)] of section 35, of sub-section (3)
of section 41 and of Explan ation 1 to clause (1) of section 43 shall, so
far as may be, apply in r elation to an asset r epr esenting expenditur e
of a capital natur e for the pur poses of pr omoting family planning as
they apply in r elation to an asset r epr esenting expenditur e of a capital
natur e on scientific r esear ch;]
(x)
3
[***]
4
[(xi) any expenditur e incur r ed by the assessee, on or after the 1st day of
Apr il, 1999 but befor e the 1st day of Apr il, 2000, wholly and exclusively
in r espect of a non-Y2K compliant computer system, owned by the
assessee and used for the pur poses of his business or pr ofession, so as
to make such computer system Y2K compliant computer system :
Provided that no such deduction shall be allowed in r espect of such
expenditur e under any other pr ovisions of this Act :
Provided further that no such deduction shall be admissible unless the
5
, along with the r etur n of
income, the r epor t of an accountant, as defined in the Explan ation
below sub-section (2) of section 288, cer tifying that the deduction has
been cor r ectly claimed in accor dance with the pr ovisions of this
clause.
Provided that, having r egar d to its capital str uctur e, the extent of its banking
oper ations outside India, its need for r esour ces for such oper ations outside India
and other r elevant factor s, the bank is, for the time being, appr oved by the Centr al
Gover nment for the pur poses of this clause.
Explan ation .For the pur poses of this clause, scheduled bank has the same
meaning as in clause (ii) of the Explan ation t o clause (viia);
3. Omitted by the Finance Act, 2007, w.e.f. 1-4-2008. Pr ior its omission, clause (x), as inser ted
by the Finance Act, 1989, w.e.f. 1-4-1989 and amended by the Finance Act, 2003, w.e.f.
(x) any sum paid by a public financial institution by way of contr ibution towar ds any
Exchange Risk Administr ation Fund set up by public financial institutions, either
jointly or separ ately.
Explan ation .For the pur poses of this clause, public financial institutions shall
have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);
5. See r ule 6ABB and For m No. 3BA.
(a) computer system means a device or collection of devices
including input and output suppor t devices and excluding calcu-
lator s which ar e not pr ogr ammable and capable of being used in
conjunction with external files, or more of which contain computer
pr ogr ammes, electr onic instr uctions, input data and output data,
that per for ms functions including, but not limited to, logic, ar ith-
metic, data stor age and r etr ieval, communication and contr ol;
(b) Y2K compliant computer system means a computer system
ca pa b le of cor r ect ly pr ocessin g, pr ovid in g or r eceivin g
data r elating to date within and between the twentieth and
twenty-fir st centur y;]
6
[(xii) an y expen diture (n ot bein g in th e n ature of capital expen diture)
in curred by a corporation or a body corporate, by wh atever n am e
called, if,
(a) it is con stituted or establish ed by a Cen tral, State or Provin cial Act;
(b) such corporation or body corporate, h avin g regard to th e objects
an d purposes of th e Act referred to in sub-clause (a), is n otified
6a
by th e Cen tral Govern men t in th e Official Gazette for th e purposes
of th is clause; an d
(c) th e expen diture is in curred for th e objects an d purposes auth orised
by th e Act un der wh ich it is con stituted or establish ed;]
7
[(xiii) any amount of banking cash tr ansaction tax paid by the assessee
dur ing the pr evious year on the taxable banking tr ansactions enter ed
into by him.
Explan ation .For the purposes of this clause, the expressions banking
cash tr ansaction tax and taxable banking tr ansaction shall have the
same meanings r espectively assigned to them under Chapter VII of
the Finance Act, 2005;]
8
[(xiv) an y sum paid by a public fin an cial in stitution by way of con tribution
to such credit guaran tee fun d trust for sm all in dustries as th e Cen tral
Govern m en t m ay, by n otification in th e Official Gazette
8a
, specify in
th is beh alf.
Explanation.For th e purposes of th is clause, public fin an cial in sti-
tution sh all h ave th e m ean in g assign ed to it in section 4A
9
of th e
Com pan ies Act, 1956 (1 of 1956).]
S. 36 I.T. ACT, 1961 1.244
6. Substituted by the Finance act, 2007, w.e.f. 1-4-2008. Pr ior to its substitution, clause (xii),
(xii) any expenditur e (not being in the natur e of capital expenditur e) incur r ed by a
cor por ation or a body cor por ate, by whatever name called, constituted or estab-
lished by a Centr al, State or Pr ovincial Act for the objects and pur poses author ised
by the Act under which such cor por ation or body cor por ate was constituted or
est ablished;
6a. For notified cor por ation or body cor por ate, see Taxmanns Master Guide to Income-tax
Act .
8a. For notified cr edit guar antee fund tr ust, see Taxmanns Master Guide to Income-tax Act.
The following clauses (xv) and (xvi) shall be inserted after clause (xiv)
of sub-section (1) of section 36 by the Finance Act, 2008, w.e.f.
1-4-2009 :
(xv) an am oun t equal to th e securities tran saction tax paid by th e assessee
in respect of th e taxable securities tran saction s en tered in to in th e
course of h is busin ess durin g th e previous year, if th e in com e arisin g
from such taxable securities tran saction s is in cluded in th e in com e
computed un der th e h ead Profits an d gain s of busin ess or profession .
Explanation.For th e purposes of th is clause, th e expression s secu-
rities tran saction taxan d taxable securities tran saction sh all h ave
th e m ean in gs respectively assign ed to th em un der Ch apter VII of th e
Fin an ce (No. 2) Act, 2004 (23 of 2004);
(xvi) an am oun t equal to th e com m odities tran saction tax paid by th e
assessee in respect of th e taxable com m odities tran saction s en tered
in to in th e course of h is busin ess durin g th e previous year, if th e
in com e arisin g from such taxable com m odities tran saction s is in -
cluded in th e in com e com puted un der th e h ead Profits an d gain s of
busin ess or profession .
Explanat ion.For th e purposes of th is clause, th e expression s
com m odities tran saction taxan d taxable com m odities tran saction
sh all h ave th e m ean in gs respectively assign ed to th em un der Ch apter
VII of th e Fin an ce Act, 2008.
10
(2) In making any deduction for a bad debt or par t ther eof, the following
pr ovisions shall apply
11
[(i) no such deduction shall be allowed unless such debt or par t ther eof
has been taken into account in computing the income of the assessee
of the pr evious year in which the amount of such debt or par t ther eof
is wr itten off or of an ear lier pr evious year , or r epr esents money lent
in the or dinar y cour se of the business of banking or money-lending
which is car r ied on by the assessee;]
(ii) if the amount ultimately r ecover ed on any such debt or par t of debt
is less than the differ ence between the debt or par t and the amount
so deducted, the deficiency shall be deductible in the pr evious year in
which the ultimate r ecover y is made;
(iii) any such debt or par t of debt may be deducted if it has alr eady
been wr itten off as ir r ecover able in the accounts of an ear lier
pr evious year
12
[(being a pr evious year r elevant to the assessment
year commencing on the 1st day of Apr il, 1988, or any ear lier
assessment year )], but the
13
[Assessing] Officer had not allowed it to
be deducted on the gr ound that it had not been established to have
become a bad debt in that year ;
13. Substituted for Income-tax, ibid., w.e.f. 1-4-1988.
S. 37 I.T. ACT, 1961 1.246
(iv) wher e any such debt or par t of debt is wr itten off as ir r ecover able in
the accounts of the pr evious year
14
[(being a pr evious year r elevant to
the assessment year commencing on the 1st day of Apr il, 1988, or any
ear lier assessment year )] and the
15
[Assessing] Officer is satisfied that
such debt or par t became a bad debt in any ear lier pr evious year not
falling beyond a per iod of four pr evious year s immediately pr eceding
the pr evious year in which such debt or par t is wr itten off, the
pr ovisions of sub-section (6) of section 155 shall apply;
16
[(v) wher e such debt or par t of debt r elates to advances made by an
assessee to which clause (viia) of sub-section (1) applies, no such
deduction shall be allowed unless the assessee has debited the amount
of such debt or par t of debt in that pr evious year to the pr ovision for
bad and doubtful debts account made under that clause.]
General.
17
37.
18
(1)
19
Any expenditur e
20
(not being expenditur e of the natur e descr ibed
in sections 30 to 36
21
[***] and not being in the natur e of capital expendi-
16. Substituted by the Finance Act, 1997, w.r .e.f. 1-4-1992. Pr ior to its substitution, clause (v),
as inser ted by the Finance Act, 1985, w.e.f. 1-4-1985, r ead as under :
(v) wher e such debt or par t of debt r elates to advances made by a bank to which clause
(viia) of sub-section (1) applies, no such deduction shall be allowed unless the bank
has debited the amount of such debt or par t of debt in that pr evious year to the
pr ovision for bad and doubtful debts account made under that clause.
17. See r ules 9A and 9B for computation of deduction in r espect of expenditur e on pr oduction
of featur e films/ expenditur e on acquisition of distr ibution r ights of film.
18. See also Letter [F. No. 27(30)-IT/ 59], dated 6-7-1959, Letter [F.No. 9/ 54/ 64-IT(A-I)], dated
2-9-1964, Let t er [F. No. 9/ 56/ 66-IT(A-I)], dat ed 17-1-1967, Let t er [F.No. 9/ 23/ 67-IT
(A-I)], dated 6-7-1967, Cir cular No. 5-P(XIV-I), dated 28-9-1963, Letter [F. No. 10/ 67/
65-IT(A-I)], dated 26-8-1965, Cir cular No. 16, dated 18-9-1969, Cir cular No. 64(XI-2), dated
27-1-1951, Cir cular No. 117, dated 22-8-1973, Letter [F. No. 10/ 25/ 63-IT(A-I)], dated
18-6-1964, Letter [F. No. 204/ 42/ 77-IT(A-II)], dated 28-9-1977, Cir cular No. 1-D(IV-53),
dated 20-1-1966, Cir cular No. 2, dated 8-3-1946, Letter [F. No. 35/ 5/ 65-IT(A-I)], dated
1-7-1965, Cir cular No. 69(XIX-3), dated 27-11-1951, Cir cular No. 4, dated 19-6-1950, Letter
[F. No. 10/ 80/ 64-IT(A-I)], dat ed 26-2-1965, Let t er [F. No. 10/ 92/ 64-IT(A-I)], dat ed
13-9-1965, Cir cular No. 3, dated 26-3-1946, Cir cular No. 22, dated 23-6-1943, Letter [F. No.
10/ 16/ 63-IT(A-I)], dated 14-5-1963, Letter [F. No. 10/ 8/ 63-IT(A-I)], dated 14-10-1963,
Let t er [F. No. 27(24)-IT/ 59], dat ed 19-5-1959, Let t er [F. No. 7/ 33/ 62-IT(A-I)], dat ed
28-8-1963, Cir cular No. 2-P(XI-6), dated 23-8-1965, Letter [F. No. 13A/ 20/ 68-IT(A-II)],
dat ed 3-10-1968, Let t er [F. No. 32/ 6/ 62-IT(A-I)], dat ed 16-1-1963, Ext r act s fr om t he
minutes of the 16th meeting of CDTAC held on 2-2-1972, Instr uction No. 943 [F. No. 204/
15/ 76-IT(A-II)], dated 2-4-1976, Cir cular No. 420, dated 4-6-1985, Cir cular No. 2(40)/ 66-
EAC, dated 16/ 17-1-1967, issued by the Ministr y of Commer ce, Cir cular No. 42 [C. No.
19(7)-IT/ 42], dated 22-8-1942, Cir cular No. 36 [R. Disc. No. 54(13)-IT/ 43], dated 24-11-1943,
Cir cular No. 48 [C. No. 19(22)-IT/ 42], dated 16-10-1942, Cir cular No. 192, dated 10-3-1976,
Cir cular No. 316, dated 30-9-1981, Boar ds Cir cular Letter No. 10/ 22/ 65 IT(A-I), dated
24-5-1965, Cir cular No. 651, dated 11-6-1993, Cir cular No. 671, dated 27-10-1993, Pr ess
Release, dated 23-1-2001, Instr uction No. 12/ 2006, dated 14-12-2006 and Cir cular No.
6/ 2007, dated 11-10-2007. For details, see Taxmanns Master Guide to Income-tax Act.
20. For the meaning of the ter m expenditur e, see Taxmanns Dir ect Taxes Manual, Vol. 3.
21. and section 80VV, which was inser ted by the Taxation Laws (Amendment) Act, 1975,
w.e.f. 1-4-1976, omitted by the Finance Act, 1985, w.e.f. 1-4-1986.
tur e
22
or per sonal expenses of the assessee), laid out or expended wholly
andexclusively
22
for the pur poses of the business
22
or pr ofession shall be allowed
in computing the income char geable under the head Pr ofits and gains of
business or pr ofession.
23
[Explan ation .For the r emoval of doubts, it is her eby declar ed that any
expenditur e incur r ed by an assessee for any pur pose which is an offence or
which is pr ohibited by law shall not be deemed to have been incur r ed for the
pur pose of business or pr ofession and no deduction or allowance shall be made
in r espect of such expenditur e.]
(2)
24
[* * *]
25
[
26
(2B) Notwithstanding anything contained in sub-section (1), no allowance
shall be made in r espect of expenditur e incur r ed by an assessee on adver tise-
ment in any souvenir , br ochur e, tr act, pamphlet or the like published by a
political par ty.]
22. For the meaning of the expr essions capital expenditur e, wholly and exclusively and for
the pur poses of the business, see Taxmanns Dir ect Taxes Manual, Vol. 3.
24. Omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Omitted sub-section (2) was substituted
for sub-sections (2) and (2A) by the Finance Act, 1992, w.e.f. 1-4-1993. Er stwhile sub-
sections (2) and (2A) wer e amended by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962, the
Finance Act, 1965, w.e.f. 1-4-1965, the Taxation Laws (Amendment) Act, 1967, w.e.f.
1-10-1967, the Finance Act, 1968, w.e.f. 1-4-1968, the Finance Act, 1970, w.e.f. 1-4-1970, the
Finance Act, 1976, w.e.f. 1-4-1977 and the Finance Act, 1983, w.r .e.f. 1-4-1976/ w.e.f. 1-4-
1984. Pr ior to its omission, sub-section (2), as substituted by the Finance Act, 1992, w.e.f.
1-4-1993, and later on amended by the Finance Act, 1994, w.r .e.f. 1-4-1993, r ead as under :
(2) Notwithstanding anything contained in sub-section (1), any expenditur e in the natur e
of enter tainment expenditur e incur r ed by any assessee dur ing

any pr evious year com-
mencing on or after the 1st day of Apr il, 1992 shall be allowed as follows :
(a) wher e the amount of such expenditur e does not exceed ten thousand r upees, the
whole of such amount;
(b) in any other case, ten thousand r upees as incr eased by a sum equal to fifty per cent
of such expenditur e in excess of ten thousand r upees.
Explan ation .For t he pu r poses of t his su b-sect ion, ent er t a inment expendit u r e
inclu des
(i) the amount of any allowance in the natur e of enter tainment allowance paid by the
assessee to any employee or other per son;
(ii) the amount of any expenditur e in the natur e of enter tainment expenditur e [not
being expenditur e incur r ed out of an allowance of the natur e r efer r ed to in clause
(i)] incur r ed for the pur poses of the business or pr ofession of the assessee by any
employee or other per son;
(iii) expenditur e on pr ovision of hospitality of ever y kind by the assessee to any per son,
whet her by way of pr ovision of food or bever ages or in any ot her manner
whatsoever and whether or not such pr ovision is made by r eason of any expr ess or
implied contr act or custom or usage of tr ade, but does not include expenditur e on
food or bever ages pr ovided by the assessee to his employees in office, factor y or
other place of their wor k.
25. Inser ted by the Taxation Laws (Amendment) Act, 1978, w.e.f. 1-4-1979. Or iginally, the sub-
section was inser ted by the Finance Act, 1970, w.e.f. 1-4-1970 which was later on omitted
26. See Cir cular No. 203, dated 16-7-1976, Cir cular No. 200, dated 28-6-1976 and Cir cular
No. 19, dated 13-6-1969. For details, see Taxmanns Dir ect Taxes Cir cular s.
(3)
27
[* * *]
(3A)
28
[* * *]
(3B)
29
[* * *]
(3C)
30
[* * *]
(3D)
31
[* * *]
(4)
32
[* * *]
S. 37 I.T. ACT, 1961 1.248
27. Omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Pr ior to its omission, sub-section (3), as
(3) Notwithstanding anything contained in sub-section (1), any expenditur e incur r ed by
an assessee after the 31st day of Mar ch, 1964, on adver tisement or on maintenance of any
r esidential accommodation including any accommodation in the natur e of a guest-house
or in connection with tr avelling by an employee or any other per son (including hotel
expenses or allowances paid in connection with such tr avelling) shall be allowed only to
the extent, and subject to such conditions, if any, as may be pr escr ibed.
28. Omitted by the Finance Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3A) was inser ted
by the Finance Act, 1983, w.e.f. 1-4-1984. Or iginal sub-section was inser ted by the Finance
Act, 1978, w.e.f. 1-4-1979 and was later omitted by the Finance (No. 2) Act, 1980, w.e.f.
1-4-1981.
29. Omitted by the Finance Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3B) was inser ted
Act, 1978, w.e.f. 1-4-1979, and was later omitted by the Finance (No. 2) Act, 1980, w.e.f.
1-4-1981.
30. Omitted by the Finance Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3C) was inser ted
1-4-1981.
31. Omitted by the Finance Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3D) was inser ted
1-4-1981.
(4) Notwithstanding anything contained in sub-section (1) or sub-section (3),
(i) no allowance shall be made in r espect of any expenditur e incur r ed by the assessee
after the 28th day of Febr uar y, 1970, on the maintenance of any r esidential
accommodation in the natur e of a guest-house (such r esidential accommodation
being her eafter in this sub-section r efer r ed to as guest-house);
(ii) in r elation to the assessment year commencing on the 1st day of Apr il, 1971, or any
subsequent assessment year , no allowance shall be made in r espect of depr eciation
of any building used as a guest-house or depr eciation of any assets in a guest-house:
Provided that the aggr egate of the expenditur e r efer r ed to in clause (i) and the amount of
any depr eciation r efer r ed to in clause (ii) shall, for the pur poses of this sub-section, be
r educed by the amount, if any, r eceived fr om per sons using the guest-house :
Provided further that nothing in this sub-section shall apply in r elation to any guest-house
maintained as a holiday home if such guest-house
(a) is maintained by an assessee who has thr oughout the pr evious year employed not
less than one hundr ed whole-time employees in a business or pr ofession car r ied on
by him; and
(b) is intended for the exclusive use of such employees while on leave.
(Con td. on p. 1.249)
(5)
33
[* * *]
Building, etc., partly used for business, etc., or not exclusively so used.
34
38. (1) Wher e a par t of any pr emises is used as dwelling house by the assessee,
(a) the deduction under sub-clause (i) of clause (a) of section 30, in
the case of r ent, shall be such amount as the
35
[Assessing] Officer
may deter mine having r egar d to the pr opor tionate annual value
of the par t used for the pur pose of the business or pr ofession, and
in the case of any sum paid for r epair s, such sum as is pr opor tionate
to the par t of the pr emises used for the pur pose of the business or
pr ofession;
(b) the deduction under clause (b) of section 30 shall be such sum as the
35
[Assessing] Officer may deter mine having r egar d to the par t so used.
(2) Wher e any building, machiner y, plant or fur nitur e is not exclusively used for
the pur poses of the business or pr ofession, the deductions under sub-clause (ii)
of clause (a) and clause (c) of section 30, clauses (i) and (ii) of section 31 and
36
[clause (ii) of sub-section (1)] of section 32 shall be r estr icted to a fair
pr opor tionate par t ther eof which the
37
[Assessing] Officer may deter mine,
having r egar d to the user of such building, machiner y, plant or fur nitur e for the
pur poses of the business or pr ofession.
Managing agency commission.
39. [Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f. 1-4-1989.]
(i) r esidential accommodation in the natur e of a guest-house shall include accommo-
dation hir ed or r eser ved by the assessee in a hotel for a per iod exceeding one
hundr ed and eighty-two days dur ing the pr evious year ; and
(ii) the expenditur e incur r ed on the maintenance of a guest-house shall, in a case wher e
the r esidential accommodation has been hir ed by the assessee, include also the r ent
paid in r espect of such accommodation.
inser ted by the Finance Act, 1983, w.r .e.f. 1-4-1979, r ead as under :
(5) For the r emoval of doubts, it is her eby declar ed that any accommodation, by whatever
name called, maintained, hir ed, r eser ved or other wise ar r anged by the assessee for the
pur pose of pr oviding lodging or boar ding and lodging to any per son (including any
employee or , wher e the assessee is a company, also any dir ector of, or the holder of any
other office in, the company), on tour or visit to the place at which such accommodation
is situated, is accommodation in the natur e of a guest-house within the meaning of sub-
section (4).
1-4-1988.
36. Substituted for clauses (i), (ii), (iia) and (iii) of sub-section (1) and sub-section (1A) by the
Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1988.
1-4-1988.
S. 40 I.T. ACT, 1961 1.250
Amounts not deductible.
40. Notwithstanding anything to the contr ar y in sections 30 to
38
[38], the
following amounts shall not be deducted in computing the income char ge-
able under the head Pr ofits and gains of business or pr ofession,
39
(a) in the case of any assessee
40
[(i) any inter est (not being inter est on a loan issued for public
subscr iption befor e the 1st day of Apr il, 1938), r oyalty, fees for
technical ser vices or other sum char geable under this Act, which
is payable,
(A) outside India; or
(B) in India to a non-r esident, not being a company or to a for eign
company,
on which tax is deductible at sour ce under Chapter XVII-B and
such tax has not been deducted or , after deduction, has not been
paid dur ing the pr evious year , or in the subsequent year befor e
the expir y of the time pr escr ibed under sub-section (1) of section
200 :
Provided that wher e in r espect of any such sum, tax has been
deducted in any subsequent year or , has been deducted in the
pr evious year but paid in any subsequent year after the expir y of
the time pr escr ibed under sub-section (1) of section 200, such
sum shall be allowed as a deduction in computing the income of
the pr evious year in which such tax has been paid.
Explan ation .For the pur poses of this sub-clause,
(A) r oyalty shall have the same meaning as in Explan ation 2 to
clause (vi) of sub-section (1) of section 9;
(B) fees for technical ser vices shall have the same meaning as
in Explan ation 2 to clause (vii) of sub-section (1) of section 9;
(ia) any inter est, commission or br oker age,
41
[r ent, r oyalty,] fees for
pr ofessional ser vices or fees for technical ser vices payable to a
r esident, or amounts payable to a contr actor or sub-contr actor ,
being r esident, for car r ying out any wor k (including supply of
labour for car r ying out any wor k), on which tax is deductible at
sour ce under Chapter XVII-B and such tax has not been deducted
or , after deduction,
41a
[h as n ot been paid,
38. Substituted for 39 by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
39. See also Cir cular No. 91/ 58/ 66-ITJ(19), dated 18-5-1967 and Cir cular No. 786, dated
40. Sub-clauses (i), (ia) and (ib) substituted for sub-clause (i) by the Finance (No. 2) Act, 2004,
w.e.f. 1-4-2005. Ear lier , sub-clause (i) was substituted by the Finance Act, 1988, w.e.f.
1-4-1989 and the Finance Act, 2003, w.e.f. 1-4-2004.
41a. Substituted for has not been paid dur ing the pr evious year , or in the subsequent year
befor e the expir y of the time pr escr ibed under sub-section (1) of section 200 : by the
Finance Act, 2008, w.r .e.f. 1-4-2005.
(A) in a case wh ere th e tax was deductible an d was so deducted
durin g th e last m on th of th e previous year, on or before th e
due date specified in sub-section (1) of section 139; or
(B) in an y oth er case, on or before th e last day of th e previous
year:]
41b
[Provided th at wh ere in respect of an y such sum , tax h as been
deducted in an y subsequen t year, or h as been deducted
(A) durin g th e last mon th of th e previous year but paid after th e
said due date; or
(B) durin g an y oth er m on th of th e previous year but paid after
th e en d of th e said previous year,
such sum sh all be allowed as a deduction in com putin g th e
in com e of th e previous year in wh ich such tax h as been paid.]
(i) commission or br oker age shall have the same meaning as
in clause (i) of the Explan ation to section 194H;
(ii) fees for technical ser vices shall have the same meaning as
in Explan ation 2 to clause (vii) of sub-section (1) of section 9;
(iii) pr ofessional ser vices shall have the same meaning as in
clause (a) of the Explan ation to section 194J;
(iv) wor k shall have the same meaning as in Explan ation III to
section 194C;
42
[(v) r ent shall have the same meaning as in clause (i) to the
Explan ation to section 194-I;
(vi) r oyalty shall have the same meaning as in Explan ation 2 to
clause (vi) of sub-section (1) of section 9;]
42a
[(ib) an y sum paid on accoun t of securities tran saction tax un der
Ch apter VII of th e Fin an ce (No. 2) Act, 2004;]]
43
[(ic) any sum paid on account of fr inge benefit tax under Chapter
XIIH;]
44
(ii) any sum paid on account of any r ate or tax levied
45
on the pr ofits
or gains of any business or pr ofession
45
or assessed at a pr opor tion
of, or other wise on the basis of, any such pr ofits or gains.
41b. Substituted by the Finance Act, 2008, w.r .e.f. 1-4-2005. Pr ior t o it s subst it ut ion, pr oviso
r ead as under :
Provided that wher e in r espect of any such sum, tax has been deducted in any subsequent
year or , has been deducted in the pr evious year but paid in any subsequent year after the
expir y of the time pr escr ibed under sub-section (1) of section 200, such sum shall be
allowed as a deduction in computing the income of the pr evious year in which such tax
has been paid.
42a. Sub-clause (ib) shall be omitted by the Finance Act, 2008, w.e.f. 1-4-2009.
45. For the meaning of the expr essions any r ate or tax levied and pr ofits or gains of any
business or pr ofession, see Taxmanns Dir ect Taxes Manual, Vol. 3.
46
[Explan ation 1.For the r emoval of doubts, it is her eby de-
clar ed that for the pur poses of this sub-clause, any sum paid on
account of any r ate or tax levied includes and shall be deemed
always to have included any sum eligible for r elief of tax under
section 90 or , as the case may be, deduction fr om the Indian
income-tax payable under section 91.]
47
[Explan ation 2.For the r emoval of doubts, it is her eby de-
clar ed that for the pur poses of this sub-clause, any sum paid on
account of any r ate or tax levied includes any sum eligible for
r elief of tax under section 90A;]
48
[
49
(iia) any sum paid on account of wealth-tax.
Explan ation .For the pur poses of this sub-clause, wealth-tax
means wealth-tax char geable under the Wealth-tax Act, 1957 (27
of 1957), or any tax of a similar char acter char geable under any
law in for ce in any countr y outside India or any tax char geable
under such law with r efer ence to the value of the assets of, or the
capital employed in, a business or pr ofession car r ied on by the
assessee, whether or not the debts of the business or pr ofession
ar e allowed as a deduction in computing the amount with r efer -
ence to which such tax is char ged, but does not include any tax
char geable with r efer ence to the value of any par ticular asset of
the business or pr ofession;]
50
[(iii) any payment which is char geable under the head Salar ies, if it
is payable
(A) outside India; or
(B) to a non-r esident,
and if the tax has not been paid ther eon nor deducted ther efr om
under Chapter XVII-B;]
(iv) any payment to a pr ovident or other fund established for the
benefit of employees of the assessee, unless the assessee has
made effective ar r angements to secur e that tax shall be deducted
at sour ce fr om any payments made fr om the fund which ar e
char geable to tax under the head Salar ies;
51
[(v) any tax actually paid by an employer r efer r ed to in clause (10CC)
of section 10;]
S. 40 I.T. ACT, 1961 1.252
48. Inser ted by the Income-tax (Amendment) Act, 1972, w.r .e.f. 1-4-1962 subject to savings
pr escr ibed by sections 4 and 5 of that Act.
(iii) r ead as under :
(iii) any payment which is char geable under the head Salar ies, if it is payable outside
India and if the tax has not been paid ther eon nor deducted ther efr om under
Chapter XVII-B;
51. Inser ted by the Finance Act, 2002, w.e.f. 1-4-2003. Or iginal clause (v) was inser ted by the
Finance Act, 1968, w.e.f. 1-4-1969, amended by the Taxation Laws (Amendment) Act, 1970,
w.e.f. 1-4-1971 and later on omitted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.
52
[(b) in the case of any fir m assessable as such,
(i) any payment of salar y, bonus, commission or r emuner ation, by
whatever name called (her einafter r efer r ed to as r emuner ation)
to any par tner who is not a wor king par tner ; or
(ii) any payment of r emuner ation to any par tner who is a wor king
par tner , or of inter est to any par tner , which, in either case, is not
author ised by, or is not in accor dance with, the ter ms of the
par tner ship deed; or
(iii) any payment of r emuner ation to any par tner who is a wor king
par tner , or of inter est to any par tner , which, in either case, is
author ised by, and is in accor dance with, the ter ms of the
par tner ship deed, but which r elates to any per iod (falling pr ior to
the date of such par tner ship deed) for which such payment was
not author ised by, or is not in accor dance with, any ear lier
par tner ship deed, so, however , that the per iod of author isation for
such payment by any ear lier par tner ship deed does not cover any
per iod pr ior to the date of such ear lier par tner ship deed; or
(iv) any payment of inter est to any par tner which is author ised by,
and is in accor dance with, the ter ms of the par tner ship deed and
r elates to any per iod falling after the date of such par tner ship
deed in so far as such amount exceeds the amount calculated at
the r ate of
53
[twelve] per cent simple inter est per annum; or
54
(v) any payment of r emuner ation to any par tner who is a wor king
par tner , which is author ised by, and is in accor dance with, the
ter ms of the par tner ship deed and r elates to any per iod falling
after the date of such par tner ship deed in so far as the amount of
such payment to all the par tner s dur ing the pr evious year exceeds
the aggr egate amount computed as her eunder :
(1) in case of a fir m car r ying on a pr ofession r efer r ed to in
section 44AA or which is notified for the pur pose of that
section
(a) on the fir st Rs. 1,00,000 of Rs. 50,000 or at the r ate of
the book-pr ofit or in case 90 per cen t of t h e b ook-
of a loss pr ofit, whichever is mor e;
(b) on t he next Rs. 1,00,000 of at t he r at e of 60 per cent ;
the book-pr ofit
(c) on the balance of t he at t he r at e of 40 per cent ;
book-pr ofit
52. Substituted by the Finance Act, 1992, w.e.f. 1-4-1993. Pr ior to substitution, clause (b) was
amended by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985, the Dir ect Tax
Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, and the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989.
53. Substituted for eighteen by the Finance Act, 2002, w.e.f. 1-6-2002.
54. See Cir cular No. 739, dated 25-3-1996. For details, see Taxmanns Mast er Guide t o
Income-tax Act.
(2) in the case of any other fir m
(a) on t he fir st Rs. 75,000 of Rs. 50,000 or at the r ate of
t he book-pr ofit, or in case 90 per cen t of t h e b ook-
of a loss pr ofit, whichever is mor e;
(b) on t he next Rs. 75,000 of at t he r at e of 60 per cent ;
the book-pr ofit
(c) on the balance of the at t he r at e of 40 per cent :
book-pr ofit
Provided that in relation to any payment under this clause to the partner
dur ing the pr evious year r elevant to the assessment year commencing
on the 1st day of Apr il, 1993, the ter ms of the par tner ship deed may,
at any time dur ing the said pr evious year , pr ovide for such payment.
Explan ation 1.Wher e an individual is a par tner in a fir m on behalf,
or for the benefit, of any other per son (such par tner and the other
per son being her einafter r efer r ed to as par tner in a r epr esentative
capacity and per son so r epr esented, r espectively),
(i) inter est paid by the fir m to such individual other wise than as
par tner in a r epr esentative capacity, shall not be taken into
account for the pur poses of this clause;
(ii) inter est paid by the fir m to such individual as par tner in a
r epr esentative capacity and inter est paid by the fir m to the per son
so r epr esented shall be taken into account for the pur poses of this
clause.
Explan ation 2.Wher e an individual is a par tner in a fir m other wise
than as par tner in a r epr esentative capacity, inter est paid by the fir m
to such individual shall not be taken into account for the pur poses of
this clause, if such inter est is r eceived by him on behalf, or for the
benefit, of any other per son.
Explan ation 3.For the pur poses of this clause, book-pr ofit means
the net pr ofit, as shown in the pr ofit and loss account for the r elevant
pr evious year , computed in the manner laid down in Chapter IV-D as
incr eased by the aggr egate amount of the r emuner ation paid or
payable to all the par tner s of the fir m if such amount has been
deducted while computing the net pr ofit.
Explan ation 4.For the pur poses of this clause, wor king par tner
means an individual who is actively engaged in conducting the affair s
of the business or pr ofession of the fir m of which he is a par tner ;]
55
[(ba) in the case of an association of per sons or body of individuals [other
than a company or a co-oper ative society or a society r egister ed
under the Societies Registr ation Act, 1860 (21 of 1860), or under any
law cor r esponding to that Act in for ce in any par t of India], any
payment of inter est, salar y, bonus, commission or r emuner ation, by
whatever name called, made by such association or body to a
member of such association or body.
S. 40 I.T. ACT, 1961 1.254
Explan ation 1.Wher e inter est is paid by an association or body to
any member ther eof who has also paid inter est to the association or
body, the amount of inter est to be disallowed under this clause shall
be limited to the amount by which the payment of inter est by the
association or body to the member exceeds the payment of inter est
by the member to the association or body.
Explan ation 2.Wher e an individual is a member of an association or
body on behalf, or for the benefit, of any other per son (such member
and the other per son being her einafter r efer r ed to as member in a
r epr esentative capacityand per son so r epr esented, r espectively),
(i) inter est paid by the association or body to such individual or by
such individual to the association or body other wise than as
member in a r epr esentative capacity, shall not be taken into
account for the pur poses of this clause;
(ii) inter est paid by the association or body to such individual or by
such individual to the association or body as member in a
r epr esentative capacity and inter est paid by the association or
body to the per son so r epr esented or by the per son so r epr esented
to the association or body, shall be taken into account for the
pur poses of this clause.
Explan ation 3.Wher e an individual is a member of an association or
body other wise than as member in a r epr esentative capacity, inter est
paid by the association or body to such individual shall not be taken
into account for the pur poses of this clause, if such inter est is r eceived
by him on behalf, or for the benefit, of any other per son.]
(c) [Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f.
1-4-1989. Earlier, it was am en ded by th e Fin an ce Act, 1963, w.e.f.
1-4-1963, Fin an ce Act, 1964, w.e.f. 1-4-1964, Fin an ce Act, 1965, w.e.f.
1-4-1965, Fin an ce Act, 1968, w.e.f. 1-4-1969, Fin an ce (No. 2) Act, 1971,
w.e.f. 1-4-1972, Fin an ce Act, 1984, w.e.f. 1-4-1985 an d Direct Tax Laws
(Am en dm en t) Act, 1987, w.e.f. 1-4-1988.]
(d) [Om itted by th e Fin an ce Act, 1988, w.e.f. 1-4-1989.]
56
[Expenses or payments not deductible in certain circumstances.
57
40A. (1) The pr ovisions of this section shall have effect notwithstanding
anything to the contr ar y contained in any other pr ovision of this Act
r elating to the computation of income under the head Pr ofits and gains of
57. See also Pr ess Note, dated 2-5-1969, issued by Ministr y of Finance, Letter [F.No. 1(22)/ 69-
TPL (Pt.)], dated 18-4-1969, Cir cular No. 34, dated 5-3-1970, Cir cular No. 33, dated 29-12-
1969, Cir cular No. 250, dated 11-1-1979, Cir cular No. 522, dated 18-8-1988, Letter [F. No.
142(14)/ 70-TPL], dat ed 28-9-1970, Let t er [F. No. 1(22)/ 69-TPL(Pt .)], dat ed 18-4-1969,
Cir cular No. 220, dated 31-5-1977, Cir cular No. 169 (par a 27), dated 23-6-1975, Letter [F.
No. 204/ 10/ 71-IT(A-II)], dated 17-4-1971 and Letter BC No. T-II/ 256-Misc. 75-76, dated
15-11-1975, fr om the Commissioner of Income-tax, Bombay. For details, see Taxmanns
58
(2)(a) Wher e the assessee incur s any expenditur e in r espect of which payment
has been or is to be made to any per son
59
r efer r ed to in clause (b) of this sub-
section, and the
60
[Assessing] Officer is of opinion that such expenditur e is
excessive or unr easonable having r egar d to the fair mar ket value of the goods,
ser vices or facilities for which the payment is made or the legitimate needs of the
business or pr ofession of the assessee or the benefit der ived by or accr uing to him
ther efr om, so much of the expenditur e as is so consider ed by him to be excessive
or unr easonable shall not be allowed as a deduction.
61
[* * *]
(b) The per sons r efer r ed to in clause (a) ar e the following, namely :
(i) wher e the assessee is an any r elative of the assessee;
individual
(ii) wher e the assessee is a any dir ector of the company, par tner
company, fir m, association of the fir m, or member of the asso-
of per sons or Hindu un- ciation or family, or any r elative of
divided family such dir ector , par tner or member ;
(iii) any individual who has a substantial inter est in the business or
pr ofession of the assessee, or any r elative of such individual;
(iv) a company, fir m, association of per sons or Hindu undivided family
having a substantial inter est in the business or pr ofession of the
assessee or any dir ector , par tner or member of such company, fir m,
association or family, or any r elative of such dir ector , par tner or
member ;
(v) a company, fir m, association of per sons or Hindu undivided family
of which a dir ector , par tner or member , as the case may be, has
a substantial inter est in the business or pr ofession of the assessee; or
any dir ector , par tner or member of such company, fir m, association
or family or any r elative of such dir ector , par tner or member ;
(vi) any per son who car r ies on a business or pr ofession,
(A) wher e the assessee being an individual, or any r elative of such
assessee, has a substantial inter est in the business or pr ofession
of that per son; or
(B) wher e the assessee being a company, fir m, association of per sons
or Hindu undivided family, or any dir ector of such company,
par tner of such fir m or member of the association or family, or
any r elative of such dir ector , par tner or member , has asubstantial
inter est in the business or pr ofession of that per son.
Explan ation .For the pur poses of this sub-section, a per son shall be deemed to
have a substantial inter est in a business or pr ofession, if,
S. 40A I.T. ACT, 1961 1.256
59. For the meaning of the expr ession any per son, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
1-4-1988.
61. Omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Pr ior to its
omission, pr oviso was amended by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.
(a) in a case wher e the business or pr ofession is car r ied on by a company,
such per son is, at any time dur ing the pr evious year , the beneficial
owner of shar es (not being shar es entitled to a fixed r ate of dividend
whether with or without a r ight to par ticipate in pr ofits) car r ying not
less than twenty per cent of the voting power ; and
(b) in any other case, such per son is, at any time dur ing the pr evious year ,
beneficially entitled to not less than twenty per cent of the pr ofits of
such business or pr ofession.
62
[
63
(3)(a) Wh ere th e assessee in curs an y expen diture in respect of wh ich paym en t
is m ade in a sum exceedin g twen ty th ousan d rupees oth erwise th an by an accoun t
payee ch eque drawn on a ban k or accoun t payee ban k draft, n o deduction sh all
be allowed in respect of such expen diture
64
;
(b) wh ere an allowan ce h as been m ade in th e assessm en t f or an y year in respect
of an y liability in curred by th e assessee for an y expen diture an d subsequen tly
durin g an y previous year (h erein after referred to as subsequen t year) th e assessee
m ak es paym en t in respect th ereof, oth erwise th an by an accoun t payee ch eque
drawn on a ban k or accoun t payee ban k draft, th e paym en t so m ade sh all be
deem ed to be th e profits an d gain s of busin ess or profession an d accordin gly
ch argeable to in com e-tax as in com e of th e subsequen t year if th e am oun t of
paym en t exceeds twen ty th ousan d rupees:
62. Substituted by the Finance, Act, 2007, w.e.f. 1-4-2008. Pr ior to its substitution, sub-section
(3), as amended by, the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988/ 1-4-1989,
Finance Act, 1995, w.e.f. 1-4-1996, Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and Taxation
(3) Wher e the assessee incur s any expenditur e in r espect of which payment is made, after
such date (not being later than the 31st day of Mar ch, 1969) as may be specified in this
behalf by the Centr al Gover nment by notification in the Official Gazette, in a sum
exceeding twenty thousand r upees other wise than by an account payee cheque dr awn on
a bank or account payee bank dr aft, twenty per cent of such expenditur e shall not be
allowed as a deduction :
Provided that wher e an allowance has been made in the assessment for any year not being
an assessment year commencing pr ior to the 1st day of Apr il, 1969, in r espect of any
liability incur r ed by the assessee for any expenditur e and subsequently dur ing any
pr evious year the assessee makes any payment in r espect ther eof in a sum exceeding
twenty thousand r upees other wise than by an account payee cheque dr awn on a bank or
account payee bank dr aft, the allowance or iginally made shall be deemed to have been
wr ongly made and the Assessing Officer may r ecompute the total income of the assessee
for the pr evious year in which such liability was incur r ed and make the necessar y
amendment, and the pr ovisions of section 154 shall, so far as may be, apply ther eto, the
per iod of four year s specified in sub-section (7) of that section being r eckoned fr om the
end of the assessment year next following the pr evious year in which the payment was so
made :
Provided further that no disallowance under this sub-section shall be made wher e any
payment in a sum exceeding twenty thousand r upees is made other wise than by an
account payee cheque dr awn on a bank or account payee bank dr aft, in such cases and
under such cir cumstances as may be pr escr ibed, having r egar d to the natur e and extent
of banking facilities available, consider ations of business expediency and other r elevant
fact or s.
63. See also Cir cular No. 522, dated 18-8-1988, Cir cular No. 4/ 2006, dated 29-3-2006 and
Cir cular No. 8/ 2006, dated 6-10-2006. For details as well as r elevant Case Laws, see
64. For the meaning of the ter m expenditur e, see Taxmanns Dir ect Taxes Manual, Vol. 3.
S. 40A I.T. ACT, 1961 1.258
Provided th at n o disallowan ce sh all be m ade an d n o paym en t sh all be deem ed to
be th e profits an d gain s of busin ess or profession un der th is sub-section wh ere
an y paym en t in a sum exceedin g twen ty th ousan d rupees is m ade oth erwise th an
by an accoun t payee ch eque drawn on a ban k or accoun t payee ban k draft, in such
cases an d un der such circum stan ces as m ay be prescribed
65
, h avin g regard to th e
n ature an d exten t of ban k in g facilities available, con sideration s of busin ess
expedien cy an d oth er relevan t factors.]
The following sub-sections (3) and (3A) shall be substituted for sub-section (3)
of section 40A by the Finance Act, 2008, w.e.f. 1-4-2009 :
(3) Wh ere th e assessee in curs an y expen diture in respect of wh ich a paym en t or
aggregate of paym en ts m ade to a person in a day, oth erwise th an by an accoun t
payeee ch eque drawn on a ban k or accoun t payeee ban k draft, exceeds twen ty
th ousan d rupees, n o deduction sh all be allowed in respect of such expen diture.
(3A) Wh ere an allowan ce h as been m ade in th e assessm en t for an y year in respect
of an y liability in curred by th e assessee for an y expen diture an d subsequen tly
durin g an y previous year (h erein after referred to as subsequen t year) th e assessee
m ak es paym en t in respect th ereof, oth erwise th an by an accoun t payee ch eque
drawn on a ban k or accoun t payee ban k draft, th e paym en t so m ade sh all be
deem ed to be th e profits an d gain s of busin ess or profession an d accordin gly
ch argeable to in com e-tax as in com e of th e subsequen t year if th e paym en t or
aggregate of paymen ts made to a person in a day, exceeds twen ty th ousan d rupees:
Provided th at n o disallowan ce sh all be m ade an d n o paym en t sh all be deem ed to
be th e profits an d gain s of busin ess or profession un der sub-section (3) an d th is
sub-section wh ere a paym en t or aggregate of paym en ts m ade to a person in a day,
oth erwise th an by an accoun t payee ch eque drawn on a ban k or accoun t payee
ban k draft, exceeds twen ty th ousan d rupees, in such cases an d un der such
circum stan ces as m ay be prescribed, h avin g regard to th e n ature an d exten t of
ban k in g facilities available, con sideration s of busin ess expedien cy an d oth er
relevan t factors.
66
[(4) Notwithstanding anything contained in any other law for the time being in
for ce or in any contr act, wher e any payment in r espect of any expenditur e has
to be made by
67
[an account payee cheque dr awn on a bank or account payee
bank dr aft] in or der that such expenditur e may not be disallowed as a deduction
under sub-section (3), then the payment may be made by such cheque or dr aft;
and wher e the payment is so made or tender ed, no per son shall be allowed to
r aise, in any suit or other pr oceeding, a plea based on the gr ound that the
payment was not made or tender ed in cash or in any other manner .]
65. See r ule 6DD for cases and cir cumstances in which payment in a sum exceeding Rs. 20,000
may be made other wise than by an account payee cheque dr awn on a bank or account
payee dr aft.
67. Substituted for a cr ossed cheque dr awn on a bank or by a cr ossed bank dr aft by the
(5)
68
[Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f. 1-4-1989.
Origin al sub-section (5) was in serted by th e Fin an ce (No. 2) Act, 1971, w.e.f.
1-4-1972.]
(6)
69
Origin al sub-section (6) was in serted by th e Fin an ce (No. 2) Act, 1971, w.e.f.
1-4-1972.]
70
[
71
(7) (a) Subject to the pr ovisions of clause (b), no deduction shall be allowed
in r espect of any pr ovision
72
(whether called as such or by any other name) made
68. Pr ior to its omission, sub-section (5) was amended by the Dir ect Taxes (Amendment) Act,
1974, w.e.f. 1-4-1974, Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985, Finance Act,
1984, w.e.f. 1-4-1985 and Finance Act, 1985, w.e.f. 1-4-1985.
69. Pr ior to its omission, sub-section (6) was amended by the Finance Act, 1984, w.e.f. 1-4-1985.
(7), as inser ted by the Finance Act, 1975, w.r .e.f. 1-4-1973, r ead as under :
(7)(a) Subject to the pr ovisions of clause (b), no deduction shall be allowed in r espect of
any pr ovision (whether called as such or by any other name) made by the assessee for the
payment of gr atuity to his employees on their r etir ement or on ter mination of their
employment for any r eason.
(b) Not hing in clause (a) shall apply in r elation to
(i) any pr ovision made by the assessee for the pur pose of payment of a sum by way of
any contr ibution towar ds an appr oved gr atuity fund, or for the pur pose of payment
of any gr atuity, that has become payable dur ing the pr evious year ;
(ii) any pr ovision made by the assessee for the pr evious year r elevant to any assessment
year commencing on or after the 1st day of Apr il, 1973, but befor e the 1st day of
Apr il, 1976, to the extent the amount of such pr ovision does not exceed the
admissible amount, if the following conditions ar e fulfilled, namely :
(1) the pr ovision is made in accor dance with an actuar ial valuation of the
ascer tainable liability of the assessee for payment of gr atuity to his employ-
ees on their r etir ement or on ter mination of their employment for any r eason;
(2) the assessee cr eates an appr oved gr atuity fund for the exclusive benefit of his
employees under an ir r evocable tr ust, the application for the appr oval of the
fund having been made befor e the 1st day of Januar y, 1976; and
(3) a sum equal to at least fifty per cent of the admissible amount, or wher e any
amount has been utilised out of such pr ovision for the pur pose of payment
of any gr atuity befor e the cr eation of the appr oved gr atuity fund, a sum equal
to at least fifty per cent of the admissible amount as r educed by the amount
so utilised, is paid by the assessee by way of contr ibution to the appr oved
gr atuity fund befor e the 1st day of Apr il, 1976, and the balance of the
admissible amount or , as the case may be, the balance of the admissible
amount as r educed by the amount so utilised, is paid by the assessee by way
of such contr ibution befor e the 1st day of Apr il, 1977.
Explan ation 1.For the pur poses of sub-clause (ii) of clause (b) of this sub-section,
admissible amount means the amount of the pr ovision made by the assessee for the
payment of gr atuity to his employees on their r etir ement or on ter mination of their
employment for any r eason, to the extent such amount does not exceed an amount
calculated at the r ate of eight and one-thir d per cent of the salar y [as defined in clause (h )
of r ule 2 of Par t A of the Four th Schedule] of each employee entitled to the payment of
such gr atuity for each year of his ser vice in r espect of which such pr ovision is made.
Explan ation 2.For the r emoval of doubts, it is her eby declar ed that wher e any pr ovision
made by the assessee for the payment of gr atuity to his employees on their r etir ement or
on ter mination of their employment for any r eason has been allowed as a deduction in
(Con td. on p. 1.260)
S. 40A I.T. ACT, 1961 1.260
by the assessee for the payment of gr atuity to his employees on their r etir ement
or on ter mination of their employment for any r eason.
(b) Nothing in clause (a) shall apply in r elation to any pr ovision made by the
assessee for the pur pose of payment of a sum by way of any contr ibution towar ds
an appr oved gr atuity fund, or for the pur pose of payment of any gr atuity, that
has become payable dur ing the pr evious year
73
.
Explan ation .For the r emoval of doubts, it is her eby declar ed that wher e any
pr ovision made by the assessee for the payment of gr atuity to his employees on
their r etir ement or ter mination of their employment for any r eason has been
allowed as a deduction in computing the income of the assessee for any
assessment year , any sum paid out of such pr ovision by way of contr ibution
towar ds an appr oved gr atuity fund or by way of gr atuity to any employee shall
not be allowed as a deduction in computing the income of the assessee of the
pr evious year in which the sum is so paid.]
(8)
74
[* * *]
75
[(9) No deduction shall be allowed in r espect of any sum paid by the assessee
as an employer towar ds the setting up or for mation of, or as contr ibution to,
any fu nd, t r u st , company, associat ion of per sons, body of individu als,
society r egister ed under the Societies Registr ation Act, 1860 (21 of 1860), or
other institution for any pur pose, except wher e such sum is so paid, for the
pur poses and to the extent pr ovided by or under clause (iv) or clause (v) of sub-
section (1) of section 36, or as r equir ed by or under any other law for the time
being in for ce.
(10) Not wit hst anding anyt hing cont ained in su b-sect ion (9), wher e t he
76
[Assessing] Officer is satisfied that the fund, tr ust, company, association of
per sons, body of individuals, society or other institution r efer r ed to in that sub-
section has, befor e the 1st day of Mar ch, 1984, bon a fide laid out or expended any
expenditur e (not being in the natur e of capital expenditur e) wholly and exclu-
sively for the welfar e of the employees of the assessee r efer r ed to in sub-section
(9) out of the sum r efer r ed to in that sub-section, the amount of such expenditur e
shall, in case no deduction has been allowed to the assessee in r espect of such
sum and subject to the other pr ovisions of this Act, be deducted in computing the
income r efer r ed to in section 28 of the assessee of the pr evious year in which such
expenditur e is so laid out or expended, as if such expenditur e had been laid out
or expended by the assessee.]
computing the income of the assessee for any assessment year , any sum paid out of such
pr ovision by way of contr ibution towar ds an appr oved gr atuity fund or by way of gr atuity
to any employee shall not be allowed as a deduction in computing the income of the
assessee of the pr evious year in which the sum is so paid.
72. For the meaning of the ter m pr ovision, see Taxmanns Dir ect Taxes Manual, Vol. 3.
73. For the meaning of the expr ession that has become payable dur ing the pr evious year , see
74. Sub-section (8) was omitted by the Finance Act, 1985, w.e.f. 1-4-1986. Pr ior to its omission
sub-section (8) was inser ted by the Finance Act, 1975, w.e.f. 1-4-1976.
1-4-1988.
77
[(11) Wher e the assessee has, befor e the 1st day of Mar ch, 1984, paid any sum
to any fund, tr ust, company, association of per sons, body of individuals, society
or other institution r efer r ed to in sub-section (9), then, notwithstanding anything
contained in any other law or in any instr ument, he shall be entitled
(i) to claim that so much of the amount paid by him as has not been laid
out or expended by such fund, tr ust, company, association of per sons,
body of individuals, society or other institution (such amount being
her einafter r efer r ed to as the unutilised amount) be r epaid to him,
and wher e any claim is so made, the unutilised amount shall be r epaid,
as soon as may be, to him;
(ii) to claim that any asset, being land, building, machiner y, plant or
fur nitur e acquir ed or constr ucted by the fund, tr ust, company,
association of per sons, body of individuals, society or other institution
out of the sum paid by the assessee, be tr ansfer r ed to him, and wher e
any claim is so made, such asset shall be tr ansfer r ed, as soon as may
be, to him.]
(12)
78
Profits chargeable to tax.
41.
79
[
80
(1) Wher e an allowance or deduction has been made in the assessment
for any year in r espect of loss, expenditur e or tr ading liability incur r ed by the
assessee (her einafter r efer r ed to as the fir st-mentioned per son) and subse-
quently dur ing any pr evious year ,
(a) the fir st-mentioned per son has obtained
81
, whether in cash or in any
other manner whatsoever , any amount in r espect of such
81
loss or
expenditur e
81
or some benefit in r espect of such tr ading liability by
way of r emission or cessation ther eof
81
, the amount obtained by such
per son or the value of benefit accr uing to him shall be deemed to be
pr ofits and gains of business or pr ofession and accor dingly char ge-
able to income-tax as the income of that pr evious year , whether the
business or pr ofession in r espect of which the allowance or deduction
has been made is in existence in that year or not; or
(b) the successor in business has obtained
81
, whether in cash or in any
other manner whatsoever , any amount in r espect of which loss or
expenditur e was incur r ed by the fir st-mentioned per son or some
benefit in r espect of the tr ading liability r efer r ed to in clause (a) by
78. Pr ior to omission sub-section (12) was inser ted by the Finance Act, 1985, w.e.f. 1-4-1986.
81. For the meaning of the ter ms obtained, such, expenditur e and r emission or cessation
ther eof, see Taxmanns Dir ect Taxes Manual, Vol. 3.
S. 41 I.T. ACT, 1961 1.262
way of r emission or cessation
82
ther eof, the amount obtained
82
by the
successor in business or the value of benefit accr uing to the successor
in business shall be deemed to be pr ofits and gains of the business or
pr ofession, and accor dingly char geable to income-tax as the income
83
[Explan ation 1.For the pur poses of this sub-section, the expr ession loss or
expenditur e or some benefit in r espect of any such tr ading liability by way of
r emission or cessation ther eof shall include the r emission or cessation of any
liability by a unilater al act by the fir st mentioned per son under clause (a) or the
successor in business under clause (b) of that sub-section by way of wr iting off
such liability in his accounts.]
84
[Explan ation 2].For the pur poses of this sub-section, successor in business
means,
(i) wher e ther e has been an amalgamation of a company with another
company, the amalgamated company;
(ii) wher e the fir st-mentioned per son is succeeded by any other per son
in that business or pr ofession, the other per son;
(iii) wher e a fir m car r ying on a business or pr ofession is succeeded by
another fir m, the other fir m;]
85
[(iv) wher e ther e has been a demer ger , the r esulting company.]
86
[(2) Wher e any building, machiner y, plant or fur nitur e,
(a) which is owned by the assessee;
(b) in r espect of which depr eciation is claimed under clause (i ) of sub-
section (1) of section 32; and
(c) which was or has been used for the pur poses of business,
is sold
87
, discar ded, demolished or destr oyed
87
and the moneys payable
87
in
r espect of such building, machiner y, plant or fur nitur e, as the case may be,
together with the amount of scr ap value, if any, exceeds the wr itten down value,
so much of the excess as does not exceed the differ ence between the actual cost
and the wr itten down value shall be char geable to income-tax as income of the
business of the pr evious year in which the moneys payable for the building,
machiner y, plant or fur nitur e became due
87
.
82. For the meaning of the ter ms obtained, such, expenditur e and r emission or cessation
ther eof, see Taxmanns Dir ect Taxes Manual, Vol. 3.
84. Explan ation r enumber ed as Explan ation 2, ibid.
86. Inser ted by the Finance (No. 2) Act, 1998, w.r .e.f. 1-4-1998. Ear lier or iginal sub-section (2)
was amended by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981 and later on omitted by the
Taxation Laws (Amendment and Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1988.
87. For the meaning of the ter ms/ expr essions sold, demolished or destr oyed, moneys
payable and due, see Taxmanns Dir ect Taxes Manual, Vol. 3.
Explan ation .Wher e the moneys payable in r espect of the building, machiner y,
plant or fur nitur e r efer r ed to in this sub-section become due in a pr evious year
in which the business for the pur pose of which the building, machiner y, plant or
fur nitur e was being used is no longer in existence, the pr ovision of this sub-
section shall apply as if the business is in existence in that pr evious year .]
(2A)
88
[***]
(3) Wher e an asset r epr esenting expenditur e of a capital natur e on scientific
r esear ch within the meaning of clause (iv) of sub-section (1),
89
[or clause (c) of
sub-section (2B),] of section 35, r ead with clause (4) of section 43, is sold, without
having been used for other pur poses, and the pr oceeds of the sale together with
the total amount of the deductions made under clause (i)
90
[or , as the case may
be, the amount of the deduction under clause (ia)] of sub-section (2),
91
[or clause
(c) of sub-section (2B),] of section 35 exceed the amount of the capital expendi-
tur e, the excess or the amount of the deductions so made, whichever is the less,
shall be char geable to income-tax as income of the business or pr ofession of the
pr evious year in which the sale took place.
Explan ation .Wher e the moneys payable in r espect of any asset r efer r ed to in
this sub-section become due in a pr evious year in which the business is no longer
in existence, the pr ovisions of this sub-section shall apply as if the business is in
existence in that pr evious year .
92
(4) Wher e a deduction has been allowed in r espect of a bad debt or par t of debt
under the pr ovisions of clause (vii) of sub-section (1) of section 36, then, if the
amount subsequently r ecover ed on any such debt or par t is gr eater than the
differ ence between the debt or par t of debt and the amount so allowed,
the excess shall be deemed to be pr ofits and gains of business or pr ofession, and
accor dingly char geable to income-tax as the income of the pr evious year in
which it is r ecover ed, whether the business or pr ofession in r espect of which the
deduction has been allowed is in existence in that year or not.
93
[Explan ation .For the pur poses of sub-section (3),
(1) moneys payable in r espect of any building, machiner y, plant or
fur nitur e includes
(a) any insur ance, salvage or compensation moneys payable in
r espect ther eof;
(b) wher e the building, machiner y, plant or fur nitur e is sold, the pr ice
for which it is sold,
1-4-1988. Or iginal sub-section (2A) was inser ted by the Taxation Laws (Amendment) Act,
1970, w.e.f. 1-4-1971.
w.e.f. 1-4-1988.
S. 41 I.T. ACT, 1961 1.264
so, however , that wher e the actual cost of a motor car is, in accor -
dance with the pr oviso to clause (1) of section 43, taken to be twenty-
five thousand r upees, the moneys payable in r espect of such motor
car shall be taken to be a sum which bear s to the amount for which
the motor car is sold or , as the case may be, the amount of any
insur ance, salvage or compensation moneys payable in r espect
ther eof (including the amount of scr ap value, if any) the same
pr opor tion as the amount of twenty-five thousand r upees bear s to the
actual cost of the motor car to the assessee as it would have been
computed befor e applying the said pr oviso;
(2) sold includes a tr ansfer by way of exchange or a compulsor y
acquisition under any law for the time being in for ce but does not
include a tr ansfer , in a scheme of amalgamation, of any asset by the
amalgamating company to the amalgamated company wher e the
amalgamated company is an Indian company.]
94
[(4A) Wher e a deduction has been allowed in r espect of any special r eser ve
cr eated and maintained under clause (viii) of sub-section (1) of section 36, any
amount subsequently withdr awn fr om such special r eser ve shall be deemed to
be the pr ofits and gains of business or pr ofession and accor dingly be char geable
to income-tax as the income of the pr evious year in which such amount is
withdr awn.
Explan ation .Wher e any amount is withdr awn fr om the special r eser ve in a
pr evious year in which the business is no longer in existence, the pr ovisions of this
sub-section shall apply as if the business is in existence in that pr evious year .]
(5) Wher e the business or pr ofession r efer r ed to in this section is no longer in
existence and ther e is income char geable to tax under sub-section (1),
95
[***] sub-
section (3)
96
[, sub-section (4) or sub-section (4A)] in r espect of that business or
pr ofession, any loss, not being a loss sustained in speculation business
97
[***],
which ar ose in that business or pr ofession dur ing the pr evious year in which it
ceased to exist and which could not be set off against any other income of that
pr evious year shall, so far as may be, be set off against the income char geable to
tax under the sub-sections afor esaid.
98
[(6) Refer ences in sub-section (3) to any other pr ovision of this Act which has
been amended or omitted by the Dir ect Tax Laws (Amendment) Act, 1987 shall,
notwithstanding such amendment or omission, be constr ued, for the pur poses of
that sub-section, as if such amendment or omission had not been made.]
95. Wor ds sub-section (2), sub-section (2A),omitted by the Taxation Laws (Amendment &
Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1988. Italicised wor ds wer e inser ted by the
96. Substituted for or sub-section (4) by the Finance Act, 1997, w.e.f. 1-4-1998.
97. Wor ds or under the head Capital gains omitted by the Finance Act, 1987, w.e.f. 1-4-1988.
Special provision for deductions in the case of business for prospecting, etc., for
mineral oil.
42.
99
[(1)] For the pur pose of computing the pr ofits or gains of any business
consisting of the pr ospecting for or extr action or pr oduction of miner al oils
in r elation to which the Centr al Gover nment has enter ed into an agr eement with
any per son for the association or par ticipation
1
[of the Centr al Gover nment or
any per son author ised by it in such business] (which agr eement has been laid on
the Table of each House of Par liament), ther e shall be made in lieu of, or in
addition to, the allowances admissible under this Act, such allowances as ar e
specified in the agr eement in r elation
(a) to expenditur e by way of infr uctuous or abor tive explor ation expen-
ses in r espect of any ar ea sur r ender ed pr ior to the beginning of
commer cial pr oduction by the assessee ;
(b) after the beginning of commer cial pr oduction, to expenditur e in-
cur r ed by the assessee, whether befor e or after such commer cial
pr oduction, in r espect of dr illing or explor ation activities or ser vices
or in r espect of physical assets used in that connection, except assets
on which allowance for depr eciation is admissible under section 32 :
2
[***]
3
[Provided that in r elation to any agr eement enter ed into after the 31st
day of Mar ch, 1981, this clause shall have effect subject to the
modification that the wor ds and figur es except assets on which
allowance for depr eciation is admissible under section 32 had been
omitted; and]
(c) to the depletion of miner al oil in the mining ar ea in r espect of the
assessment year r elevant to the pr evious year in which commer cial
pr oduction is begun and for such succeeding year or year s as may be
specified in the agr eement;
and such allowances shall be computed and made in the manner specified in the
agr eement, the other pr ovisions of this Act being deemed for this pur pose to have
been modified to the extent necessar y to give effect to the ter ms of the agr eement.
4
[(2) Wher e the business of the assessee consisting of the pr ospecting for or
extr action or pr oduction of petr oleum and natur al gas is tr ansfer r ed wholly or
par tly or any inter est in such business is tr ansfer r ed in accor dance with the
agr eement r efer r ed to in sub-section (1), subject to the pr ovisions of the said
agr eement and wher e the pr oceeds of the tr ansfer (so far as they consist of
capital sums)
99. Section 42 r enumber ed as sub-section (1) ther eof by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999.
1. Substituted for in such business of the Centr al Gover nment by the Finance Act, 1981,
w.e.f. 1-4-1981.
2. Wor d and omitted, ibid.
3. Inser ted, ibid.
(a) ar e less than the expenditur e incur r ed r emaining unallowed, a deduc-
tion equal to such expenditur e r emaining unallowed, as r educed by
the pr oceeds of tr ansfer , shall be allowed in r espect of the pr evious
year in which such business or inter est, as the case may be, is
tr ansfer r ed;
(b) exceed the amount of the expenditur e incur r ed r emaining unallowed,
so much of the excess as does not exceed the differ ence between the
expenditur e incur r ed in connection with the business or to obtain
inter est ther ein and the amount of such expenditur e r emaining
unallowed, shall be char geable to income-tax as pr ofits and gains of
the business in the pr evious year in which the business or inter est
ther ein, whether wholly or par tly, had been tr ansfer r ed :
Provided that in a case wher e the pr ovisions of this clause do not
apply, the deduction to be allowed for expenditur e incur r ed r emain-
ing unallowed shall be ar r ived at by substr acting the pr oceeds of
tr ansfer (so far as they consist of capital sums) fr om the expenditur e
r emaining unallowed.
Explan ation .Wher e the business or inter est in such business is
tr ansfer r ed in a pr evious year in which such business car r ied on by
the assessee is no longer in existence, the pr ovisions of this clause shall
apply as if the business is in existence in that pr evious year ;
(c) ar e not less than the amount of the expenditur e incur r ed r emaining
unallowed, no deduction for such expenditur e shall be allowed in
r espect of the pr evious year in which the business or inter est in such
business is tr ansfer r ed or in r espect of any subsequent year or year s :
5
[Provided that wher e in a scheme of amalgamation or demer ger , the amalga-
mating or the demer ged company sells or other wise tr ansfer s the business to the
amalgamated or the r esulting company (being an Indian company), the pr ovi-
sions of this sub-section
(i) shall not apply in the case of the amalgamating or the demer ged
company; and
(ii) shall, as far as may be, apply to the amalgamated or the r esulting
company as they would have applied to the amalgamating or the
demer ged company if the latter had not tr ansfer r ed the business or
inter est in the business.]]
S. 42 I.T. ACT, 1961 1.266
5. Substituted by the Finance Act, 1999, w.e.f. 1-4-2000. Pr ior to its substitution, pr oviso, as
inser ted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999, r ead as under :
Provided t hat in a scheme of amalgamat ion, t he amalgamat ing company sells or
other wise tr ansfer s the business to the amalgamated company (being an Indian com-
pany), the pr ovisions of this sub-section
(i) shall not apply in the case of the amalgamating company; and
(ii) shall, as far as may be, apply to the amalgamated company as they would have
applied to the amalgamating company if the latter had not tr ansfer r ed the business
or inter est in the business.
6
[Explan ation .For the pur poses of this section, miner al oil includes petr oleum
and natur al gas.]
Definitions of certain terms relevant to income from profits and gains of business
or profession.
43. In sections 28 to 41 and in this section, unless the context other wise
r equir es
7
8
(1) actual cost means the actual cost
7
of the assets to the assessee,
r educed by that por tion of the cost ther eof, if any, as has been met
7
dir ectly or indir ectly by any other per son or author ity:
9
[Provided that wher e the actual cost of an asset, being a motor car
which is acquir ed by the assessee after the 31st day of Mar ch, 1967,
10
[but befor e the 1st day of Mar ch, 1975,] and is used other wise than
in a business of r unning it on hir e for tour ists, exceeds twenty-five
thousand r upees, the excess of the actual cost over such amount shall
be ignor ed, and the actual cost ther eof shall be taken to be twenty-five
thousand r upees.]
Explan ation 1.Wher e an asset is used in the business after it ceases
to be used for scientific r esear ch r elated to that business and a
deduction has to be made under
11
section 32 in r espect of that asset, the actual cost of the asset to the
assessee shall be the actual cost to the assessee as r educed by the
amount of any deduction allowed under clause (iv) of sub-section (1)
of section 35 or under any cor r esponding pr ovision of the Indian
Income-tax Act, 1922 (11 of 1922).
12
[Explan ation 2.Wher e an asset is acquir ed by the assessee by way
of gift or inher itance, the actual cost of the asset to the assessee shall
be the actual cost to the pr evious owner , as r educed by
(a) the amount of depr eciation actually allowed under this Act and
the cor r esponding pr ovisions of the Indian Income-tax Act, 1922
(11 of 1922), in r espect of any pr evious year r elevant to the
assessment year commencing befor e the 1st day of Apr il, 1988;
and
7. For the meaning of the expr essions unless the context other wise r equir es, actual cost
and has been met, see Taxmanns Dir ect Taxes Manual, Vol. 3.
Income-tax Act.
9. Substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Or iginal pr oviso was inser ted
11. Substituted for clause (i), clause (ii) or clause (iii) of sub-section (1) or sub-section (1A)
by the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1988.
Italicised wor ds wer e inser ted by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971.
w.e.f. 1-4-1988.
(b) the amount of depr eciation that would have been allowable to the
assessee for any assessment year commencing on or after the 1st
day of Apr il, 1988, as if the asset was the only asset in the r elevant
block of assets.]
Explan ation 3.Wher e, befor e the date of acquisition by the assessee,
the assets wer e at any time used by any other per son for the pur poses
of his business or pr ofession and the
13
[Assessing] Officer is satisfied
that the main pur pose of the tr ansfer of such assets, dir ectly or
indir ectly to the assessee, was the r eduction of a liability to income-
tax (by claiming depr eciation with r efer ence to an enhanced cost), the
actual cost to the assessee shall be such an amount as the
13
[Assessing]
Officer may, with the pr evious appr oval of the
14
[Joint Commis-
sioner ], deter mine having r egar d to all the cir cumstances of the case.
15
[Explan ation 4.Wher e any asset which had once belonged to the
assessee and had been used by him for the pur poses of his business
or pr ofession and ther eafter ceased to be his pr oper ty by r eason of
tr ansfer or other wise, is r e-acquir ed by him, the actual cost to the
assessee shall be
(i) the actual cost to him when he fir st acquir ed the asset as r educed
by
(a) the amount of depr eciation actually allowed to him under
this Act or under the cor r esponding pr ovisions of the Indian
Income-tax Act, 1922 (11 of 1922), in r espect of any pr evious
year r elevant to the assessment year commencing befor e the
1st day of Apr il, 1988; and
(b) the amount of depr eciation that would have been allowable
to the assessee for any assessment year commencing on or
after the 1st day of Apr il, 1988, as if the asset was the only
asset in the r elevant block of assets; or
(ii) the actual pr ice for which the asset is r e-acquir ed by him,
whichever is less.]
16
[Explan ation 4A.Wher e befor e the date of acquisition by the
assessee (her einafter r efer r ed to as the fir st mentioned per son), the
assets wer e at any time used by any other per son (her einafter
r efer r ed to as the second mentioned per son) for the pur poses of his
business or pr ofession and depr eciation allowance has been claimed
S. 43 I.T. ACT, 1961 1.268
1-4-1988.
14. Substituted for Deputy Commissioner by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998.
Ear lier Deputy Commissioner was substituted for Inspecting Assistant Commissioner
by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
w.e.f. 1-4-1988. Pr ior to its substitution, Explan ation 4 was amended by the Taxation Laws
in r espect of such assets in the case of the second mentioned per son
and such per son acquir es on lease, hir e or other wise assets fr om the
fir st mentioned per son, then, notwithstanding anything contained in
Explan ation 3, the actual cost of the tr ansfer r ed assets, in the case of
fir st mentioned per son, shall be the same as the wr itten down value
of the said assets at the time of tr ansfer ther eof by the second
mentioned per son.]
Explan ation 5.Wher e a building pr eviously the pr oper ty of the
assessee is br ought into use for the pur pose of the business or
pr ofession after the 28th day of Febr uar y, 1946, the actual cost to the
assessee shall be the actual cost of the building to the assessee, as
r educed by an amount equal to the depr eciation calculated at the r ate
in for ce on that date that would have been allowable had the building
been used for the afor esaid pur poses since the date of its acquisition
by the assessee.
17
[Explan ation 6.When any capital asset is tr ansfer r ed by a holding
company to its subsidiar y company or by a subsidiar y company to its
holding company, then, if the conditions of clause (iv) or , as the case
may be, of clause (v) of section 47 ar e satisfied, the actual cost of the
tr ansfer r ed capital asset to the tr ansfer ee-company shall be taken to
be the same as it would have been if the tr ansfer or -company had
continued to hold the capital asset for the pur poses of its business.]
18
[Explan ation 7.Wher e, in a scheme of amalgamation, any capital
asset is tr ansfer r ed by the amalgamating company to the amalga-
mated company and the amalgamated company is an Indian com-
pany, the actual cost of the tr ansfer r ed capital asset to the amalga-
mated company shall be taken to be the same as it would have been
if the amalgamating company had continued to hold the capital asset
for the pur poses of its own business.]
19
[Explan ation 7A.Wher e, in a demer ger , any capit al asset is
tr ansfer r ed by the demer ged company to the r esulting company and
the r esulting company is an Indian company, the actual cost of the
tr ansfer r ed capital asset to the r esulting company shall be taken to be
the same as it would have been if the demer ged company had
continued to hold the capital asset for the pur pose of its own business :
Provided that such actual cost shall not exceed the wr itten down
value of such capital asset in the hands of the demer ged company.]
20
that wher e any amount is paid or is payable as inter est in connection
with the acquisition of an asset, so much of such amount as is r elatable
to any per iod after such asset is fir st put to use shall not be included,
S. 43 I.T. ACT, 1961 1.270
and shall be deemed never to have been included, in the actual cost
of such asset.]
21
that wher e an asset is or has been acquir ed on or after the 1st day of
Mar ch, 1994 by an assessee, the actual cost of asset shall be r educed
by the amount of duty of excise or the additional duty leviable under
section 3 of the Customs Tar iff Act, 1975 (51 of 1975) in r espect of
which a claim of cr edit has been made and allowed under the Centr al
Excise Rules, 1944.]
22
[Explan ation 10.Wher e a por tion of the cost of an asset acquir ed
by the assessee has been met dir ectly or indir ectly by the Centr al
Gover nment or a State Gover nment or any author ity established
under any law or by any other per son, in the for m of a subsidy or gr ant
or r eimbur sement (by whatever name called), then, so much of the
cost as is r elatable to such subsidy or gr ant or r eimbur sement shall
not be included in the actual cost of the asset to the assessee :
Provided that wher e such subsidy or gr ant or r eimbur sement is of
such natur e that it cannot be dir ectly r elatable to the asset acquir ed,
so much of the amount which bear s to the total subsidy or r eimbur se-
ment or gr ant the same pr opor tion as such asset bear s to all the assets
in r espect of or with r efer ence to which the subsidy or gr ant or
r eimbur sement is so r eceived, shall not be included in the actual cost
of the asset to the assessee.]
23
[Explan ation 11.Wher e an asset which was acquir ed outside India
by an assessee, being a non-r esident, is br ought by him to India and
used for the pur poses of his business or pr ofession, the actual cost of
the asset to the assessee shall be the actual cost to the assessee, as
r educed by an amount equal to the amount of depr eciation calcu-
lated at the r ate in for ce that would have been allowable had the asset
been used in India for the said pur poses since the date of its acquisi-
tion by the assessee.]
24
[Explan ation 12.Where any capital asset is acquired by the assessee
under a scheme for cor por atisation of a r ecognised stock exchange
in India, appr oved by the Secur ities and Exchange Boar d of India
established under section 3 of the Secur ities and Exchange Boar d of
India Act, 1992 (15 of 1992), the actual cost of the asset shall be
deemed to be the amount which would have been r egar ded as actual
cost had ther e been no such cor por atisation;]
(2) paid means actually paid
25
or incur r ed accor ding to the method of
accounting upon the basis of which the pr ofits or gains ar e computed
under the head Pr ofits and gains of business or pr ofession;
25. For the meaning of the expr ession actually paid, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
26
(3) plant
27
includes ships, vehicles, books
27
, scientific appar atus and
sur gical equipment used for the pur poses of the business or pr ofes-
sion
28
[but does not include tea bushes or livestock]
29
[or buildings or
fur nitur e and fittings];
(4)
30
[(i) scientific r esear ch means any activities for the extension of
knowledge in the fields of natur al or applied science including
agr icultur e, animal husbandr y or fisher ies;]
(ii) r efer ences to expenditur e incur r ed on scientific r esear ch include
all expenditur e incur r ed for the pr osecution, or the pr ovision of
facilities for the pr osecution, of scientific r esear ch, but do not include
any expenditur e incur r ed in the acquisition of r ights in, or ar ising out
of, scientific r esear ch;
(iii) r efer ences to scientific r esear ch r elated to a business or class of
business include
(a) any scientific research which may lead to or facilitate an extension
of that business or , as the case may be, all businesses of that class;
(b) any scientific r esear ch of a medical natur e which has a special
r elation to the welfar e of wor ker s employed in that business or ,
as the case may be, all businesses of that class;
31
(5)
32
speculative tr ansaction
33
means a tr ansaction in which a contr act
33
for the pur chase or sale of any commodity, including stocks and
shar es, is per iodically or ultimately settled other wise than by the
actual deliver y
33
or tr ansfer of the commodity or scr ips:
Provided that for the pur poses of this clause
(a) a contr act in r espect of r aw mater ials or mer chandise enter ed
into by a person in the course of his manufacturing or merchanting
business to guar d against loss thr ough futur e pr ice fluctuations
in r espect of his contr acts for actual deliver y of goods manufac-
tur ed by him or mer chandise sold by him; or
(b) a contr act in r espect of stocks and shar es enter ed into by a dealer
or investor ther ein to guar d against loss in his holdings of stocks
and shar es thr ough pr ice fluctuations; or
(c) a contr act enter ed into by a member of a for war d mar ket or a
stock exchange in the cour se of any tr ansaction in the natur e of
27. For the meaning of the ter ms plant and books, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
31. See also Cir cular No. 23D(XXXIX-4), dated 12-9-1960. For details, see Taxmanns Master
33. For t he meaning of t he t er ms/ expr essions speculat ive t r ansact ion, cont r act and
actual deliver y, see Taxmanns Dir ect Taxes Manual, Vol. 3.
jobbing or ar bitr age to guar d against loss which may ar ise in the
or dinar y cour se of his business as such member ;
34
[or ]
34
[(d) an eligible tr ansaction in r espect of tr ading in der ivatives r efer r ed
to in clause
35
[(ac)] of section 2
36
of the Secur ities Contr acts
(Regulation) Act, 1956 (42 of 1956) car r ied out in a r ecognised
stock exchange;]
shall not be deemed to be a speculative tr ansaction.
37
[Explan ation .For the pur poses of this clause, the expr essions
(i) eligible tr ansaction means any tr ansaction,
(A) car r ied out electr onically on scr een-based systems thr ough a
stock br oker or sub-br oker or such other inter mediar y r eg-
ister ed under section 12 of the Secur ities and Exchange
Boar d of India Act, 1992 (15 of 1992) in accor dance with the
pr ovisions of the Secur ities Contr acts (Regulation) Act, 1956
(42 of 1956) or the Secur ities and Exchange Boar d of India
Act, 1992 (15 of 1992) or the Depositor ies Act, 1996 (22 of
1996) and the r ules, r egulations or bye-laws made or dir ec-
tions issued under those Acts or by banks or mutual funds on
a r ecognised stock exchange; and
(B) which is suppor ted by a time stamped contr act note issued by
such stock br oker or sub-br oker or such other inter mediar y
to ever y client indicating in the contr act note the unique
client identity number allotted under any Act r efer r ed to in
sub-clause (A) and per manent account number allotted
under this Act;
(ii) r ecognised stock exchange means a r ecognised stock exchange
as r efer r ed to in clause ( f) of section 2
38
of the Secur ities Con-
tr acts (Regulation) Act, 1956 (42 of 1956) and which fulfils such
conditions as may be pr escr ibed and notified
39
by the Centr al
Gover nment for this pur pose;]
40
(6) wr itten down value means
(a) in the case of assets acquir ed in the pr evious year , the actual cost
to the assessee;
(b) in the case of assets acquir ed befor e the pr evious year , the actual
cost to the assessee less all depr eciation actually allowed
41
to him
S. 43 I.T. ACT, 1961 1.272
35. Substituted for (aa) by the Finance Act, 2006, w.e.f. 1-4-2006.
36. For text of section 2(ac) of the Secur ities Contr acts (Regulation) Act, 1956, see Appendix.
38. For text of section 2(f ) of the Secur ities Contr acts (Regulation) Act, 1956, see Appendix.
39. See r ules 6DDA and 6DDB. Recognised Stock Exchanges ar e : NSE/ Bombay Stock
Exchange - SO 89(E), dated 25-1-2006.
41. For the meaning of the expr ession actually allowed, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
under this Act, or under the Indian Income-tax Act, 1922 (11 of
1922), or any Act r epealed by that Act, or under any executive
or der s issued when the Indian Income-tax Act, 1886 (2 of 1886),
was in for ce:
42
[Provided that in deter mining the wr itten down value in r espect
of buildings, machiner y or plant for the pur poses of clause (ii) of
sub-section (1) of section 32, depr eciation actually allowed shall
not include depr eciation allowed under sub-clauses (a), (b) and (c)
of clause (vi) of sub-section (2) of section 10 of the Indian Income-
tax Act, 1922 (11 of 1922), wher e such depr eciation was not
deductible in deter mining the wr itten down value for the pur -
poses of the said clause (vi);]
43
[(c) in the case of any block of assets,
(i) in r espect of any pr evious year r elevant to the assessment
year commencing on the 1st day of Apr il, 1988, the aggr egate
of the wr itten down values of all the assets falling within that
block of assets at the beginning of the pr evious year and
adjusted,
(A) by the incr ease by the actual cost of any asset falling
within that block, acquir ed dur ing the pr evious year ;
(B) by the r eduction of the moneys payable in r espect of
any asset falling within that block, which is sold or
discar ded or demolished or destr oyed dur ing that
pr evious year together with the amount of the scr ap
value, if any, so, however , that the amount of such
r eduction does not exceed the wr itten down value as so
incr eased; and
44
[(C) in the case of a slump sale, decr ease by the actual cost
of the asset falling within that block as r educed
(a) by the amount of depr eciation actually allowed to
him under this Act or under the cor r esponding
pr ovisions of the Indian Income-tax Act, 1922 (11
of 1922) in r espect of any pr evious year r elevant to
the assessment year commencing befor e the 1st
day of Apr il, 1988; and
(b) by the amount of depr eciation that would have
been allowable to the assessee for any assessment
year commencing on or after the 1st day of Apr il,
1988 as if the asset was the only asset in the
r elevant block of assets,
so, however , that the amount of such decr ease does not
exceed the wr itten down value;]
1-4-1988.
(ii) in r espect of any pr evious year r elevant to the assessment
year commencing on or after the 1st day of Apr il, 1989, the
wr itten down value of that block of assets in the immediately
pr eceding pr evious year as r educed by the depr eciation
actually allowed in r espect of that block of assets in r elation
to the said pr eceding pr evious year and as fur ther adjusted
by the incr ease or the r eduction r efer r ed to in item (i).]
Explan ation 1.When in a case of succession in business or pr ofes-
sion, an assessment is made on the successor under sub-section (2) of
section 170 the wr itten down value of
45
[any asset or any block of
assets] shall be the amount which would have been taken as its
wr itten down value if the assessment had been made dir ectly on the
per son succeeded to.
46
[Explan ation 2.Wher e in any pr evious year , any block of assets is
tr ansfer r ed,
(a) by a holding company t o it s subsidiar y company or by a
subsidiar y company to its holding company and the conditions of
clause (iv) or , as the case may be, of clause (v) of section 47 ar e
satisfied; or
(b) by the amalgamating company to the amalgamated company in
a scheme of amalgamation, and the amalgamated company is an
Indian company,
then, notwithstanding anything contained in clause (1), the actual cost
of the block of assets in the case of the tr ansfer ee-company or the
amalgamated company, as the case may be, shall be the wr itten down
value of the block of assets as in the case of the tr ansfer or -company
or the amalgamating company for the immediately pr eceding pr evi-
ous year as r educed by the amount of depr eciation actually allowed
in r elation to the said pr eceding pr evious year .]
47
[Explan ation 2A.Wher e in any pr evious year , any asset for ming
par t of a block of assets is tr ansfer r ed by a demer ged company to the
r esulting company, then, notwithstanding anything contained in
clause (1), the wr itten down value of the block of assets of the
demer ged company for the immediately pr eceding pr evious year
shall be r educed by the
48
[wr itten down value of the assets] tr ans-
fer r ed to the r esulting company pur suant to the demer ger .
Explan ation 2B.Wher e in a pr evious year , any asset for ming par t of
a block of assets is tr ansfer r ed by a demer ged company to the
r esulting company, then, notwithstanding anything contained in
S. 43 I.T. ACT, 1961 1.274
45. Substituted for any asset by the Taxation Laws (Amendment & Miscellaneous Pr ovi-
sions) Act, 1986, w.e.f. 1-4-1988.
46. Substituted for Explan ation 2 and Explan ation 2A by the Taxation Laws (Amendment &
Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1988. Pr ior to their substitution, Explan a-
tion 2 was substituted by the Finance Act, 1965, w.e.f. 1-4-1965 and Explan ation 2A was
inser ted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
47. Explan ation 2A, Explan ation 2B and pr oviso ther eof inser ted by the Finance Act, 1999,
w.e.f. 1-4-2000.
48. Substituted for book value of the assets by the Finance Act, 2000, w.e.f. 1-4-2000.
clause (1), the wr itten down value of the block of assets in the case of
the r esulting company shall be the
49
[wr itten down value of the
tr ansfer r ed assets
50
[***] of the demer ged company immediately
befor e the demer ger .
51
[***]]
Explan ation 3.Any allowance in r espect of any depr eciation car r ied
for war d under sub-section (2) of section 32 shall be deemed to be
depr eciation actually allowed.
52
[Explan ation 4.For the pur poses of this clause, the expr essions
moneys payable and sold shall have the same meanings as in the
Explan ation below sub-section (4) of section 41.]
53
[Explan ation 5.Wher e in a pr evious year , any asset for ming par t
of a block of assets is tr ansfer r ed by a r ecognised stock exchange in
India to a company under a scheme for cor por atisation appr oved by
the Secur ities and Exchange Boar d of India established under section
3 of the Secur ities and Exchange Boar d of India Act, 1992 (15 of 1992),
the wr itten down value of the block of assets in the case of such
company shall be the wr itten down value of the tr ansfer r ed assets
immediately befor e such tr ansfer .]
53a
[Explanation 6.Wh ere an assessee was n ot required to com pute
h is total in com e for th e purposes of th is Act for an y previous year or
years precedin g th e previous year relevan t to th e assessm en t year
un der con sideration ,
(a) th e actual cost of an asset sh all be adjusted by th e am oun t
attributable to th e revaluation of such asset, if an y, in th e book s of
accoun t;
(b) th e total am oun t of depreciation on such asset, provided in th e
book s of accoun t of th e assessee in respect of such previous year
or years precedin g th e previous year relevan t to th e assessm en t
year un der con sideration sh all be deem ed to be th e depreciation
actually allowed un der th is Act for th e purposes of th is clause; an d
(c) th e depreciation actually allowed un der clause (b) sh all be ad-
justed by th e am oun t of depreciation attributable to such revalu-
ation of th e asset.]
49. Substituted for value of the assets as appear ing in the books of account by the Finance
Act, 2000, w.e.f. 1-4-2000.
50. Wor ds as appear ing in the books of account omitted by the Finance Act, 2003, w.e.f.
1-4-2004.
51. Omitted by the Finance Act, 2000, w.e.f. 1-4-2000. Pr ior to its omission, pr oviso, as inser ted
Provided that if the value of the assets as appear ing in the books of account of the
demer ged company immediately befor e the demer ger exceeds the wr itten down value of
such assets in the hands of the demer ged company, the amount r epr esenting such excess
shall be r educed fr om the wr itten down value of the assets.
1-4-1988.
S. 43A I.T. ACT, 1961 1.276
54
[Special provisions consequential to changes in rate of exchange of currency.
43A. Notwithstanding anything contained in any other pr ovision of this Act,
wher e an assessee has acquir ed any asset in any pr evious year fr om a
countr y outside India for the pur poses of his business or pr ofession and, in
consequence of a change in the r ate of exchange dur ing any pr evious year after
the acquisition of such asset, ther e is an incr ease or r eduction in the liability of
the assessee as expr essed in Indian cur r ency (as compar ed to the liability existing
at the time of acquisition of the asset) at the time of making payment
(a) towar ds the whole or a par t of the cost of the asset; or
54. Substituted by the Finance Act, 2002, w.e.f. 1-4-2003. Pr ior to its substitution, section 43A,
as inser ted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967 and amended by the Dir ect Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and Dir ect Tax Laws (Amendment) Act, 1989,
43A. Special provision s con sequen tial to ch an ges in rate of exch an ge of curren cy.(1)
Notwithstanding anything contained in any other pr ovision of this Act, wher e an assessee
has acquir ed any asset fr om a countr y outside India for the pur poses of his business or
pr ofession and, in consequence of a change in the r ate of exchange at any time after the
acquisition of such asset, ther e is an incr ease or r eduction in the liability of the assessee
as expr essed in Indian cur r ency for making payment towar ds the whole or a par t of the
cost of the asset or for r epayment of the whole or a par t of the moneys bor r owed by him
fr om any per son, dir ectly or indir ectly, in any for eign cur r ency specifically for the pur pose
of acquir ing the asset (being in either case the liability existing immediately befor e the date
on which the change in the r ate of exchange takes effect), the amount by which the liability
afor esaid is so incr eased or r educed dur ing the pr evious year shall be added to, or , as the
case may be, deducted fr om, the actual cost of the asset as defined in clause (1) of section
43 or the amount of expenditur e of a capital natur e r efer r ed to in clause (iv) of sub-section
(1) of section 35 or in section 35A or in clause (ix) of sub-section (1) of section 36, or , in the
case of a capital asset (not being a capital asset r efer r ed toin section 50), the cost of
acquisition ther eof for the pur poses of section 48, and the amount ar r ived at after such
addition or deduction shall be taken to be the actual cost of the asset or the amount of
expenditur e of a capital natur e or , as the case may be, the cost of acquisition of the capital
asset as afor esaid.
Explan ation 1.In this sub-section, unless the context other wise r equir es,
(a) r ate of exchange means the r ate of exchange deter mined or r ecognised by the
Centr al Gover nment for the conver sion of Indian cur r ency into for eign cur r ency
or for eign cur r ency into Indian cur r ency;
(b) for eign cur r ency and Indian cur r ency have the meanings r espectively assigned
to them in section 2 of the For eign Exchange Regulation Act, 1947 (7 of 1947).
Explan at ion 2.Wher e t he whole or a ny pa r t of t he lia bilit y a for esa id is met ,
not by the assessee, but, dir ectly or indir ectly, by any other per son or author ity, the liability
so met shall not be taken into account for the pur poses of this sub-section.
Explan ation 3.Wher e the assessee has enter ed into a contr act with an author ised dealer
as defined in section 2 of the For eign Exchange Regulation Act, 1947 (7 of 1947), for
pr oviding him with a specified sum in a for eign cur r ency on or after a stipulated futur e
date at the r ate of exchange specified in the contr act to enable him to meet the whole or
any par t of the liability afor esaid, the amount, if any, to be added to, or deducted fr om, the
actual cost of the asset or the amount of expenditur e of a capital natur e or , as the case may
be, the cost of acquisition of the capital asset under this sub-section shall, in r espect of so
much of the sum specified in the contr act as is available for dischar ging the liability
afor esaid, be computed with r efer ence to the r ate of exchange specified ther ein.
(2) The pr ovisions of sub-section (1) shall not be taken into account in computing the actual
cost of an asset for the pur pose of the deduction on account of development r ebate under
section 33.
(b) towar ds r epayment of the whole or a par t of the moneys bor r owed by
him fr om any per son, dir ectly or indir ectly, in any for eign cur r ency
specifically for the pur pose of acquir ing the asset along with inter est,
if any,
the amount by which the liability as afor esaid is so incr eased or r educed dur ing
such pr evious year and which is taken into account at the time of making the
payment, ir r espective of the method of accounting adopted by the assessee, shall
be added to, or , as the case may be, deducted fr om
(i) the actual cost of the asset as defined in clause (1) of section 43; or
(ii) the amount of expenditur e of a capital natur e r efer r ed to in clause (iv)
of sub-section (1) of section 35; or
(iii) the amount of expenditur e of a capital natur e r efer r ed to in section
35A; or
(iv) the amount of expenditur e of a capital natur e r efer r ed to in clause (ix)
of sub-section (1) of section 36; or
(v) the cost of acquisition of a capital asset (not being a capital asset
r efer r ed to in section 50) for the pur poses of section 48,
and the amount ar r ived at after such addition or deduction shall be taken to be
the actual cost of the asset or the amount of expenditur e of a capital natur e or ,
as the case may be, the cost of acquisition of the capital asset as afor esaid:
Provided that wher e an addition to or deduction fr om the actual cost or
expenditur e or cost of acquisition has been made under this section, as it stood
immediately befor e its substitution by the Finance Act, 2002, on account of an
incr ease or r eduction in the liability as afor esaid, the amount to be added to, or ,
as the case may be, deducted under this section fr om, the actual cost or expendi-
tur e or cost of acquisition at the time of making the payment shall be so adjusted
that the total amount added to, or , as the case may be, deducted fr om, the actual
cost or expenditur e or cost of acquisition, is equal to the incr ease or r eduction
in the afor esaid liability taken into account at the time of making payment.
Explan ation 1.In this section, unless the context other wise r equir es,
(a) r ate of exchange means the r ate of exchange deter mined or
r ecognised by the Centr al Gover nment for the conver sion of Indian
cur r ency into for eign cur r ency or for eign cur r ency into Indian
cur r ency;
(b)
55
for eign cur r ency and Indian cur r ency have the meanings r e-
spectively assigned to them in section 2 of the For eign Exchange
Management Act, 1999 (42 of 1999).
55. Clause (m ) and clause (q) of section 2 of the For eign Exchange Management Act, 1999,
define for eign cur r ency and Indian cur r ency r espectively as follows :
(m ) for eign cur r ency means any cur r ency other than Indian cur r ency;
(q) Indian cur r ency means cur r ency which is expr essed or dr awn in Indian r upees
but does not include special bank notes and special one r upee notes issued under
section 28A of the Reser ve Bank of India Act, 1934 (2 of 1934);
Explan ation 2.Wher e the whole or any par t of the liability afor esaid is met, not
by the assessee, but, dir ectly or indir ectly, by any other per son or author ity, the
liability so met shall not be taken into account for the pur poses of this section.
Explan ation 3.Where the assessee has entered into a contract with an authorised
dealer
56
as defined in section 2 of the For eign Exchange Management Act, 1999
(42 of 1999), for pr oviding him with a specified sum in a for eign cur r ency on or
after a stipulated futur e date at the r ate of exchange specified in the contr act to
enable him to meet the whole or any par t of the liability afor esaid, the amount,
if any, to be added to, or deducted fr om, the actual cost of the asset or the amount
of expenditur e of a capital natur e or , as the case may be, the cost of acquisition
of the capital asset under this section shall, in r espect of so much of the sum
specified in the contr act as is available for dischar ging the liability afor esaid, be
computed with r efer ence to the r ate of exchange specified ther ein.]
57
[Certain deductions to be only on actual payment.
58
43B.
59
Notwithstanding anything contained in any other pr ovision of this Act,
a deduction other wise allowable under this Act in r espect of
60
[(a) any sum payable by the assessee by way of tax
61
, duty, cess or fee, by
whatever name called, under any law for the time being in for ce, or ]
(b) any sum payable by the assessee as an employer by way of contr ibu-
tion to any pr ovident fund or super annuation fund or gr atuity fund
or any other fund for the welfar e of employees,
62
[or ]
62
[(c) any sum r efer r ed to in clause (ii) of sub-section (1) of section 36,]
63
[or ]
63
[(d) any sum payable by the assessee as inter est on any loan or bor r owing
fr om any public financial institution
64
[or a State financial cor por a-
tion or a State industr ial investment cor por ation], in accor dance with
the ter ms and conditions of the agr eement gover ning such loan or
bor r owing
65
[, or ]
65
[(e) any sum payable by the assessee as inter est on any
66
[loan or
advances] fr om a scheduled bank in accor dance with the ter ms and
S. 43B I.T. ACT, 1961 1.278
56. Clause (c) of section 2 of the For eign Exchange Management Act, 1999, defines author ised
dealer as follows :
(c) author ised per son means an author ised dealer , money changer , off-shor e bank-
ing unit or any other per son for the time being author ised under sub-section (1) of
section 10 to deal in for eign exchange or for eign secur ities;
No. 7/ 2006, dated 17-7-2006. For details, see Taxmanns Master Guide to Income-tax Act.
61. For the meaning of the ter m tax, see Taxmanns Dir ect Taxes Manual, Vol. 3.
66. Substituted for ter m loan by the Finance Act, 2003, w.e.f. 1-4-2004.
conditions of the agr eement gover ning such loan
67
[or advances],]
68
[or ]
68
[( f) any sum payable by the assessee as an employer in lieu of any leave
at the cr edit of his employee,]
shall be allowed (ir r espective of the pr evious year in which the liability to pay
such sum was incur r ed by the assessee accor ding to the method of accounting
r egular ly employed by him) only in computing the income r efer r ed to in section
28 of that pr evious year in which such sum is actually paid by him:
69
[Provided that nothing contained in this section shall apply in r elation to any
sum
70
[***] which is actually paid by the assessee on or befor e the due date
applicable in his case for fur nishing the r etur n of income under sub-section (1)
of section 139 in r espect of the pr evious year in which the liability to pay such sum
was incur r ed as afor esaid and the evidence of such payment is fur nished by the
assessee along with such r etur n.
71
[***]]
Explan ation
72
[1].For the r emoval of doubts, it is her eby declar ed that wher e
a deduction in r espect of any sum r efer r ed to in clause (a) or clause (b) of this
section is allowed in computing the income r efer r ed to in section 28 of the
pr evious year (being a pr evious year r elevant to the assessment year commenc-
ing on the 1st day of Apr il, 1983, or any ear lier assessment year ) in which the
liability to pay such sum was incur r ed by the assessee, the assessee shall not be
entitled to any deduction under this section in r espect of such sum in computing
the income of the pr evious year in which the sum is actually paid by him.]
73
[Explan ation 2.For the pur poses of clause (a), as in for ce at all mater ial times,
any sum payable means a sum for which the assessee incur r ed liability in the
pr evious year even though such sum might not have been payable within that
year under the r elevant law.]
1.279 CH. IV - COMPUTATION OF BUSINESS INCOME S. 43B
70. Wor ds r efer r ed to in clause (a) or clause (c) or clause (d) or clause (e) or clause (f ) omitted
by the Finance Act, 2003, w.e.f. 1-4-2004. Ear lier the quoted wor ds wer e amended by the
Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, Finance Act, 1988, w.e.f. 1-4-1989,
Finance (No. 2) Act, 1998, w.r .e.f. 1-4-1997 and Finance Act, 2001, w.e.f. 1-4-2002.
71. Second pr oviso omitted by the Finance Act, 2003, w.e.f. 1-4-2004. Pr ior to its omission, the
second pr oviso, as substituted by the Finance Act, 1989, w.e.f. 1-4-1989, r ead as under :
Provided further that no deduction shall, in r espect of any sum r efer r ed to in clause (b),
be allowed unless such sum has actually been paid in cash or by issue of a cheque or dr aft
or by any other mode on or befor e the due date as defined in the Explan ation below clause
(va) of sub-section (1) of section 36, and wher e such payment has been made other wise
than in cash, the sum has been r ealised within fifteen days fr om the due date.
74
[
75
[Explan ation 3].For the r emoval of doubts it is her eby declar ed that wher e
a deduction in r espect of any sum r efer r ed to in clause (c)
76
[or clause (d)] of this
section is allowed in computing the income r efer r ed to in section 28 of the
pr evious year (being a pr evious year r elevant to the assessment year commenc-
ing on the 1st day of Apr il, 1988, or any ear lier assessment year ) in which the
liability to pay such sum was incur r ed by the assessee, the assessee shall not be
entitled to any deduction under this section in r espect of such sum in computing
the income of the pr evious year in which the sum is actually paid by him.]
77
[Explan ation 3A.For the r emoval of doubts, it is her eby declar ed that wher e
a deduction in r espect of any sum r efer r ed to in clause (e) of this section is
allowed in computing the income r efer r ed to in section 28 of the pr evious year
(being a pr evious year r elevant to the assessment year commencing on the 1st
day of Apr il, 1996, or any ear lier assessment year ) in which the liability to pay
such sum was incur r ed by the assessee, the assessee shall not be entitled to any
deduction under this section in r espect of such sum in computing the income of
the pr evious year in which the sum is actually paid by him.]
78
[Explan ation 3B.For the r emoval of doubts, it is her eby declar ed that wher e
a deduction in r espect of any sum r efer r ed to in clause (f) of this section is
allowed in computing the income, r efer r ed to in section 28, of the pr evious year
(being a pr evious year r elevant to the assessment year commencing on the 1st
day of Apr il, 2001, or any ear lier assessment year ) in which the liability to pay
such sum was incur r ed by the assessee, the assessee shall not be entitled to any
deduction under this section in r espect of such sum in computing the income of
the pr evious year in which the sum is actually paid by him.]
79
[Explan ation 3C.For the r emoval of doubts, it is her eby declar ed that a
deduction of any sum, being inter est payable under clause (d) of this section, shall
be allowed if such inter est has been actually paid and any inter est r efer r ed to in
that clause which has been conver ted into a loan or bor r owing shall not be
deemed to have been actually paid.]
80
[Explan ation 3D.For the r emoval of doubts, it is her eby declar ed that a
deduction of any sum, being inter est payable under clause (e) of this section, shall
be allowed if such inter est has been actually paid and any inter est r efer r ed to in
that clause which has been conver ted into a loan or advance shall not be deemed
to have been actually paid.]
81
[Explan ation 4.For the pur poses of this section,
S. 43B I.T. ACT, 1961 1.280
75. Renumber ed by the Finance Act, 1989, w.r .e.f. 1-4-1984.
81. Substituted by the Finance Act, 1990, w.e.f. 1-4-1991. Pr ior to substitution, Explan ation 4
was inser ted by the Finance Act, 1988, w.e.f. 1-4-1989 and amended by the Finance Act,
1989, w.r .e.f. 1-4-1984.
1.281 CH. IV - COMPUTATION OF BUSINESS INCOME S. 43C
(a) public financial institutions shall have the meaning assigned to it in
section 4A
82
83
[(aa) scheduled bank shall have the meaning assigned to it in the Expla-
n ation to clause (iii) of sub-section (5) of section 11;]
(b) State financial cor por ation means a financial cor por ation estab-
lished under section 3 or section 3A or an institution notified under
section 46 of the State Financial Cor por ations Act, 1951 (63 of 1951);
(c) State industr ial investment cor por ation means a Gover nment
company
84
within the meaning of section 617 of the Companies Act,
1956 (1 of 1956), engaged in the business of pr oviding long-ter m
finance for industr ial pr ojects and
85
[eligible for deduction under
clause (viii) of sub-section (1) of section 36].]
86
[Special provision for computation of cost of acquisition of certain assets.
43C. (1) Wher e an asset [not being an asset r efer r ed to in sub-section (2) of
section 45] which becomes the pr oper ty of an amalgamated company
under a scheme of amalgamation, is sold after the 29th day of Febr uar y, 1988,
by the amalgamated company as stock-in-tr ade of the business car r ied on by it,
the cost of acquisition of the said asset to the amalgamated company in
computing the pr ofits and gains fr om the sale of such asset shall be the cost of
acquisition of the said asset to the amalgamating company, as incr eased by the
cost, if any, of any impr ovement made ther eto, and the expenditur e, if any,
incur r ed, wholly and exclusively in connection with such tr ansfer by the
amalgamating company.
(2) Wher e an asset [not being an asset r efer r ed to in sub-section (2) of section 45]
which becomes the pr oper ty of the assessee on the total or par tial par tition of a
Hindu undivided family or under a gift or will or an ir r evocable tr ust, is sold after
the 29th day of Febr uar y, 1988, by the assessee as stock-in-tr ade of the business
car r ied on by him, the cost of acquisition of the said asset to the assessee in
computing the pr ofits and gains fr om the sale of such asset shall be the cost of
acquisition of the said asset to the tr ansfer or or the donor , as the case may be,
as incr eased by the cost, if any, of any impr ovement made ther eto, and
the expenditur e, if any, incur r ed, wholly and exclusively in connection with such
tr ansfer (by way of effecting the par tition, acceptance of the gift, obtaining
pr obate in r espect of the will or the cr eation of the tr ust), including the payment
of gift-tax, if any, incur r ed by the tr ansfer or or the donor , as the case may be.]
Appendix.
83. Substituted by the Finance Act, 1999, w.e.f. 1-4-2000. Pr ior to its substitution, clause (aa),
as inser ted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997, r ead as under :
(aa) scheduled bank shall have t he meaning assigned t o it in clause (ii) of t he
Explan ation t o clause (viia) of sub-section (1) of section 36;
85. Substituted for appr oved by the Centr al Gover nment under clause (viii) of sub-section
(1) of section 36 by the Finance Act, 2000, w.e.f. 1-4-2000.
S. 43D I.T. ACT, 1961 1.282
87
[Special provision in case of income of public financial institutions, public
companies, etc.
43D. Notwithstanding anything to the contr ar y contained in any other pr ovision
of this Act,
(a) in the case of a public financial institution or a scheduled bank or a
State financial cor por ation or a State industr ial investment cor por a-
tion, the income by way of inter est in r elation to such categor ies of bad
or doubtful debts as may be pr escr ibed
88
having r egar d to the
guidelines issued by the Reser ve Bank of India in r elation to such
debts;
(b) in the case of a public company, the income by way of inter est in
r elation to such categor ies of bad or doubtful debts as may be
pr escr ibed
89
having r egar d to the guidelines issued by the National
Housing Bank in r elation to such debts,
shall be char geable to tax in the pr evious year in which it is cr edited by the public
financial institution or the scheduled bank or the State financial cor por ation or
the State industrial investment corporation or the public company to its profit and
loss account for that year or , as the case may be, in which it is actually r eceived
by that institution or bank or cor por ation or company, whichever is ear lier .
(a) National Housing Bank means the National Housing Bank established
under section 3 of the National Housing Bank Act, 1987 (53 of 1987);
87. Substituted by the Finance Act, 1999, w.e.f. 1-4-2000. Pr ior to its substitution, section 43D,
as inser ted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991, r ead as under :
43D. Special provision in case of in come of public fin an cial in stitution s, etc.Notwith-
standing anything to the contr ar y contained in any other pr ovision of this Act, in the case
of a public financial institution or a scheduled bank or a State financial cor por ation or a
State industr ial investment cor por ation, the income by way of inter est in r elation to such
categor ies of bad or doubtful debts as may be pr escr ibed having r egar d to the guidelines
issued by the Reser ve Bank of India in r elation to such debts, shall be char geable to tax
in the pr evious year in which it is cr edited by the public financial institution or the
scheduled bank or the State financial cor por ation or the State industr ial investment
cor por ation to its pr ofit and loss account for that year or , as the case may be, in which it
is actually r eceived by that institution or bank or cor por ation, whichever is ear lier .
(a) public financial institution shall have the meaning assigned to it in section 4A of
the Companies Act, 1956 (1 of 1956);
(b) scheduled bank shall have t he meaning assigned t o it in clause (ii) of t he
Explan ation t o clause (viia) of sub-section (1) of section 36;
(c) St at e financial cor por at ion means a financial cor por at ion est ablished under
section 3 or section 3A or an institution notified under section 46 of the State
Financial Cor por ations Act, 1951 (63 of 1951);
(d) State industr ial investment cor por ation means a Gover nment company within
the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the
business of pr oviding long-ter m finance for industr ial pr ojects and appr oved by the
Cent r al Gover nment under clause (viii) of sub-section (1) of section 36.
88. See r ule 6EA, fr amed under section 43D, as it stood pr ior to 1-4-2000.
89. See r ule 6EB.
(b) public company means a company,
(i) which is a public company within the meaning of section 3
90
(ii) whose main object is car r ying on the business of pr oviding
long-ter m finance for constr uction or pur chase of houses in
India for r esidential pur poses; and
(iii) which is r egister ed in accor dance with the Housing Finance
Companies (NHB) Directions, 1989 given under section 30 and
section 31 of the National Housing Bank Act, 1987 (53 of 1987);
(c) public financial institution shall have the meaning assigned to it in
section 4A
91
(d) scheduled bank shall have the meaning assigned to it in clause (ii) of
the Explan ation to clause (viia) of sub-section (1) of section 36;
(e) State financial cor por ation means a financial cor por ation estab-
lished under section 3 or section 3A or an institution notified under
section 46 of the State Financial Cor por ations Act, 1951 (63 of 1951);
(f) State industr ial investment cor por ation means a Gover nment com-
pany within the meaning of section 617
92
of the Companies Act, 1956
(1 of 1956), engaged in the business of pr oviding long-ter m finance for
industr ial pr ojects.]
Insurance business.
93
44. Notwithstanding anything to the contr ar y contained in the pr ovisions of
this Act r elating to the computation of income char geable under the head
Inter est on secur ities, Income fr om house pr oper ty, Capital gains or Income
fr om other sour ces, or in section 199 or in sections 28 to
94
[43B], the pr ofits and
gains of any business of insur ance, including any such business car r ied on by a
mutual insur ance company or by a co-oper ative society, shall be computed in
accor dance with the r ules contained in the Fir st Schedule.
95
[Special provision for deduction in the case of trade, professional or similar
association.
96
44A. (1) Notwithstanding anything to the contr ar y contained in this Act,
wher e the amount r eceived dur ing a pr evious year by any tr ade, pr ofes-
90. Clause (iv) of section 3(1) of the Companies Act, 1956, defines public company. For text
Appendix.
93. See also Letter [F. No. 14/ 3/ 7-IT(A-I)], dated 7-8-1967 and Cir cular No. 38, dated 3-10-1956.
For details, see Taxmanns Master Guide to Income-tax Act.
94. Substituted for 43A by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
Ear lier , 43A was substituted for 43 by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
S. 44AA I.T. ACT, 1961 1.284
sional or
97
similar association
98
[(other than an association or institution r efer r ed
to in clause (23A) of section 10)] fr om its member s, whether by way of subscr ip-
tion or other wise (not being r emuner ation r eceived for r ender ing any specific
ser vices to such member s) falls shor t of the expenditur e incur r ed by such
association dur ing that pr evious year (not being expenditur e deductible in
computing the income under any other pr ovision of this Act and not being in the
natur e of capital expenditur e) solely for the pur poses of pr otection or advance-
ment of the common inter ests of its member s, the amount so fallen shor t
(hereinafter referred to as deficiency) shall, subject to the provisions of this section,
be allowed as a deduction in computing the income of the association assessable
for the r elevant assessment year under the head Pr ofits and gains of business
or pr ofession and if ther e is no income assessable under that head or the
deficiency allowable exceeds such income, the whole or the balance of the
deficiency, as the case may be, shall be allowed as a deduction in computing the
income of the association assessable for the r elevant assessment year under any
other head.
(2) In computing the income of the association for the r elevant assessment year
under sub-section (1), effect shall fir st be given to any other pr ovision of this
Act under which any allowance or loss in r espect of any ear lier assessment year
is car r ied for war d and set off against the income for the r elevant assessment
year .
(3) The amount of deficiency to be allowed as a deduction under this section shall
in no case exceed one-half of the total income of the association as computed
befor e making any allowance under this section.
(4) This section applies only to that tr ade, pr ofessional or similar association the
income of which or any par t ther eof is not distr ibuted to its member s except as
gr ants to any association or institution affiliated to it.]
99
[Maintenance of accounts by certain persons carrying on profession or business.
1
44AA. (1) Ever y per son car r ying on legal, medical, engineer ing or ar chitec-
tural profession or the profession of accountancy or technical consultancy
or inter ior decor ation or any other pr ofession as is notified
2
by the Boar d in the
Official Gazette shall keep and maintain such books of account and other
documents as may enable the
3
[Assessing] Officer to compute his total income
in accor dance with the pr ovisions of this Act.
(2) Ever y per son car r ying on business or pr ofession [not being a pr ofession
r efer r ed to in sub-section (1)] shall,
97. For the meaning of the expr ession similar association, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
2. For specified pr ofessions, see Taxmanns Master Guide to Income-tax Act.
1-4-1988.
(i) if his income fr om business or pr ofession exceeds
4
[one lakh twenty]
thousand r upees or his total sales, tur nover or gr oss r eceipts, as the
case may be, in business or pr ofession exceed or exceeds
5
[ten lakh]
r upees in any one of the thr ee year s immediately pr eceding the
pr evious year ; or
(ii) wher e the business or pr ofession is newly set up in any pr evious year ,
if his income fr om business or pr ofession is likely to exceed
6
[one lakh
twenty] thousand r upees or his total sales, tur nover or gr oss r eceipts,
as the case may be, in business or pr ofession ar e or is likely to exceed
7
[ten lakh] r upees,
8
[dur ing such pr evious year ; or
(iii) wher e the pr ofits and gains fr om the business ar e deemed to be the
pr ofits and gains of the assessee under section 44AD or section 44AE
or section 44AF
9
[or section 44BB or section 44BBB], as the case may
be, and the assessee has claimed his income to be lower than the
pr ofits or gains so deemed to be the pr ofits and gains of his business,
as the case may be, dur ing such pr evious year ,]
keep and maintain such books of account and other documents as may enable
the
10
[Assessing] Officer to compute his total income in accor dance with the
pr ovisions of this Act.
(3) The Boar d may, having r egar d to the natur e of the business or pr ofession
car r ied on by any class of per sons, pr escr ibe
11
, by r ules, the books of account
and other documents (including inventor ies, wher ever necessar y) to be kept and
maintained under sub-section (1) or sub-section (2), the par ticular s to be
contained ther ein and the for m and the manner in which and the place at which
they shall be kept and maintained.
(4) Without pr ejudice to the pr ovisions of sub-section (3), the Boar d may
pr escr ibe, by r ules, the per iod for which the books of account and other
documents to be kept and maintained under sub-section (1) or sub-section (2)
shall be r etained.]
1.285 CH. IV - COMPUTATION OF BUSINESS INCOME S. 44AA
4. Substituted for for ty by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Ear lier for ty was
substituted for twenty-five by the Finance Act, 1992, w.e.f. 1-4-1993.
5. Substituted for five hundr ed thousand by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
Ear lier five hundr ed thousand was substituted for two hundr ed and fifty thousand by
6. Substituted for for ty by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Ear lier for ty was
substituted for twenty-five by the Finance Act, 1992, w.e.f. 1-4-1993.
7. Substituted for five hundr ed thousand by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
Ear lier five hundr ed thousand was substituted for two hundr ed and fifty thousand by
8. Substituted for dur ing such pr evious year , by the Finance Act, 1997, w.e.f. 1-4-1998.
1-4-1988.
11. See r ule 6F for pr escr ibed books of account to be maintained by pr ofessionals. For m 3C
has been pr escr ibed as a Daily Case Register to be maintained by Medical Pr ofessionals.
12
[Audit of accounts of certain persons carrying on business or profession.
13
44AB.
14
Ever y per son,
(a) car r ying on business shall, if his total sales, tur nover or gr oss r eceipts,
as the case may be, in business exceed or exceeds for ty lakh r upees
in any pr evious year
15
[***]; or
(b) car r ying on pr ofession shall, if his gr oss r eceipts in pr ofession exceed
ten lakh r upees in any
16
[pr evious year ; or
(c) car r ying on the business shall, if the pr ofits and gains fr om the
business ar e deemed to be the pr ofits and gains of such per son under
section 44AD or section 44AE or section 44AF
17
[or section 44BB or
section 44BBB], as the case may be, and he has claimed his income
to be lower than the pr ofits or gains so deemed to be the pr ofits and
gains of his business, as the case may be, in any pr evious year ,]
18
[***]
get his accounts of such pr evious year
19
[***] audited by an accountant befor e
the specified date and
20
[fur nish by] that date the r epor t of such audit in the
pr escr ibed for m duly signed and ver ified by such accountant and setting for th
such par ticular s as may be pr escr ibed:
21
[Provided that this section shall not apply to the per son, who der ives income of
the natur e r efer r ed to in
22
[***] section 44B or
23
[section 44BBA], on and fr om the
1st day of Apr il, 1985 or , as the case may be, the date on which the r elevant section
came into for ce, whichever is later :
S. 44AB I.T. ACT, 1961 1.286
14. See r ule 6G. Pr escr ibed audit r epor ts ar e as under :
(i) Audit r epor t in case of per son who car r ies on business or pr ofession and who is
r equir ed to get his accounts audited under any other law: For m 3CA
(ii) Audit r epor t in case of per son who car r ies on business or pr ofession and who is not
r equir ed to get his accounts audited under any other law: For m 3CB
(iii) Pr escr ibed par ticular s in case of (i) and (ii) above: For m 3CD.
15. Wor ds or year s r elevant to the assessment year commencing on the fir st day of Apr il,
1985, or any subsequent assessment year omit t ed by t he Finance Act , 1988, w.e.f.
1-4-1989.
16. Substituted for pr evious year , by the Finance Act, 1997, w.e.f. 1-4-1998.
18. Wor ds or year s r elevant to the assessment year commencing on the fir st day of Apr il,
1985, or any subsequent assessment year , omitted by the Finance Act, 1988, w.e.f.
1-4-1989.
19. Wor ds or year s omitted, ibid.
20. Substituted for obtain befor e by the Finance Act, 1995, w.e.f. 1-7-1995.
21. Substituted for Pr ovided that by the Finance Act, 1992, w.r .e.f. 1-4-1985.
22. Wor ds section 44AC or omitted by the Finance Act, 1995, w.e.f. 1-7-1995.
23. Substituted for section 44BB or section 44BBA or section 44BBB by the Finance Act,
2003, w.e.f. 1-4-2004.
Provided further that] in a case wher e such per son is r equir ed by or under any
other law to get his accounts audited
24
[***], it shall be sufficient compliance
with the pr ovisions of this section if such per son gets the accounts of such
business or pr ofession audited under such law befor e the specified date and
25
[fur nishes by] that date the r epor t of the audit as r equir ed under such other law
and a further report
26
[by an accountant] in the form prescribed under this section.
(i) accountant shall have the same meaning as in the Explan ation
below sub-section (2) of section 288;
27
[(ii) specified date, in r elation to the accounts of the assessee of the
pr evious year r elevant to an assessment year , means the
27a
[30th day
of Septem ber] of the assessment year .]]
Special provision for computing profits and gains from the business of trading
in certain goods.
44AC.
28
29
[
30
Special provision for computing profits and gains of business of civil
construction, etc.
44AD. (1) Notwithstanding anything to the contr ar y contained in sections 28
to 43C, in the case of an assessee engaged in the business of civil
constr uction or supply of labour for civil constr uction, a sum equal to eight per
cent of the gr oss r eceipts paid or payable to the assessee in the pr evious year on
account of such business or , as the case may be, a sum higher than the afor esaid
sum as declar ed by the assessee in his r etur n of income, shall be deemed to be
the pr ofits and gains of such business char geable to tax under the head Pr ofits
and gains of business or pr ofession:
Provided that nothing contained in this sub-section shall apply in case the
afor esaid gr oss r eceipts paid or payable exceed an amount of for ty lakh r upees.
1.287 CH. IV - COMPUTATION OF BUSINESS INCOME S. 44AD
24. Wor ds by an accountant omitted by the Finance Act, 1985, w.e.f. 1-4-1985.
25. Substituted for obtains befor e by the Finance Act, 1995, w.e.f. 1-7-1995.
27. Substituted, ibid. Pr ior to its substitution, clause (ii), as substituted by the Finance Act,
1988, w.e.f. 1-4-1989 and later on amended by the Finance Act, 1994, w.e.f. 1-4-1994, r ead
as under :
(ii) specified date, in r elation to the accounts of the pr evious year r elevant to an
assessment year means,
(a) wher e the assessee is a company, the 30th day of November of the assessment
year ;
(b) in any other case, the 31st day of October of the assessment year .
27a. Substituted for 31st day of October by the Finance Act, 2008, w.e.f. 1-4-2008.
28. Pr ior to omission section 44AC was inser ted by the Finance Act, 1988, w.e.f. 1-4-1989 and
later amended by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989 and the
Finance Act, 1990, w.e.f. 1-4-1991.
Income-tax Act.
(2) Any deduction allowable under the pr ovisions of sections 30 to 38 shall, for
the pur poses of sub-section (1), be deemed to have been alr eady given full effect
to and no fur ther deduction under those sections shall be allowed :
31
[Provided that wher e the assessee is a fir m, the salar y and inter est paid to its
par tner s shall be deducted fr om the income computed under sub-section (1)
subject to the conditions and limits specified in clause (b) of section 40.]
(3) The wr itten down value of any asset used for the pur pose of the business
r efer r ed to in sub-section (1) shall be deemed to have been calculated as if the
assessee had claimed and had been actually allowed the deduction in r espect of
the depr eciation for each of the r elevant assessment year s.
(4) The pr ovisions of sections 44AA and 44AB shall not apply in so far as they
r elate to the business r efer r ed to in sub-section (1) and in computing the
monetar y limits under those sections, the gr oss r eceipts or , as the case may be,
the income fr om the said business shall be excluded.
32
[(5) Nothing contained in the for egoing pr ovisions of this section shall apply,
wher e the assessee claims and pr oduces evidence to pr ove that the pr ofits and
gains fr om the afor esaid business dur ing the pr evious year r elevant to the
assessment year commencing on the 1st day of Apr il, 1997 or any ear lier
assessment year , ar e lower than the pr ofits and gains specified in sub-section (1),
and ther eupon the Assessing Officer shall pr oceed to make an assessment of the
total income or loss of the assessee and deter mine the sum payable by the
assessee on the basis of assessment made under sub-section (3) of section 143.]
33
[(6) Notwithstanding anything contained in the for egoing pr ovisions of this sec-
tion, an assessee may claim lower pr ofits and gains than the pr ofits and gains
specified in sub-section (1), if he keeps and maintains such books of account and
other documents as r equir ed under sub-section (2) of section 44AA and gets his
accounts audited and fur nishes a r epor t of such audit as r equir ed under section
44AB.]
Explan ation .For the pur poses of this section, the expr ession civil constr uc-
tion includes
(a) the constr uction or r epair of any building, br idge, dam or other
str uctur e or of any canal or r oad;
(b) the execution of any wor ks contr act.]
34
Special provision for computing profits and gains of business of plying, hiring
or leasing goods carriages.
44AE. (1) Notwithstanding anything to the contr ar y contained in sections 28
to 43C, in the case of an assessee, who owns not mor e than ten goods
S. 44AE I.T. ACT, 1961 1.288
32. Inser ted by the Income-tax (Second Amendment) Act, 1998, w.r .e.f. 1-4-1997. Ear lier sub-
section (5) was inser ted by the Finance Act, 1994, w.e.f. 1-4-1994 and later on omitted by
34. See Cir cular No. 737, dated 23-2-1996. For details, see Taxmanns Master Guide to Income-
tax Act.
1.289 CH. IV - COMPUTATION OF BUSINESS INCOME S. 44AE
car r iages
35
[at any time dur ing the pr evious year ] and who is engaged in the
business of plying, hir ing or leasing such goods car r iages, the income of such
business char geable to tax under the head Pr ofits and gains of business or
pr ofession shall be deemed to be the aggr egate of the pr ofits and gains, fr om all
the goods car r iages owned by him in the pr evious year , computed in accor dance
with the pr ovisions of sub-section (2).
(2) For the pur poses of sub-section (1), the pr ofits and gains fr om each goods
car r iage,
(i) being a heavy goods vehicle, shall be an amount equal to
36
[thr ee
thousand five hundr ed ] r upees for ever y month or par t of a month
dur ing which the heavy goods vehicle is owned by the assessee in the
pr evious year or , as the case may be, an amount higher than the
afor esaid amount as declar ed by him in his r etur n of income;
(ii) other than a heavy goods vehicle, shall be an amount equal to
37
[thr ee
thousand one hundr ed and fifty] r upees for ever y month or par t of
a month dur ing which the goods car r iage is owned by the assessee in
the pr evious year or , as the case may be, an amount higher than the
afor esaid amount as declar ed by him in his r etur n of income.
38
[Provided that wher e the assessee is a fir m, the salar y and inter est paid to its
subject to the conditions and limits specified in clause (b) of section 40.]
monetar y limits under those sections, the gr oss r eceipts or , as the case may be,
the income fr om the said business shall be excluded.
39
[(6) Nothing contained in the for egoing pr ovisions of this section shall apply,
wher e the assessee claims and pr oduces evidence to pr ove that the pr ofits and
gains fr om the afor esaid business dur ing the pr evious year r elevant to the
assessment year commencing on the 1st day of Apr il, 1997 or any ear lier
assessment year , ar e lower than the pr ofits and gains specified in sub-sections (1)
36. Substituted for two thousand by the Finance Act, 2002, w.e.f. 1-4-2003.
37. Substituted for one thousand eight hundr ed, ibid.
39. Inser ted by the Income-tax (Second Amendment) Act, 1998, w.r .e.f. 1-4-1997. Ear lier sub-
and (2), and ther eupon the Assessing Officer shall pr oceed to make an assessment
of the total income or loss of the assessee and deter mine the sum payable by the
assessee on the basis of assessment made under sub-section (3) of section 143.]
40
section, an assessee may claim lower pr ofits and gains than the pr ofits and gains
specified in sub-sections (1) and (2), if he keeps and maintains such books of
account and other documents as r equir ed under sub-section (2) of section 44AA
and gets his accounts audited and fur nishes a r epor t of such audit as r equir ed
under section 44AB.]
(a) the expr essions goods car r iage
41
and heavy goods vehicle
41
shall
have the meanings r espectively assigned to them in section 2 of the
Motor Vehicles Act, 1988 (59 of 1988);
(b) an assessee, who is in possession of a goods car r iage, whether taken
on hir e pur chase or on instalments and for which the whole or par t
of the amount payable is still due, shall be deemed to be the owner of
such goods car r iage.]
42
[Special provisions for computing profits and gains of retail business.
44AF. (1) Notwithstanding anything to the contr ar y contained in sections 28 to
43C, in the case of an assessee engaged in r etail tr ade in any goods or
mer chandise, a sum equal to five per cent of the total tur nover in the pr evious
year on account of such business or , as the case may be, a sum higher than the
afor esaid sum as declar ed by the assessee in his r etur n of income shall be
deemed to be the pr ofits and gains of such business char geable to tax under the
head Pr ofits and gains of business or pr ofession :
Provided that nothing contained in this sub-section shall apply in r espect of an
assessee whose total tur nover exceeds an amount of for ty lakh r upees in the
pr evious year .
Provided that wher e the assessee is a fir m, the salar y and inter est paid to its
subject to the conditions and limits specified in clause (b) of section 40.
S. 44AF I.T. ACT, 1961 1.290
41. Clause (14) and clause (16) of section 2 of the Motor Vehicles Act, 1988, define goods
car r iage and heavy goods vehicle, r espectively, as follows :
(14) goods car r iage means any motor vehicle constr ucted or adopted for use solely
for the car r iage of goods, or any motor vehicle not so constr ucted or adopted
when used for the car r iage of goods;
(16) heavy goods vehicle means any goods car r iage the gr oss vehicle weight of
which, or a tr actor or a r oad-r oller the unladen weight of either of which,
exceeds 12,000 kilogr ams;
monetar y limits under those sections, the total tur nover or , as the case may be,
the income fr om the said business shall be excluded.]
43
[(5) Not wit hst anding anyt hing cont ained in t he for egoing pr ovisions of
thissection, an assessee may claim lower pr ofits and gains than the pr ofits and
gains specified in sub-section (1), if he keeps and maintains such books of account
and other documents as r equir ed under sub-section (2) of section 44AA and gets
his accounts audited and fur nishes a r epor t of such audit as r equir ed under
section 44AB.]
44
[Special provision for computing profits and gains of shipping business in the
case of non-residents.
45
44B. (1) Notwithstanding anything to the contr ar y contained in sections 28 to
43A, in the case of an assessee, being a non-r esident, engaged in the
business of oper ation of ships, a sum equal to seven and a half per cent of the
aggr egate of the amounts specified in sub-section (2) shall be deemed to be
the pr ofits and gains of such business char geable to tax under the head Pr ofits
and gains of business or pr ofession.
(2) The amounts r efer r ed to in sub-section (1) shall be the following, namely:
(i) the amount paid or payable (whether in or out of India) to the assessee
or to any per son on his behalf on account of the car r iage of passen-
ger s, livestock, mail or goods shipped at any por t in India; and
(ii) the amount r eceived or deemed to be r eceived in India by or on behalf
of the assessee on account of the car r iage of passenger s, livestock,
mail or goods shipped at any por t outside India.]
46
[Explan ation .For the pur poses of this sub-section, the amount r efer r ed to in
clause (i) or clause (ii) shall include the amount paid or payable or r eceived or
deemed to be r eceived, as the case may be, by way of demur r age char ges or
handling char ges or any other amount of similar natur e.]
47
[Special provision for computing profits and gains in connection with the
business of exploration, etc., of mineral oils.
44BB. (1) Notwithstanding anything to the contr ar y contained in sections 28 to
41 and sections 43 and 43A, in the case of an assessee
48
[, being a non-
r esident,] engaged in the business of pr oviding ser vices or facilities in connection
1.291 CH. IV - COMPUTATION OF BUSINESS INCOME S. 44BB
with, or supplying plant and machiner y on hir e used, or to be used, in the
pr ospecting for , or extr action or pr oduction of, miner al oils, a sum equal to ten
per cent of the aggr egate of the amounts specified in sub-section (2) shall be
deemed to be the pr ofits and gains of such business char geable to tax under the
head Pr ofits and gains of business or pr ofession :
Provided that this sub-section shall not apply in a case wher e the pr ovisions of
section 42 or section 44D or section 115A or section 293A apply for the pur poses
of computing pr ofits or gains or any other income r efer r ed to in those sections.
(2) The amounts r efer r ed to in sub-section (1) shall be the following, namely :
(a) the amount paid or payable (whether in or out of India) to the assessee
or to any per son on his behalf on account of the pr ovision of ser vices
and facilities in connection with, or supply of plant and machiner y on
hir e used, or to be used, in the pr ospecting for , or extr action or
pr oduction of, miner al oils in India; and
(b) the amount r eceived or deemed to be r eceived in India by or on behalf
of the assessee on account of the pr ovision of ser vices and facilities
in connection with, or supply of plant and machiner y on hir e used, or
to be used, in the pr ospecting for , or extr action or pr oduction of,
miner al oils outside India.
49
[(3) Notwithstanding anything contained in sub-section (1), an assessee may
claim lower pr ofits and gains than the pr ofits and gains specified in that sub-
section, if he keeps and maintains such books of account and other documents
as r equir ed under sub-section (2) of section 44AA and gets his accounts audited
and fur nishes a r epor t of such audit as r equir ed under section 44AB, and
ther eupon the Assessing Officer shall pr oceed to make an assessment of the total
income or loss of the assessee under sub-section (3) of section 143 and deter mine
the sum payable by, or r efundable to, the assessee.]
(i) plant includes ships, air cr aft, vehicles, dr illing units, scientific appa-
r atus and equipment, used for the pur poses of the said business;
(ii) miner al oil includes petr oleum and natur al gas.]
50
[Special provision for computing profits and gains of the business of operation
of aircraft in the case of non-residents.
44BBA. (1) Notwithstanding anything to the contr ar y contained in sections 28
to 43A, in the case of an assessee, being a non-r esident, engaged in the
business of oper ation of air cr aft, a sum equal to five per cent of the aggr egate of
the amounts specified in sub-section (2) shall be deemed to be the pr ofits and
gains of such business char geable to tax under the head Pr ofits and gains of
(2) The amounts r efer r ed to in sub-section (1) shall be the following, namely :
S. 44BBA I.T. ACT, 1961 1.292
1.293 CH. IV - COMPUTATION OF BUSINESS INCOME S. 44C
(a) the amount paid or payable (whether in or out of India) to the assessee
or to any per son on his behalf on account of the car r iage of passen-
ger s, livestock, mail or goods fr om any place in India; and
(b) the amount r eceived or deemed to be r eceived in India by or on behalf
of the assessee on account of the car r iage of passenger s, livestock,
mail or goods fr om any place outside India.]
51
[Special provision for computing profits and gains of foreign companies engaged
in the business of civil construction, etc., in certain turnkey power projects.
52
44BBB.
53
[(1)] Notwithstanding anything to the contr ar y contained in sections
28 to 44AA, in the case of an assessee, being a for eign company,
engaged in the business of civil constr uction or the business of er ection of plant
or machiner y or testing or commissioning ther eof, in connection with a tur nkey
power pr oject appr oved by the Centr al Gover nment in this behalf
54
[***], a sum
equal to ten per cent of the amount paid or payable (whether in or out of India)
to the said assessee or to any per son on his behalf on account of such civil
constr uction, er ection, testing or commissioning shall be deemed to be the pr ofits
and gains of such business char geable to tax under the head Pr ofits and gains
of business or pr ofession.]
55
[(2) Notwithstanding anything contained in sub-section (1), an assessee may
claim lower pr ofits and gains than the pr ofits and gains specified in that sub-
section, if he keeps and maintains such books of account and other documents
as r equir ed under sub-section (2) of section 44AA and gets his accounts audited
and fur nishes a r epor t of such audit as r equir ed under section 44AB, and
ther eupon the Assessing Officer shall pr oceed to make an assessment of the total
income or loss of the assessee under sub-section (3) of section 143 and deter mine
the sum payable by, or r efundable to, the assessee.]
56
[Deduction of head office expenditure in the case of non-residents.
57
58
44C. Notwithstanding anything to the contr ar y contained in sections 28 to
43A, in the case of an assessee, being a non-r esident, no allowance shall
be made, in computing the income char geable under the head Pr ofits and gains
of business or pr ofession, in r espect of so much of the expenditur e in the natur e
of head office expenditur e as is in excess of the amount computed as her eunder ,
namely:
(a) an amount equal to five per cent of the adjusted total income; or
Income-tax Act.
53. Renumber ed as sub-section (1) by the Finance Act, 2003, w.e.f. 1-4-2004.
54. Wor ds and financed under any inter national aid pr ogr amme omitted, ibid.
Income-tax Act.
(b)
59
[***]
(c) the amount of so much of the expenditur e in the natur e of head office
expenditur e incur r ed by the assessee as is attr ibutable to the business
or pr ofession of the assessee in India
60
,
whichever is the least :
Provided that in a case wher e the adjusted total income of the assessee is a loss,
the amount under clause (a) shall be computed at the r ate of five per cent of the
aver age adjusted total income of the assessee.
(i) adjusted total income means the total income computed in accor -
dance with the pr ovisions of this Act, without giving effect to the
allowance r efer r ed to in this section or in sub-section (2) of section 32
or the deduction r efer r ed to in section 32A or section 33 or section 33A
or the fir st pr oviso to clause (ix) of sub-section (1) of section 36 or any
loss car r ied for war d under sub-section (1) of section 72 or sub-section
(2) of section 73 or sub-section (1)
61
[or sub-section (3)] of section 74or
sub-section (3) of section 74A or the deductions under Chapter VI-A;
(ii) aver age adjusted total income means,
(a) in a case wher e the total income of the assessee is assessable for
each of the thr ee assessment year s immediately pr eceding the
r elevant assessment year , one-thir d of the aggr egate amount of
the adjusted total income in r espect of the pr evious year s r elevant
to the afor esaid thr ee assessment year s;
(b) in a case wher e the total income of the assessee is assessable only
for two of the afor esaid thr ee assessment year s, one-half of the
aggr egate amount of the adjusted total income in r espect of the
pr evious year s r elevant to the afor esaid two assessment year s;
(c) in a case wher e the total income of the assessee is assessable only
for one of the afor esaid thr ee assessment year s, the amount of the
adjusted total income in r espect of the pr evious year r elevant to
that assessment year ;
(iii)
62
[***]
(iv) head office expenditur e means executive and gener al administr a-
tion expenditur e incur r ed by the assessee outside India, including
expenditur e incur r ed in r espect of
(a) r ent, r ates, taxes, r epair s or insur ance of any pr emises outside
India used for the pur poses of the business or pr ofession;
(b) salar y, wages, annuity, pension, fees, bonus, commission, gr a-
tuity, per quisites or pr ofits in lieu of or in addition to salar y,
S. 44C I.T. ACT, 1961 1.294
60. For the meaning of the expr ession so much of the expenditur e . . . in India, see Taxmanns
whether paid or allowed to any employee or other per son em-
ployed in, or managing the affair s of, any office outside India;
(c) tr avelling by any employee or other per son employed in, or
managing the affair s of, any office outside India; and
(d) such ot her mat t er s connect ed wit h execut ive and gener al
administr ation as may be pr escr ibed.]
63
[Special provisions for computing income by way of royalties, etc., in the case
of foreign companies.
44D. Notwithstanding anything to the contr ar y contained in sections 28 to 44C,
in the case of an assessee, being a for eign company,
(a) the deductions admissible under the said sections in computing the
income by way of r oyalty or fees for technical ser vices r eceived
64
[fr om Gover nment or an Indian concer n in pur suance of an agr ee-
ment made by the for eign company with Gover nment or with the
Indian concer n] befor e the 1st day of Apr il, 1976, shall not exceed in
the aggr egate twenty per cent of the gr oss amount of such r oyalty or
fees as r educed by so much of the gr oss amount of such r oyalty as
consists of lump sum consider ation for the tr ansfer outside India of,
or the impar ting of infor mation outside India in r espect of, any data,
documentation, dr awing or specification r elating to any patent,
invention, model, design, secr et for mula or pr ocess or tr ade mar k or
similar pr oper ty;
(b) no deduction in r espect of any expenditur e or allowance shall be
allowed under any of the said sections in computing the income by
way of r oyalty or fees for technical ser vices r eceived
64
[fr om Gover n-
ment or an Indian concer n in pur suance of an agr eement made by the
for eign company with Gover nment or with the Indian concer n] after
the 31st day of Mar ch, 1976
65
[but befor e the 1st day of Apr il, 2003];
(c)
66
[***]
(d)
67
[***]
68
[Explan ation 2] to clause (vii) of sub-section (1) of section 9;
(b) for eign company shall have the same meaning as in section 80B;
64. Substituted for the por tion beginning with fr om an Indian concer n and ending with with
the Indian concer n by the Finance Act, 1983, w.e.f. 1-6-1983.
66. Omitted by the Finance Act, 1994, w.e.f. 1-4-1995. Pr ior to its omission, clause (c) was
67. Omitted by the Finance Act, 1994, w.e.f. 1-4-1995. Pr ior to its omission, clause (d) was
inser ted by the Finance (No. 2) Act, 1991, w.r .e.f. 1-4-1989.
68. Substituted for the Explan ation by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977.
(c) r oyalty shall have the same meaning as in
69
[Explan ation 2] to clause
(vi) of sub-section (1) of section 9;
(d) r oyalt y r eceived
70
[fr om Gover nment or an Indian concer n in
pur suance of an agr eement made by a for eign company with Gover n-
ment or with the Indian concer n] after the 31st day of Mar ch, 1976,
shall be deemed to have been r eceived in pur suance of an agr eement
made befor e the 1st day of Apr il, 1976, if such agr eement is deemed,
for the pur poses of the pr oviso to clause (vi) of sub-section (1) of
section 9, to have been made befor e the 1st day of Apr il, 1976.]
71
[Special provision for computing income by way of royalties, etc., in case of non-
residents.
44DA. (1) The income by way of r oyalty or fees for technical ser vices r eceived
fr om Gover nment or an Indian concer n in pur suance of an agr eement
made by a non-r esident (not being a company) or a for eign company with
Gover nment or the Indian concer n after the 31st day of Mar ch, 2003, wher e such
non-r esident (not being a company) or a for eign company car r ies on business in
India thr ough a per manent establishment situated ther ein, or per for ms pr ofes-
sional ser vices fr om a fixed place of pr ofession situated ther ein, and the r ight,
pr oper ty or contr act in r espect of which the r oyalties or fees for technical
ser vices ar e paid is effectively connected with such per manent establishment or
fixed place of pr ofession, as the case may be, shall be computed under the head
Pr ofits and gains of business or pr ofession in accor dance with the pr ovisions
of this Act :
Provided that no deduction shall be allowed,
(i) in r espect of any expenditur e or allowance which is not wholly and
exclusively incur r ed for the business of such per manent establish-
ment or fixed place of pr ofession in India; or
(ii) in r espect of amounts, if any, paid (other wise than towar ds r eim-
bur sement of actual expenses) by the per manent establishment to its
head office or to any of its other offices.
(2) Ever y non-r esident (not being a company) or a for eign company shall keep
and maintain books of account and other documents in accor dance with the
pr ovisions contained in section 44AA and get his accounts audited by an
and fur nish along with the r etur n of income, the r epor t of such audit in the
pr escr ibed for m
72
duly signed and ver ified by such accountant.
Explan ation 2 to clause (vii) of sub-section (1) of section 9;
(b) r oyalt y shall have t he same meaning as in Explan ation 2 t o
clause (vi) of sub-section (1) of section 9;
S. 44DA I.T. ACT, 1961 1.296
69. Substituted for the Explan ation by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977.
70. Substituted for the por tion beginning with fr om an Indian concer n and ending with with
the Indian concer n by the Finance Act, 1983, w.e.f. 1-6-1983.
72. See r ule 6GA and For m No. 3CE.
(c) per manent establishment shall have the same meaning as in clause
(iiia) of section 92F.]
73
[Special provision for computing deductions in the case of business reorganiza-
tion of co-operative banks.
44DB. (1) Th e deduction un der section 32, section 35D, section 35DD or section
35DDA sh all, in a case wh ere busin ess reorgan ization of a co-operative
ban k h as tak en place durin g th e fin an cial year, be allowed in accordan ce with th e
provision s of th is section .
(2) Th e am oun t of deduction allowable to th e predecessor co-operative ban k
un der section 32, section 35D, section 35DD or section 35DDA sh all be determ in ed
in accordan ce with th e form ula
B
C
wh ere A = th e am oun t of deduction allowable to th e predecessor co-operative
ban k if th e busin ess reorgan isation h ad n ot tak en place;
B = th e n um ber of days com prised in th e period begin n in g with th e 1st
day of th e fin an cial year an d en din g on th e day im m ediately
precedin g th e date of busin ess reorgan isation ; an d
C = th e total n um ber of days in th e fin an cial year in wh ich th e busin ess
reorgan isation h as tak en place.
(3) Th e am oun t of deduction allowable to th e successor co-operative ban k un der
section 32, section 35D, section 35DD or section 35DDA sh all be determ in ed in
accordan ce with th e form ula
B
C
wh ere A = th e am oun t of deduction allowable to th e predecessor co-operative
ban k if th e busin ess reorgan isation h ad n ot tak en place;
B = th e n umber of days comprised in th e period begin n in g with th e date
of busin ess reorgan isation an d en din g on th e last day of th e
f in an cial year; an d
C = th e total n um ber of days in th e fin an cial year in wh ich th e busin ess
reorgan isation h as tak en place.
(4) Th e provision s of section 35D, section 35DD or section 35DDA sh all, in a case
wh ere an un dertak in g of th e predecessor co-operative ban k en titled to th e
deduction un der th e said section is tran sferred before th e expiry of th e period
specified th erein to a successor co-operative ban k on accoun t of busin ess
reorgan isation , apply to th e successor co-operative ban k in th e fin an cial years
subsequen t to th e year of busin ess reorgan isation as th ey would h ave applied to
th e predecessor co-operative ban k, as if th e busin ess reorgan isation h ad n ot taken
place.
(5) For th e purposes of th is section ,
(a) am algam ated co-operative ban k m ean s
(i) a co-operative ban k with wh ich on e or m ore am algam atin g co-
operative ban k s m erge; or
1.297 CH. IV - COMPUTATION OF BUSINESS INCOME S. 44DB
(ii) a co-operative ban k form ed as a result of m erger of two or m ore
am algam atin g co-operative ban k s;
(b) am algam atin g co-operative ban k m ean s
(i) a co-operative ban k wh ich m erges with an oth er co-operative
ban k ; or
(ii) every co-operative ban k mergin g to form a n ew co-operative ban k ;
(c) am algam ation m ean s th e m erger of an am algam atin g co-operative
ban k or ban k s with an am algam ated co-operative ban k , in such
m an n er th at
(i) all th e assets an d liabilities of th e amalgamatin g co-operative ban k
or ban k s im m ediately before th e m erger (oth er th an th e assets
tran sferred, by sale or distribution on win din g up, to th e amalgam-
ated co-operative ban k ) becom e th e assets an d liabilities of th e
am algam ated co-operative ban k ;
(ii) th e m em bers h oldin g seven ty-five per cen t or m ore votin g righ ts
in th e am algam atin g co-operative ban k becom e m em bers of th e
am algam ated co-operative ban k ; an d
(iii) th e sh areh olders h oldin g seven ty-five per cen t or m ore in value of
th e sh ares in th e am algam atin g co-operative ban k (oth er th an th e
sh ares h eld by th e am algam ated co-operative ban k or its n om in ee
or its subsidiary, im m ediately before th e m erger) becom e sh are-
h olders of th e am algam ated co-operative ban k ;
(d) busin ess reorgan isation m ean s th e reorgan isation of busin ess in -
volvin g th e am algam ation or dem erger of a co-operative ban k ;
(e) co-operative ban k sh all h ave th e m ean in g assign ed to it in clause
(cci) of section 5 of th e Ban k in g Regulation Act, 1949 (10 of 1949)
73a
;
(f) demergermean s th e tran sfer by a demerged co-operative ban k of on e
or m ore of its un dertak in gs to an y resultin g co-operative ban k , in such
m an n er th at
(i) all th e assets an d liabilities of th e un dertak in g or un dertak in gs
im m ediately before th e tran sfer becom e th e assets an d liabilities
of th e resultin g co-operative ban k ;
(ii) th e assets an d th e liabilities are tran sferred to th e resultin g co-
operative ban k at values (oth er th an ch an ge in th e value of assets
con sequen t to th eir revaluation ) appearin g in its book s of accoun t
im m ediately before th e tran sfer;
(iii) th e resultin g co-operative ban k issues, in con sideration of th e
tran sfer, its m em bersh ip to th e m em bers of th e dem erged co-
operative ban k on a proportion ate basis;
(iv) th e sh areh olders h oldin g seven ty-five per cen t or m ore in value of
th e sh ares in th e dem erged co-operative ban k (oth er th an sh ares
already h eld by th e resultin g ban k or its n om in ee or its subsidiary
im m ediately before th e tran sfer), becom e sh areh olders of th e
resultin g co-operative ban k , oth erwise th an as a result of th e
acquisition of th e assets of th e dem erged co-operative ban k or an y
un dertak in g th ereof by th e resultin g co-operative ban k ;
S. 44DB I.T. ACT, 1961 1.298
73a. For text of section 5(cci) of the Banking Regulation Act, 1949, see Appendix.
(v) th e tran sf er of th e un dertak in g is on a goin g con cern basis; an d
(vi) th e tran sfer is in accordan ce with th e con dition s specified by th e
Cen tral Govern m en t, by n otification in th e Official Gazette, h av-
in g regard to th e n ecessity to en sure th at th e tran sfer is for gen uin e
busin ess purposes;
(g) dem erged co-operative ban k m ean s th e co-operative ban k wh ose
un dertak in g is tran sferred, pursuan t to a dem erger, to a resultin g
ban k;
(h) predecessor co-operative ban k m ean s th e am algam atin g co-opera-
tive ban k or th e dem erged co-operative ban k , as th e case m ay be;
(i) successor co-operative ban k m ean s th e am algam ated co-operative
ban k or th e resultin g ban k , as th e case m ay be;
(j) resultin g co-operative ban k m ean s
(i) on e or m ore co-operative ban k s to wh ich th e un dertak in g of th e
dem erged co-operative ban k is tran sferred in a dem erger; or
(ii) an y co-operative ban k form ed as a result of dem erger.]
E.Capital gain s
Capital gains.
74
45.
75
[(1)] Any pr ofits or gains ar ising fr om the tr ansfer of a capital asset
76
effected in the pr evious year shall, save as other wise pr ovided in sections
77
[***]
78
[54, 54B,
79
[***]
80
[
81
[54D,
82
[54E,
83
[54EA, 54EB,] 54F
84
[, 54G and 54H]]]]],
be char geable to income-tax under the head Capital gains, and shall be deemed
to be the income of the pr evious year in which the tr ansfer took place.
85
[(1A) Notwithstanding anything contained in sub-section (1), wher e any per son
r eceives at any time dur ing any pr evious year any money or other assets under
74. See also Cir cular No. 23D(XXIII-6) of 1965 and Cir cular No. 768, dated 24-6-1998. For
75. Inser ted by the Finance Act, 1964, w.e.f. 1-4-1964. (1) deemed to have been omitted with
the omission of sub-sections (2) to (4) by the Finance Act, 1966, w.e.f. 1-4-1966 and deemed
t o have been inser t ed wit h t he inser t ion of sub-sect ion (2) by t he Taxat ion Laws
76. For the meaning of the ter ms/ expr essions tr ansfer , tr ansfer of a capital asset, and
effected, see Taxmanns Dir ect Taxes Manual, Vol. 3.
77. Figur e 53, omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
78. 53, 54 and 54B substituted for 53 and 54 by the Finance Act, 1970, w.e.f. 1-4-1970; 53,
54, 54B and 54C substituted for 53, 54 and 54B by the Finance Act, 1972, w.e.f. 1-4-1973
and 53, 54, 54B, 54C and 54D substituted for 53, 54, 54B and 54C by the Finance Act,
1973, w.e.f. 1-4-1974.
79. 54C omitted by the Finance Act, 1976, w.e.f. 1-4-1976.
80. Substituted for and 54D by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
81. Substituted for 54D and 54E by the Finance Act, 1982, w.e.f. 1-4-1983.
82. Substituted for 54E and 54F by the Finance Act, 1987, w.e.f. 1-4-1988.
84. Substituted for and 54G by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.
an insur ance fr om an insur er on account of damage to, or destr uction of, any
capital asset, as a r esult of
(i) flood, typhoon, hur r icane, cyclone, ear thquake or other convulsion of
natur e; or
(ii) r iot or civil distur bance; or
(iii) accidental fir e or explosion; or
(iv) action by an enemy or action taken in combating an enemy (whether
with or without a declar ation of war ),
then, any pr ofits or gains ar ising fr om r eceipt of such money or other assets shall
be char geable to income-tax under the head Capital gains and shall be deemed
to be the income of such per son of the pr evious year in which such money or
other asset was r eceived and for the pur poses of section 48, value of any money
or the fair mar ket value of other assets on the date of such r eceipt shall be
deemed to be the full value of the consider ation r eceived or accr uing as a r esult
of the tr ansfer of such capital asset.
Explan ation .For the pur poses of this sub-section, the expr ession insur er shall
have the meaning assigned to it in clause (9) of section 2
86
of the Insur ance Act,
1938 (4 of 1938).]
87
[(2) Notwithstanding anything contained in sub-section (1), the pr ofits or gains
ar ising fr om the tr ansfer by way of conver sion by the owner of a capital asset
into, or its tr eatment by him as stock-in-tr ade of a business car r ied on by him
shall be char geable to income-tax as his income of the pr evious year in which
such stock-in-tr ade is sold or other wise tr ansfer r ed by him and, for the pur poses
of section 48, the fair mar ket value of the asset on the date of such conver sion
or tr eatment shall be deemed to be the full value of the consider ation r eceived
or accr uing as a r esult of the tr ansfer of the capital asset.]
88
[(2A)
89
Wher e any per son has had at any time dur ing pr evious year any
beneficial inter est in any secur ities, then, any pr ofits or gains ar ising fr om
tr ansfer made by the depositor y or par ticipant of such beneficial inter est in
r espect of secur ities shall be char geable to income-tax as the income of the
beneficial owner of the pr evious year in which such tr ansfer took place and shall
not be r egar ded as income of the depositor y who is deemed to be the r egister ed
owner of secur ities by vir tue of sub-section (1) of section 10 of the Depositor ies
Act, 1996, and for the pur poses of
(i) section 48; and
(ii) pr oviso to clause (42A) of section 2,
the cost of acquisition and the per iod of holding of any secur ities shall be
deter mined on the basis of the fir st-in-fir st-out method.
S. 45 I.T. ACT, 1961 1.300
86. For definition of insur er under section 2(9) of the Insur ance Act, 1938, see Appendix.
87. Inser ted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985. Or iginal sub-
88. Inser ted by the Depositor ies Act, 1996, w.r .e.f. 20-9-1995.
89. See Cir cular No. 768, dated 24-6-1998 for deter mination of date of tr ansfer and per iod
of holding secur ities held in demater ialized for m.
1.301 CH. IV - COMPUTATION OF INCOME FROM CAPITAL GAINS S. 45
Explan ation .For the pur poses of this sub-section, the expr essions beneficial
owner
90
, depositor y
90
and secur ity
90
shall have the meanings r espectively
assigned to them in clauses (a), (e) and (l) of sub-section (1) of section 2 of the
Depositor ies Act, 1996.]
91
[(3) The pr ofits or gains ar ising fr om the tr ansfer of a capital asset by a per son
to a fir m or other association of per sons or body of individuals (not being a
company or a co-oper ative society) in which he is or becomes a par tner or
member , by way of capital contr ibution or other wise, shall be char geable to tax
as his income of the pr evious year in which such tr ansfer takes place and, for the
pur poses of section 48, the amount r ecor ded in the books of account of the fir m,
association or body as the value of the capital asset shall be deemed to be the full
value of the consider ation r eceived or accr uing as a r esult of the tr ansfer of the
capital asset.
(4) The pr ofits or gains ar ising fr om the tr ansfer of a capital asset by way of
distr ibution of capital assets on the dissolution of a fir m or other association of
per sons or body of individuals (not being a company or a co-oper ative society)
or other wise
92
, shall be char geable to tax as the income of the fir m, association
or body, of the pr evious year in which the said tr ansfer takes place and, for the
pur poses of section 48, the fair mar ket value of the asset on the date of such
tr ansfer shall be deemed to be the full value of the consider ation r eceived or
accr uing as a r esult of the tr ansfer .]
93
[(5) Notwithstanding anything contained in sub-section (1), wher e the capital
gain ar ises fr om the tr ansfer of a capital asset, being a tr ansfer by way of
compulsor y acquisition under any law, or a tr ansfer the consider ation for which
was deter mined or appr oved by the Centr al Gover nment or the Reser ve Bank of
India, and the compensation or the consider ation for such tr ansfer is enhanced
or fur ther enhanced by any cour t, Tr ibunal or other author ity, the capital gain
shall be dealt with in the following manner , namely :
(a) the capital gain computed with reference to the compensation awarded
in the fir st instance
94
or , as the case may be, the consider ation
deter mined or appr oved in the fir st instance by the Centr al Gover n-
ment or the Reser ve Bank of India shall be char geable as
95
[income
under the head Capital gains of the pr evious year in which such
compensation or par t ther eof, or such consider ation or par t ther eof,
was fir st r eceived]; and
90. For definitions of beneficial owner , depositor y and secur ity under clauses (a), (e) and
(l), r espectively, of section 2(1) of the Depositor ies Act, 1996, see Appendix.
91. Inser ted by the Finance Act, 1987, w.e.f. 1-4-1988. Or iginal sub-sections (3) and (4) wer e
inser ted by the Finance Act, 1964, w.e.f. 1-4-1964 and later on omitted by the Finance Act,
1966, w.e.f. 1-4-1966.
92. For the meaning of the ter m other wise, see Taxmanns Dir ect Taxes Manual, Vol. 3.
94. For t he meaning of expr ession compensat ion awar ded in t he fir st inst ance, see
95. Substituted for income under the head Capital gains of the pr evious year in which the
tr ansfer took place by the Finance (No. 2) Act, 1991, w.r .e.f. 1-4-1988.
(b) the amount by which the compensation or consider ation is enhanced
or fur ther enhanced by the cour t, Tr ibunal or other author ity shall be
deemed to be income char geable under the head Capital gains of the
pr evious year in which such amount is r eceived by the assessee;
96
[(c) wher e in the assessment for any year , the capital gain ar ising fr om the
tr ansfer of a capital asset is computed by taking the compensation or
consider ation r efer r ed to in clause (a) or , as the case may be,
enhanced compensation or consider ation r efer r ed to in clause (b),
and subsequently such compensation or consider ation is r educed by
any cour t, Tr ibunal or other author ity, such assessed capital gain of
that year shall be r ecomputed by taking the compensation or consid-
er ation as so r educed by such cour t, Tr ibunal or other author ity to be
the full value of the consider ation.]
(i) in r elation to the amount r efer r ed to in clause (b), the cost of
acquisition and the cost of impr ovement shall be taken to be n il;
(ii) the pr ovisions of this sub-section shall apply also in a case wher e the
tr ansfer took place pr ior to the 1st day of Apr il, 1988;
(iii) wher e by r eason of the death of the per son who made the tr ansfer , or
for any other r eason, the enhanced compensation or consider ation is
r eceived by any other per son, the amount r efer r ed to in clause (b)
shall be deemed to be the income, char geable to tax under the head
Capital gains, of such other per son.]
97
[(6) Notwithstanding anything contained in sub-section (1), the differ ence
between the r epur chase pr ice of the units r efer r ed to in sub-section (2) of
section 80CCB and the capital value of such units shall be deemed to be the
capit al gains ar ising t o t he assessee in t he pr evious year in which such
r epur chase takes place or the plan r efer r ed to in that section is ter minated and
shall be taxed accor dingly.
Explan ation .For the pur poses of this sub-section, capital value of such units
means any amount invested by the assessee in the units r efer r ed to in sub-section
(2) of section 80CCB.]
Capital gains on distribution of assets by companies in liquidation.
98
46. (1) Notwithstanding anything contained in section 45, wher e the assets of
a company ar e distr ibuted to its shar eholder s on its liquidation
99
, such
distr ibution shall not be r egar ded as a tr ansfer by the company for the pur poses
of section 45.
(2) Wher e a shar eholder on the liquidation of a company r eceives any money or
other assets
99
fr om the company, he shall be char geable to income-tax under
the head Capital gains, in r espect of the money so r eceived or the mar ket value
of the other assets on the date of distr ibution, as r educed by the amount assessed
S. 46 I.T. ACT, 1961 1.302
99. For the meaning of the expr essions on its liquidation and assets, see Taxmanns Dir ect
as dividend within the meaning of sub-clause (c) of clause (22) of section 2 and
the sum so ar r ived at shall be deemed to be the full value of the consider ation for
the pur poses of section 48.
1
[Capital gains on purchase by company of its own shares or other specified
securities.
46A. Wher e a shar eholder or a holder of other specified secur ities r eceives any
consider ation fr om any company for pur chase of its own shar es or other
specified secur ities held by such shar eholder or holder of other specified
secur ities, then, subject to the pr ovisions of section 48, the differ ence between
the cost of acquisition and the value of consider ation r eceived by the shar eholder
or the holder of other specified secur ities, as the case may be, shall be deemed
to be the capital gains ar ising to such shar eholder or the holder of other specified
secur ities, as the case may be, in the year in which such shar es or other specified
secur ities wer e pur chased by the company.
Explan ation .For the pur poses of this section, specified secur ities shall have
the meaning assigned to it in Explan ation to section 77A
2
of the Companies Act,
1956 (1 of 1956).]
Transactions not regarded as transfer
2a
.
3
47. Nothing contained in section 45 shall apply to the following tr ansfer s :
(i) any distr ibution of capital assets
4
on the total or par tial par tition of a
Hindu undivided family;
(ii)
5
[***]
(iii) any tr ansfer of a capital asset under a gift
6
or will or an ir r evocable
trust :
7
[Provided that this clause shall not apply to tr ansfer under a gift or
an ir r evocable tr ust of a capital asset being shar es, debentur es or
war r ants allotted by a company dir ectly or indir ectly to its employees
under
8
[any Employees Stock Option Plan or Scheme of the company
offer ed to such employees in accor dance with the guidelines issued
by the Centr al Gover nment in this behalf];]
(iv) any tr ansfer of a capital asset by a company to its subsidiar ycompany,
if
(a) the par ent company or its nominees hold the whole of the shar e
capital of the subsidiar y company, and
(b) the subsidiar y company is an Indian company;
2a. See also Cir cular No. 2/ 2008, dated 22-2-2008. For details, see Taxmanns Master Guide to
Income-tax Act.
4. For the meaning of the expr ession distr ibution of capital assets, see Taxmanns Dir ect
6. For the meaning of the expr ession under a gift, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
8. Substituted for the Employees Stock Option Plan or Scheme by the Finance Act, 2001,
w.e.f. 1-4-2001.
9
[(v) any tr ansfer of a capital asset by a subsidiar y company to the holding
company, if
(a) the whole of the shar e capital of the subsidiar y company is held
by the holding company, and
(b) the holding company is an Indian company :]
10
[Provided that nothing contained in clause (iv) or clause (v) shall
apply to the tr ansfer of a capital asset made after the 29th day of
Febr uar y, 1988, as stock-in-tr ade;]
11
[(vi) any tr ansfer , in a scheme of amalgamation
12
, of a capital asset by the
amalgamating company to the amalgamated company if the amal-
gamated company is an Indian company;]
13
[(via) any tr ansfer , in a scheme of amalgamation
12
, of a capital asset being
a shar e or shar es held in an Indian company, by the amalgamating
for eign company to the amalgamated for eign company, if
(a) at least twenty-five per cent of the shar eholder s of the amalga-
mating for eign company continue to r emain shar eholder s of the
amalgamated for eign company, and
(b) such tr ansfer does not attr act tax on capital gains in the countr y,
in which the amalgamating company is incor por ated;]
14
[(viaa) any tr ansfer , in a scheme of amalgamation of a banking company
with a banking institution sanctioned and br ought into for ce by the
Centr al Gover nment under sub-section (7) of section 45 of the
Banking Regulation Act, 1949 (10 of 1949), of a capital asset by the
banking company to the banking institution.
(i) banking company shall have the same meaning assigned to it
in clause (c) of section 5
15
of the Banking Regulation Act, 1949 (10
of 1949);
(ii) banking institution shall have the same meaning assigned to it
in sub-section (15) of section 45
15
of the Banking Regulation Act,
1949 (10 of 1949);]
16
[(vib) any tr ansfer , in a demer ger , of a capital asset by the demer ged
company to the r esulting company, if the r esulting company is an
Indian company;
(vic) any tr ansfer in a demer ger , of a capital asset, being a shar e or shar es
held in an Indian company, by the demer ged for eign company to the
r esulting for eign company, if
S. 47 I.T. ACT, 1961 1.304
12. For the meaning of the ter m amalgamation, see Taxmanns Dir ect Taxes Manual, Vol. 3.
15. For text of sections 5(c) and 45 of the Banking Regulation Act, 1949, see Appendix.
16. Clauses (vib), (vic) and (vid) inser ted by the Finance Act, 1999, w.e.f. 1-4-2000.
(a)
17
[the shar eholder s holding not less than thr ee-four ths in value of
the shar es] of the demer ged for eign company continue to r emain
shar eholder s of the r esulting for eign company; and
(b) such tr ansfer does not attr act tax on capital gains in the countr y,
in which the demer ged for eign company is incor por ated :
Provided that the pr ovisions of sections 391 to 394
18
of the Companies
Act, 1956 (1 of 1956) shall not apply in case of demer ger s r efer r ed to
in this clause;
19
[(vica) an y tran sfer in a busin ess reorgan isation , of a capital asset by th e
predecessor co-operative ban k to th e successor co-operative ban k ;
(vicb) an y tran sfer by a sh areh older, in a busin ess reorgan isation , of a capital
asset bein g a sh are or sh ares h eld by h im in th e predecessor co-
operative ban k if th e tran sfer is made in con sideration of th e allotmen t
to h im of an y sh are or sh ares in th e successor co-operative ban k .
Explanation.For th e purposes of clauses (vica) an d (vicb), th e
expression s busin ess reorgan isation , predecessor co-operative
ban k an d successor co-operative ban k sh all h ave th e m ean in gs
respectively assign ed to th em in section 44DB;]
(vid) any tr ansfer or issue of shar es by the r esulting company, in a scheme
of demer ger to the shar eholder s of the demer ged company if the
tr ansfer or issue is made in consider ation of demer ger of the under -
taking;]
(vii) any tr ansfer by a shar eholder , in a scheme of amalgamation, of a
capital asset being a shar e or shar es held by him in the amalgamating
company, if
(a) the tr ansfer is made in consider ation of the allotment to him of
any shar e or shar es in the amalgamated company, and
(b) the amalgamated company is an Indian company;
20
[(viia) any tr ansfer of a capital asset, being bonds or
21
[Global Depositor y
Receipts] r efer r ed to in sub-section (1) of section 115AC, made
outside India by a non-r esident to another non-r esident;]
22
[(viii) any tr ansfer of agr icultur al land in India effected befor e the 1st day
of Mar ch, 1970;]
23
[(ix) any tr ansfer of a capital asset, being any wor k of ar t, ar chaeological,
scientific or ar t collection, book, manuscr ipt, dr awing, painting,
photogr aph or pr int, to the Gover nment or a Univer sity or the
National Museum, National Ar t Galler y, National Ar chives or any
17. Substituted for at least seventy-five per cent of the shar eholder s by the Finance Act,
2000, w.e.f. 1-4-2000.
18. For text of sections 391 to 394 of the Companies Act, 1956, see Appendix.
21. Substituted for shar es by the Finance Act, 2001, w.e.f. 1-4-2002.
such other public museum or institution as may be notified
24
by the
Centr al Gover nment in the Official Gazette to be of national impor -
tance or to be of r enown thr oughout any State or States.
Explan ation .For the pur poses of this clause, Univer sity means a
Univer sity established or incor por ated by or under a Centr al, State or
Pr ovincial Act and includes an institution declar ed under section 3 of
the Univer sity Gr ants Commission Act, 1956 (3 of 1956), to be a
Univer sity for the pur poses of that Act;]
25
[(x) any tr ansfer by way of conver sion of
26
[bonds or ] debentur es, deben-
tur e-stock or deposit cer tificates in any for m, of a company into
shar es or debentur es of that company;]
26a
[(xa) an y tran sfer by way of con version of bon ds referred to in clause (a) of
sub-section (1) of section 115AC in to sh ares or deben tures of an y
compan y;]
27
[(xi) any tr ansfer made on or befor e the 31st day of December ,
28
[1998] by
a per son (not being a company) of a capital asset being member ship
of a r ecognised stock exchange to a company in exchange of shar es
allotted by that company to the tr ansfer or .
Explan ation .For the pur poses of this clause, the expr ession mem-
ber ship of a r ecognised stock exchange means the member ship of a
stock exchange in India which is r ecognised under the pr ovisions of
the Secur ities Contr acts (Regulation) Act, 1956 (42 of 1956);
(xii) any tr ansfer of a capital asset, being land of a sick industr ial company,
made under a scheme pr epar ed and sanctioned under section 18
29
of
the Sick Industr ial Companies (Special Pr ovisions) Act, 1985 (1 of
1986) wher e such sick industr ial company is being managed by its
wor ker s co-oper ative :
Provided that such tr ansfer is made dur ing the per iod commencing
fr om the pr evious year in which the said company has become a sick
industr ial company under sub-section (1) of section 17
30
of that Act
and ending with the pr evious year dur ing which the entir e net wor th
of such company becomes equal to or exceeds the accumulated
losses.
Explan ation .For the pur poses of this clause, net wor th shall have
the meaning assigned to it in clause (ga) of sub-section (1) of
section 3
30
of the Sick Industr ial Companies (Special Pr ovisions) Act,
1985 (1 of 1986);]
S. 47 I.T. ACT, 1961 1.306
24. For notified public institutions, see Taxmanns Master Guide to Income-tax Act.
28. Substituted for 1997 by the Finance (No. 2) Act, 1998, w.r .e.f. 1-4-1998.
29. For text of section 18 of the Sick Industr ial Companies (Special Pr ovisions) Act, 1985, see
Appendix.
30. For text of sections 3(1)(ga) and 17 of the Sick Industr ial Companies (Special Pr ovisions)
Act, 1985, see Appendix.
31
[(xiii)
32
[any tr ansfer of a capital asset or intangible asset by a fir m to a
company as a r esult of succession of the fir m by a company in the
business car r ied on by the fir m, or any tr ansfer of a capital asset to a
company in the cour se of
33
[demutualisation or ] cor por atisation of a
r ecognised stock exchange in India as a r esult of which an association
of per sons or body of individuals is succeeded by such company :]
Provided that
(a) all the assets and liabilities of the fir m
34
[or of the association of
per sons or body of individuals] r elating to the business immedi-
ately befor e the succession become the assets and liabilities of
the company;
(b) all the par tner s of the fir m immediately befor e the succession
become the shar eholder s of the company in the same pr opor tion
in which their capital accounts stood in the books of the fir m on
the date of the succession;
(c) the par tner s of the fir m do not r eceive any consider ation or
benefit, dir ectly or indir ectly, in any for m or manner , other than
by way of allotment of shar es in the company; and
(d) the aggr egate of the shar eholding in the company of the par tner s
of the fir m is not less than fifty per cent of the total voting power
in the company and their shar eholding continues to be as such for
a per iod of five year s fr om the date of the succession;
35
[(e) the
36
[demutualisation or ] cor por atisation of a r ecognised stock
exchange in India is car r ied out in accor dance with a scheme for
36
[demutualisation or ] cor por atisation which is appr oved by the
Secur ities and Exchange Boar d of India established under sec-
tion 3 of the Secur ities and Exchange Boar d of India Act, 1992 (15
of 1992);]
36
[(xiiia) any tr ansfer of a capital asset being a member ship r ight held by a
member of a r ecognised stock exchange in India for acquisition of
shar es and tr ading or clear ing r ights acquir ed by such member in that
r ecognised st ock exchange in accor dance wit h a scheme for
demu t u alisat ion or cor por at isat ion which is appr oved by t he
Secur ities and Exchange Boar d of India established under section 3
of the Secur ities and Exchange Boar d of India Act, 1992 (15 of
1992);]
31. Clauses (xiii) t o (xv) inser ted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
32. Substituted for the por tion beginning with the wor ds wher e a fir m is succeeded and
ending with the wor ds intangible asset to the company by the Finance Act, 2001, w.e.f.
wher e a fir m is succeeded by a company in the business car r ied on by it as a r esult of
which the fir m sells or other wise tr ansfer s any capital asset or intangible asset to the
company:
S. 47A I.T. ACT, 1961 1.308
(xiv) wher e a sole pr opr ietar y concer n is succeeded by a company in the
business car r ied on by it as a r esult of which the sole pr opr ietar y
concer n sells or other wise tr ansfer s any capital asset or intangible
asset to the company :
Provided that
(a) all the assets and liabilities of the sole pr opr ietar y concer n
r elating to the business immediately befor e the succession be-
come the assets and liabilities of the company;
(b) the shar eholding of the sole pr opr ietor in the company is not less
than fifty per cent of the total voting power in the company and
his shar eholding continues to r emain as such for a per iod of five
year s fr om the date of the succession; and
(c) the sole pr opr ietor does not r eceive any consider ation or benefit,
dir ectly or indir ectly, in any for m or manner , other than by way
of allotment of shar es in the company;
(xv) any tr ansfer in a scheme for lending of any secur ities under an
agr eement or ar r angement, which the assessee has enter ed into with
the bor r ower of such secur ities and which is subject to the guidelines
issued by the Secur ities and Exchange Boar d of India, established
under section 3 of the Secur ities and Exchange Boar d of India Act,
1992 (15 of 1992)
37
[or the Reser ve Bank of India constituted under
sub-section (1) of section 3 of the Reser ve Bank of India Act, 1934 (2
of 1934)], in this r egar d;]
37a
[(xvi) an y tran sfer of a capital asset in a tran saction of reverse m ortgage
un der a sch em e m ade an d n otif ied by th e Cen tral Govern m en t.]
38
[Withdrawal of exemption in certain cases.
47A.
38a
[(1)] Wher e at any time befor e the expir y of a per iod of eight year s fr om
the date of the tr ansfer of a capital asset r efer r ed to in clause (iv) or , as the
case may be, clause (v) of section 47,
(i) such capital asset is conver ted by the tr ansfer ee company into, or is
tr eated by it as, stock-in-tr ade of its business; or
(ii) the par ent company or its nominees or , as the case may be, the holding
company ceases or cease to hold the whole of the shar e capital of the
subsidiar y company,
the amount of pr ofits or gains ar ising fr om the tr ansfer of such capital asset not
char ged under section 45 by vir tue of the pr ovisions contained in clause (iv) or ,
as the case may be, clause (v) of section 47 shall, notwithstanding anything
contained in the said clauses, be deemed to be income char geable under the head
Capital gains of the pr evious year in which such tr ansfer took place.]
39
[(2) Wher e at any time, befor e the expir y of a per iod of thr ee year s fr om the date
of the tr ansfer of a capital asset r efer r ed to in clause (xi) of section 47, any of the
shar es allotted to the tr ansfer or in exchange of a member ship in a r ecognised
stock exchange ar e tr ansfer r ed, the amount of pr ofits and gains not char ged
under section 45 by vir tue of the pr ovisions contained in clause (xi) of section 47
shall, notwithstanding anything contained in the said clause, be deemed to be the
income char geable under the head Capital gains of the pr evious year in which
such shar es ar e tr ansfer r ed.]
40
[(3) Wher e any of the conditions laid down in the pr oviso to clause (xiii) or the
pr oviso to clause (xiv) of section 47 ar e not complied with, the amount of pr ofits
or gains ar ising fr om the tr ansfer of such capital asset or intangible asset not
char ged under section 45 by vir tue of conditions laid down in the pr oviso to
clause (xiii) or the pr oviso to clause (xiv) of section 47 shall be deemed to be the
pr ofits and gains char geable to tax of the successor company for the pr evious
year in which the r equir ements of the pr oviso to clause (xiii) or the pr oviso to
clause (xiv), as the case may be, ar e not complied with.]
41
[Mode of computation.
42
48. The income char geable under the head Capital gains shall be computed,
by deducting fr om the full value of the consider ation
43
r eceived or accr uing
as a r esult of the tr ansfer of the capital asset the following amounts, namely :
(i) expenditur e incur r ed wholly and exclusively in connection with such
tr ansfer
43
;
(ii) the cost of acquisition of the asset and the cost of any impr ovement
43
ther eto:
44
Provided that in the case of an assessee, who is a non-r esident, capital gains
ar ising fr om the tr ansfer of a capital asset being shar es in, or debentur es of, an
Indian company shall be computed by conver ting the cost of acquisition,
expenditur e incur r ed wholly and exclusively in connection with such tr ansfer
and the full value of the consider ation r eceived or accr uing as a r esult of the
tr ansfer of the capital asset into the same for eign cur r ency as was initially utilised
in the pur chase of the shar es or debentur es, and the capital gains so computed
in such for eign cur r ency shall be r econver ted into Indian cur r ency, so, however ,
that the afor esaid manner of computation of capital gains shall be applicable in
r espect of capital gains accr uing or ar ising fr om ever y r einvestment ther eafter
in, and sale of, shar es in, or debentur es of, an Indian company :
41. Substituted by the Finance Act, 1992, w.e.f. 1-4-1993. Pr ior to substitution, section 48, was
amended by the Finance Act, 1987, w.e.f. 1-4-1988, the Dir ect Tax Laws (Second Amend-
ment) Act, 1989, w.e.f. 1-4-1990, the Finance Act, 1989, w.e.f. 1-4-1990 and the Finance
(No. 2) Act, 1991, w.e.f. 1-4-1992.
43. For the meaning of the ter ms/ expr essions consider ation, full value of the consider -
a t ion , in con n ect ion wit h su ch t r a n sf er , expen d it u r e in cu r r ed wh olly a n d
exclusively . . .tr ansfer and impr ovement, see Taxmanns Dir ect Taxes Manual, Vol. 3.
44. See r ule 115A.
S. 48 I.T. ACT, 1961 1.310
Provided further that wher e long-ter m capital gain ar ises fr om the tr ansfer of
a long-ter m capital asset, other than capital gain ar ising to a non-r esident fr om
the tr ansfer of shar es in, or debentur es of, an Indian company r efer r ed to in the
fir st pr oviso, the pr ovisions of clause (ii) shall have effect as if for the wor ds cost
of acquisition and cost of any impr ovement, the wor ds indexed cost of
acquisition and indexed cost of any impr ovement had r espectively been
substituted :
45
[Provided also that nothing contained in the second pr oviso shall apply to
the long-ter m capital gain ar ising fr om the tr ansfer of a long-ter m capital asset
being bond or debentur e other than capital indexed bonds issued by the
Gover nment :]
46
[Provided also that wher e shar es, debentur es or war r ants r efer r ed to in the
pr oviso to clause (iii) of section 47 ar e tr ansfer r ed under a gift or an ir r evocable
tr ust, the mar ket value on the date of such tr ansfer shall be deemed to be the full
value of consider ation r eceived or accr uing as a r esult of tr ansfer for the
pur poses of this section :]
47
[Provided also that no deduction shall be allowed in computing the income
char geable under the head Capital gains in r espect of any sum paid on account
of secur ities tr ansaction tax under Chapter VII of the Finance (No. 2) Act, 2004.]
(i) for eign cur r ency
48
and Indian cur r ency
48
shall have the meanings
r espectively assigned to them in section 2 of the For eign Exchange
Regulation Act, 1973 (46 of 1973);
(ii) the conver sion of Indian cur r ency into for eign cur r ency and the
r econver sion of for eign cur r ency into Indian cur r ency shall be at the
r ate of exchange pr escr ibed in this behalf;
(iii) indexed cost of acquisition means an amount which bear s to the
cost of acquisition the same pr opor tion as Cost Inflation Index for
the year in which the asset is tr ansfer r ed bear s to the Cost Inflation
Index for the fir st year in which the asset was held by the assessee
or for the year beginning on the 1st day of Apr il, 1981, whichever is
later ;
(iv) indexed cost of any impr ovement means an amount which bear s to
the cost of impr ovement the same pr opor tion as Cost Inflation Index
for the year in which the asset is tr ansfer r ed bear s to the Cost Inflation
Index for the year in which the impr ovement to the asset took
place;
48. For definition of for eign cur r ency and Indian cur r ency, see footnote Nos. 41 & 42 on
pages 1.65 and 1.432, r espectively.
49
[(v) Cost Inflation Index, in r elation to a pr evious year , means such Index
as the Centr al Gover nment may, having r egar d to seventy-five per
cent of aver age r ise in the Consumer Pr ice Index for ur ban non-
manual employees for the immediately pr eceding pr evious year to
such pr evious year , by notification
50
in the Official Gazette, specify, in
this behalf.]]
Cost with reference to certain modes of acquisition.
51
49.
52
[(1)] Wher e the capital asset became the pr oper ty of the assessee
(i) on any distr ibution of assets on the total or par tial par tition of a Hindu
undivided family;
(ii) under a gift or will;
(iii) (a) by succession, inher itance or devolution
53
, or
54
[(b) on any distr ibution of assets on the dissolution of a fir m, body of
individuals, or other association of per sons, wher e such dissolu-
tion had taken place at any time befor e the 1st day of Apr il, 1987,
or ]
(c) on any distr ibution of assets on the liquidation of a company, or
(d) under a tr ansfer to a r evocable or an ir r evocable tr ust, or
(e) under any such tr ansfer as is r efer r ed to in clause (iv)
55
[or clause
(v)]
56
[or clause (vi)]
57
[or clause (via)]
58
[or clause (viaa)]
59
[or
clause (vica) or clause (vicb)] of section 47;
60
[(iv) such assessee being a Hindu undivided family, by the mode r efer r ed
to in sub-section (2) of section 64 at any time after the 31st day of
December , 1969,]
the cost of acquisition of the asset shall be deemed to be the cost for which the
pr evious owner of the pr oper ty acquir ed it, as incr eased by the cost of any
49. Substituted by the Finance Act, 2000, w.r .e.f. 1-4-1993. Pr ior to its substitution, clause (v)
of Explan ation , r ead as under :
(v) Cost Inflation Index for any year means such Index as the Centr al Gover nment
may, having r egar d to seventy-five per cent of aver age r ise in the Consumer Pr ice
Index for ur ban non-manual employees for that year , by notification in the Official
Gazette, specify in this behalf.
50. Notified Cost Inflation Index for r elevant financial year is as under :
1981-82 : 100/ 1982-83 : 109/ 1983-84 : 116/ 1984-85 : 125/ 1985-86 : 133/ 1986-87 : 140/ 1987-
88 : 150/ 1988-89 : 161/ 1989-90 : 172/ 1990-91 : 182/ 1991-92 : 199/ 1992-93 : 223/ 1993-94 :
244/ 1994-95 : 259/ 1995-96 : 281/ 1996-97 : 305/ 1997-98 : 331/ 1998-99 : 351/ 1999-2000 :
389/ 2000-01 : 406/ 2001-02 : 426/ 2002-03 : 447/ 2003-04 : 463/ 2004-05 : 480/ 2005-06 : 497/
2006-07 : 519/ 2007-08 : 551. For details, see Taxmanns Master Guide to Income-tax Act.
53. For the meaning of the ter m devolution, see Taxmanns Dir ect Taxes Manual, Vol. 3.
S. 49 I.T. ACT, 1961 1.312
impr ovement of the assets incur r ed or bor ne by the pr evious owner or the
assessee, as the case may be.
61
[Explan ation .In this
62
[sub-section] the expr ession pr evious owner of the
pr oper ty in r elation to any capital asset owned by an assessee means the last
pr evious owner of the capital asset who acquir ed it by a mode of acquisition
other than that r efer r ed to in clause (i) or clause (ii) or clause (iii)
63
[or clause (iv)]
of this
64
[sub-section].]
65
[(2) Wher e the capital asset being a shar e or shar es in an amalgamated
company which is an Indian company became the pr oper ty of the assessee in
consider ation of a tr ansfer r efer r ed to in clause (vii) of section 47, the cost of
acquisition of the asset shall be deemed to be the cost of acquisition to him of the
shar e or shar es in the amalgamating company.]
66
[(2A) Wh ere th e capital asset, bein g a sh are or deben ture of a com pan y, becam e
th e property of th e assessee in con sideration of a tran sfer referred to in clause (x)
or clause (xa) of section 47, th e cost of acquisition of th e asset to th e assessee sh all
be deemed to be th at part of th e cost of deben ture, deben ture-stock, bon d or deposit
certificate in relation to wh ich such asset is acquired by th e assessee.]
67
[(2AA) Wher e the capital gain ar ises fr om the tr ansfer of the shar es, debentur es
or war r ants, the value of which has been taken into account while computing the
value of per quisite under clause (2 ) of section 17, the cost of acquisition of such
shar es, debentur es or war r ants shall be the value under that clause.]
68
[(2AB) Wh ere th e capital gain arises from th e tran sfer of specified security or
sweat equity sh ares, th e cost of acquisition of such security or sh ares sh all be th e
fair m ark et value wh ich h as been tak en in to accoun t wh ile com putin g th e value
of frin ge ben efits un der clause (ba) of sub-section (1) of section 115WC.]
69
[(2B)
70
[***]
(2C) The cost of acquisition of the shar es in the r esulting company shall be the
amount which bear s to the cost of acquisition of shar es held by the assessee in
62. Substituted for section by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
64. Substituted for section by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
(2A), as inser ted by the Finance (No. 2) Act, 1991, w.r .e.f. 1-4-1962, r ead as under :
(2A) Wher e the capital asset, being a shar e or debentur e in a company, became the
pr oper ty of the assessee in consider ation of a tr ansfer r efer r ed to in clause (x) of section
47, the cost of acquisition of the asset to the assessee shall be deemed to be that par t of
the cost of debentur e, debentur e-stock or deposit cer tificates in r elation to which such
asset is acquir ed by the assessee.
69. Sub-sections (2B), (2C) and (2D) inser ted by the Finance Act, 1999, w.e.f. 1-4-2000.
70. Omitted by the Finance Act, 2000, w.e.f. 1-4-2001. Pr ior to its omission, sub-section (2B),
(2B) Wher e the capital gain ar ises fr om the tr ansfer of the specified secur ity r efer r ed to
in sub-clause (iiia) of clause (2) of section 17, the cost of acquisition of such specified
secur ity shall be the fair mar ket value on the date of exer cise of option.
the demer ged company the same pr opor tion as the net book value of the assets
tr ansfer r ed in a demer ger bear s to the net wor th of the demer ged company
immediately befor e such demer ger .
(2D) The cost of acquisition of the or iginal shar es held by the shar eholder in the
demer ged company shall be deemed to have been r educed by the amount as so
ar r ived at under sub-section (2C).]
71
[(2E) Th e provision s of sub-section (2), sub-section (2C) an d sub-section (2D)
sh all, as far as m ay be, also apply in relation to busin ess reorgan ization of a co-
operative ban k as referred to in section 44DB.]
Explan ation .For the pur poses of this section, net wor th shall mean the
aggr egate of the paid up shar e capital and gener al r eser ves as appear ing in the
books of account of the demer ged company immediately befor e the demer ger .]
72
[(3) Notwithstanding anything contained in sub-section (1), wher e the capital
gain ar ising fr om the tr ansfer of a capital asset r efer r ed to in clause (iv) or , as the
case may be, clause (v) of section 47 is deemed to be income char geable under
the head Capital gains by vir tue of the pr ovisions contained in section 47A, the
cost of acquisition of such asset to the tr ansfer ee-company shall be the cost for
which such asset was acquir ed by it.]
73
[Special provision for computation of capital gains in case of depreciable assets.
74
50. Notwithstanding anything contained in clause (42A) of section 2, wher e
the capital asset is an asset for ming par t of a block of assets in r espect of
which depr eciation has been allowed under this Act or under the Indian Income-
tax Act, 1922 (11 of 1922), the pr ovisions of sections 48 and 49 shall be subject to
the following modifications :
(1) wher e the full value of the consider ation r eceived or accr uing as a
r esult of the tr ansfer of the asset together with the full value of such
consider ation r eceived or accr uing as a r esult of the tr ansfer of any
other capital asset falling within the block of the assets dur ing the
pr evious year , exceeds the aggr egate of the following amounts,
namely :
(i) expenditur e incur r ed wholly and exclusively in connection with
such tr ansfer or tr ansfer s;
(ii) the wr itten down value of the block of assets at the beginning of
the pr evious year ; and
(iii) the actual cost of any asset falling within the block of assets
acquir ed dur ing the pr evious year ,
such excess shall be deemed to be the capital gains ar ising fr om the
tr ansfer of shor t-ter m capital assets;
(2) wher e any block of assets ceases to exist as such, for the r eason that
all the assets in that block ar e tr ansfer r ed dur ing the pr evious year ,
w.e.f. 1-4-1988. Ear lier section 50 was amended by the Finance Act, 1986, w.e.f. 1-4-1987
and the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
the cost of acquisition of the block of assets shall be the wr itten down
value of the block of assets at the beginning of the pr evious year , as
incr eased by the actual cost of any asset falling within that block of
assets, acquir ed by the assessee dur ing the pr evious year and the
income r eceived or accr uing as a r esult of such tr ansfer or tr ansfer s
shall be deemed to be the capital gains ar ising fr om the tr ansfer of
shor t-ter m capital assets.]
75
[Special provision for cost of acquisition in case of depreciable asset.
50A. Wher e the capital asset is an asset in r espect of which a deduction on
account of depr eciation under clause (i) of sub-section (1) of section 32 has
been obtained by the assessee in any pr evious year , the pr ovisions of sections 48
and 49 shall apply subject to the modification that the wr itten down value, as
defined in clause (6) of section 43, of the asset, as adjusted, shall be taken as the
cost of acquisition of the asset.]
76
[Special provision for computation of capital gains in case of slump sale.
50B. (1) Any pr ofits or gains ar ising fr om the slump sale effected in the pr evious
year shall be char geable to income-tax as capital gains ar ising fr om the
tr ansfer of long-ter m capital assets and shall be deemed to be the income of the
pr evious year in which the tr ansfer took place :
Provided that any pr ofits or gains ar ising fr om the tr ansfer under the slump sale
of any capital asset being one or mor e under takings owned and held by an
assessee for not mor e than thir ty-six months immediately pr eceding the date of
its tr ansfer shall be deemed to be the capital gains ar ising fr om the tr ansfer of
shor t-ter m capital assets.
(2) In r elation to capital assets being an under taking or division tr ansfer r ed by
way of such sale, the net wor th of the under taking or the division, as the case
may be, shall be deemed to be the cost of acquisition and the cost of impr ovement
for the pur poses of sections 48 and 49 and no r egar d shall be given to the
pr ovisions contained in the second pr oviso to section 48.
(3) Ever y assessee, in the case of slump sale, shall fur nish in the pr escr ibed
for m
77
along with the r etur n of income, a r epor t of an accountant as defined in
the Explan ation below sub-section (2) of section 288, indicating the computation
of the net wor th of the under taking or division, as the case may be, and cer tifying
that the net wor th of the under taking or division, as the case may be, has been
cor r ectly ar r ived at in accor dance with the pr ovisions of this section.
78
[Explan ation 1.For the pur poses of this section, net wor th shall be the
aggr egate value of total assets of the under taking or division as r educed by the
S. 50B I.T. ACT, 1961 1.314
77. See r ule 6H and For m No. 3CEA.
78. Explan ation 1 and Explan ation 2 subst it ut ed for Explan ation by the Finance Act, 2000,
w.e.f. 1-4-2000. Pr ior to its substitution, Explan ation , as inser ted by the Finance Act, 1999,
Explan ation .For the pur poses of this section, net wor th means the net wor th as
defined in clause (ga) of sub-section (1) of section 3 of the Sick Industr ial Companies
(Special Pr ovisions) Act, 1985 (1 of 1986).
value of liabilities of such under taking or division as appear ing in its books of
account :
Provided that any change in the value of assets on account of r evaluation of
assets shall be ignor ed for the pur poses of computing the net wor th.
Explan ation 2.For computing the net wor th, the aggr egate value of total assets
shall be,
(a) in the case of depr eciable assets, the wr itten down value of the block
of assets deter mined in accor dance with the pr ovisions contained in
sub-item (C) of item (i) of sub-clause (c) of clause (6) of section 43; and
(b) in the case of other assets, the book value of such assets.]]
79
[Special provision for full value of consideration in certain cases.
50C. (1) Wher e the consider ation r eceived or accr uing as a r esult of the tr ansfer
by an assessee of a capital asset, being land or building or both, is less than
the value adopted or assessed by any author ity of a State Gover nment (her eafter
in this section r efer r ed to as the stamp valuation author ity) for the pur pose of
payment of stamp duty in r espect of such tr ansfer , the value so adopted or
assessed shall, for the pur poses of section 48, be deemed to be the full value of
the consider ation r eceived or accr uing as a r esult of such tr ansfer .
(2) Without pr ejudice to the pr ovisions of sub-section (1), wher e
(a) the assessee claims befor e any Assessing Officer that the value
adopted or assessed by the stamp valuation author ity under sub-
section (1) exceeds the fair mar ket value of the pr oper ty as on the date
of tr ansfer ;
(b) the value so adopted or assessed by the stamp valuation author ity
under sub-section (1) has not been disputed in any appeal or r evision
or no r efer ence has been made befor e any other author ity, cour t or
the High Cour t,
the Assessing Officer may r efer the valuation of the capital asset to a Valuation
Officer and wher e any such r efer ence is made, the pr ovisions of sub-sections (2),
(3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6)
and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and
section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessar y modifica-
tions, apply in r elation to such r efer ence as they apply in r elation to a r efer ence
made by the Assessing Officer under sub-section (1) of section 16A of that Act.
Explan ation .For the pur poses of this section, Valuation Officer shall have
the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of
1957).
(3) Subject to the pr ovisions contained in sub-section (2), wher e the value
ascer tained under sub-section (2) exceeds the value adopted or assessed by the
stamp valuation author ity r efer r ed to in sub-section (1), the value so adopted or
assessed by such author ity shall be taken as the full value of the consider ation
r eceived or accr uing as a r esult of the tr ansfer .]
1.315 CH. IV - COMPUTATION OF INCOME FROM CAPITAL GAINS S. 50C
S. 54 I.T. ACT, 1961 1.316
Advance money received.
51. Wher e any capital asset was on any pr evious occasion the subject of
negotiations for its tr ansfer , any advance or other money
80
r eceived and
r etained by the assessee in r espect of such negotiations shall be deducted fr om
the cost for which the asset was acquir ed or the wr itten down value or the fair
mar ket value, as the case may be, in computing the cost of acquisition.
Consideration for transfer in cases of understatement.
52.
81
Exemption of capital gains from a residential house.
53.
82
Profit on sale of property used for residence.
83
54.
84
[(1)]
85
[
86
[Subject to the pr ovisions of sub-section (2), wher e, in the case
of an assessee
87
being an individual or a Hindu undivided family], the
capital gain ar ises fr om the tr ansfer of a long-ter m capital asset
88
[***], being
buildings or
89
lands appur tenant ther eto, and being a r esidential house, the
income of which is char geable under the head Income fr om house pr oper ty
(her eafter in this section r efer r ed to as the or iginal asset), and the assessee has
within a per iod of
90
[one year befor e or two year s after the date on which the
tr ansfer took place pur chased
91
], or has within a per iod of thr ee year s after that
date constr ucted, a r esidential house, then], instead of the capital gain being
char ged to income-tax as income of the pr evious year in which the tr ansfer took
80. For the meaning of expr ession other money, see Taxmanns Dir ect Taxes Manual, Vol. 3.
81. Pr ior to omission sub-section (2) of section 52 and its pr oviso wer e inser ted by the Finance
Act, 1964, w.e.f. 1-4-1964 and the Finance Act, 1975, with r etr ospective effect fr om
1-4-1974, r espectively. The pr oviso was later amended by the Finance Act, 1978, w.r .e.f.
1-4-1974.
82. Pr ior to its omission, section 53 was amended by the Taxation Laws (Amendment) Act,
1984, w.e.f. 1-4-1985 and the Finance Act, 1987, w.e.f. 1-4-1988.
No. 538, dated 13-7-1989, Cir cular No. 672, dated 16-12-1993, Cir cular No. 667, dated
18-10-1993 and Cir cular No. 743, dated 6-5-1996. For details, see Taxmanns Master Guide
to Income-tax Act.
86. Substituted for Wher e, in the case of an assessee being an individual by the Finance Act,
1987, w.e.f. 1-4-1988.
87. For t he meaning of t he t er ms assessee and lands appur t enant t o building, see
88. to which the pr ovisions of section 53 ar e not applicable omitted by the Finance Act, 1985,
w.e.f. 1-4-1985.
89. For t he meaning of t he t er ms assessee and lands appur t enant t o building, see
90. Substituted for one year befor e or after the date on which the tr ansfer took place
pur chased by the Finance Act, 1986, w.e.f. 1-4-1987.
91. For the meaning of the ter m pur chased, see Taxmanns Dir ect Taxes Manual, Vol. 3.
place, it shall be dealt with in accor dance with the following pr ovisions of this
section, that is to say,
(i) if the amount of the capital gain
92
[is gr eater than the cost of
93
[the
r esidential house] so pur chased or constr ucted (her eafter in this
section r efer r ed to as the new asset)], the differ ence between the
amount of the capital gain and the cost of the new asset shall be
char ged under section 45 as the income of the pr evious year ; and for
the pur pose of computing in r espect of the new asset any capital gain
ar ising fr om its tr ansfer within a per iod of thr ee year s of its pur chase
or constr uction, as the case may be, the cost shall be n il; or
(ii) if the amount of the capital gain is equal to or less than the cost of the
new asset, the capital gain shall not be char ged under section 45; and
for the pur pose of computing in r espect of the new asset any capital
gain ar ising fr om its tr ansfer within a per iod of thr ee year s of its
pur chase or constr uction, as the case may be, the cost shall be
r educed by the amount of the capital gain.
94
[***]
95
[(2) The amount of the capital gain which is not appr opr iated by the assessee
towar ds the pur chase of the new asset made within one year befor e the date on
which the tr ansfer of the or iginal asset took place, or which is not utilised by him
for the pur chase or constr uction of the new asset befor e the date of fur nishing
the r etur n of income under section 139, shall be deposited by him befor e
fur nishing such r etur n [such deposit being made in any case not later than the
due date applicable in the case of the assessee for fur nishing the r etur n of income
under sub-section (1) of section 139] in an account in any such bank or institution
as may be specified in, and utilised in accor dance with, any scheme
96
which the
Centr al Gover nment may, by notification in the Official Gazette, fr ame in this
behalf and such r etur n shall be accompanied by pr oof of such deposit; and, for
the pur poses of sub-section (1), the amount, if any, alr eady utilised by the
assessee for the pur chase or constr uction of the new asset together with the
amount so deposited shall be deemed to be the cost of the new asset :
92. Substituted for is gr eater than the cost of the new asset by the Finance Act, 1978, w.r .e.f.
1-4-1974.
93. Substituted for the house pr oper ty by the Finance Act, 1982, w.e.f. 1-4-1983.
94. Omitted by the Finance Act, 1987, w.e.f. 1-4-1988. Or iginal Explan ation , as inser ted by the
Finance Act, 1982, w.e.f. 1-4-1983, stood as under :
Explan ation .For the pur poses of this sub-section, long-ter m capital asset means a
capital asset which is not a shor t-ter m capital asset.
95. Substituted by the Finance Act, 1987, w.e.f. 1-4-1988. Ear lier it was inser ted by the Finance
Act, 1978, w.r .e.f. 1-4-1974 and amended by the Finance Act, 1982, w.e.f. 1-4-1983 and the
Finance Act, 1986, w.e.f. 1-4-1987.
96. For text of Capital Gains Accounts Scheme, 1988GSR 724(E), dated 22-6-1988 and for
list of author ised br anches (except r ur al br anches) of the banks specified to r eceive
deposits and maintain accountGSR 725(E), dated 22-6-1988, see Taxmanns Dir ect
Taxes Cir cular s.
97. Pr ior to its omission, Explan ation was amended by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1992.
2. Substituted for Wher e the capital gain ar ises by the Finance Act, 1987, w.e.f. 1-4-1988.
Provided that if the amount deposited under this sub-section is not utilised
wholly or par tly for the pur chase or constr uction of the new asset within the
per iod specified in sub-section (1), then,
(i) the amount not so utilised shall be char ged under section 45 as the
income of the pr evious year in which the per iod of thr ee year s fr om
the date of the tr ansfer of the or iginal asset expir es; and
(ii) the assessee shall be entitled to withdr aw such amount in accor dance
with the scheme afor esaid.
Explan ation .
97
Relief of tax on capital gains in certain cases.
54A. [Om itted by th e Fin an ce (No. 2) Act, 1971, w.e.f. 1-4-1972. Origin al section
was in serted by th e Fin an ce Act, 1965, w.e.f. 1-4-1965. Th e Direct Tax Laws
(Am en dm en t) Act, 1989 h as deleted section 54A, dealin g with relief of tax on
capital gain s on tran sfer of property h eld un der trust for ch aritable or religious
purposes or by certain in stitution , earlier in serted by th e Direct Tax Laws
(Am en dm en t) Act, 1987, w.e.f. 1-4-1989.]
98
[Capital gain on transfer of land used for agricultural purposes not to be charged
in certain cases.
99
54B.
1
[(1)]
2
[Subject to the pr ovisions of sub-section (2), wher e the capital
gain ar ises] fr om the tr ansfer of a capital asset being land which, in the
two year s immediately pr eceding the date on which the tr ansfer took place,
was being used by the assessee or a par ent of his for agr icultur al pur poses
3
[(her einafter r efer r ed to as the or iginal asset)], and the assessee has, within a
per iod of two year s after that date, pur chased any other land for being used for
agr icultur al pur poses, then, instead of the capital gain being char ged to income-
tax as income of the pr evious year in which the tr ansfer took place, it shall be
dealt with in accor dance with the following pr ovisions of this section, that is to
say,
(i) if the amount of the capital gain is gr eater than the cost of the land so
pur chased (her einafter r efer r ed to as the new asset), the differ ence
between the amount of the capital gain and the cost of the new asset
shall be char ged under section 45 as the income of the pr evious year ;
and for the pur pose of computing in r espect of the new asset any
capital gain ar ising fr om its tr ansfer within a per iod of thr ee year s of
its pur chase, the cost shall be n il; or
(ii) if the amount of the capital gain is equal to or less than the cost of
the new asset, the capital gain shall not be char ged under section 45;
S. 54B I.T. ACT, 1961 1.318
and for the pur pose of computing in r espect of the new asset
any capital gain ar ising fr om its tr ansfer within a per iod of thr ee
year s of its pur chase, the cost shall be r educed, by the amount of the
capital gain.]
4
[(2) The amount of the capital gain which is not utilised by the assessee for the
pur chase of the new asset befor e the date of fur nishing the r etur n of income
under section 139, shall be deposited by him befor e fur nishing such r etur n [such
deposit being made in any case not later than the due date applicable in the case
of the assessee for fur nishing the r etur n of income under sub-section (1) of
section 139] in an account in any such bank or institution as may be specified in,
and utilised in accor dance with, any scheme
5
which the Centr al Gover nment
may, by notification in the Official Gazette, fr ame in this behalf and such r etur n
shall be accompanied by pr oof of such deposit; and, for the pur poses of sub-
section (1), the amount, if any, alr eady utilised by the assessee for the pur chase
of the new asset together with the amount so deposited shall be deemed to be the
cost of the new asset:
wholly or par tly for the pur chase of the new asset within the per iod specified in
sub-section (1), then,
income of the pr evious year in which the per iod of two year s fr om the
date of the tr ansfer of the or iginal asset expir es; and
Explan ation .
6
[Om itted by th e Fin an ce Act, 1992, w.e.f. 1-4-1993.]]
Capital gain on transfer of jewellery held for personal use not to be charged in
certain cases.
54C. [Om itted by th e Fin an ce Act, 1976, w.e.f. 1-4-1976. Origin al section was
in serted by th e Fin an ce Act, 1972, w.e.f. 1-4-1973.]
7
[Capital gain on compulsory acquisition of lands and buildings not to be charged
in certain cases.
8
54D.
9
[(1)]
10
[Subject to the pr ovisions of sub-section (2), wher e the capital
gain ar ises] fr om the tr ansfer by way of compulsor y acquisition under
any law of a capital asset, being land or building or any r ight in land or building,
Act, 1978, w.r .e.f. 1-4-1974.
5. For text of the Capital Gains Accounts Scheme, 1988GSR 724(E), dated 22-6-1988 and
for list of author ised br anches (except r ur al br anches) of the banks specified to r eceive
deposits and maintain accountsGSR 725(E), dated 22-6-1988, see Taxmanns Dir ect
Taxes Cir cular s.
6. Pr ior to omission, Explan ation was amended by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1992.
10. Substituted for Wher e the capital gain ar ises by the Finance Act, 1987, w.e.f. 1-4-1988.
1.319 CH. IV - COMPUTATION OF INCOME FROM CAPITAL GAINS S. 54D
11. For the meaning of the expr ession industr ial under taking, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
13. Substituted by the Finance Act, 1987, w.e.f. 1-4-1988. Pr ior to substitution sub-section (2)
was inser ted by the Finance Act, 1978, w.r .e.f. 1-4-1974.
Taxes Cir cular s.
S. 54D I.T. ACT, 1961 1.320
for ming par t of an industr ial under taking
11
belonging to the assessee which, in
the two year s immediately pr eceding the date on which the tr ansfer took place,
was being used by the assessee for the pur poses of the business of the said
under taking
12
[(her eafter in this section r efer r ed to as the or iginal asset)], and
the assessee has within a per iod of thr ee year s after that date pur chased any
other land or building or any r ight in any other land or building or constr ucted
any other building for the pur poses of shifting or r e-establishing the said
under taking or setting up another industr ial under taking, then, instead of the
capital gain being char ged to income-tax as the income of the pr evious year in
which the tr ansfer took place, it shall be dealt with in accor dance with the
following pr ovisions of this section, that is to say,
(i) if the amount of the capital gain is gr eater than the cost of the land,
building or r ight so pur chased or the building so constr ucted (such
land, building or r ight being her eafter in this section r efer r ed to as the
new asset), the differ ence between the amount of the capital gain and
the cost of the new asset shall be char ged under section 45 as the
income of the pr evious year ; and for the pur pose of computing in
r espect of the new asset any capital gain ar ising fr om its tr ansfer
within a per iod of thr ee year s of its pur chase or constr uction, as the
case may be, the cost shall be n il; or
(ii) if the amount of the capital gain is equal to or less than the cost of the
new asset, the capital gain shall not be char ged under section 45; and
gain ar ising fr om its tr ansfer within a per iod of thr ee year s of its
pur chase or constr uction, as the case may be, the cost shall be
r educed by the amount of the capital gain.]
13
[(2) The amount of the capital gain which is not utilised by the assessee for the
pur chase or constr uction of the new asset befor e the date of fur nishing the
r etur n of income under section 139, shall be deposited by him befor e fur nishing
such r etur n [such deposit being made in any case not later than the due date
applicable in the case of the assessee for fur nishing the r etur n of income under
sub-section (1) of section 139] in an account in any such bank or institution as
may be specified in, and utilised in accor dance with, any scheme
14
which the
Centr al Gover nment may, by notification in the Official Gazette, fr ame in this
behalf and such r etur n shall be accompanied by pr oof of such deposit; and, for
the pur poses of sub-section (1), the amount, if any, alr eady utilised by the
amount so deposited shall be deemed to be the cost of the new asset:
Explan ation .
15
16
[Capital gain on transfer of capital assets not to be charged in certain cases.
17
54E. (1) Wher e the capital gain ar ises fr om the tr ansfer of a
18
[long-ter m
capital asset]
19
[befor e the 1st day of Apr il, 1992], (the capital asset so
tr ansfer r ed being her eafter in this section r efer r ed to as the or iginal asset) and
the assessee has, within a per iod of six months after the date of such tr ansfer ,
invested or deposited the
20
[whole or any par t of the net consider ation] in any
specified asset (such specified asset being her eafter in this section r efer r ed to as
the new asset), the capital gain shall be dealt with in accor dance with the
following pr ovisions of this section, that is to say,
(a) if the cost of the new asset is not less than the
21
[net consider ation] in
r espect of the or iginal asset, the whole of such capital gain shall not
be char ged under section 45;
(b) if the cost of the new asset is less than the
22
[net consider ation] in
r espect of the or iginal asset, so much of the capital gain as bear s to the
whole of the capital gain the same pr opor tion as the cost of acquisition
of the new asset bear s to the
23
[net consider ation] shall not be char ged
under section 45:
24
[Provided that in a case wher e the or iginal asset is tr ansfer r ed after the 28th day
of Febr uar y, 1983, the pr ovisions of this sub-section shall not apply unless the
assessee has invested or deposited the whole or , as the case may be, any par t of
the net consider ation in the new asset by initially subscr ibing to such new asset:]
1.321 CH. IV - COMPUTATION OF INCOME FROM CAPITAL GAINS S. 54E
15. Pr ior to its omission, Explan ation was amended by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1992.
18. Substituted for capital asset, not being a shor t-ter m capital asset by the Finance Act,
1987, w.e.f. 1-4-1988.
20. Substituted for full value of the consider ation or any par t ther eof r eceived or accr uing
as a r esult of such tr ansfer by the Finance Act, 1979, w.e.f. 1-4-1979.
21. Substituted for full value of consider ation r eceived or accr uing, ibid.
22. Substituted for full value of consider ation r eceived or accr uing, ibid.
23. Substituted for full value of such consider ation, ibid.
25
[Provided further that in a case wher e the tr ansfer of the or iginal asset is by way
of compulsor y acquisition under any law and the full amount of compensation
awar ded for such acquisition is not r eceived by the assessee on the date of such
tr ansfer , the per iod of six months r efer r ed to in this sub-section shall, in r elation
to so much of such compensation as is not r eceived on the date of the tr ansfer ,
be r eckoned fr om the date immediately following the date on which such
compensation is r eceived by the assessee
26
[or the 31st day of Mar ch, 1992,
whichever is ear lier ].]
Explan ation 1.
27
[For t he pur poses of t his sub-sect ion, specified asset
means,
(a) in a case wher e the or iginal asset is tr ansfer r ed befor e the 1st day of
Mar ch, 1979, any of the following assets, namely:]
(i) secur ities of the Centr al Gover nment or a State Gover nment;
(ii)
28
savings cer tificates as defined in clause (c) of section 2 of the
Gover nment Savings Cer tificates Act, 1959 (46 of 1959);
(iii) units in the Unit Tr ust of India established under the Unit Tr ust
of India Act, 1963 (52 of 1963);
(iv) debent u r es specified by t he Cent r al Gover nment for t he
pur poses of clause (ii) of sub-section (1) of section 80L;
(v) shar es in any Indian company which ar e issued to the public or
ar e listed in a r ecognised stock exchange in India in accor dance
with the Secur ities Contr acts (Regulation) Act, 1956 (42 of 1956),
and any r ules made ther eunder ,
29
[wher e the investment in such
shar es is made befor e the 1st day of Mar ch, 1978];
29
[(va) equity shar es for ming par t of any eligible issue of capital, wher e
the investment in such shar es is made after the 28th day of
Febr uar y, 1978;]
(vi) deposits for a per iod of not less than thr ee year s with the State
Bank of India established under the State Bank of India Act, 1955
(23 of 1955), or any subsidiar y bank as defined in the State Bank
of India (Subsidiar y Banks) Act , 1959 (38 of 1959) or any
nationalised bank, that is to say, any cor r esponding new bank,
constituted under section 3 of the Banking Companies (Acquisi-
tion and Tr ansfer of Under takings) Act, 1970 (5 of 1970), or any
co-oper ative society engaged in car r ying on the business of
banking (including a co-oper ative land mor tgage bank or a co-
oper ative land development bank);
S. 54E I.T. ACT, 1961 1.322
27. Substituted for For the pur poses of this sub-section an d sub-section (3), specified asset
means any of the following assets, namely: by the Finance Act, 1979, w.e.f. 1-4-1979. The
italicised wor ds wer e inser ted by the Finance Act, 1978, w.e.f. 1-4-1978.
28. For definition of savings cer tificates, see footnote 57 on p. 1.130 an te.
30
[(b) in a case wher e the or iginal asset is tr ansfer r ed after the 28th day of
Febr uar y, 1979
31
[but befor e the 1st day of Mar ch, 1983], such
National Rur al Development Bonds as the Centr al Gover nment may
notify
32
in this behalf in the Official Gazette;]
33
[(c) in a case wher e the or iginal asset is tr ansfer r ed after the 28th day of
Febr uar y, 1983
34
[but befor e the 1st day of Apr il, 1986], any of the
following assets, namely :
(i) secur ities of the Centr al Gover nment which that Gover nment
may, by notification in the Official Gazette, specify in this behalf;
(ii) special ser ies of units of the Unit Tr ust of India established under
the Unit Tr ust of India Act, 1963 (52 of 1963), which the Centr al
Gover nment may, by notification
35
in the Official Gazette, specify
in this behalf;
(iii) such National Rur al Development Bonds as have been noti-
fied
35
under clause (b) of Explan ation 1 or as may be notified in
this behalf under this clause by the Centr al Gover nment;
(iv) such debentur es issued by the Housing and Ur ban Development
Cor por ation Limited [a
36
Gover nment company as defined in
section 617 of the Companies Act, 1956 (1 of 1956)], as the Centr al
Gover nment may, by notification in the Official Gazette, specify
in this behalf;]
37
[(d) in a case wher e the or iginal asset is tr ansfer r ed after the 31st day of
Mar ch, 1986, any of the assets specified in clause (c) and such bonds
issued by any public sector company, as the Centr al Gover nment
38
in the Official Gazette, specify in this behalf;
39
[***]]
40
[(e) in a case wher e the or iginal asset is tr ansfer r ed after the 31st day of
Mar ch, 1989, any of the assets specified in clauses (c) and (d) and such
debentur es or bonds issued by the National Housing Bank established
under section 3 of the National Housing Bank Act, 1987 (53 of 1987),
41
in the Official
Gazette, specify in this behalf.]
32. For notification, see Taxmanns Master Guide to Income-tax Act.
42
[Explan ation 2.Eligible issue of capital shall have the meaning assigned to
it in sub-section (3) of section 80CC.]
42
[Explan ation 3.An assessee shall not be deemed to have invested the
43
[whole
or any par t of the net consider ation in any equity shar es r efer r ed to in sub-
clause (va) of clause (a)] of Explan ation 1, unless the assessee has subscr ibed to
or pur chased the shar es in the manner specified in sub-section (4) of section
80CC.]
Explan ation
44
[4].Cost, in r elation to any new asset, being a deposit r efer r ed
to in
45
[sub-clause (vi) of clause (a)] of Explan ation 1, means the amount of such
deposit.
46
[Explan ation 5.Net consider ation, in r elation to the tr ansfer of a capital
asset, means the full value of the consider ation r eceived or accr uing as a r esult
of the tr ansfer of the capital asset as r educed by any expenditur e incur r ed wholly
and exclusively in connection with such tr ansfer .
47
[(1A) Wher e the assessee deposits after the 27th day of Apr il, 1978, the
48
[whole or any par t of the net consider ation in r espect] of the or iginal asset in
any new asset, being a deposit r efer r ed to in
49
[sub-clause (vi) of clause (a)] of
Explan ation 1 below sub-section (1), the cost of such new asset shall not be
taken into account for the pur poses of that sub-section unless the following
(a) the assessee fur nishes, along with the deposit, a declar ation in wr iting,
to the bank or the co-oper ative society r efer r ed to in the said
49
[sub-
clause (vi)] with which such deposit is made, to the effect that the
assessee will not take any loan or advance on the secur ity of such
deposit dur ing a per iod of thr ee year s fr om the date on which the
deposit is made;
(b) the assessee fur nishes, along with the r etur n of income for the
assessment year r elevant to the pr evious year in which the tr ansfer of
the or iginal asset was effected or within such fur ther time as may be
allowed by the
50
[Assessing] Officer , a copy of the declar ation r efer r ed
to in clause (a) duly attested by an officer not below the r ank of sub-
agent, agent or manager of such bank or an officer of cor r esponding
r ank of such co-oper ative society.]
S. 54E I.T. ACT, 1961 1.324
43. Substituted for full value of the consider ation or any par t ther eof in any equity shar es
r efer r ed t o in clause (va) by the Finance Act, 1979, w.e.f. 1-4-1979.
45. Subst it ut ed for clause (vi) by the Finance Act, 1979, w.e.f. 1-4-1979.
as a r esult of the tr ansfer by the Finance Act, 1979, w.e.f. 1-4-1979.
49. Subst it ut ed for clause (vi), ibid.
1-4-1988.
51
[(1B) Wher e on the fulfilment of the conditions specified in sub-section (1A), the
cost of the new asset r efer r ed to in that sub-section is taken into account for the
pur poses of sub-section (1), the assessee shall, within a per iod of ninety days
fr om the expir y of the per iod of thr ee year s r eckoned fr om the date of such
deposit, fur nish to the
52
[Assessing] Officer a cer tificate fr om the officer r efer r ed
to in clause (b) of sub-section (1A) to the effect that the assessee has not taken any
loan or advance on the secur ity of such deposit dur ing the said per iod of thr ee
year s.]
53
[(1C) Notwithstanding anything contained in sub-section (1), wher e the capital
gain ar ises fr om the tr ansfer of the or iginal asset, made after the 31st day of
Mar ch, 1992, in r espect of which the assessee had r eceived any amount by way
of advance on or befor e the 29th day of Febr uar y, 1992 and had invested or
deposited the whole or any par t of such amount in the new asset on or befor e the
later date, then, the pr ovisions of clauses (a) and (b) of sub-section (1) shall apply
in the case of such investment or deposit as they apply in the case of investment
or deposit under that sub-section.]
(2) Wher e the new asset is tr ansfer r ed, or conver ted (other wise than by tr ansfer )
into money, within a per iod of thr ee year s fr om the date of its acquisition, the
amount of capital gain ar ising fr om the tr ansfer of the or iginal asset not char ged
under section 45 on the basis of the cost of such new asset as pr ovided in clause
(a) or , as the case may be, clause (b), of sub-section (1) shall be deemed to be
income char geable under the head Capital gains r elating to
54
[long-ter m capital
assets] of the pr evious year in which the new asset is tr ansfer r ed or conver ted
(other wise than by tr ansfer ) into money.]
55
[
56
[Explan ation 1].Wher e the assessee deposits after the 27th day of Apr il,
1978, the
57
[whole or any par t of the net consider ation in r espect] of the or iginal
asset in any new asset, being a deposit r efer r ed to in
58
[sub-clause (vi) of clause
(a)] of Explan ation 1 below sub-section (1), and such assessee takes any loan or
advance on the secur ity of such deposit, he shall be deemed to have conver ted
(other wise than by tr ansfer ) such deposit into money on the date on which such
loan or advance is taken.]
59
[Explan ation 2.In a case wher e the or iginal asset is tr ansfer r ed after the 28th
day of Febr uar y, 1983 and the assessee invests the whole or any par t of the net
1-4-1988.
54. Substituted for capital assets other than shor t-ter m capital assets by the Finance Act,
1987, w.e.f. 1-4-1988.
56. Number ed as Explan ation 1 by the Finance Act, 1983, w.e.f. 1-4-1983.
as a r esult of the tr ansfer by the Finance Act, 1979, w.e.f. 1-4-1979.
58. Subst it ut ed for clause (vi), ibid.
consider ation in r espect of the or iginal asset in any new asset and such assessee
takes any loan or advance on the secur ity of such new asset, he shall be deemed
to have conver ted (other wise than by tr ansfer ) such new asset on the date on
which such loan or advance is taken.]
60
[***]
61
[***]
62
[***]
63
[(3) Wher e the cost of the equity shar es r efer r ed to in
64
[sub-clause (va) of clause
(a)] of Explan ation 1 below sub-section (1) is taken into account for the pur poses
of clause (a) or clause (b) of sub-section (1)
65
[***], a deduction with r efer ence to
such cost shall not be allowed under section 80CC.]
66
[Capital gain on transfer of long-term capital assets not to be charged in the case
of investment in
67
[specified securities].
68
54EA. (1) Wher e the capital gain ar ises fr om the tr ansfer of a long-ter m
capital asset
69
[befor e the 1st day of Apr il, 2000] (the capital asset so
tr ansfer r ed being her eafter in this section r efer r ed to as the or iginal asset) and
the assessee has, at any time within a per iod of six months after the date of such
tr ansfer , invested the whole or any par t of the net consider ation in any of the
70
[bonds, debentur es, shar es of a public company or units of any mutual fund
r efer r ed to in clause (23D) of section 10,] specified
71
by the Boar d in this behalf
by notification in the Official Gazette (such assets her eafter in this section
S. 54EA I.T. ACT, 1961 1.326
60. Omitted by the Finance Act, 1987, w.e.f. 1-4-1988. Or iginal sub-section (3) was inser ted
by the Finance Act, 1978, w.e.f. 1-4-1978. Pr ior to its omission, sub-section (3) was amended
by the Finance Act, 1983, w.e.f. 1-4-1983 and the Finance Act, 1979, w.e.f. 1-4-1979.
61. Omitted by the Finance Act, 1987, w.e.f. 1-4-1988. Or iginal sub-section (4) was inser ted by
the Finance Act, 1978, w.e.f. 1-4-1978. Pr ior to its omission, sub-section (4) was amended
the Finance Act, 1978, w.e.f. 1-4-1978. Pr ior to its omission, sub-section (5) was amended
63. Sub-section (6), which was or iginally inser ted by the Finance Act, 1978, w.e.f. 1-4-1978, was
r enumber ed as sub-section (3) by the Finance Act, 1987, w.e.f. 1-4-1988.
64. Subst it ut ed for clause (va) by the Finance Act, 1979, w.e.f. 1-4-1979.
65. or clause (a) or clause (b) of sub-section (3) omitted by the Finance Act, 1987, w.e.f.
1-4-1988.
66. Sections 54EA and 54EB inser ted by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996.
67. Substituted for specified bonds or debentur es by the Income-tax (Amendment) Act,
1997, w.r .e.f. 1-10-1996.
No. 791, dated 2-6-2000 and PIB Pr ess Release, dated 13-4-2000. See Taxmanns Dir ect
Taxes Cir cular s.
70. Substituted for bonds, debentur es or units of any mutual fund r efer r ed to in clause (23D)
of section 10, by the Income-tax (Amendment) Act, 1997, w.r .e.f. 1-10-1996.
71. For notified bonds/ secur ities, see Taxmanns Dir ect Taxes Cir cular s.
r efer r ed to as the
72
[specified secur ities]), the capital gain shall be dealt with in
accor dance with the following pr ovisions of this section, that is to say,
(a) if the cost of the
72
[specified secur ities] is not less than the net
consider ation in r espect of the or iginal asset, the whole of such capital
gain shall not be char ged under section 45;
(b) if the cost of the
72
[specified secur ities] is less than the net consider -
ation in r espect of the or iginal asset, so much of the capital gain as
bear s to the whole of the capital gain the same pr opor tion as the cost
of acquisition of the
72
[specified secur ities] bear s to the net consider -
ation shall not be char ged under section 45.
(2) Wher e the
72
[specified secur ities] ar e tr ansfer r ed or conver ted (other wise
than by tr ansfer ) into money at any time within a per iod of thr ee year s fr om the
date of their acquisition, the amount of capital gain ar ising fr om the tr ansfer of
the or iginal asset not char ged under section 45 on the basis of the cost of such
72
[specified secur ities] as pr ovided in clause (a) or clause (b) of sub-section (1)
shall be deemed to be the income char geable under the head Capital gains
r elating to long-ter m capital assets of the pr evious year in which the
72
[specified
secur ities] ar e tr ansfer r ed or conver ted (other wise than by tr ansfer ) into money.
Explan ation .In a case wher e the or iginal asset is tr ansfer r ed and the assessee
invests the whole or any par t of the net consider ation in r espect of the or iginal
asset in any
72
[specified secur ities] and such assessee takes any loan or advance
on the secur ity of such
72
[specified secur ities], he shall be deemed to have
conver ted (other wise than by tr ansfer ) such
72
[specified secur ities] into money
on the date on which such loan or advance is taken.
(3) Wher e the cost of the
72
[specified secur ities] has been taken into account for
the pur poses of clause (a) or clause (b) of sub-section (1), a r ebate with r efer ence
to such cost shall not be allowed under section 88.
(a) cost, in r elation to any
72
[specified secur ities], means the amount
invested in such
72
[specified secur ities] out of the net consider ation
r eceived or accr uing as a r esult of the tr ansfer of the or iginal asset ;
(b) net consider ation, in r elation to the tr ansfer of a capital asset, means
the full value of the consider ation r eceived or accr uing as a r esult of
the tr ansfer of the capital asset as r educed by the expenditur e
incur r ed wholly and exclusively in connection with such tr ansfer .
Capital gain on transfer of long-term capital assets not to be charged in certain
cases.
73
54EB. (1) Wher e the capital gain ar ises fr om the tr ansfer of a long-ter m
capital asset
74
[befor e the 1st day of Apr il, 2000] (the capital asset so
1.327 CH. IV - COMPUTATION OF INCOME FROM CAPITAL GAINS S. 54EA
72. Substituted for specified bonds or debentur es by the Income-tax (Amendment) Act,
1997, w.r .e.f. 1-10-1996.
No. 791, dated 2-6-2000 and PIB Pr ess Release, dated 13-4-2000. See Taxmanns Dir ect
Taxes Cir cular s.
tr ansfer r ed being her eafter in this section r efer r ed to as the or iginal asset), and
the assessee has, at any time within a per iod of six months after the date of such
tr ansfer invested the whole or any par t of capital gains, in any of the assets
specified
75
by the Boar d in this behalf by notification in the Official Gazette (such
assets her eafter in this section r efer r ed to as the long-ter m specified assets), the
capital gain shall be dealt with in accor dance with the following pr ovisions of this
(a) if the cost of the long-ter m specified asset is not less than the capital
gain ar ising fr om the tr ansfer of the or iginal asset, the whole of such
capital gain shall not be char ged under section 45 ;
(b) if the cost of the long-ter m specified asset is less than the capital gain
ar ising fr om the tr ansfer of the or iginal asset, so much of the capital
gain as bear s to the whole of the capital gain the same pr opor tion as
the cost of acquisition of the long-ter m specified asset bear s to the
whole of the capital gain, shall not be char ged under section 45.
Explan ation .Cost, in r elation to any long-ter m specified asset, means the
amount invested in such specified asset out of capital gains r eceived or accr uing
as a r esult of the tr ansfer of the or iginal asset.
(2) Wher e the long-ter m specified asset is tr ansfer r ed or conver ted (other wise
than by tr ansfer ) into money at any time within a per iod of seven year s fr om the
date of its acquisition, the amount of capital gains ar ising fr om the tr ansfer of the
or iginal asset not char ged under section 45 on the basis of the cost of such
long-ter m specified asset as pr ovided in clause (a), or as the case may be, clause
(b) of sub-section (1) shall be deemed to be the income char geable under the
head Capital gains r elating to long-ter m capital assets of the pr evious year in
which the long-ter m specified asset is tr ansfer r ed or conver ted (other wise than
by tr ansfer ) into money.
invests the whole or any par t of the capital gain r eceived or accr ued as a r esult
of tr ansfer of the or iginal asset in any long-ter m specified asset and such assessee
takes any loan or advance on the secur ity of such specified asset, he shall be
deemed to have conver ted (other wise than by tr ansfer ) such specified asset into
money on the date on which such loan or advance is taken.
(3) Wher e the cost of the long-ter m specified asset has been taken into account
for the pur poses of clause (a) or clause (b) of sub-section (1), a deduction fr om
the amount of income-tax with r efer ence to such cost shall not be allowed under
section 88.]
76
[Capital gain not to be charged on investment in certain bonds.
54EC. (1) Wher e the capital gain ar ises fr om the tr ansfer of a long-ter m capital
asset (the capital asset so tr ansfer r ed being her eafter in this section
r efer r ed to as the or iginal asset) and the assessee has, at any time within a per iod
of six months after the date of such tr ansfer , invested the whole or any par t of
S. 54EC I.T. ACT, 1961 1.328
75. For notified long-ter m capital assets, see Taxmanns Dir ect Taxes Cir cular s.
76. Inser ted by the Finance Act, 2000, w.e.f. 1-4-2001. See also Cir cular No. 791, dated 2-6-2000.
capital gains in the long-ter m specified asset, the capital gain shall be dealt with
in accor dance with the following pr ovisions of this section, that is to say,
(a) if the cost of the long-ter m specified asset is not less than the capital
gain ar ising fr om the tr ansfer of the or iginal asset, the whole of such
capital gain shall not be char ged under section 45;
(b) if the cost of the long-ter m specified asset is less than the capital gain
the cost of acquisition of the long-ter m specified asset bear s to the
whole of the capital gain, shall not be char ged under section 45 :
77
[Provided that the investment made on or after the 1st day of Apr il, 2007 in the
long-ter m specified asset by an assessee dur ing any financial year does not
exceed fifty lakh r upees.]
(2) Wher e the long-ter m specified asset is tr ansfer r ed or conver ted (other wise
than by tr ansfer ) into money at any time within a per iod of thr ee year s fr om the
date of its acquisition, the amount of capital gains ar ising fr om the tr ansfer of the
or iginal asset not char ged under section 45 on the basis of the cost of such long-
ter m specified asset as pr ovided in clause (a) or , as the case may be, clause (b) of
sub-section (1) shall be deemed to be the income char geable under the head
Capital gains r elating to long-ter m capital asset of the pr evious year in which
the long-ter m specified asset is tr ansfer r ed or conver ted (other wise than by
tr ansfer ) into money.
invests the whole or any par t of the capital gain r eceived or accr ued as a r esult
of tr ansfer of the or iginal asset in any long-ter m specified asset and such assessee
takes any loan or advance on the secur ity of such specified asset, he shall be
deemed to have conver ted (other wise than by tr ansfer ) such specified asset into
money on the date on which such loan or advance is taken.
78
[(3) Wher e the cost of the long-ter m specified asset has been taken into account
for the pur poses of clause (a) or clause (b) of sub-section (1),
(a) a deduction fr om the amount of income-tax with r efer ence to such
cost shall not be allowed under section 88 for any assessment year
ending befor e the 1st day of Apr il, 2006;
(b) a deduction fr om the income with r efer ence to such cost shall not be
allowed under section 80C for any assessment year beginning on or
after the 1st day of Apr il, 2006.]
(a) cost, in r elation to any long-ter m specified asset, means the amount
invested in such specified asset out of capital gains r eceived or
accr uing as a r esult of the tr ansfer of the or iginal asset;
1.329 CH. IV - COMPUTATION OF INCOME FROM CAPITAL GAINS S. 54EC
(3) Wher e the cost of the long-ter m specified asset has been taken into account for the
pur poses of clause (a) or clause (b) of sub-section (1), a deduction fr om the amount of
income-tax with r efer ence to such cost shall not be allowed under section 88.
79
[(b) long-ter m specified asset for making any investment under this
section dur ing the per iod commencing fr om the 1st day of Apr il, 2006
and ending with the 31st day of Mar ch, 2007, means any bond,
r edeemable after thr ee year s and issued on or after the 1st day of
Apr il, 2006, but on or befor e the 31st day of Mar ch, 2007,
(i) by the National Highways Author ity of India constituted
under section 3 of the National Highways Author ity of India
Act, 1988 (68 of 1988); or
(ii) by the Rur al Electr ification Cor por ation Limited, a company
for med and r egister ed under the Companies Act, 1956 (1 of
1956),
and notified
80
by the Centr al Gover nment in the Official Gazette for
the pur poses of this section with such conditions (including the
condition for pr oviding a limit on the amount of investment by an
assessee in such bond) as it thinks fit:]
81
[Provided that wher e any bond has been notified befor e the 1st day
of Apr il, 2007, subject to the conditions specified in the notification, by
the Centr al Gover nment in the Official Gazette under the pr ovisions
of clause (b) as they stood immediately befor e their amendment by
the Finance Act, 2007, such bond shall be deemed to be a bond notified
under this clause;]
82
[(ba) long-ter m specified asset for making any investment under this
section on or after the 1st day of Apr il, 2007 means any bond,
r edeemable after thr ee year s and issued on or after the 1st day of
Apr il, 2007 by the National Highways Author ity of India constituted
under section 3 of the National Highways Author ity of India Act, 1988
(68 of 1988) or by the Rur al Electr ification Cor por ation Limited, a
company for med and r egister ed under the Companies Act, 1956 (1 of
1956).]
S. 54EC I.T. ACT, 1961 1.330
79. Substituted by the Finance Act, 2007, w.r .e.f. 1-4-2006. Pr ior to its substitution, clause (b)
of Explan ation , as substituted by the Finance Act, 2001, w.e.f. 1-4-2002 and amended by
the Finance Act, 2002, w.e.f. 1-4-2003 and later on substituted by the Finance Act, 2006,
(b) long-ter m specified asset means any bond, r edeemable after thr ee year s and
issued on or after the 1st day of Apr il, 2006,
(i) by the National Highways Author ity of India constituted under section 3 of
the National Highways Author ity of India Act, 1988 (68 of 1988), and notified
by the Centr al Gover nment in the Official Gazette for the pur poses of this
section; or
(ii) by the Rur al Electr ification Cor por ation Limited, a company for med and
r egister ed under the Companies Act, 1956 (1 of 1956), and notified by the
Centr al Gover nment in the Official Gazette for the pur poses of this section.
80. For notified bonds, see Taxmanns Master Guide to Income-tax Act.
81. Inser ted by the Finance Act, 2007, w.r .e.f. 1-4-2006. See also Or der F. No. 142/ 09/ 2006-
TPL, dated 30-6-2006.
83
[Capital gain on transfer of certain listed securities or unit not to be charged in
certain cases.
54ED. (1) Wher e the capital gain ar ises fr om the tr ansfer
84
[befor e the 1st day
of Apr il, 2006,] of a long-ter m capital asset, being listed secur ities or unit
(the capital asset so tr ansfer r ed being her eafter in this section r efer r ed to as the
or iginal asset), and the assessee has, within a per iod of six months after the date
of such tr ansfer , invested the whole or any par t of the capital gain in acquir ing
equity shar es for ming par t of an eligible issue of capital (such equity shar es being
her eafter in this section r efer r ed to as the specified equity shar es), the said capital
gain shall be dealt with in accor dance with the following pr ovisions of this
(a) if the cost of the specified equity shar es is not less than the capital gain
ar ising fr om the tr ansfer of the or iginal asset, the whole of such
capital gain shall not be char ged under section 45;
(b) if the cost of the specified equity shar es is less than the capital gain
the cost of the specified equity shar es acquir ed bear s to the whole of
the capital gain shall not be char ged under section 45.
(i) eligible issue of capital means an issue of equity shar es which
satisfies the following conditions, namely:
(a) the issue is made by a public company for med and r egister ed in
India;
(b) the shar es for ming par t of the issue ar e offer ed for subscr iption
to the public;
(ii) listed secur ities shall have the same meaning as in clause (a) of the
Explan ation to sub-section (1) of section 112;
(iii) unit shall have the meaning assigned to it in clause (b) of the
Explan ation to section 115AB.
(2) Wher e the specified equity shar es ar e sold or other wise tr ansfer r ed within a
per iod of one year fr om the date of their acquisition, the amount of capital gain
ar ising fr om the tr ansfer of the or iginal asset not char ged under section 45 on the
basis of the cost of such specified equity shar es as pr ovided in clause (a) or , as
the case may be, clause (b), of sub-section (1) shall be deemed to be the income
char geable under t he head Capit al gains r elat ing t o long-t er m capit al
assets of the pr evious year in which such equity shar es ar e sold or other wise
tr ansfer r ed.
1.331 CH. IV - COMPUTATION OF INCOME FROM CAPITAL GAINS S. 54ED
S. 54F I.T. ACT, 1961 1.332
85
[(3) Wher e the cost of the specified equity shar es has been taken into account
for the pur poses of clause (a) or clause (b) of sub-section (1),
(a) a deduction fr om the amount of income-tax with r efer ence to such
cost shall not be allowed under section 88 for any assessment year
ending befor e the 1st day of Apr il, 2006;
(b) a deduction fr om the income with r efer ence to such cost shall not be
allowed under section 80C for any assessment year beginning on or
after the 1st day of Apr il, 2006.]]
86
[Capital gain on transfer of certain capital assets not to be charged in case of
investment in residential house.
87
54F. (1)
88
[Subject to the pr ovisions of sub-section (4), wher e, in the case of an
assessee being an individual or a Hindu undivided family], the capital gain
ar ises fr om the tr ansfer of any long-ter m capital asset, not being a r esidential
house (her eafter in this section r efer r ed to as the or iginal asset), and the assessee
has, within a per iod of one year befor e or
89
[two year s] after the date on which
the tr ansfer took place pur chased, or has within a per iod of thr ee year s after that
date constr ucted, a r esidential house (her eafter in this section r efer r ed to as the
new asset), the capital gain shall be dealt with in accor dance with the following
pr ovisions of this section, that is to say,
(a) if the cost of the new asset is not less than the net consider ation in
be char ged under section 45 ;
(b) if the cost of the new asset is less than the net consider ation in r espect
of the or iginal asset, so much of the capital gain as bear s to the whole
of the capital gain the same pr opor tion as the cost of the new asset
bear s to the net consider ation, shall not be char ged under section 45 :
90
[Provided that nothing contained in this sub-section shall apply wher e
(a) the assessee,
(3) Wher e the cost of the specified equity shar es has been taken into account for the
pur poses of clause (a) or clause (b) of sub-section (1), a deduction fr om the amount of
income-tax with r efer ence to such cost shall not be allowed under section 88.
88. Substituted for Wher e, in the case of an assessee being an individual by the Finance Act,
1987, w.e.f. 1-4-1988.
Provided that nothing contained in this sub-section shall apply wher e the assessee owns
on the date of the tr ansfer of the or iginal asset, or pur chases, within the per iod of one year
after such date, or constr ucts, within the per iod of thr ee year s after such date, any
r esidential house, the income fr om which is char geable under the head Income fr om
house pr oper ty, other than the new asset.
(i) owns mor e than one r esidential house, other than the new asset,
on the date of tr ansfer of the or iginal asset; or
(ii) purchases any residential house, other than the new asset, within a
per iod of one year after the date of tr ansfer of the or iginal asset;
or
(iii) constr ucts any r esidential house, other than the new asset, within
a per iod of thr ee year s after the date of tr ansfer of the or iginal
asset; and
(b) the income fr om such r esidential house, other than the one r esidential
house owned on the date of tr ansfer of the or iginal asset, is char geable
under the head Income fr om house pr oper ty.]
91
[***]
92
[***] net consider ation, in r elation to the tr ansfer of a capital asset, means
the full value of the consider ation r eceived or accr uing as a r esult of
the tr ansfer of the capital asset as r educed by any expenditur e
(2) Wher e the assessee pur chases, within the per iod of
93
[two year s] after the date
of the tr ansfer of the or iginal asset, or constr ucts, within the per iod of thr ee year s
after such date, any residential house, the income from which is chargeable under
the head Income fr om house pr oper ty, other than the new asset, the amount of
capital gain ar ising fr om the tr ansfer of the or iginal asset not char ged under
section 45 on the basis of the cost of such new asset as pr ovided in clause (a), or ,
as the case may be, clause (b), of sub-section (1), shall be deemed to be income
char geable under the head Capital gains r elating to long-ter m capital assets of
the pr evious year in which such r esidential house is pur chased or constr ucted.
(3) Wher e the new asset is tr ansfer r ed within a per iod of thr ee year s fr om the
date of its pur chase or , as the case may be, its constr uction, the amount of capital
gain ar ising fr om the tr ansfer of the or iginal asset not char ged under section 45
on the basis of the cost of such new asset as pr ovided in clause (a) or , as the
case may be, clause (b), of sub-section (1) shall be deemed to be income
char geable under the head Capital gains r elating to long-ter m capital assets of
the pr evious year in which such new asset is tr ansfer r ed.]
94
[(4) The amount of the net consider ation which is not appr opr iated by the
assessee towar ds the pur chase of the new asset made within one year befor e the
date on which the tr ansfer of the or iginal asset took place, or which is not utilised
by him for the pur chase or constr uction of the new asset befor e the date of
fur nishing the r etur n of income under section 139, shall be deposited by him
befor e fur nishing such r etur n [such deposit being made in any case not later than
1.333 CH. IV - COMPUTATION OF INCOME FROM CAPITAL GAINS S. 54F
92. (ii) omitted, ibid.
93. Substituted for one year , ibid.
S. 54G I.T. ACT, 1961 1.334
the due date applicable in the case of the assessee for fur nishing the r etur n of
income under sub-section (1) of section 139] in an account in any such bank or
institution as may be specified in, and utilised in accor dance with, any scheme
95
which the Centr al Gover nment may, by notification in the Official Gazette, fr ame
in this behalf and such r etur n shall be accompanied by pr oof of such deposit ;
and, for the pur poses of sub-section (1), the amount, if any, alr eady utilised by the
amount so deposited shall be deemed to be the cost of the new asset :
(i) the amount by which
(a) the amount of capital gain ar ising fr om the tr ansfer of the or iginal
asset not char ged under section 45 on the basis of the cost of the
new asset as pr ovided in clause (a) or , as the case may be, clause
(b) of sub-section (1),
exceeds
(b) the amount that would not have been so char ged had the amount
actually utilised by the assessee for the pur chase or constr uction
of the new asset within the per iod specified in sub-section (1) been
the cost of the new asset,
shall be char ged under section 45 as income of the pr evious year in
which the per iod of thr ee year s fr om the date of the tr ansfer of the
or iginal asset expir es ; and
(ii) the assessee shall be entitled to withdr aw the unutilised amount in
accor dance with the scheme afor esaid.
Explan ation .
96
97
[Exemption of capital gains on transfer of assets in cases of shifting of industrial
undertaking from urban area.
54G. (1) Subject to the pr ovisions of sub-section (2), wher e the capital gain
ar ises fr om the tr ansfer of a capital asset, being machiner y or plant or
building or land or any r ights in building or land used for the pur poses of the
business of an industr ial under taking situate in an ur ban ar ea, effected in the
cour se of, or in consequence of, the shifting of such industr ial under taking
(her eafter in this section r efer r ed to as the or iginal asset) to any ar ea (other than
an ur ban ar ea) and the assessee has within a per iod of one year befor e or thr ee
year s after the date on which the tr ansfer took place,
Taxes Cir cular s.
1-4-1992.
(a) pur chased new machiner y or plant for the pur poses of business of the
industr ial under taking in the ar ea to which the said under taking is
shifted ;
(b) acquir ed building or land or constr ucted building for the pur poses of
his business in the said ar ea ;
(c) shifted the or iginal asset and tr ansfer r ed the establishment of such
under taking to such ar ea; and
(d) incur r ed expenses on such other pur pose as may be specified in a
scheme fr amed by the Centr al Gover nment for the pur poses of this
section,
then, instead of the capital gain being char ged to income-tax as income of the
pr evious year in which the tr ansfer took place, it shall be dealt with in accor dance
with the following pr ovisions of this section, that is to say,
(i) if the amount of the capital gain is gr eater than the cost and expenses
incur r ed in r elation to all or any of the pur poses mentioned in clauses
(a) to (d) (such cost and expenses being her eafter in this section
r efer r ed to as the new asset), the differ ence between the amount of
the capital gain and the cost of the new asset shall be char ged under
section 45 as the income of the pr evious year ; and for the pur pose of
computing in r espect of the new asset any capital gain ar ising fr om its
tr ansfer within a per iod of thr ee year s of its being pur chased,
acquir ed, constr ucted or tr ansfer r ed, as the case may be, the cost shall
be n il ; or
(ii) if the amount of the capital gain is equal to, or less than, the cost of the
new asset, the capital gain shall not be char ged under section 45 ; and
gain ar ising fr om its tr ansfer within a per iod of thr ee year s of its being
pur chased, acquir ed, constr ucted or tr ansfer r ed, as the case may be,
the cost shall be r educed by the amount of the capital gain.
Explan ation .In this sub-section, ur ban ar ea means any such ar ea within the
limits of a municipal cor por ation or municipality as the Centr al Gover nment
may, having r egar d to the population, concentr ation of industr ies, need for
pr oper planning of the ar ea and other r elevant factor s, by gener al or special
or der
98
, declar e to be an ur ban ar ea for the pur poses of this sub-section.
(2) The amount of capital gain which is not appr opr iated by the assessee towar ds
the cost and expenses incur r ed in r elation to all or any of the pur poses mentioned
in clauses (a) to (d) of sub-section (1) within one year befor e the date on which
the tr ansfer of the or iginal asset took place, or which is not utilised by him for all
or any of the pur poses afor esaid befor e the date of fur nishing the r etur n of
income under section 139, shall be deposited by him befor e fur nishing such
r etur n [such deposit being made in any case not later than the due date applicable
in the case of the assessee for fur nishing the r etur n of income under sub-section
(1) of section 139] in an account in any such bank or institution as may be
1.335 CH. IV - COMPUTATION OF INCOME FROM CAPITAL GAINS S. 54G
98. For notified ur ban ar ea, see Taxmanns Master Guide to Income-tax Act.
specified in, and utilised in accor dance with, any scheme
99
which the Centr al
Gover nment may, by notification in the Official Gazette, fr ame in this behalf and
such r etur n shall be accompanied by pr oof of such deposit ; and, for the pur poses
of sub-section (1), the amount, if any, alr eady utilised by the assessee for all or
any of the pur poses afor esaid together with the amount, so deposited shall be
deemed to be the cost of the new asset :
wholly or par tly for all or any of the pur poses mentioned in clauses (a) to (d) of
sub-section (1) within the per iod specified in that sub-section, then,
the date of the tr ansfer of the or iginal asset expir es ; and
Explan ation .
1
2
[Exemption of capital gains on transfer of assets in cases of shifting of industrial
undertaking from urban area to any Special Economic Zone.
54GA. (1) Not wit hst anding anyt hing cont ained in sect ion 54G, wher e t he
capital gain ar ises fr om the tr ansfer of a capital asset, being machiner y or
plant or building or land or any r ights in building or land used for the pur poses
of the business of an industr ial under taking situate in an ur ban ar ea, effected in
the cour se of, or in consequence of the shifting of such industr ial under taking to
any Special Economic Zone, whether developed in any ur ban ar ea or any other
ar ea and the assessee has within a per iod of one year befor e or thr ee year s after
the date on which the tr ansfer took place,
(a) pur chased machiner y or plant for the pur poses of business of the
industr ial under taking in the Special Economic Zone to which the
said under taking is shifted;
(b) acquir ed building or land or constr ucted building for the pur poses of
his business in the Special Economic Zone;
(c) shifted the or iginal asset and tr ansfer r ed the establishment of such
under taking to the Special Economic Zone; and
(d) incur r ed expenses on such other pur poses as may be specified in a
scheme fr amed by the Centr al Gover nment for the pur poses of this
section,
then, instead of the capital gain being char ged to income-tax as income of the
pr evious year in which the tr ansfer took place, it shall, subject to the pr ovisions
S. 54GA I.T. ACT, 1961 1.336
deposits and maintain accountsGSR 725(E), dated 22-6-1988; see Taxmanns Dir ect
Taxes Cir cular s.
1-4-1992.
of sub-section (2), be dealt with in accor dance with the following pr ovisions of
this section, that is to say,
(i) if the amount of the capital gain is gr eater than the cost and expenses
incur r ed in r elation to all or any of the pur poses mentioned in clauses
(a) to (d) (such cost and expenses being her eafter in this section
r efer r ed to as the new asset), the differ ence between the amount of
the capital gain and the cost of the new asset shall be char ged
under section 45 as the income of the pr evious year ; and for the
pur pose of computing in r espect of the new asset any capital gain
ar ising fr om its tr ansfer within a per iod of thr ee year s of its being
pur chased, acquir ed, constr ucted or tr ansfer r ed, as the case may be,
the cost shall be Nil ; or
(ii) if the amount of the capital gain is equal to, or less than, the cost of
the new asset, the capital gain shall not be char ged under section 45,
and for the pur pose of computing in r espect of the new asset
any capital gain ar ising fr om its tr ansfer within a per iod of thr ee
year s of its being pur chased, acquir ed, constr ucted or tr ansfer r ed, as
the case may be, the cost shall be r educed by the amount of the capital
gain.
Explan ation .In this sub-section,
(a) Special Economic Zone shall have the meaning assigned to it in
clause (za) of *[section 2 of] the Special Economic Zones Act, 2005
3
;
(b) ur ban ar ea means any such ar ea within the limits of a muni-
cipal cor por ation or municipality as the Centr al Gover nment may,
having r egar d to the population, concentr ation of industr ies, need for
pr oper planning of the ar ea and other r elevant factor s, by gener al or
special or der , declar e to be an ur ban ar ea for the pur poses of this sub-
section.
(2) The amount of capital gain which is not appr opr iated by the assessee towar ds
the cost and expenses incur r ed in r elation to all or any of the pur poses mentioned
in clauses (a) to (d) of sub-section (1) within one year befor e the date on which
the tr ansfer of the or iginal asset took place, or which is not utilised by him for
all or any of the pur poses afor esaid befor e the date of fur nishing the r etur n of
income under section 139, shall be deposited by him befor e fur nishing such
r etur n [such deposit being made in any case not later than the due date applicable
in the case of the assessee for fur nishing the r etur n of income under sub-section
(1) of section 139] in an account in any such bank or institution as may be
specified in, and utilised in accor dance with, any scheme
3a
which the Centr al
Gover nment may, by notification, fr ame in this behalf and such r etur n shall be
accompanied by pr oof of such deposit; and, for the pur poses of sub-section (1),
the amount, if any, alr eady utilised by the assessee for all or any of the afor esaid
pur poses together with the amount so deposited shall be deemed to be the cost
of the new asset :
1.337 CH. IV - COMPUTATION OF INCOME FROM CAPITAL GAINS S. 54GA
3. For the text of clause (za) of section 2 of Special Economic Zones Act, 2005, see Appendix.
3a. See Capital Gains Accounts Scheme, 1988.
*Added by Edit or s.
wholly or par tly for all or any of the pur poses mentioned in clauses (a) to (d) of
sub-section (1) within the per iod specified in that sub-section, then,
with the scheme afor esaid.]
4
[Extension of time for acquiring new asset or depositing or investing amount of
capital gain.
54H. Not wit hst anding anyt hing cont ained in sect ions 54, 54B, 54D
5
[***]
6
[, 54EC] and 54F, wher e the tr ansfer of the or iginal asset is by way
of compulsor y acquisition under any law and the amount of compensation
awar ded for such acquisition is not r eceived by the assessee on the date of such
tr ansfer , the per iod for acquir ing the new asset by the assessee r efer r ed to in
those sections or , as the case may be, the per iod available to the assessee under
those sections for depositing or investing the amount of capital gain in r elation
to such compensation as is not r eceived on the date of the tr ansfer , shall be
r eckoned fr om the date of r eceipt of such compensation :
Provided that wher e the compensation in r espect of tr ansfer of the or iginal asset
by way of compulsor y acquisition under any law is r eceived befor e the 1st day
of Apr il, 1991, the afor esaid per iod or per iods, if expir ed, shall extend up to the
31st day of December , 1991.]
Meaning of adjusted, cost of improvement and cost of acquisition.
7
55. (1) For the pur poses of
8
[sections 48 and 49],
(a)
9
[***]
10
[(b) cost of any impr ovement,
(1) in r elation to a capital asset being goodwill of a business
11
[or a
r ight to manufactur e, pr oduce or pr ocess any ar ticle or thing]
12
[or r ight to car r y on any business] shall be taken to be n il ; and
5. , 54E omitted by the Finance Act, 1992, w.e.f. 1-4-1992.
6. Substituted for , 54EA, 54EB by the Finance Act, 2001, w.e.f. 1-4-2001. Ear lier the quoted
figur es and letter s wer e inser ted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
8. Substituted for sections 48, 49 and 50 by the Taxation Laws (Amendment & Miscella-
neous Pr ovisions) Act, 1986, w.e.f. 1-4-1988.
9. Omitted, ibid. Pr ior t o it s omission, clause (a) was amended by the Taxation Laws
(Amendment) Act, 1970, w.e.f. 1-4-1971, the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978 and
10. Substituted for cost of any impr ovement, in r elation to a capital asset, by the Finance
Act, 1987, w.e.f. 1-4-1988.
S. 55 I.T. ACT, 1961 1.338
(2) in r elation to any other capital asset,]
(i) wher e the capital asset became the pr oper ty of the pr evious
owner or the assessee befor e the
13
[1st day of Apr il,
14
[1981]],
15
[***] means all expenditur e of a capital natur e incur r ed in
making any additions or alter ations to the capital asset on or
after the said date by the pr evious owner or the assessee, and
(ii) in any other case, means all expenditur e of a capital natur e
incur r ed in making any additions or alter ations to the capital
asset by the assessee after it became his pr oper ty, and, wher e
the capital asset became the pr oper ty of the assessee by any
of the modes specified in
16
[sub-section (1) of] section 49, by
the pr evious owner ,
but does not include any expenditur e which is deductible in
computing the income char geable under the head Inter est on
secur ities, Income fr om house pr oper ty, Pr ofits and gains of
business or pr ofession, or Income fr om other sour ces, and the
expr ession impr ovement shall be constr ued accor dingly.
17
(2)
18
[For the pur poses of sections 48 and 49, cost of acquisition
19
,
20
[(a) in r elation to a capital asset, being goodwill of a business
21
[or a tr ade
mar k or br and name associated with a business]
22
[or a r ight to
manufactur e, pr oduce or pr ocess any ar ticle or thing]
23
[or r ight to
car r y on any business], tenancy r ights, stage car r iage per mits or loom
hour s,
(i) in the case of acquisition of such asset by the assessee by
pur chase fr om a pr evious owner , means the amount of the
pur chase pr ice ; and
(ii) in any other case [not being a case falling under sub-clauses (i) to
(iv) of sub-section (1) of section 49], shall be taken to be n il ;
13. Substituted for 1st day of Januar y, *1964 by the Finance Act, 1986, w.e.f. 1-4-1987.
*1964" was substituted for 1954 by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
15. Wor ds and the fair mar ket value of the asset on that day is taken as the cost of acquisition
at the option of the assessee, omitted, ibid.
17. See also Cir cular No. 31 (LXXVII-5)-D, dated 21-9-1962. For details, see Taxmanns Master
18. Substituted for For the pur poses of sections 48 and 49, cost of acquisition, in r elation
to a capital asset, by the Finance Act, 1987, w.e.f. 1-4-1988.
19. For the meaning of the expr ession cost of acquisition, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
20. Subst it ut ed for clause (a) by the Finance Act, 1994, w.e.f. 1-4-1995.
(aa)
24
[in a case wher e, by vir tue of holding a capital asset, being a shar e
or any other secur ity
25
, within the meaning of clause (h ) of section 2
of the Secur ities Contr acts (Regulation) Act, 1956 (42 of 1956) (her e-
after in this clause r efer r ed to as the financial asset), the assessee
(A) becomes entitled to subscr ibe to any additional financial
asset; or
(B) is allotted any additional financial asset without any pay-
ment,
then, subject to the pr ovisions of sub-clauses (i) and (ii) of clause (b)],
(i) in r elation to the or iginal financial asset, on the basis of which the
assessee becomes entitled to any additional financial asset,
means the amount actually paid for acquir ing the or iginal
financial asset;
(ii) in r elation to any r ight to r enounce the said entitlement to
subscr ibe to the financial asset, when such r ight is r enounced by
the assessee in favour of any per son, shall be taken to be n il in
the case of such assessee ;
(iii) in r elation to the financial asset, to which the assessee has
subscr ibed on the basis of the said entitlement, means the amount
actually paid by him for acquir ing such asset ;
26
[(iiia) in r elation to the financial asset allotted to the assessee without
any payment and on the basis of holding of any other financial
asset, shall be taken to be n il in the case of such assessee ;] and
(iv) in r elation to any financial asset pur chased by any per son in
whose favour the r ight to subscr ibe to such asset has been
r enounced, means the aggr egate of the amount of the pur chase
pr ice paid by him to the per son r enouncing such r ight and the
amount paid by him to the company or institution, as the case may
be, for acquir ing such financial asset ;]
27
[(ab) in r elation to a capital asset, being equity shar e or shar es allotted to
a shar eholder of a r ecognised stock exchange in India under a scheme
for
28
[demutualisation or ] cor por atisation appr oved by the Secur ities
and Exchange Boar d of India established under section 3 of the
S. 55 I.T. ACT, 1961 1.340
24. Substituted for the por tion beginning with the wor ds in a case wher e, and ending with
t he wor ds sub-clauses (i) and (ii) of clause (b) by the Finance Act, 1995, w.e.f. 1-4-1996.
Pr ior to its substitution, the quoted por tion r ead as under :
in a case wher e, by vir tue of holding a capital asset, being a shar e or any other secur ity
within the meaning of clause (h ) of section 2 of the Secur ities Contr acts (Regulation) Act,
1956 (42 of 1956) (her eafter in this clause r efer r ed to as the financial asset), the assessee
becomes entitled to subscr ibe to any additional financial asset, then, subject to the
pr ovisions of sub-clauses (i) and (ii) of clause (b).
25. For definition of secur ity, see footnote 7 on p. 1.26 an te.
Secur ities and Exchange Boar d of India Act, 1992 (15 of 1992), shall
be the cost of acquisition of his or iginal member ship of the exchange:]
28a
[Provided that the cost of a capital asset, being tr ading or clear ing
r ights of the r ecognised stock exchange acquir ed by a shar eholder
who has been allotted equity shar e or shar es under such scheme of
demutualisation or cor por atisation, shall be deemed to be n il;]
(b) in r elation to any other capital asset,]
(i) wher e the capital asset became the pr oper ty of the assessee
29
before the
30
[1st day of April,
31
[1981]], means the cost of acquisition
of the asset to the assessee or the fair
32
mar ket value of the asset
on the
33
[1st day of Apr il,
34
[1981]], at the option of the assessee ;
(ii) wher e the capital asset became the pr oper ty of the assessee
35
by
any of the modes specified in
36
[sub-section (1) of] section 49, and
the capital asset became the pr oper ty of the pr evious owner
befor e the
37
[1st day of Apr il,
38
[1981]], means the cost of the
capital asset to the pr evious owner or the fair
39
mar ket value of
the asset on the
37
[1st day of Apr il,
38
[1981]], at the option of the
assessee ;
(iii) wher e the capital asset became the pr oper ty of the assessee
39
on
t he dist r ibut ion of t he capit al asset s of a company on it s
liquidation and the assessee has been assessed to income-tax
under the head Capital gains in r espect of that asset under
section 46, means the fair
39
mar ket value of the asset on the date
of distr ibution ;
(iv)
40
[***]
29. For the meaning of the expr ession became the pr oper ty of the assessee, see Taxmanns
*1964" was substituted for 1954 by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
32. For the meaning of ter m fair , see Taxmanns Dir ect Taxes Manual, Vol. 3.
*1964 was substituted for 1954 by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
35. For the meaning of the expr ession became the pr oper ty of the assessee, see Taxmanns
*1964 was substituted for 1954 by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
39. For the meaning of the ter ms became the pr oper ty of the assessee and fair , see
40. Omitted by the Finance Act, 1966, w.e.f. 1-4-1966. Or iginal clause (iv) was inser ted by the
Finance Act, 1964, w.e.f. 1-4-1964.
41
[(v) wher e the capital asset, being a shar e or a stock of a company,
became the pr oper ty of the assessee on
(a) the consolidation and division of all or any of the shar e
capital of the company into shar es of lar ger amount than its
existing shar es,
(b) the conver sion of any shar es of the company into stock,
(c) the r e-conver sion of any stock of the company into shar es,
(d) the sub-division of any of the shar es of the company into
shar es of smaller amount, or
(e) the conver sion of one kind of shar es of the company into
another kind,
means the cost of acquisition of the asset calculated with r efer -
ence to the cost of acquisition of the shar es or stock fr om which
such asset is der ived.]
(3) Wher e the cost for which the pr evious owner acquir ed the pr oper ty cannot
be ascer tained, the cost of acquisition to the pr evious owner means the fair
mar ket value on the date on which the capital asset became the pr oper ty of the
pr evious owner .
42
[Reference to Valuation Officer.
43
55A. With a view to ascer taining the fair mar ket value of a capital asset for
the pur poses of this Chapter
44
, the
45
[Assessing] Officer may r efer the
valuation of capital asset to a Valuation Officer
(a) in a case wher e the value of the asset as claimed by the assessee is in
accor dance with the estimate made by a r egister ed valuer , if the
45
[Assessing] Officer is of opinion that the value so claimed is less than
its fair mar ket value ;
(b) in any other case, if the
45
[Assessing] Officer is of opinion
(i) that the fair mar ket value of the asset exceeds the value of the
asset as claimed by t he assessee by mor e t han such per -
centage
46-47
of the value of the asset as so claimed or by mor e than
such amount
46-47
as may be pr escr ibed in this behalf ; or
(ii) that having r egar d to the natur e of the asset and other r elevant
cir cumstances, it is necessar y so to do,
S. 55A I.T. ACT, 1961 1.342
44. For the meaning of the expr ession with a view to . . . a capital asset for the pur poses of
this Chapter , see Taxmanns Dir ect Taxes Manual, Vol. 3.
45. Substituted for Income-tax by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-
1988.
46-47. Per centage of value of asset r efer r ed to in section 55A(b)(i) : 15%/ Amount r efer r ed to in
section 55A(b)(i) : Rs. 25,000. [Rule 111AA]
48
and wher e any such r efer ence is made, the pr ovisions of sub-sections (2), (3), (4),
(5) and (6) of section 16A, clauses (h a) and (i) of sub-section (1) and sub-sections
(3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35
and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessar y
modifications, apply in r elation to such r efer ence as they apply in r elation to a
r efer ence made by the
49
[Assessing] Officer under sub-section (1) of section 16A
of that Act.
Explan ation .In this section, Valuation Officer has the same meaning, as in
clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).]
F.In com e f rom oth er sources
Income from other sources.
50
56. (1) Income of ever y kind which is not to be excluded fr om the total
income under this Act shall be char geable to income-tax under the head
Income fr om other sour ces, if it is not char geable to income-tax under any of
the heads specified in section 14, items A to E.
(2) In par ticular , and without pr ejudice to the gener ality of the pr ovisions of sub-
section (1), the following incomes, shall be char geable to income-tax under the
head Income fr om other sour ces, namely :
(i) dividends ;
51
[(ia) income r efer r ed to in sub-clause (viii) of clause (24) of section 2 ;]
52
[(ib) income r efer r ed to in sub-clause (ix) of clause (24) of section 2 ;]
48. See r ule 111AB. Pr escr ibed for m of r epor t of valuation by r egister ed valuer (vide Wealth-
t ax Rules) ar e as follows :
(i) Immovable pr oper ty (other than agr icultur al lands, plantations, For m O-1
for ests, mines and quar r ies)
(ii) Agr icultur al lands (other than coffee, tea, r ubber and car damom For m O-2
plant at ions)
(iii) Coffee, tea, r ubber or car damom plantations For m O-3
(iv ) For est s For m O-4
(v) Mines and quar r ies For m O-5
(vi) Stocks, shar es, debentur es, secur ities, shar es in par tner ship fir ms For m O-6
and business asset s including goodwill but excluding t hose
r efer r ed to in any other item in this Table
(vii) Machiner y and plant For m O-7
(viii) Jeweller y For m O-8
(ix) Wor k of ar t For m O-9
(x) Life inter est, r ever sions and inter est in expectancy For m O-10.
49. Substituted for Wealth-tax by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1988.
50. See also Letter [F.No. 40/ 29/ 67-IT (A-I)], dated 22-5-1967, Cir cular No. 371, dated 31-11-
1983, Cir cular No. 409, dated 12-2-1985 and Cir cular No. 3-D(XXXI-20), dated 30-3-1967.
S. 56 I.T. ACT, 1961 1.344
58. Inser ted by the Finance Act, 2007, w.r .e.f. 1-4-2005. Ear lier clauses (e) t o (g) wer e inser ted
by the Taxation Laws (Amendment) Act, 2006, w.e.f. 13-7-2006.
53
[(ic) income r efer r ed to in sub-clause (x) of clause (24) of section 2, if such
income is not char geable to income-tax under the head Pr ofits and
gains of business or pr ofession ;]
54
[(id) income by way of inter est on secur ities, if the income is not char ge-
able to income-tax under the head Pr ofits and gains of business or
pr ofession ;]
(ii) income fr om machiner y, plant or fur nitur e belonging to the assessee
and let on hir e, if the income is not char geable to income-tax under
the head Pr ofits and gains of business or pr ofession;
(iii) wher e an assessee lets on hir e machiner y, plant or fur nitur e belong-
ing to him and also buildings, and the letting of the buildings is
insepar able fr om the letting of the said machiner y, plant or fur nitur e,
the income fr om such letting, if it is not char geable to income-tax
under the head Pr ofits and gains of business or pr ofession;
55
[(iv) income r efer r ed to in sub-clause (xi) of clause (24) of section 2, if such
income is not char geable to income-tax under the head Pr ofits and
gains of business or pr ofession or under the head Salar ies;]
56
[(v) wher e any sum of money exceeding twenty-five thousand r upees is
r eceived without consider ation by an individual or a Hindu undivided
family fr om any per son on or after the 1st day of September , 2004
57
[but befor e the 1st day of Apr il, 2006], the whole of such sum :
Provided that this clause shall not apply to any sum of money
r eceived
(a) fr om any r elative; or
(b) on the occasion of the mar r iage of the individual; or
(c) under a will or by way of inher itance; or
(d) in contemplation of death of the payer ; or
58
[(e) fr om any local author ity as defined in the Explan ation to clause
(20) of section 10; or
(f) fr om any fund or foundation or univer sity or other educational
institution or hospital or other medical institution or any tr ust or
institution r efer r ed to in clause (23C) of section 10; or
(g) fr om any tr ust or institution r egister ed under section 12AA.]
Explan ation .For the pur poses of this clause, r elative means
(iv) br other or sister of either of the par ents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the indi-
vidual;
(vii) spouse of the per son r efer r ed to in clauses (ii) to (vi);]
59
[(vi) wher e any sum of money, the aggr egate value of which exceeds fifty
thousand r upees, is r eceived without consider ation, by an individual
or a Hindu undivided family, in any pr evious year fr om any per son or
per sons on or after the 1st day of Apr il, 2006, the whole of the
aggr egate value of such sum:
Provided that this clause shall not apply to any sum of money
r eceived
(a) fr om any r elative; or
(b) on the occasion of the mar r iage of the individual; or
(c) under a will or by way of inher itance; or
(d) in contemplation of death of the payer ; or
(e) fr om any local author ity as defined in the Explan ation to clause
(20) of section 10; or
(f) fr om any fund or foundation or univer sity or other educational
institution or hospital or other medical institution or any tr ust or
institution r efer r ed to in clause (23C) of section 10; or
(g) fr om any tr ust or institution r egister ed under section 12AA.
Explan ation .For the pur poses of this clause, r elative means
(iv) br other or sister of either of the par ents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the indi-
vidual;
(vii) spouse of the per son r efer r ed to in clauses (ii) to (vi).]
Deductions.
60
57. The income char geable under the head Income fr om other sour ces shall
be computed after making the following deductions, namely :
1.345 CH. IV - COMPUTATION OF INCOME FROM OTHER SOURCES S. 57
No. 648, dated 30-3-1993 and Cir cular No. 677, dated 28-1-1994. For details, see Taxmanns
(i) in the case of dividends,
61
[other than dividends r efer r ed to in section
115-O,]
62
[or inter est on secur ities], any r easonable sum paid by way
of commission or r emuner ation to a banker or any other per son for
the pur pose of r ealising such dividend
63
[or inter est] on behalf of the
assessee ;
64
[(ia) in the case of income of the natur e r efer r ed to in sub-clause (x) of
clause (24) of section 2 which is char geable to income-tax under the
head Income fr om other sour ces, deductions, so far as may be, in
accor dance with the pr ovisions of clause (va) of sub-section (1) of
section 36 ;]
(ii) in the case of income of the natur e r efer r ed to in clauses (ii) and (iii)
of sub-section (2) of section 56, deductions, so far as may be, in
accor dance with the pr ovisions of sub-clause (ii) of clause (a) and
clause (c) of section 30, section 31 and
65
[sub-sections (1)
66
[***] and
(2)] of section 32 and subject to the pr ovisions of
67
[section 38] ;
67a
[(iia) in the case of income in the natur e of family pension, a deduction of
a sum equal to thir ty-thr ee and one-thir d per cent of such income or
68
[fifteen] thousand r upees, whichever is less.
Explan ation .For the pur poses of this clause, family pension means
a r egular monthly amount payable by the employer to a per son
belonging to the family of an employee in the event of his death ;]
(iii) any other expenditur e (not being in the natur e of capital expenditur e)
laid out or expended wholly and exclusively for the pur pose
69
of
making or ear ning such income.
70
[***]
Explan ation .[Om itted by th e Fin an ce Act, 1988, w.e.f. 1-4-1989.]
S. 57 I.T. ACT, 1961 1.346
65. Substituted for sub-sections (1) and (2) by the Taxation Laws (Amendment) Act, 1970,
w.e.f. 1-4-1971.
66. , (1A) omitted by the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986,
w.e.f. 1-4-1988.
67. Substituted for sections 34 and 38, ibid.
68. Substituted for twelve by the Finance Act, 1997, w.e.f. 1-4-1998.
69. For the meaning of the ter m pur pose, see Taxmanns Dir ect Taxes Manual, Vol. 3.
70. Pr oviso omitted by the Finance Act, 1994, w.e.f. 1-4-1995. Pr ior to its omission, pr oviso, as
inser ted by the Finance Act, 1976, w.e.f. 1-6-1976 and later on substituted by the Finance
(No. 2) Act, 1991, w.r .e.f. 1-4-1989, r ead as under :
Provided that nothing contained in clause (i) or clause (iii) shall apply in computing the
income r efer r ed to in clause (a) or clause (aa) or clause (ab) of sub-section (1) of section
115A in the case of an assessee, being a for eign company.
Amounts not deductible.
71
58.
72
[(1)] Notwithstanding anything to the contr ar y contained in section 57,
the following amounts shall not be deductible in computing the income
char geable under the head Income fr om other sour ces, namely :
(a) in the case of any assessee,
(i) any per sonal expenses of the assessee ;
73
[(ia) any expenditur e of the natur e r efer r ed to in sub-section (12)
74
of
section 40A ;]
(ii) any inter est char geable under this Act which is payable outside
India (not being inter est on a loan issued for public subscr iption
befor e the 1st day of Apr il, 1938) on which tax has not been paid
or deducted under Chapter XVII-B
75
[***] ;
(iii) any payment which is char geable under the head Salar ies, if it
is payable outside India, unless tax has been paid ther eon or
deducted ther efr om under Chapter XVII-B ;
(iv)
76
[***]
(b)
77
[***]
78
[(1A) The pr ovisions of sub-clause (iia) of clause (a) of section 40 shall, so far as
may be, apply in computing the income char geable under the head Income fr om
other sour ces as they apply in computing the income char geable under the head
Pr ofits and gains of business or pr ofession.]
79
[(2) The pr ovisions of section 40A shall, so far as may be, apply in computing the
income char geable under the head Income fr om other sour ces as they apply
in computing the income char geable under the head Pr ofits and gains of
business or pr ofession.]
80
[(3) In the case of an assessee, being a for eign company, the pr ovisions of section
44D shall, so far as may be, apply in computing the income char geable under the
head Income fr om other sour ces as they apply in computing the income
char geable under the head Pr ofits and gains of business or pr ofession.]
1.347 CH. IV - COMPUTATION OF INCOME FROM OTHER SOURCES S. 58
72. Inser ted by the Finance Act, 1968, w.e.f. 1-4-1968 and is deemed always to have been ther e
vide section 3 of the Income-tax (Amendment) Act, 1972.
74. Sub-section (12) of section 40A was omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
75. and in r espect of which ther e is no per son in India who may be tr eated as an agent under
section 163 omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
76. Omitted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972. Or iginal sub-clause was inser ted
77. Omitted by the Finance Act, 1988, w.e.f. 1-4-1989. Pr ior to its omission, clause (b) was
amended by the Finance Act, 1963, w.e.f. 1-4-1963 and Finance Act, 1968, w.e.f. 1-4-1969.
78. Inser ted by the Income-tax (Amendment) Act, 1972, w.r .e.f. 1-4-1962 subject to savings
pr escr ibed by section 5 of the Amendment Act r egar ding cer tain cases decided by the
Supr eme Cour t.
81
[(4) In the case of an assessee having income char geable under the head
Income fr om other sour ces, no deduction in r espect of any expenditur e or
allowance in connection with such income shall be allowed under any pr ovision
of this Act in computing the income by way of any winnings fr om lotter ies,
cr osswor d puzzles, r aces including hor se r aces, car d games and other games of
any sor t or fr om gambling or betting of any for m or natur e, whatsoever :
Provided that nothing contained in this sub-section shall apply in computing the
income of an assessee, being the owner of hor ses maintained by him for r unning
in hor se r aces, fr om the activity of owning and maintaining such hor ses.
Explan ation .For the pur poses of this sub-section, hor se r ace means a hor se
r ace upon which wager ing or betting may be lawfully made.]
Profits chargeable to tax.
59. (1) The pr ovisions of sub-section (1) of section 41 shall apply, so far as may
be, in computing the income of an assessee under section 56, as they apply
in computing the income of an assessee under the head Pr ofits and gains of
(2)
82
[***]
(3)
83
[***]
84
[***]
CHAPTER V
INCOME OF OTHER PERSONS, INCLUDED IN ASSESSEES
TOTAL INCOME
Transfer of income where there is no transfer of assets.
85
60. All income ar ising t o any per son by vir t ue of a t r ansfer
86
whet her
r evocable or not and whether effected befor e or after the commencement
of this Act shall, wher e ther e is no tr ansfer of the assets fr om which the income
ar ises, be char geable to income-tax as the income of the tr ansfer or and shall be
included in his total income.
Revocable transfer of assets.
61. All income ar ising to any per son by vir tue of a r evocable tr ansfer
86
of
assets shall be char geable to income-tax as the income of the tr ansfer or and
shall be included in his total income.
S. 61 I.T. ACT, 1961 1.348
1-4-1988.
83. Omitted, ibid. Pr ior to its omission, sub-section (3) was inser ted by the Taxation Laws
1-4-1988.
86. For the meaning of ter m/ expr ession tr ansfer , see Taxmanns Dir ect Taxes Manual,
Vol. 3.
1.349 CH. V - INCOME OF OTHER PERSONS, INCLUDED IN ASSESSEES INCOME S. 64
Transfer irrevocable for a specified period.
87
62. (1) The pr ovisions of section 61 shall not apply to any income ar ising to
any per son by vir tue of a tr ansfer
(i) by way of tr ust which is not r evocable dur ing the lifetime of the
beneficiar y, and, in the case of any other tr ansfer , which is not
r evocable dur ing the lifetime of the tr ansfer ee ; or
(ii) made befor e the 1st day of Apr il, 1961, which is not r evocable for a
per iod exceeding six year s :
Provided that the tr ansfer or der ives no dir ect or indir ect benefit fr om such
income in either case.
(2) Notwithstanding anything contained in sub-section (1), all income ar ising to
any per son by vir tue of any such tr ansfer shall be char geable to income-tax as
the income of the tr ansfer or as and when the power to r evoke the tr ansfer ar ises,
and shall then be included in his total income.
Transfer and revocable transfer defined.
87
63. For the pur poses of sections 60, 61 and 62 and of this section,
(a) a tr ansfer
88
shall be deemed to be r evocable if
(i) it contains any pr ovision for the r e-tr ansfer dir ectly or indir ectly
89
of the whole or any par t of the income or assets to the tr ansfer or ,
or
(ii) it, in any way, gives the tr ansfer or a r ight to r e-assume power
dir ectly or indir ectly over the whole or any par t of the income or
assets ;
(b) tr ansfer
88
includes any settlement, tr ust, covenant, agr eement or
ar r angement
88
.
Income of individual to include income of spouse, minor child, etc.
90
64.
91
[
92
[(1)] In computing the total income of any individual, ther e shall be
included all such income as ar ises dir ectly or indir ectly
(i)
93
88. For the meaning of the ter ms tr ansfer and ar r angement, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
89. For the meaning of ter m tr ansfer and indir ectly, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
90. See also Letter [F. No. 12/ 2/ 63-IT (A-I)], dated 20-11-1963. For details, see Taxmanns
93. Pr ior t o omission, clause (i) as r eintr oduced by the Dir ect Tax Laws (Amendment) Act,
1989, w.e.f. 1-4-1989, which was ear lier omitted by the Dir ect Tax Laws (Amendment) Act,
1987, with effect fr om the same date.
(ii) to the spouse
94
of such individual by way of salar y, commission, fees
or any other for m of r emuner ation whether in cash or in kind fr om
a concer n in which such individual has a substantial inter est :
95
[Provided that nothing in this clause shall apply in r elation to any
income ar ising to the spouse wher e the spouse possesses technical or
pr ofessional qualifications
94
and the income is solely attr ibutable to
the application of his or her technical or pr ofessional knowledge and
exper ience ;]
(iii)
96
(iv) subject to the pr ovisions of clause (i) of section 27,
97
[* * *] to the
spouse
98
of such individual fr om assets tr ansfer r ed
98
dir ectly or
indir ectly to the spouse by such individual other wise than for
adequate consider ation
98
or in connection with an agr eement to live
apar t ;
(v)
99
(vi) to the sons wife,
1
[* * *] of such individual, fr om assets tr ansfer r ed
98
dir ectly or indir ectly on or after the 1st day of June, 1973, to the sons
wife
2
[* * *] by such individual other wise than for adequate consider -
ation;
3
[* * *]
(vii) to any per son
4
or association of per sons fr om assets tr ansfer r ed
4
dir ectly or indir ectly other wise than for adequate consider ation
4
to the per son or association of per sons by such individual, to the
extent to which the income fr om such assets is for the immediate or
defer r ed benefit
4
of his or her spouse
5
[* * *]; and]
6
[(viii) to any per son
4
or association of per sons fr om assets tr ansfer r ed
4
dir ectly or indir ectly on or after the 1st day of June, 1973, other wise
S. 64 I.T. ACT, 1961 1.350
94. For the meaning of the ter m/ expr ession spouse and technical or pr ofessional qualifi-
cations, see Taxmanns Dir ect Taxes Manual, Vol. 3.
95. Restor ed to its or iginal ver sion by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
96. Pr ior t o it s omission, clause (iii), was r eintr oduced, ibid.
97. Wor ds in a case not falling under clause (i) of this sub-section, omitted by the Finance
Act, 1992, w.e.f. 1-4-1993. Ear lier these wor ds wer e r eintr oduced by the Dir ect Tax Laws
98. For the meaning of the ter ms/ expr essions spouse, tr ansfer r ed and adequate consi-
der ation, see Taxmanns Dir ect Taxes Manual, Vol. 3.
99. Pr ior t o it s omission, clause (v) was amended by the Dir ect Tax Laws (Amendment) Act,
1989, w.e.f. 1-4-1989.
1. Wor ds or sons minor child, omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
2. Wor ds or sons minor child, omitted, ibid.
3. and omitted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
4. For the meaning of the ter ms/ expr essions any per son, tr ansfer r ed, adequate consi-
der ation and defer r ed benefit, see Taxmanns Dir ect Taxes Manual, Vol. 3.
5. Wor ds or minor child or both omitted by the Finance Act, 1992, w.e.f. 1-4-1993. Ear lier
these wor ds wer e amended by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985
and Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
than for adequate consider ation
6a
, to the per son or association of
per sons by such individual, to the extent to which the income fr om
such assets is for the immediate or defer r ed benefit
6a
of his sons wife
7
[* * *].]
8
[Explan ation 1.For the pur poses of clause (ii), the individual in computing
whose total income the income r efer r ed to in that clause is to be included, shall
be the husband or wife whose total income (excluding the income r efer r ed to in
that clause) is gr eater ; and wher e any such income is once included in the total
income of either spouse, any such income ar ising in any succeeding year shall not
be included in the total income of the other spouse unless the Assessing Officer
is satisfied, after giving that spouse an oppor tunity of being hear d, that it is
necessar y
9
so to do.]
Explan ation 2.For the pur poses of clause (ii), an individual shall be deemed to
have a substantial inter est in a concer n
(i) in a case wher e the concer n is a company, if its shar es (not being
shar es entitled to a fixed r ate of dividend whether with or without a
fur ther r ight to par ticipate in pr ofits) car r ying not less than twenty per
cent of the voting power ar e, at any time dur ing the pr evious year ,
owned beneficially by such per son or par tly by such per son and par tly
by one or mor e of his r elatives ;
(ii) in any other case, if such per son is entitled, or such per son and one or
mor e of his r elatives ar e entitled in the aggr egate, at any time dur ing
the pr evious year , to not less than twenty per cent of the pr ofits of such
concer n.
Explan ation 2A.
10
11
[Explan ation 3.For the pur poses of clauses (iv) and (vi), wher e the assets
tr ansfer r ed dir ectly or indir ectly by an individual to his spouse or sons wife
(her eafter in this Explan ation r efer r ed to as the tr ansfer ee) ar e invested by the
tr ansfer ee,
(i) in any business, such investment being not in the natur e of contr ibu-
tion of capital as a par tner in a fir m or , as the case may be, for being
admitted to the benefits of par tner ship in a fir m, that par t of the
income ar ising out of the business to the tr ansfer ee in any pr evious
year , which bear s the same pr opor tion to the income of the tr ansfer ee
6a. For the meaning of the expr ession adequate consider ation and defer r ed benefit, see
7. Wor ds or sons minor child or both omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
8. Substituted for existing Explan ation s 1 and 1A, ibid. Pr ior to substitution, Explan ation s 1
and 1A wer e amended by the Finance Act, 1979, w.e.f. 1-4-1980, the Dir ect Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1989 and the Dir ect Tax Laws (Amendment) Act, 1989,
w.e.f. 1-4-1989.
9. For the meaning of the ter m necessar y, see Taxmanns Dir ect Taxes Manual, Vol. 3.
10. Pr ior to its omission, Explan ation 2A, was inser ted by the Finance Act, 1979, w.e.f. 1-4-1980
and later amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the
Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
11. Substituted by the Finance Act, 1992, w.e.f. 1-4-1993. Pr ior to substitution, Explan ation 3
was amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the
fr om the business as the value of the assets afor esaid as on the fir st
day of the pr evious year bear s to the total investment in the business
by the tr ansfer ee as on the said day ;
(ii) in the natur e of contr ibution of capital as a par tner in a fir m, that par t
of the inter est r eceivable by the tr ansfer ee fr om the fir m in any
pr evious year , which bear s the same pr opor tion to the inter est
r eceivable by the tr ansfer ee fr om the fir m as the value of investment
afor esaid as on the fir st day of the pr evious year bear s to the total
investment by way of capital contr ibution as a par tner in the fir m as
on the said day,
shall be included in the total income of the individual in that pr evious year .]
12
[(1A) In computing the total income of any individual, ther e shall be included
all such income as ar ises or accr ues to his minor child
13
[, not being a minor child
suffer ing fr om any disability of the natur e specified in section 80U] :
Provided that nothing contained in this sub-section shall apply in r espect of such
income as ar ises or accr ues to the minor child on account of any
(a) manual wor k done by him ; or
(b) activity involving application of his skill, talent or specialised know-
ledge and exper ience.
Explan ation .For the pur poses of this sub-section, the income of the minor child
shall be included,
(a) wher e the mar r iage of his par ents subsists, in the income of that
par ent whose total income (excluding the income includible under
this sub-section) is gr eater ; or
(b) wher e the mar r iage of his par ents does not subsist, in the income of
that par ent who maintains the minor child in the pr evious year ,
and wher e any such income is once included in the total income of either par ent,
any such income ar ising in any succeeding year shall not be included in the total
income of the other par ent, unless the Assessing Officer is satisfied, after giving
that par ent an oppor tunity of being hear d, that it is necessar y so to do.]
14
[(2) Wher e, in the case of an individual being a member of a Hindu undivided
family, any pr oper ty having been the separ ate pr oper ty of the individual has, at
any time after the 31st day of December , 1969, been conver ted by the individual
into pr oper ty belonging to the family thr ough the act of impr essing such
separ ate pr oper ty with the char acter of pr oper ty belonging to the family or
thr owing it
15
[into the common stock of the family or been tr ansfer r ed by the
individual, dir ectly or indir ectly, to the family other wise than for adequate
consider ation (the pr oper ty so conver ted or tr ansfer r ed being her einafter
r efer r ed t o as t he conver t ed pr oper t y)], t hen, not wit hst anding anyt hing
S. 64 I.T. ACT, 1961 1.352
15. Substituted for into the common stock of the family (such pr oper ty being her einafter
r efer r ed to as the conver ted pr oper ty) by the Finance Act, 1979, w.e.f. 1-4-1980.
16. For meaning of expr ession or any par t ther eof, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
17. in so far as it is attr ibutable to the inter est of the individual in the pr oper ty of the family
omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
18. Substituted, ibid.
19. Wor ds or minor child omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
20. Wor ds or minor child omitted, ibid. Ear lier wor d child was substituted for son by the
22. (1) omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
23. Clause (2) omitted, ibid.
contained in any other pr ovision of this Act or in any other law for the time being
in for ce, for the pur pose of computation of the total income of the individual
under this Act for any assessment year commencing on or after the 1st day of
Apr il, 1971,
(a) the individual shall be deemed to have tr ansfer r ed the conver ted
pr oper ty, thr ough the family, to the member s of the family for being
held by them jointly ;
(b) the income der ived fr om the conver ted pr oper ty or any par t ther eof
16
17
[* * *] shall be deemed to ar ise to the individual and not to the family;
18
[(c) wher e the conver ted pr oper ty has been the subject-matter of a
par tition (whether par tial or total) amongst the member s of the
family, the income der ived fr om such conver ted pr oper ty as is
r eceived by the spouse
19
[* * *] on par tition shall be deemed to ar ise to
the spouse
19
[* * *] fr om assets tr ansfer r ed indir ectly by the individual
to the spouse
19
[* * *] and the pr ovisions of sub-section (1) shall, so far
as may be, apply accor dingly :]
Provided that the income r efer r ed to in clause (b) or clause (c) shall, on being
included in the total income of the individual, be excluded fr om the total income
of the family or , as the case may be, the spouse
20
[* * *] of the individual.
Explan ation
21
[1].For the pur poses of sub-section (2),
22
[* * *] pr oper ty includes any inter est in pr oper ty, movable or immovable, the
pr oceeds of sale ther eof and any money or investment for the time being
r epr esenting the pr oceeds of sale ther eof and wher e the pr oper ty is conver ted
into any other pr oper ty by any method, such other pr oper ty.
23
[* * *]]
24
[Explan ation 2.For the pur poses of this section, income includes loss.]
Liability of person in respect of income included in the income of another person.
65. Wher e, by r eason of the pr ovisions contained in this Chapter or in clause (i)
of section 27, the income fr om any asset or fr om member ship in a fir m of a
per son other than the assessee is included in the total income of the assessee, the
per son in whose name such asset stands or who is a member of the fir m shall,
notwithstanding anything to the contr ar y contained in any other law for the
time being in for ce, be liable, on the ser vice of a notice of demand by the
S. 67A I.T. ACT, 1961 1.354
25
[Assessing] Officer in this behalf, to pay that por tion of the tax levied on the
assessee which is attr ibutable to the income so included, and the pr ovisions of
Chapter XVII-D shall, so far as may be, apply accor dingly :
Provided that wher e any such asset is held jointly by mor e than one per son, they
shall be jointly and sever ally liable to pay the tax which is attr ibutable to the
income fr om the assets so included.
CHAPTER VI
AGGREGATION OF INCOME AND SET OFF OR
CARRY FORWARD OF LOSS
Aggregation of in com e
Total income.
66. In computing the total income of an assessee, ther e shall be included all
income on which no income-tax is payable under Chapter VII
26
[* * *].
Method of computing a partners share in the income of the firm.
67.
27
28
[Method of computing a members share in income of association of persons or
body of individuals.
67A. (1) In computing the total income of an assessee who is a member of an
association of per sons or a body of individuals wher ein the shar es of the
member s ar e deter minate and known [other than a company or a cooper ative
society or a society r egister ed under the Societies Registr ation Act, 1860 (21 of
1860), or under any law cor r esponding to that Act in for ce in any par t of India],
whether the net r esult of the computation of the total income of such association
or body is a pr ofit or a loss, his shar e (whether a net pr ofit or net loss) shall be
computed as follows, namely :
(a) any inter est, salar y, bonus, commission or r emuner ation by whatever
name called, paid to any member in r espect of the pr evious year shall
be deducted fr om the total income of the association or body and the
balance ascer tained and appor tioned among the member s in the
pr opor tions in which they ar e entitled to shar e in the income of the
association or body ;
1-4-1988.
26. and any amount in r espect of which the assessee is entitled to a deduction fr om the
amount of income-tax on his total income with which he is char geable for any assessment
year in accor dance with, and to the extent pr ovided in, sections 87, 87A and 88 omitted
by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Ear lier 87A was inser ted in the omitted
por tion by the Finance Act, 1964, w.e.f. 1-4-1964.
27. Pr ior to its omission, section 67 was amended by the Finance Act, 1968, w.e.f. 1-4-1969, the
Finance (No. 2) Act, 1971, w.e.f. 1-4-1971, the Dir ect Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989 and the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
(b) wher e the amount appor tioned to a member under clause (a) is a
pr ofit, any inter est, salar y, bonus, commission or r emuner ation afor e-
said paid to the member by the association or body in r espect of the
pr evious year shall be added to that amount, and the r esult shall be
tr eated as the member s shar e in the income of the association or
body ;
(c) wher e the amount appor tioned to a member under clause (a) is a loss,
any interest, salary, bonus, commission or remuneration aforesaid paid
to the member by the association or body in respect of the previous year
shall be adjusted against that amount, and the r esult shall be tr eated
as the member s shar e in the income of the association or body.
(2) The shar e of a member in the income or loss of the association or body, as
computed under sub-section (1), shall, for the pur poses of assessment, be
appor tioned under the var ious heads of income in the same manner in which the
income or loss of the association or body has been deter mined under each head
of income.
(3) Any inter est paid by a member on capital bor r owed by him for the pur poses
of investment in the association or body shall, in computing his shar e char geable
under the head Pr ofits and gains of business or pr ofession in r espect of his shar e
in the income of the association or body, be deducted fr om his shar e.
Explan ation .In this section, paid has the same meaning as is assigned to it in
clause (2) of section 43.]
Cash credits.
29
68.
30
Wher e any sum is found cr edited in the books
31
of an assessee maintained
for any pr evious year , and the assessee offer s no explanation about the
natur e and sour ce ther eof or the explanation offer ed by him is not, in the opinion
of the
32
[Assessing] Officer , satisfactor y, the sum so cr edited may be char ged to
income-tax as the income of the assessee of that pr evious year .
Unexplained investments.
33
69. Wher e in the financial year immediately pr eceding the assessment year
the assessee has made investments which ar e not r ecor ded in the books of
account, if any, maintained by him for any sour ce of income, and the assessee
offer s no explanation about the natur e and sour ce of the investments or the
explanation offer ed by him is not, in the opinion of the
32
satisfactor y, the value of the investments may be deemed to be the income of the
assessee of such financial year .
1.355 CH. VI - AGGREGATION OF INCOME AND SET OFF OF LOSS S. 69
29. See also Cir cular No. 5, dat ed 20-2-1969 and Let t er [F.No. 222/ 7/ 70-IT(A-I)], dat ed
31. For the meaning of the ter m/ expr ession any sum is found cr edited in the books and
books, see Taxmanns Dir ect Taxes Manual, Vol. 3.
1-4-1988.
34
[Unexplained money, etc.
35
69A. Wher e in any financial year the assessee is found to be the owner of any
money, bullion, jeweller y or other valuable ar ticle and such money,
bullion, jeweller y or valuable ar ticle is not r ecor ded in the books of account, if
any, maintained by him for any sour ce of income
36
, and the assessee offer s no
explanation about the natur e and sour ce of acquisition of the money, bullion,
jeweller y or other valuable ar ticle, or the explanation offer ed by him is not, in the
opinion of the
37
[Assessing] Officer , satisfactor y, the money and the value of the
bullion, jeweller y or other valuable ar ticle may be deemed to be the income
36
of
the assessee for such financial year .]
38
[Amount of investments, etc., not fully disclosed in books of account.
35
69B. Wher e in any financial year the assessee has made investments or is
found to be the owner of any bullion, jeweller y or other valuable ar ticle,
and the
39
[Assessing] Officer finds that the amount expended on making such
investments or in acquir ing such bullion, jeweller y or other valuable ar ticle
exceeds the amount r ecor ded in this behalf in the books of account maintained
by the assessee for any sour ce of income, and the assessee offer s no explanation
about such excess amount or the explanation offer ed by him is not, in the opinion
of the
40
[Assessing] Officer , satisfactor y, the excess amount may be deemed to be
the income of the assessee for such financial year .]
41
[Unexplained expenditure, etc.
42
69C. Wher e in any financial year an assessee has incur r ed any expenditur e
and he offer s no explanation about the sour ce of such expenditur e or par t
ther eof, or the explanation, if any, offer ed by him is not, in the opinion of the
40
[Assessing] Officer , satisfactor y, the amount cover ed by such expenditur e or
par t ther eof, as the case may be, may be deemed to be the income of the assessee
for such financial year :]
43
[Provided that, notwithstanding anything contained in any other pr ovision of
this Act, such unexplained expenditur e which is deemed to be the income of the
assessee shall not be allowed as a deduction under any head of income.]
S. 69C I.T. ACT, 1961 1.356
36. For the meaning of the ter m income, see Taxmanns Dir ect Taxes Manual, Vol. 3.
1-4-1988.
1-4-1988.
40. Substituted for Income-tax, ibid.
44
[Amount borrowed or repaid on hundi.
45
69D. Wher e any amount is bor r owed on a h un di fr om, or any amount due
ther eon is r epaid to, any per son other wise than thr ough an account
payee cheque dr awn on a bank, the amount so bor r owed or r epaid shall be
deemed to be the income of the per son bor r owing or r epaying the amount
afor esaid for the pr evious year in which the amount was bor r owed or r epaid, as
the case may be:
Provided that, if in any case any amount bor r owed on a h un di has been deemed
under the pr ovisions of this section to be the income of any per son, such per son
shall not be liable to be assessed again in r espect of such amount under the
pr ovisions of this section on r epayment of such amount.
Explan ation .For the pur poses of this section, the amount r epaid shall include
the amount of inter est paid on the amount bor r owed.]
Set off, or carry forward an d set off
46
[Set off of loss from one source against income from another source under the
same head of income.
70. (1) Save as other wise pr ovided in this Act, wher e the net r esult for any
assessment year in r espect of any sour ce falling under any head of income,
other than Capital gains, is a loss, the assessee shall be entitled to have the
amount of such loss set off against his income fr om any other sour ce under the
same head.
(2) Wher e the r esult of the computation made for any assessment year under
sections 48 to 55 in r espect of any shor t-ter m capital asset is a loss, the assessee
shall be entitled to have the amount of such loss set off against the income, if any,
as ar r ived at under a similar computation made for the assessment year in
r espect of any other capital asset.
(3) Wher e the r esult of the computation made for any assessment year under
sections 48 to 55 in r espect of any capital asset (other than a shor t-ter m capital
asset) is a loss, the assessee shall be entitled to have the amount of such loss set
off against the income, if any, as ar r ived at under a similar computation made
for the assessment year in r espect of any other capital asset not being a shor t-
ter m capital asset.]
as substituted by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962 and amended by the Finance
70. Set off of loss from on e source again st in com e from an oth er source un der th e sam e
h ead of in come.Save as other wise pr ovided in this Act, wher e the net r esult for any
assessment year in r espect of any sour ce falling under any head of income is a loss, the
assessee shall be entitled to have the amount of such loss set off against his income fr om
any other sour ce under the same head.
47
[Set off of loss from one head against income from another.
48
71. (1) Wher e in r espect of any assessment year the net r esult of the computa-
tion under any head of income, other than Capital gains, is a loss and the
assessee has no income under the head Capital gains, he shall, subject to the
pr ovisions of this Chapter , be entitled to
49
have the amount of such loss set off
against his income, if any, assessable for that assessment year under any other
head.
(2) Wher e in r espect of any assessment year , the net r esult of the computation
under any head of income, other than Capital gains, is a loss and the
assessee has income assessable under the head Capital gains, such loss may,
subject to the pr ovisions of this Chapter , be set off against his income, if any,
assessable for that assessment year under any head of income including the head
Capital gains (whether r elating to shor t-ter m capital assets or any other capital
assets).
50
[(2A) Notwithstanding anything contained in sub-section (1) or sub-section (2),
wher e in r espect of any assessment year , the net r esult of the computation under
the head Pr ofits and gains of business or pr ofession is a loss and the assessee
has income assessable under the head Salar ies, the assessee shall not be entitled
to have such loss set off against such income.]
(3) Wher e in r espect of any assessment year , the net r esult of the computation
under the head Capital gains is a loss and the assessee has income assessable
under any other head of income, the assessee shall not be entitled to have such
loss set off against income under the other head.]
51
[(4) Wher e the net r esult of the computation under the head Income fr om
house pr oper ty is a loss, in r espect of the assessment year s commencing on the
1st day of Apr il, 1995 and the 1st day of Apr il, 1996, such loss shall be fir st set off
under sub-sections (1) and (2) and ther eafter the loss r efer r ed to in section 71A
shall be set off in the r elevant assessment year in accor dance with the pr ovisions
of that section.]
S. 71 I.T. ACT, 1961 1.358
47. Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Pr ior to substitution, section
71 was amended by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962, Finance Act, 1987, w.e.f.
1-4-1988 and the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
48. See also Cir cular No. 26 (LXXVI-3), dated 7-7-1955, Cir cular No. 104, dated 19-2-1973 and
Cir cular No. 587, dated 11-12-1990. For details, see Taxmanns Master Guide to Income-
tax Act.
49. For the meaning of the expr ession be entitled to, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
51. Substituted by the Finance Act, 1994, w.e.f. 1-4-1995. Pr ior to substitution, sub-section (4),
(4) Notwithstanding anything contained in sub-sections (1) and (2), wher e in r espect of any
assessment year the net r esult of the computation, in r elation to any pr oper ty [other than
the pr oper ty r efer r ed to in sub-clause (i) of clause (a) of sub-section (2) of section 23], under
the head Income fr om house pr oper ty is a loss and the assessee has income assessable
under any other head of income, the assessee shall not be entitled to have such loss set off
against income under the other head.
52
[Transitional provisions for set off of loss under the head Income from house
property.
71A. Wher e in r espect of the assessment year commencing on the 1st day of
Apr il, 1993 or the 1st day of Apr il, 1994, the net r esult of the computation
under the head Income fr om house pr oper ty is a loss, such loss in so far as it
r elates to inter est on bor r owed capital r efer r ed to in clause (vi) of sub-section (1)
of section 24 and to the extent it has not been set off shall be car r ied for war d and
set off in the assessment year commencing on the 1st day of Apr il, 1995, and the
balance, if any, in the assessment year commencing on the 1st day of Apr il, 1996,
against the income under any head.]
53
[Carry forward and set off of loss from house property.
71B. Wher e for any assessment year the net r esult of computation under the
head Income fr om house pr oper ty is a loss to the assessee and such loss
cannot be or is not wholly set off against income fr om any other head of income
in accor dance with the pr ovisions of section 71, so much of the loss as has not
been so set-off or wher e he has no income under any other head, the whole loss
shall, subject to the other pr ovisions of this Chapter , be car r ied for war d to the
following assessment year and
(i) be set off against the income fr om house pr oper ty assessable for that
assessment year ; and
(ii) the loss, if any, which has not been set off wholly, the amount of loss
not so set off,
shall be car r ied for war d to the following assessment year , not being mor e than
eight assessment year s immediately succeeding the assessment year for which
the loss was fir st computed.]
Carry forward and set off of business losses.
54
72.
55
[(1) Wher e for any assessment year , the net r esult of the computation
under the head Pr ofits and gains of business or pr ofession is a loss to the
assessee, not being a loss sustained in a speculation business, and such loss
cannot be or is not wholly set off against income under any head of income in
accor dance with the pr ovisions of section 71, so much of the loss as has not been
52. Substituted by the Finance Act, 1994, w.e.f. 1-4-1995. Pr ior to substitution, section 71A, as
71A. Carry forward of losses un der th e h ead In com e from h ouse property.Wher e in
r espect of any assessment year , the net r esult of the computation under the head Income
fr om house pr oper ty is a loss, the loss in so far as it r elates to inter est on bor r owed capital
r efer r ed t o in clause (vi) of sub-section (1) of section 24 shall be car r ied for war d by the
assessee to the following assessment year or year s and set off against the income under
that head.
54. See also Cir cular No. 26 (LXXVI-3), dated 7-7-1955, Cir cular No. 104, dated 19-2-1973 and
tax Act.
so set off or ,
56
[* * *] wher e he has no income under any other head, the whole loss
following assessment year , and
(i) it shall be set off against the pr ofits and gains, if any, of any businessor
pr ofession car r ied on by him and assessable for that assessment year ;
57
[* * *]
(ii) if the loss cannot be wholly so set off, the amount of loss not so set
off shall be car r ied for war d to the following assessment year and so
on:]
58-59
[Provided that wher e the whole or any par t of such loss is sustained in any
such business as is r efer r ed to in section 33B which is discontinued in the
cir cumstances specified in that section, and, ther eafter , at any time befor e the
expir y of the per iod of thr ee year s r efer r ed to in that section, such business is
r e-established, r econstr ucted or r evived by the assessee, so much of the loss as
is attr ibutable to such business shall be car r ied for war d to the assessment year
r elevant to the pr evious year in which the business is so r e-established,
r econstr ucted or r evived, and
(a) it shall be set off against the pr ofits and gains, if any, of that business
or any other business car r ied on by him and assessable for that
assessment year ; and
(b) if the loss cannot be wholly so set off, the amount of loss not so set off
shall, in case the business so r e-established, r econstr ucted or r evived
continues to be car r ied on by the assessee, be car r ied for war d to the
following assessment year and so on for seven assessment year s
immediately succeeding.]
(2) Wher e any allowance or par t ther eof is, under sub-section (2) of section 32 or
sub-section (4) of section 35, to be car r ied for war d, effect shall fir st be given to
the pr ovisions of this section.
(3) No loss
58-59
[(other than the loss r efer r ed to in the pr oviso to sub-section (1) of
this section)] shall be car r ied for war d under this section for mor e than eight
assessment year s immediately succeeding the assessment year for which the
loss was fir st computed.
S. 72 I.T. ACT, 1961 1.360
56. Wor ds wher e the assessee has income only under the head Capital gains relatin g to
capital assets oth er th an sh ort-term capital assets and has exer cised the option under sub-
section (2) of that section or omitted by the Finance Act, 1987, w.e.f. 1-4-1988. In the
omitted por tion, expr ession in italics was inser ted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1968.
57. Pr oviso to clause (i) omitted by the Finance Act, 1999, w.e.f. 1-4-2000. Pr ior to its
omission, pr oviso r ead as under :
Provided that the business or pr ofession for which the loss was or iginally computed
continued to be car r ied on by him in the pr evious year r elevant for that assessment year ;
and
58-59. Inser ted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
60
[Provisions relating to carry forward and set off of accumulated loss and
unabsorbed depreciation allowance in amalgamation or demerger, etc.
72A.
61
[(1) Wh ere th ere h as been an am algam ation of
(a) a com pan y own in g an in dustrial un dertak in g or a sh ip or a h otel with
an oth er com pan y; or
(b) a ban k in g com pan y referred to in clause (c) of section 5 of th e Ban k in g
Regulation Act, 1949 (10 of 1949)
61a
with a specified ban k ; or
(c) on e or m ore public sector com pan y or com pan ies en gaged in th e
busin ess of operation of aircraft with on e or m ore public sector
com pan y or com pan ies en gaged in sim ilar busin ess,
th en , n otwith stan din g an yth in g con tain ed in an y oth er provision of th is Act, th e
accumulated loss an d th e un absorbed depreciation of th e amalgamatin g compan y
sh all be deem ed to be th e loss or, as th e case m ay be, allowan ce for un absorbed
depreciation of th e am algam ated com pan y for th e previous year in wh ich th e
am algam ation was effected, an d oth er provision s of th is Act relatin g to set off an d
carry forward of loss an d allowan ce for depreciation sh all apply accordin gly.]
62
[(2) Notwithstanding anything contained in sub-section (1), the accumulated
loss shall not be set off or car r ied for war d and the unabsor bed depr eciation shall
not be allowed in the assessment of the amalgamated company unless
(a) the amalgamating company
(i) has been engaged in the business, in which the accumulated loss
occur r ed or depr eciation r emains unabsor bed, for thr ee or mor e
year s;
1.361-363 CH. VI - AGGREGATION OF INCOME AND SET OFF OF LOSS S. 72A
was inser ted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978 and later on amended by the
Finance Act, 1978, w.e.f. 1-4-1978 and Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
(1), as amended by the Finance Act, 2003, w.e.f. 1-4-2004 and Finance Act, 2000, w.e.f.
(1) Wher e ther e has been an amalgamation of a company owning an industr ial under tak-
ing or a ship or a hotel with another company or an amalgamation of a banking company
r efer r ed to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) with
a specified bank, then, notwithstanding anything contained in any other pr ovision of this
Act, the accumulated loss and the unabsor bed depr eciation of the amalgamating com-
pany shall be deemed to be the loss or , as the case may be, allowance for depr eciation of
the amalgamated company for the pr evious year in which the amalgamation was effected,
and other pr ovisions of this Act r elating to set off and car r y for war d of loss and allowance
for depr eciation shall apply accor dingly.
61a. For text of section 5(c) of the Banking Regulation Act, 1949, see Appendix.
62. Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Pr ior to their substitution, sub-
section (2), as amended by the Finance Act, 2000, w.e.f. 1-4-2000, r ead as under :
(2) Notwithstanding anything contained in sub-section (1), the accumulated loss shall not
be set off or car r ied for war d and the unabsor bed depr eciation shall not be allowed in the
assessment of the amalgamated company unless the amalgamated company
(i) holds continuously for a minimum per iod of five year s fr om the date of amalgam-
ation at least thr ee-four ths in the book value of fixed assets of the amalgamating
company acquir ed in a scheme of amalgamation;
(ii) continues the business of the amalgamating company for a minimum per iod of five
year s fr om the date of amalgamation;
(iii) fulfils such other conditions as may be pr escr ibed to ensur e the r evival of the
business of the amalgamating company or to ensur e that the amalgamation is for
genuine business pur pose.
S. 72A I.T. ACT, 1961 1.364
(ii) has held continuously as on the date of the amalgamation at least
thr ee-four ths of the book value of fixed assets held by it two year s
pr ior to the date of amalgamation;
(b) the amalgamated company
(i) holds continuously for a minimum per iod of five year s fr om the
date of amalgamation at least thr ee-four ths of the book value of
fixed assets of the amalgamating company acquir ed in a scheme
of amalgamation;
(ii) continues the business of the amalgamating company for a
minimum per iod of five year s fr om the date of amalgamation;
(iii) fulfils such other conditions as may be pr escr ibed
63
to ensur e the
r evival of the business of the amalgamating company or to
ensur e that the amalgamation is for genuine business pur pose.]
(3) In a case wher e any of the conditions laid down in sub-section (2) ar e not
complied with, the set off of loss or allowance of depr eciation made in any
pr evious year in the hands of the amalgamated company shall be deemed to be
the income of the amalgamated company char geable to tax for the year in which
such conditions ar e not complied with.
(4) Notwithstanding anything contained in any other pr ovisions of this Act, in the
case of a demer ger , the accumulated loss and the allowance for unabsor bed
depr eciation of the demer ged company shall
(a) wher e such loss or unabsor bed depr eciation is dir ectly r elatable to
the under takings tr ansfer r ed to the r esulting company, be allowed to
be car r ied for war d and set off in the hands of the r esulting company;
(b) wher e such loss or unabsor bed depr eciation is not dir ectly r elatable
to the under takings tr ansfer r ed to the r esulting company, be appor -
tioned between the demer ged company and the r esulting company in
the same pr opor tion in which the assets of the under takings have
been r etained by the demer ged company and tr ansfer r ed to the
r esulting company, and be allowed to be car r ied for war d and set off
in the hands of the demer ged company or the r esulting company, as
the case may be.
(5) The Centr al Gover nment may, for the pur poses of this Act, by notification in
the Official Gazette, specify such conditions as it consider s necessar y to ensur e
that the demer ger is for genuine business pur poses.
(6) Wher e ther e has been r eor ganisation of business, wher eby, a fir m is succeeded
by a company fulfilling the conditions laid down in clause (xiii) of section 47 or
a pr opr ietar y concer n is succeeded by a company fulfilling the conditions laid
down in clause (xiv) of section 47, then, notwithstanding anything contained in
any other pr ovision of this Act, the accumulated loss and the unabsor bed
depr eciation of the pr edecessor fir m or the pr opr ietar y concer n, as the case may
be, shall be deemed to be the loss or allowance for depr eciation of the successor
company for the pur pose of pr evious year in which business r eor ganisation was
effected and other pr ovisions of this Act r elating to set off and car r y for war d of
loss and allowance for depr eciation shall apply accor dingly :
Provided that if any of the conditions laid down in the pr oviso to clause (xiii) or
the pr oviso to clause (xiv) to section 47 ar e not complied with, the set off of loss
or allowance of depr eciation made in any pr evious year in the hands of the
successor company, shall be deemed to be the income of the company
char geable to tax in the year in which such conditions ar e not complied with.
(a) accumulated loss means so much of the loss of the pr edecessor fir m
or the pr opr ietar y concer n or the amalgamating company or the
demer ged company, as the case may be, under the head Pr ofits and
gains of business or pr ofession (not being a loss sustained in a
speculation business) which such pr edecessor fir m or the pr opr ietar y
concer n or amalgamating company or demer ged company, would
have been entitled to car r y for war d and set off under the pr ovisions
of section 72 if the r eor ganisation of business or amalgamation or
demer ger had not taken place;
64
[(aa) industrial undertaking means any undertaking which is engaged in
(i) the manufactur e or pr ocessing of goods; or
(ii) the manufactur e of computer softwar e; or
(iii) the business of gener ation or distr ibution of electr icity or any
other for m of power ; or
65
[(iiia) the business of pr oviding telecommunication ser vices, whether
basic or cellular , including r adio paging, domestic satellite ser -
vice, networ k of tr unking, br oadband networ k and inter net
ser vices; or ]
(iv) mining; or
(v) the constr uction of ships, air cr afts or r ail systems;]
(b) unabsor bed depr eciation means so much of the allowance for
depr eciation of the pr edecessor fir m or the pr opr ietar y concer n or
the amalgamating company or the demer ged company, as the case
may be, which r emains to be allowed and which would have been
allowed to the pr edecessor fir m or the pr opr ietar y concer n or
amalgamating company or demer ged company, as the case may be,
under the pr ovisions of this Act, if the r eor ganisation of business or
amalgamation or demer ger had not taken place;]
66
[(c) specified bank means the State Bank of India constituted under the
State Bank of India Act, 1955 (23 of 1955) or a subsidiar y bank as
defined in the State Bank of India (Subsidiar y Banks) Act, 1959 (38 of
1959) or a cor r esponding new bank constituted under section 3 of the
Banking Companies (Acquisition and Tr ansfer of Under takings) Act,
1970 (5 of 1970) or under section 3 of the Banking Companies
(Acquisition and Tr ansfer of Under takings) Act, 1980 (40 of 1980).]
1.365 CH. VI - AGGREGATION OF INCOME AND SET OFF OF LOSS S. 72A
S. 72AB I.T. ACT, 1961 1.366
67
[Provisions relating to carry forward and set-off of accumulated loss and
unabsorbed depreciation allowance in scheme of amalgamation of banking
company in certain cases.
72AA. Notwithstanding anything contained in sub-clauses (i) to (iii) of clause
(1B) of section 2 or section 72A, wher e ther e has been an amalgamation
of a banking company with any other banking institution under a scheme
sanctioned and br ought into for ce by the Centr al Gover nment under sub-section
(7) of section 45 of the Banking Regulation Act, 1949 (10 of 1949)
68
, the
accumulated loss and the unabsor bed depr eciation of such banking company
shall be deemed to be the loss or , as the case may be, allowance for depr eciation
of such banking institution for the pr evious year in which the scheme of
amalgamation was br ought into for ce and other pr ovisions of this Act r elating to
set-off and car r y for war d of loss and allowance for depr eciation shall apply
accor dingly.
(i) accumulated loss means so much of the loss of the amalgamating
banking company under the head Pr ofits and gains of business or
pr ofession (not being a loss sustained in a speculation business)
which such amalgamating banking company, would have been en-
titled to car r y for war d and set-off under the pr ovisions of section 72
if the amalgamation had not taken place;
(ii) banking company shall have the same meaning assigned to it in
1949)
68
;
(iii) banking institution shall have the same meaning assigned to it in
sub-section (15) of section 45 of the Banking Regulation Act, 1949 (10
of 1949)
68
;
(iv) unabsor bed depr eciation means so much of the allowance for
depr eciation of the amalgamating banking company which r emains
to be allowed and which would have been allowed to such banking
company if amalgamation had not taken place.]
69
[Provisions relating to carry forward and set off of accumulated loss and
unabsorbed depreciation allowance in business reorganisation of co-operative
banks.
72AB. (1) Th e assessee, bein g a successor co-operative ban k , sh all, in a case
wh ere th e am algam ation h as tak en place durin g th e previous year, be
allowed to set off th e accum ulated loss an d th e un absorbed depreciation , if an y,
of th e predecessor co-operative ban k as if th e am algam ation h ad n ot tak en place,
an d all th e oth er provision s of th is Act relatin g to set off an d carry forward of loss
an d allowan ce for depreciation sh all apply accordin gly.
(2) Th e provision s of th is section sh all apply if
(a) th e predecessor co-operative ban k
(i) h as been en gaged in th e busin ess of ban k in g f or th ree or m ore
years; an d
68. For text of sections 5(c) and 45 of the Banking Regulation Act, 1949, see Appendix.
(ii) h as h eld at least th ree-fourth s of th e book value of fixed assets as
on th e date of th e busin ess reorgan isation , con tin uously for two
years prior to th e date of busin ess reorgan isation ;
(b) th e successor co-operative ban k
(i) h olds at least th ree-fourth s of th e book value of fixed assets of th e
predecessor co-operative ban k acqu ired th rou gh bu sin ess
reorgan isation , con tin uously for a m in im um period of five years
im m ediately succeedin g th e date of busin ess reorgan isation ;
(ii) con tin ues th e busin ess of th e predecessor co-operative ban k for a
m in im u m period of f ive years f rom th e date of bu sin ess
reorgan isation ; an d
(iii) fulfils such oth er con dition s as m ay be prescribed to en sure th e
revival of th e busin ess of th e predecessor co-operative ban k or to
en sure th at th e busin ess reorgan isation is for gen uin e busin ess
purpose.
(3) Th e am oun t of set-off of th e accum ulated loss an d un absorbed depreciation ,
if an y, allowable to th e assessee bein g a resultin g co-operative ban k sh all be,
(i) th e accum ulated loss or un absorbed depreciation of th e dem erged co-
operative ban k if th e wh ole of th e am oun t of such loss or un absorbed
depreciation is directly relatable to th e un dertak in gs tran sferred to th e
resultin g co-operative ban k ; or
(ii) th e am oun t wh ich bears th e sam e proportion to th e accum ulated loss
or un absorbed depreciation of th e dem erged co-operative ban k as th e
assets of th e un dertak in g tran sferred to th e resultin g co-operative
ban k bears to th e assets of th e dem erged co-operative ban k if such
accum ulated loss or un absorbed depreciation is n ot directly relatable
to th e un dertak in gs tran sferred to th e resultin g co-operative ban k .
(4) Th e Cen tral Govern m en t m ay, for th e purposes of th is section , by n otification
in th e Official Gazette, specify such oth er con dition s as it con siders n ecessary,
oth er th an th ose prescribed un der sub-clause (iii) of clause (b) of sub-section (2),
to en sure th at th e busin ess reorgan isation is for gen uin e busin ess purposes.
(5) Th e period com m en cin g from th e begin n in g of th e previous year an d en din g
on th e date im m ediately precedin g th e date of busin ess reorgan isation , an d th e
period com m en cin g from th e date of such busin ess reorgan isation an d en din g
with th e previous year sh all be deem ed to be two differen t previous years for th e
purposes of set off an d carry forward of loss an d allowan ce for depreciation .
(6) In a case wh ere th e con dition s specified in sub-section (2) or n otified un der
sub-section (4) are n ot com plied with , th e set off of accum ulated loss or un ab-
sorbed depreciation allowed in an y previous year to th e successor co-operative
ban k sh all be deem ed to be th e in com e of th e successor co-operative ban k
ch argeable to tax for th e year in wh ich th e con dition s are n ot com plied with .
(a) accum ulated lossm ean s so m uch of loss of th e am algam atin g co-
operative ban k or th e dem erged co-operative ban k , as th e case m ay be,
un der th e h ead Profits an d gain s of busin ess or profession(n ot bein g
a loss sustain ed in a speculation busin ess) wh ich such am algam atin g
co-operative ban k or th e dem erged co-operative ban k , would h ave
1.367 CH. VI - AGGREGATION OF INCOME AND SET OFF OF LOSS S. 72AB
been en titled to carry forward an d set-off un der th e provision s of
section 72 as if th e busin ess reorgan isation h ad n ot tak en place;
(b) un absorbed depreciation m ean s so m uch of th e allowan ce for
depreciation of th e am algam atin g co-operative ban k or th e dem erged
co-operative ban k , as th e case m ay be, wh ich rem ain s to be allowed
an d wh ich would h ave been allowed to such ban k as if th e busin ess
reorgan isation h ad n ot tak en place;
(c) th e expression s am algam ated co-operative ban k , am algam atin g co-
operative ban k , am algam ation , busin ess reorgan isation , co-
operat iv e ban k , dem erged co-operat iv e ban k , dem erger,
predecessor co-operative ban k , successor co-operative ban k an d
resultin g co-operative ban k sh all h ave th e m ean in gs respectively
assign ed to th em in section 44DB.]
Losses in speculation business.
70
73. (1) Any loss, computed in r espect of a speculation business car r ied on by
the assessee, shall not be set off except against pr ofits and gains, if any, of
another speculation business.
(2) Wher e for any assessment year any loss computed in r espect of a speculation
business has not been wholly set off under sub-section (1), so much of the loss as
is not so set off or the whole loss wher e the assessee had no income fr om any
71
other speculation business, shall, subject to the other pr ovisions of this Chapter ,
be car r ied for war d to the following assessment year , and
(i) it shall be set off against the pr ofits and gains, if any, of any speculation
business car r ied on by him assessable for that assessment year ;
and
(ii) if the loss cannot be wholly so set off, the amount of loss not so set off
shall be car r ied for war d to the following assessment year and so
on.
(3) In r espect of allowance on account of depr eciation or capital expenditur e
on scientific r esear ch, the pr ovisions of sub-section (2) of section 72 shall
apply in r elation to speculation business as they apply in r elation to any other
business.
(4) No loss shall be car r ied for war d under this section for mor e than
72
[four ]
73
[Explan ation .Wher e any par t of the business of a company (
74
[other than a
company whose gr oss t ot al income consist s mainly of income which is
char geable under the heads Inter est on secur ities, Income fr om house
pr oper ty, Capital gains and Income fr om other sour ces], or a company the
pr incipal business of which is the business of banking or the gr anting of loans
S. 73 I.T. ACT, 1961 1.368
70. See also Cir cular No. 13(102)-IT/ 53, dated 8-9-1954. For details, see Taxmanns Master
71. For the meaning of the ter m any, see Taxmanns Dir ect Taxes Manual, Vol. 3.
72. Substituted for eight by the Finance Act, 2005, w.e.f. 1-4-2006.
74. Substituted for other than an investment company, as defined in clause (ii) of section 109
and advances) consists in the pur chase and sale of shar es of other companies,
such company shall, for the pur poses of this section, be deemed to be car r ying
on a speculation business to the extent to which the business consists of the
pur chase and sale of such shar es.]
75
[Losses under the head Capital gains.
74.
76
[(1) Wher e in r espect of any assessment year , the net r esult of the compu-
tation under the head Capital gains is a loss to the assessee, the whole loss
following assessment year , and
(a) in so far as such loss r elates to a shor t-ter m capital asset, it shall be set
off against income, if any, under the head Capital gains assessable
for that assessment year in r espect of any other capital asset;
(b) in so far as such loss r elates to a long-ter m capital asset, it shall be set
off against income, if any, under the head Capital gains assessable
for that assessment year in r espect of any other capital asset not being
a shor t-ter m capital asset;
(c) if the loss cannot be wholly so set off, the amount of loss not so set
off shall be car r ied for war d to the following assessment year and so
on.]
(2) No loss shall be car r ied for war d under this section for mor e than eight
(3)
77
75. Substituted by the Finance Act, 1987, w.e.f. 1-4-1988. Ear lier , section 74 was substituted
by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962 and amended by the Finance (No. 2) Act,
1967, w.e.f. 1-4-1968 and the Finance Act, 1986, w.e.f. 1-4-1987.
(1), as amended by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992, r ead as under :
(1) Wher e in r espect of any assessment year , the net r esult of the computation under the
head Capital gains is a loss to the assessee, the whole loss shall, subject to the other
pr ovisions of this Chapter , be car r ied for war d to the following assessment year , and
(a) it shall be set off against income, if any, under the head Capital gains assessable
for that assessment year ; and
(b) if the loss cannot be wholly so set off, the amount of loss not so set off shall be car r ied
for war d to the following assessment year , and so on.
(3) Any loss computed under the head Capital gains in r espect of the assessment year
commencing on the 1st day of Apr il, 1987, or any ear lier assessment year which is car r ied
for war d in accor dance with the pr ovisions of this section as it stood befor e the 1st day of
Apr il, 1988, shall be dealt with in the assessment year commencing on the 1st day of Apr il,
1988, or any subsequent assessment year as follows :
(a) in so far as such loss r elates to shor t-ter m capital assets, it shall be car r ied for war d
and set off in accor dance with the pr ovisions of sub-sections (1) and (2) ;
(b) in so far as such loss r elates to long-ter m capital assets, it shall be r educed by the
deductions specified in sub-section (2) of section 48 and the r educed amount
shall be car r ied for war d and set off in accor dance with the pr ovisions of sub-
sect ion (1) but such car r y for war d shall not be allowed beyond t he four t h
assessment year immediately succeeding the assessment year for which the loss
was fir st computed.
78
[Losses from certain specified sources falling under the head Income from
other sources.
74A. (1)
79
[* * *]
(2)
80
[* * *]
81
[(3)
82
[* * *] In the case of an assessee, being the owner of hor ses maintained by
him for r unning in hor se r aces (such hor ses being her eafter in this sub-section
r efer r ed to as r ace hor ses),
83
[the amount of loss incur r ed by the assessee in the
activity of owning and maintaining r ace hor ses in any assessment year shall not
be set off against income, if any, fr om any sour ce other than the activity of
owning and maintaining r ace hor ses in that year and] shall, subject to the other
pr ovisions of this Chapter , be car r ied for war d to the following assessment year
and
(a) it shall be set off against the income, if any,
84
[fr om the activity of own-
ing and maintaining r ace hor ses] assessable for that assessment year :
Provided that the activity of owning and maintaining r ace hor ses is
car r ied on by him in the pr evious year r elevant for that assessment
year ; and
(b) if the loss cannot be wholly so set off, the amount of loss not so set off
shall be car r ied for war d to the following assessment year and so on;
so, however , that no por tion of the loss shall be car r ied for war d for
mor e than four assessment year s immediately succeeding the assess-
ment year for which the loss was fir st computed.
Explan ation .For the pur poses of this sub-section
(a) amount of loss incur r ed by the assessee in the activity of owning and
maintaining r ace hor ses means
(i) in a case wher e the assessee has no income by way of stake
money, the amount of expenditur e (not being in the natur e of
capital expenditur e) laid out or expended by him wholly and
exclusively for the pur poses of maintaining r ace hor ses ;
(ii) in a case wher e the assessee has income by way of stake money,
the amount by which such income falls shor t of the amount of
expenditur e (not being in the natur e of capital expenditur e) laid
S. 74A I.T. ACT, 1961 1.370
78. Inser ted by the Finance Act, 1972, w.e.f. 1-4-1972. For r elevant case laws, see Taxmanns
79. Omitted by the Finance Act, 1986, w.e.f. 1-4-1987. Ear lier , it was amended by the Finance
Act, 1974, w.e.f. 1-4-1975.
82. Wor ds Wher e for any assessment year omitted by the Finance Act, 1986, w.e.f. 1-4-1987.
83. Substituted for the net r esult of the computation in r espect of the sour ce, specified in
clause (c) of sub-section (2) is a loss, then, so much of the amount of such loss as does not
exceed t he amount of loss incur r ed by t he assessee in t he act ivit y of owning and
maintaining r ace hor ses, ibid.
84. Substituted for fr om the sour ce specified in clause (c) of sub-section (2) by the Finance
Act, 1986, w.e.f. 1-4-1987.
out or expended by the assessee wholly and exclusively for the
pur poses of maintaining r ace hor ses ;
(b) hor se r ace means a hor se r ace upon which wager ing or betting may
be lawfully made ;
(c) income by way of stake money means the gr oss amount of pr ize
money r eceived on a r ace hor se or r ace hor ses by the owner ther eof
on account of the hor se or hor ses or any one or mor e of the hor ses
winning or being placed second or in any lower position in hor se
r aces.]
85
[Losses of firms.
75. Wher e the assessee is a fir m, any loss in r elation to the assessment year
commencing on or befor e the 1st day of Apr il, 1992, which could not be set
off against any other income of the fir m and which had been appor tioned to a
par tner of the fir m but could not be set off by such par tner pr ior to the
assessment year commencing on the 1st day of Apr il, 1993, then, such loss shall
be allowed to be set off against the income of the fir m subject to the condition
that the par tner continues in the said fir m and to be car r ied for war d for set off
under sections 70, 71, 72, 73, 74 and 74A.]
Carry forward and set off of losses in case of change in constitution of firm or on
succession.
86
78.
87
[(1) Wher e a change has occur r ed in the constitution of a fir m, nothing
in this Chapter shall entitle the fir m to have car r ied for war d and set off so
much of the loss pr opor tionate to the shar e of a r etir ed or deceased par tner
as exceeds his shar e of pr ofits, if any, in the fir m in r espect of the pr evious year .]
(2) Wher e any per son car r ying on any business or pr ofession has been
succeeded in such capacity by another per son other wise than by inher itance,
nothing in this Chapter shall entitle any per son other than the per son incur r ing
the loss to have it car r ied for war d and set off against his income.
Carry forward and set off of losses in the case of certain companies.
79. Notwithstanding anything contained in this Chapter , wher e a change in
shar eholding has taken place in a pr evious year in the case of a company, not
being a company in which the public ar e substantially inter ested, no loss
88
incur r ed in any year pr ior to the pr evious year shall be car r ied for war d and set
off against the income of the pr evious year unless
85. Substituted for sections 75, 76 and 77 by the Finance Act, 1992, w.e.f. 1-4-1993. Pr ior to
their substitution, sections 75, 76 and 77 wer e amended by the Finance Act, 1972, w.e.f.
Dir ect Tax Laws (Amendment ) Act , 1987, w.e.f. 1-4-1989 and t he Dir ect Tax Laws
86. In view of amendments stated in footnote No. 85, ther e ar e no sections with number s of
76 and 77.
87. Substituted by the Finance Act, 1992, w.e.f. 1-4-1993. Pr ior to substitution, sub-section (1)
was amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the
88. For the meaning of the ter m loss, see Taxmanns Dir ect Taxes Manual, Vol. 3.
S. 80A I.T. ACT, 1961 1.372
(a) on the last day of the pr evious year the shar es of the company car r y-
ing not less than fifty-one per cent of the voting power wer e benefi-
cially held by per sons who beneficially held shar es of the company
car r ying not less than fifty-one per cent of the voting power on the last
day of the year or year s in which the loss was incur r ed
89
[* * *] :
90
[Provided that nothing contained in this section shall apply to a case
wher e a change in the said voting power takes place in a pr evious year
consequent upon the death of a shar eholder or on account of tr ansfer
of shar es by way of gift to any r elative of the shar eholder making such
gift :]
91
[Provided further that nothing contained in this section shall apply
to any change in the shar eholding of an Indian company which is a
subsidiar y of a for eign company as a r esult of amalgamation or
demer ger of a for eign company subject to the condition that fifty-one
per cent shar eholder s of the amalgamating or demer ged for eign
company continue to be the shar eholder s of the amalgamated or the
r esulting for eign company.]
(b)
92
Submission of return for losses.
80. Notwithstanding anything contained in this Chapter , no loss which has
not been deter mined in pur suance of a r etur n filed
93
[in accor dance with the
pr ovisions of sub-section (3) of section 139], shall be car r ied for war d and set off
under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section
(1)
94
[or sub-section (3)] of section 74
95
[or sub-section (3) of section 74A].
96
[CHAPTER VI -A
DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME
A.Gen eral
Deductions to be made in computing total income.
80A. (1) In compu t ing t he t ot al income of an assessee, t her e shall be
allowed fr om his gr oss total income, in accor dance with and subject to
89. or omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
92. Pr ior to omission clause (b) was amended by the Dir ect Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1988.
93. Substituted for within the time allowed under sub-section (1) of section 139 or within
such fur ther time as may be allowed by the Income-tax Officer by the Dir ect Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1989. Ear lier , the said expr ession was substituted for
under section 139 by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
96. Chapter VI-A, consisting of sections 80A, 80B, 80C, 80D, 80E, 80F, 80G, 80H, 80-I, 80J, 80K,
80L, 80M, 80N, 80-O, 80P, 80Q, 80R, 80S and 80T, was substituted by the Finance (No. 2)
Act, 1967, w.e.f. 1-4-1968. The or iginal Chapter , consisting of only sections 80A to 80D, was
inser ted by the Finance Act, 1965, w.e.f. 1-4-1965. In the or iginal Chapter , section 80A was
amended by the Finance Act, 1966, w.e.f. 1-4-1966 and new section 80E was inser ted by
the pr ovisions of this Chapter , the deductions specified in sections 80C to
97
[80U].
(2) The aggr egate amount of the deductions
98
under this Chapter shall not, in any
case, exceed the gr oss total income of the assessee.
99
[(3) Wher e, in computing the total income of an association of per sons or a body
of individuals, any deduction is admissible under section 80G or section 80GGA
1
[or section 80GGC] or section 80HH or section 80HHA or section 80HHB or
section 80HHC or section 80HHD or section 80-I or section 80-IA
2
[or section
80-IB]
3
[or section 80-IC]
4
[or section 80-ID or section 80-IE] or section 80J
5

or
section 80JJ, no deduction under the same section shall be made in computing
the total income of a member of the association of per sons or body of individuals
in r elation to the shar e of such member in the income of the association of
per sons or body of individuals.]
(4)
6
[* * *]
Computation of deduction under section 80M.
80AA.
7
1.373 CH. VI-A - DEDUCTIONS - GENERAL S. 80AA
97. Substituted for 80VV by the Finance Act, 1985, w.e.f. 1-4-1986. Ear lier , 80VV was
substituted for 80U by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 and
80U was substituted for 80T by the Finance Act, 1968, w.e.f. 1-4-1969.
98. For the meaning of the ter m deductions, see Taxmanns Dir ect Taxes Manual, Vol. 3.
99. Substituted for sub-section (3) by the Finance Act, 1992, w.e.f. 1-4-1993. Pr ior to substitu-
tion, sub-section (3) was amended by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971, the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972, the Finance Act, 1972, w.e.f.
1-4-1972, the Dir ect Taxes (Amendment) Act, 1974, w.e.f. 1-4-1974, the Finance Act, 1974,
w.e.f. 1-4-1975, the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976, the Finance Act,
1975, w.e.f. 1-4-1976, the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978, the Finance Act, 1979,
w.e.f. 1-4-1980, the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981, the Finance Act, 1982, w.e.f.
1-4-1983, the Finance Act, 1983, w.e.f. 1-4-1983/ 1-4-1984, the Finance Act, 1985, w.e.f.
1-4-1986, the Finance Act, 1986, w.e.f. 1-4-1987, the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989, the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989 and the
Finance Act, 1989, w.e.f. 1-4-1989.
5. Omitted by the Finance (No. 2) Act, 1996, w.r .e.f. 1-4-1989.
6. Omitted by the Finance Act, 1978, w.e.f. 1-4-1979. Or iginally, sub-section (4) was inser ted
7. Pr ior to its omission, section 80AA, as inser ted by the Finance (No. 2) Act, 1980, w.r .e.f.
1-4-1968, subject to the savings pr escr ibed in section 44 of the said Act, r ead as under :
80AA. Computation of deduction un der section 80M.Wher e any deduction is r equir ed
to be allowed under section 80M in r espect of any income by way of dividends fr om a
domestic company which is included in the gr oss total income of the assessee, then,
notwithstanding anything contained in that section, the deduction under that section shall
be computed with r efer ence to the income by way of such dividends as computed in
accor dance with the pr ovisions of this Act (befor e making any deduction under this
Chapter ) and not with r efer ence to the gr oss amount of such dividends.
8
[Deductions to be made with reference to the income included in the gross total
income.
9
80AB. Wher e any deduction is r equir ed to be made or allowed under any
section
10
[* * *] included in this Chapter under the heading C.Deduc-
tion s in respect of certain in com es in r espect of any income of the natur e
specified in that section which is included in the gr oss total income of the
assessee, then, notwithstanding anything contained in that section, for the
pur pose of computing the deduction under that section, the amount of income
of that natur e as computed in accor dance with the pr ovisions of this Act (befor e
making any deduction under this Chapter ) shall alone be deemed to be the
amount of income of that natur e which is der ived or r eceived by the assessee and
which is included in his gr oss total income.]
11
[Deduction not to be allowed unless return furnished.
80AC. Wher e in computing the total income of an assessee of the pr evious year
r elevant to the assessment year commencing on the 1st day of Apr il,
2006 or any subsequent assessment year , any deduction is admissible under
section 80-IA or section 80-IAB or section 80-IB or section 80-IC
12
[or section
80-ID or section 80-IE], no such deduction shall be allowed to him unless he
fur nishes a r etur n of his income for such assessment year on or befor e the due
date specified under sub-section (1) of section 139.]
13
[Definitions.
80B. In this Chapter
(1)
14
[* * *]
(2)
15
[* * *]
(3)
16
[* * *]
(4)
17
[* * *]
(5) gr oss total income means the total income computed in accor dance
with the pr ovisions of this Act, befor e making any deduction under
this Chapter
18
[* * *]
19
[* * *];
(6)
20
[* * *]
10. Wor ds (except section 80M) omitted by the Finance Act, 1997, w.e.f. 1-4-1998.
13. Inser ted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 in place of or iginal section 80D.
14. Omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
18. Wor ds or under section 280-O omitted by the Finance Act, 1988, w.e.f. 1-4-1988.
19. Wor ds and without applying the pr ovisions of section 64 omitted by the Taxation Laws
(Amendment) Act, 1970, with r etr ospective effect fr om 1-4-1968.
S. 80B I.T. ACT, 1961 1.374
(7)
21
[* * *]
(8)
22
[* * *]
(9)
23
[* * *].]
B.Deduction s in respect of certain paym en ts
24
[Deduction in respect of life insurance premia, deferred annuity, contributions
to provident fund, subscription to certain equity shares or debentures, etc.
25
80C.
26
(1) In computing the total income of an assessee, being an individual or
a Hindu undivided family, ther e shall be deducted, in accor dance with
and subject to the pr ovisions of this section, the whole of the amount paid or
deposited in the pr evious year , being the aggr egate of the sums r efer r ed to in sub-
section (2), as does not exceed one lakh r upees.
(2) The sums r efer r ed to in sub-section (1) shall be any sums paid or deposited
in the pr evious year by the assessee
(i) to effect or to keep in for ce an insur ance on the life of per sons
specified in sub-section (4);
(ii) to effect or to keep in for ce a contr act for a defer r ed annuity, not
being an annuity plan r efer r ed to in clause (xii), on the life of per sons
specified in sub-section (4):
Provided that such contr act does not contain a pr ovision for the
exer cise by the insur ed of an option to r eceive a cash payment in lieu
of the payment of the annuity;
(iii) by way of deduction fr om the salar y payable by or on behalf of the
Gover nment to any individual being a sum deducted in accor dance
with the conditions of his ser vice, for the pur pose of secur ing to him
a defer r ed annuity or making pr ovision for his spouse or childr en, in
so far as the sum so deducted does not exceed one-fifth of the salar y;
1.375 CH. VI-A - DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS S. 80C
24. Inser ted by the Finance Act, 2005, w.e.f. 1-4-2006. Ear lier section 80C was omitted by the
Finance Act, 1990, w.e.f. 1-4-1991.
25. Subject-matter of section 80C has been dealt with by differ ent sections at differ ent times,
viz., (i) section 87 as or iginally enacted; and (ii) or iginal section 80A as intr oduced by the
Finance Act, 1965, w.e.f. 1-4-1965. Section 80C was intr oduced by the Finance (No. 2) Act,
1967, w.e.f. 1-4-1968 and the same was r eplaced by section 88 w.e.f. 1-4-1991. Section 80C
was again r eintr oduced in place of section 88 w.e.f. 1-4-2006.
26. Section 80C on ear lier occasions was amended by the Finance Act, 1968, w.e.f. 1-4-1969,
Finance Act, 1969, w.e.f. 1-4-1970, Finance Act, 1970, w.e.f. 1-4-1971, Finance (No. 2) Act,
Finance Act, 1975, w.e.f. 1-4-1976, Finance Act, 1976, w.e.f. 1-4-1977, Finance Act, 1978,
w.e.f. 1-4-1979, Finance Act, 1979, w.e.f. 1-4-1980, Finance (No. 2) Act, 1980, w.e.f. 1-4-1981,
Finance Act, 1982, w.e.f. 1-4-1983, Finance Act, 1983, w.e.f. 1-4-1984, Taxation Laws
(Amendment) Act, 1984, w.r .e.f. 1-4-1971, Taxation Laws (Amendment) Act, 1984, w.r .e.f.
1-4-1983, Finance Act, 1987, w.e.f. 1-4-1988, Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989, Dir ect Tax Laws (Second Amdt.) Act, 1989, w.r .e.f. 1-4-1984, Dir ect Tax Laws
(Second Amdt.) Act, 1989, w.e.f. 1-4-1990 and Finance Act, 1989, w.e.f. 1-4-1990.
(iv) as a contr ibution by an individual to any pr ovident fund to which the
Pr ovident Funds Act, 1925 (19 of 1925) applies;
(v) as a contr ibution to any pr ovident fund set up by the Centr al
Gover nment and notified
27
by it in this behalf in the Official Gazette,
wher e such contr ibution is to an account standing in the name of any
per son specified in sub-section (4);
(vi) as a contr ibution by an employee to a r ecognised pr ovident fund;
(vii) as a contr ibution by an employee to an appr oved super annuation
fund;
(viii) as subscr iption to any such secur ity of the Centr al Gover nment or any
such deposit scheme as that Gover nment may, by notification in the
(ix) as subscr iption to any such savings cer tificate as defined in clause (c)
of section 2
28
of the Gover nment Savings Cer tificates Act, 1959 (46 of
1959), as the Centr al Gover nment may, by notification
29
in the Official
Gazette, specify in this behalf;
(x) as a contr ibution, in the name of any per son specified in sub-section
(4), for par ticipation in the Unit-linked Insur ance Plan, 1971 (her eafter
in this section r efer r ed to as the Unit-linked Insur ance Plan) specified
in Schedule II of the Unit Tr ust of India (Tr ansfer of Under taking and
Repeal) Act, 2002 (58 of 2002);
(xi) as a contr ibution in the name of any per son specified in sub-section
(4) for par ticipation in any such unit-linked insur ance plan of the LIC
Mutual Fund
30
[r efer r ed to in] clause (23D) of section 10, as the Centr al
31
in the Official Gazette, specify in
this behalf;
(xii) to effect or to keep in for ce a contr act for such annuity plan of the Life
Insur ance Cor por ation or any other insur er as the Centr al Gover n-
32
in the Official Gazette, specify;
(xiii) as subscr iption to any units of any Mutual Fund
33
[r efer r ed to in]
clause (23D) of section 10 or fr om the Administr ator or the specified
company under any plan for mulated in accor dance with such scheme
34
in the Official
(xiv) as a contr ibution by an individual to any pension fund set up by any
Mutual Fund
35
[r efer r ed to in] clause (23D) of section 10 or by the
S. 80C I.T. ACT, 1961 1.376
27. For notified Public Pr ovident Fund, see Taxmanns Master Guide to Income-tax Act.
28. For definition of savings cer tificate as defined in section 2(c) of the Gover nment Savings
Cer tificates Act, 1959, see Appendix.
29. For notified Savings Cer tificates, see Taxmanns Master Guide to Income-tax Act.
30. Substituted for notified under by the Finance Act, 2006, w.e.f. 1-4-2007.
31. For notified Unit Linked Insur ance Plan of LIC Mutual Fund, see Taxmanns Master Guide
to Income-tax Act.
32. For notified annuity plans of LIC, see Taxmanns Master Guide to Income-tax Act.
34. For Equity Linked Savings Scheme, 2005, see Taxmanns Income-tax Rules.
Administr ator or the specified company, as the Centr al Gover nment
36
(xv) as subscr iption to any such deposit scheme of, or as a contr ibution to
any such pension fund set up by, the National Housing Bank estab-
lished under section 3 of the National Housing Bank Act, 1987 (53 of
1987) (her eafter in this section r efer r ed to as the National Housing
Bank), as the Centr al Gover nment may, by notification in the Official
(xvi) as subscr iption to any such deposit scheme of
(a) a public sector company which is engaged in pr oviding long-ter m
finance for constr uction or pur chase of houses in India for
r esidential pur poses; or
(b) any author ity constituted in India by or under any law enacted
either for the pur pose of dealing with and satisfying the need
for housing accommodation or for the pur pose of planning,
development or impr ovement of cities, towns and villages, or for
both,
37
in the Official
(xvii) as tuition fees (excluding any payment towar ds any development fees
or donation or payment of similar natur e), whether at the time of
admission or ther eafter ,
(a) to any univer sity, college, school or other educational institution
situated within India;
(b) for the pur pose of full-time education of any of the per sons
(xviii) for the pur poses of pur chase or constr uction of a r esidential house
pr oper ty the income fr om which is char geable to tax under the
head Income fr om house pr oper ty (or which would, if it had not
been used for the assessees own r esidence, have been char geable to
tax under that head), wher e such payments ar e made towar ds or by
way of
(a) any instalment or par t payment of the amount due under any self-
financing or other scheme of any development author ity, housing
boar d or other author ity engaged in the constr uction and sale of
house pr oper ty on owner ship basis; or
(b) any instalment or par t payment of the amount due to any
company or co-oper ative society of which the assessee is a
shar eholder or member towar ds the cost of the house pr oper ty
allotted to him; or
(c) r epayment of the amount bor r owed by the assessee fr om
(1) the Centr al Gover nment or any State Gover nment, or
(2) any bank, including a co-oper ative bank, or
36. For notified Pension Fund, see Taxmanns Master Guide to Income-tax Act.
37. For notified Deposit Scheme, see Taxmanns Master Guide to Income-tax Act.
(3) the Life Insur ance Cor por ation, or
(4) the National Housing Bank, or
(5) any public company for med and r egister ed in India with the
for r esidential pur poses which is eligible for deduction under
clause (viii) of sub-section (1) of section 36, or
(6) any company in which the public ar e substantially inter ested
or any co-oper ative society, wher e such company or co-
oper ative society is engaged in the business of financing the
constr uction of houses, or
(7) the assessees employer wher e such employer is an author ity
or a boar d or a cor por ation or any other body established or
constituted under a Centr al or State Act, or
(8) the assessees employer wher e such employer is a public
company or a public sector company or a univer sity estab-
lished by law or a college affiliated to such univer sity or a
local author ity or a co-oper ative society; or
(d) stamp duty, r egistr ation fee and other expenses for the pur pose
of tr ansfer of such house pr oper ty to the assessee,
but shall not include any payment towar ds or by way of
(A) the admission fee, cost of shar e and initial deposit which a
shar eholder of a company or a member of a co-oper ative society
has to pay for becoming such shar eholder or member ; or
(B) the cost of any addition or alter ation to, or r enovation or r epair of,
the house pr oper ty which is car r ied out after the issue of the
completion cer tificate in r espect of the house pr oper ty by the
author ity competent to issue such cer tificate or after the house
pr oper ty or any par t ther eof has either been occupied by the
assessee or any other per son on his behalf or been let out; or
(C) any expenditur e in r espect of which deduction is allowable under
the pr ovisions of section 24;
(xix) as subscr iption to equity shar es or debentur es for ming par t of any
eligible issue of capital appr oved by the Boar d on an application made
by a public company or as subscr iption to any eligible issue of capital
by any public financial institution in the pr escr ibed for m
38
.
(i) eligible issue of capital means an issue made by a public
company for med and r egister ed in India or a public financial
institution and the entir e pr oceeds of the issue ar e utilised wholly
and exclusively for the pur poses of any business r efer r ed to in
sub-section (4) of section 80-IA;
(ii) public company shall have the meaning assigned to it in section
3
39
S. 80C I.T. ACT, 1961 1.378
38. See r ule 20 and For m No. 59.
(iii) public financial institution shall have the meaning assigned to it
in section 4A
40
(xx) as subscr iption to any units of any mutual fund r efer r ed to in clause
(23D) of section 10 and appr oved by the Boar d on an application made
by such mutual fund in the pr escr ibed for m
41
:
Provided that this clause shall apply if the amount of subscr iption to
such units is subscr ibed only in the eligible issue of capital of any
company.
Explan ation .For the pur poses of this clause eligible issue of capi-
tal means an issue r efer r ed to in clause (i) of the Explan ation to
clause (xix) of sub-section (2);
42
[(xxi) as ter m deposit
(a) for a fixed per iod of not less than five year s with a scheduled
bank; and
(b) which is in accor dance with a scheme
43
fr amed and notified, by
the Centr al Gover nment, in the Official Gazette for the pur poses
of this clause.
Explan ation .For the pur poses of this clause, scheduled bank
means the State Bank of India constituted under the State Bank of
India Act, 1955 (23 of 1955), or a subsidiar y bank as defined in the
State Bank of India (Subsidiar y Banks) Act, 1959 (38 of 1959), or a
cor r esponding new bank constituted under section 3 of the Banking
Companies (Acquisition and Tr ansfer of Under takings) Act, 1970 (5 of
1970), or under section 3 of the Banking Companies (Acquisition and
Tr ansfer of Under takings) Act, 1980 (40 of 1980), or any other bank,
being a bank included in the Second Schedule to the Reser ve Bank of
India Act, 1934 (2 of 1934);]
44
[(xxii) as subscription to such bon ds issued by th e Nation al Ban k for
Agriculture an d Rural Developm en t, as th e Cen tral Govern m en t m ay,
by n otification in th e Official Gazette
44a
, specify in th is beh alf;]
44b
[(xxiii) in an accoun t un der th e Sen ior Citizen s Savin gs Sch em e Rules,
2004
44c
;
(xxiv) as five year tim e deposit in an accoun t un der th e Post Office Tim e
Deposit Rules, 1981.]
(3) The pr ovisions of sub-section (2) shall apply only to so much of any pr emium
or other payment made on an insur ance policy other than a contr act for a
defer r ed annuity as is not in excess of twenty per cent of the actual capital sum
assur ed.
Appendix.
41. See r ule 20A and For m No. 59A.
43. See Bank Ter m Deposit Scheme, 2006. For details, see Taxmanns Income-tax Rules.
44a. For notified bonds, see Taxmanns Master Guide to Income-tax Act.
44b. Inser ted by the Finance Act, 2008, w.e.f. 1-4-2008.
44c. For Senior Citizen Savings Rules, 2004, see Taxmanns Income-tax Rules.
Explan ation .In calculating any such actual capital sum assur ed, no account
shall be taken
(i) of the value of any pr emiums agr eed to be r etur ned, or
(ii) of any benefit by way of bonus or other wise over and above the sum
actually assur ed, which is to be or may be r eceived under the policy
by any per son.
(4) The per sons r efer r ed to in sub-section (2) shall be the following, namely:
(a) for the pur poses of clauses (i), (v), (x) and (xi) of that sub-section,
(i) in the case of an individual, the individual, the wife or husband
and any child of such individual, and
(ii) in the case of a Hindu undivided family, any member ther eof;
(b) for the pur poses of clause (ii) of that sub-section, in the case of an
individual, the individual, the wife or husband and any child of such
individual;
(c) for the pur poses of clause (xvii) of that sub-section, in the case of an
individual, any two childr en of such individual.
(5) Wher e, in any pr evious year , an assessee
(i) ter minates his contr act of insur ance r efer r ed to in clause (i) of sub-
section (2), by notice to that effect or wher e the contr act ceases to be
in for ce by r eason of failur e to pay any pr emium, by not r eviving
contr act of insur ance,
(a) in case of any single pr emium policy, within two year s after the
date of commencement of insur ance; or
(b) in any other case, befor e pr emiums have been paid for two year s;
or
(ii) ter minates his par ticipation in any unit-linked insur ance plan r e-
fer r ed to in clause (x) or clause (xi) of sub-section (2), by notice to that
effect or wher e he ceases to par ticipate by r eason of failur e to pay any
contr ibution, by not r eviving his par ticipation, befor e contr ibutions in
r espect of such par ticipation have been paid for five year s; or
(iii) tr ansfer s the house pr oper ty r efer r ed to in clause (xviii) of sub-section
(2) befor e the expir y of five year s fr om the end of the financial year
in which possession of such pr oper ty is obtained by him, or r eceives
back, whether by way of r efund or other wise, any sum specified in
that clause,
then,
(a) no deduction shall be allowed to the assessee under sub-section (1)
with r efer ence to any of the sums, r efer r ed to in clauses (i), (x), (xi) and
(xviii) of sub-section (2), paid in such pr evious year ; and
(b) the aggr egate amount of the deductions of income so allowed in
r espect of the pr evious year or year s pr eceding such pr evious year ,
shall be deemed to be the income of the assessee of such pr evious year
and shall be liable to tax in the assessment year r elevant to such
pr evious year .
(6) If any equity shar es or debentur es, with r efer ence to the cost of which a
deduction is allowed under sub-section (1), ar e sold or other wise tr ansfer r ed by
the assessee to any per son at any time within a per iod of thr ee year s fr om the date
S. 80C I.T. ACT, 1961 1.380
of their acquisition, the aggr egate amount of the deductions of income so
allowed in r espect of such equity shar es or debentur es in the pr evious year or
year s pr eceding the pr evious year in which such sale or tr ansfer has taken place
shall be deemed to be the income of the assessee of such pr evious year and shall
be liable to tax in the assessment year r elevant to such pr evious year .
Explan ation .A per son shall be tr eated as having acquir ed any shar es or
debentur es on the date on which his name is enter ed in r elation to those shar es
or debentur es in the r egister of member s or of debentur e-holder s, as the case
may be, of the public company.
44d
[(6A) If an y am oun t, in cludin g in terest accrued th ereon , is with drawn by th e
assessee f rom h is accoun t ref erred to in clause (xxiii) or clause (xxiv) of sub-
section (2), before th e expiry of th e period of five years from th e date of its deposit,
th e am oun t so with drawn sh all be deem ed to be th e in com e of th e assessee of th e
previous year in wh ich th e am oun t is with drawn an d sh all be liable to tax in th e
assessm en t year relevan t to such previous year:
Provided th at th e am oun t liable to tax sh all n ot in clude th e followin g am oun ts,
n amely:
(i) an y am oun t of in terest, relatin g to deposits referred to in clause (xxiii)
or clause (xxiv) of sub-section (2), wh ich h as been in cluded in th e total
in com e of th e assessee of th e previous year or years precedin g such
previous year; an d
(ii) an y am oun t received by th e n om in ee or legal h eir of th e assessee, on
th e death of such assessee, oth er th an in terest, if an y, accrued th ereon ,
wh ich was n ot in cluded in th e total in com e of th e assessee for th e
previous year or years precedin g such previous year.]
(a) the insur ance, defer r ed annuity, pr ovident fund and super annuation
fund r efer r ed to in clauses (i) to (vii);
(b) unit-linked insur ance plan and annuity plan r efer r ed to in clauses (xii)
to (xiiia);
(c) pension fund and subscr iption to deposit scheme r efer r ed to in
clauses (xiiic) to (xiva);
(d) amount bor r owed for pur chase or constr uction of a r esidential house
r efer r ed to in clause (xv),
of sub-section (2) of section 88 shall be eligible for deduction under the cor r es-
ponding pr ovisions of this section and the deduction shall be allowed in accor -
(8) In this section,
(i) Administr ator means the Administr ator as r efer r ed to in clause (a)
of section 2 of the Unit Tr ust of India (Tr ansfer of Under taking and
Repeal) Act, 2002 (58 of 2002);
(ii) contr ibution to any fund shall not include any sums in r epayment of
loan;
44d. Inser ted by the Finance Act, 2008, w.e.f. 1-4-2008.
(iii) insur ance shall include
(a) a policy of insur ance on the life of an individual or the spouse or
the child of such individual or a member of a Hindu undivided
family secur ing the payment of specified sum on the stipulated
date of matur ity, if such per son is alive on such date notwith-
standing that the policy of insur ance pr ovides only for the r etur n
of pr emiums paid (with or without any inter est ther eon) in the
event of such per son dying befor e the said stipulated date;
(b) a policy of insur ance effected by an individual or a member of a
Hindu undivided family for the benefit of a minor with the object
of enabling the minor , after he has attained major ity to secur e
insur ance on his own life by adopting the policy and on his being
alive on a date (after such adoption) specified in the policy in this
behalf;
(iv) Life Insur ance Cor por ation means the Life Insur ance Cor por ation
of India established under the Life Insur ance Cor por ation Act, 1956
(31 of 1956);
(v) public company shall have the same meaning as in section 3
45
of the
(vi) secur ity means a Gover nment secur ity as defined in clause (2) of
section 2
46
of the Public Debt Act, 1944 (18 of 1944);
(vii) specified company means a company as r efer r ed to in clause (h ) of
section 2 of the Unit Tr ust of India (Tr ansfer of Under taking and
Repeal) Act, 2002 (58 of 2002);
(viii) tr ansfer shall be deemed to include also the tr ansactions r efer r ed to
in clause (f) of section 269UA.]
Deduction in respect of investment in certain new shares.
80CC.
47
[Om itted by th e Fin an ce (No. 2) Act, 1996, w.r.e.f. 1-4-1993.]
S. 80CC I.T. ACT, 1961 1.382
46. Clause (2) of section 2 of the Public Debt Act, 1944, defines secur ity. For text of section
2(2), see Appendix.
47. Pr ior to its omission, section 80CC was inser ted by the Finance Act, 1978, w.e.f. 1-4-1978
and later on amended by the Finance Act, 1982, w.e.f. 1-4-1983; Finance Act, 1984, w.e.f.
1-4-1984/ 1-4-1985; Taxation Laws (Amendment) Act, 1984, w.r .e.f. 1-4-1978; Finance Act,
1985, w.e.f. 1-4-1985; Finance Act, 1987, w.e.f. 1-4-1987; Finance Act, 1988, w.e.f. 1-4-1989/
1-4-1990; Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989; Dir ect Tax Laws
(Second Amendment) Act, 1989, w.e.f. 1-4-1990; Finance Act, 1989, w.e.f. 1-4-1990 and
Finance Act, 1994, w.r .e.f. 1-4-1978, r ead as under :
80CC. Deduction in respect of in vestm en t in certain n ew sh ares.(1) Wher e an assessee,
being
(a) an individual, or
(b) a Hindu undivided family,
(c) [* * *]
has acquir ed in the pr evious year (being a pr evious year r elevant to the assessment year ,
commencing on the 1st day of Apr il, 1979, or any subsequent assessment year ) out of his
income char geable to tax, equity shar es for ming par t of any eligible issue of capital, or
units of any Mutual Fund specified under clause (23D) of section 10 or units issued under
any scheme of the Unit Tr ust of India established under section 3 of the Unit Tr ust of India
(Con td. on p. 1.383)
1.383 CH. VI-A - DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS S. 80CC
Act, 1963 (52 of 1963), if the amount of subscr iption to any units, issued by the Mutual Fund
or , as the case may be, the Unit Tr ust of India under such scheme, is subscr ibed only to
eligible issue of capital, he shall, in accor dance with and subject to the pr ovisions of this
section, be allowed a deduction in the computation of his total income of an amount equal
to fifty per cent of the cost of such shar es to him.
Explan ation .Wher e in any pr evious year the assessee has acquir ed any shar es r efer r ed
to in this sub-section and has, within a per iod of six months fr om the end of that pr evious
year paid the whole or a par t of the amount, if any, r emaining unpaid on such shar es, the
amount so paid shall be deemed to have been paid by the assessee towar ds the cost of such
shar es in that pr evious year .
(2) Wher e the aggr egate cost to the assessee of the shar es r efer r ed to in sub-section (1)
which ar e acquir ed by him in the pr evious year exceeds twenty thousand r upees, the
deduction under that sub-section shall be allowed only with r efer ence to such of those
shar es (being shar es the aggr egate cost wher eof to the assessee does not exceed twenty
thousand r upees) as ar e specified by him in this behalf.
(3) For the pur poses of this section, eligible issue of capital means an issue of equity
shar es which satisfies the following conditions, namely :
(a) the issue is made by a public company for med and r egister ed in India and the issue
is wholly and exclusively for the pur poses of car r ying on the business of
(i) constr uction, manufactur e or pr oduction of any ar ticle or thing, not being an
ar ticle or thing specified in the list in the Eleventh Schedule; or
(ii) pr oviding long-ter m finance for constr uction or pur chase of houses in India
for r esident ial pur poses :
Provided that in the case of a public company car r ying on the business
r efer r ed to in sub-clause (ii), such company is appr oved by the Centr al
Gover nment for the pur poses of this section; or
(iia) a hospital; or
(iii) a hotel appr oved by the pr escr ibed author ity; or
(iv ) oper ation of ships;
(b) the issue is an issue of capital made by the company for the fir st time :
Provided that this clause shall not apply in the case of an issue of equity shar es made
by a public company for med and r egister ed in India with the main object of
car r ying on the business of oper ation of ships;
(c) the shar es for ming par t of the issue ar e offer ed for subscr iption to the public and
such offer for subscr iption is made by the company befor e the 1st day of Apr il, 1990;
(d) such other conditions as may be pr escr ibed :
Provided that in the case of a company which had or iginally been incor por ated as a
pr ivat e company bu t has become a pu blic company u nder t he pr ovisions of t he
Companies Act, 1956 (1 of 1956), an issue of equity shar es made by it for the fir st time
after it has become a public company shall not be r egar ded as an eligible issue of
capital, if
(i) such company had declar ed, distr ibuted or paid any dividend when it was a pr ivate
company; or
(ii) any of the shar es for ming par t of such issue is offer ed for subscr iption at a
pr emiu m.
Explan ation 1.If any question ar ises as to whether any issue of equity shar es would
constitute an eligible issue of capital for the pur poses of this section, the question shall be
r efer r ed to the Centr al Gover nment whose decision ther eon shall be final.
Explan ation 2.In this sub-section and sub-section (4), public company shall have the
meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956).
(4) The deduction under sub-section (1) shall not be allowed unless the assessee has
(i) subscr ibed to the shar es in pur suance of an offer for subscr iption to the public
made by the public company or in pur suance of a r eser vation or an option in his
favour by r eason of his being a pr omoter of the company; or
(Con td. on p. 1.384)
S. 80CCA I.T. ACT, 1961 1.384
48
[Deduction in respect of deposits under National Savings Scheme or payment
to a deferred annuity plan.
49
80CCA. (1) Wher e an assessee, being
50
[* * *]
(c)
51
[* * *]
has in the pr evious year
(i) deposited any amount in accor dance with such scheme as the Centr al
52
this behalf
53
[* * *]; or
(ii) paid any amount to effect or to keep in for ce a contr act for such
annuity plan of the Life Insur ance Cor por ation as the Centr al Gover n-
54
in the Official Gazette, specify,
out of his income char geable to tax, he shall, in accor dance with, and subject to,
the pr ovisions of this section, be allowed a deduction in the computation of his
total income of the whole of the amount deposited or paid (excluding inter est or
bonus accr ued or cr edited to the assessees account, if any) as does not exceed
the amount of twenty thousand r upees in the pr evious year :
(ii) pur chased the shar es fr om a per son who is specified as an under wr iter in r espect
of the issue of such shar es in pur suance of clause 11 of Par t I of Schedule II to the
Companies Act, 1956 (1 of 1956), and who has acquir ed such shar es by vir tue of his
obligation as such under wr iter .
(5) If any equity shar es, with r efer ence to the cost of which a deduction is allowed under
sub-section (1), ar e sold or other wise tr ansfer r ed by the assessee to any per son at any time
within a per iod of thr ee year s fr om the date of their acquisition, an amount equal to fifty
per cent of the cost to the assessee of the shar es so sold or other wise tr ansfer r ed shall be
deemed to be the income of the assessee of the pr evious year in which the shar es ar e so
sold or tr ansfer r ed and shall be char geable to tax accor dingly.
Explan ation .A per son shall be tr eated as having acquir ed any shar es on the date on
which his name is enter ed in r elation to those shar es in the r egister of member s of the
company.
(6) Wher e a deduction is claimed and allowed under sub-section (1) with r efer ence to the
cost of any equity shar es, the cost of such shar es shall not be taken into account for the
pur poses of section 54E.
48. Substituted by the Finance Act, 1988, w.e.f. 1-4-1988. Or iginal section 80CCA was inser ted
49. See also Cir cular No. 527, dated 9-12-1988, Notification No. GSR 903(E), dated 6-9-1988,
Cir cular No. 531, dated 17-3-1989, Cir cular No. 532, dated 17-3-1989 and Cir cular No. 534,
dated 7-4-1989. For details, see Taxmanns Dir ect Taxes Cir cular s.
50. Wor d or omitted by the Finance Act, 1994, w.r .e.f. 1-4-1988.
51. Omitted, ibid. Ear lier , clause (c) was substituted by the Finance Act, 1988, w.e.f. 1-4-1988.
52. For notified scheme, see Taxmanns Dir ect Taxes Cir cular s.
53. (her eafter in this section r efer r ed to as the National Savings Scheme) omitted by the
54. For notified annuity plans, see Taxmanns Dir ect Taxes Cir cular s.
55
[Provided that in r elation to
(a) the assessment year s commencing on the 1st day of Apr il, 1989 and
the 1st day of Apr il, 1990, this sub-section shall have effect as if for the
wor ds twenty thousand r upees, the wor ds thir ty thousand r upees
had been substituted;
(b) the assessment year commencing on the 1st day of Apr il, 1991 and
subsequent assessment year s, this sub-section shall have effect as if
for the wor ds twenty thousand r upees, the wor ds for ty thousand
r upees had been substituted:]
56
[Provided further that no deduction under this sub-section shall be allowed in
r elation to any amount deposited or paid under clauses (i) and (ii) on or after the
1st day of Apr il, 1992.]
(2) Wher e any amount
(a) standing to the cr edit of the assessee
57
[under the scheme r efer r ed to
in clause (i) of sub-section (1)] in r espect of which a deduction has
been allowed under sub-section (1) together with the inter est accr ued
on such amount is withdr awn in whole or in par t in any pr evious
year , or
(b) is r eceived on account of the sur r ender of the policy or as annuity or
bonus in accor dance with the annuity plan of the Life Insur ance
Cor por ation in any pr evious year ,
an amount equal to the whole of the amount r efer r ed to in clause (a) or clause
(b) shall be deemed to be the income of the assessee of that pr evious year in which
such withdr awal is made or , as the case may be, amount is r eceived, and shall,
accor dingly, be char geable to tax as the income of that pr evious year :
58
[Provided that nothing contained in this sub-section shall apply to any amount
r eceived by the assessee on account of the sur r ender of the policy in accor dance
with the ter ms of the annuity plan of the Life Insur ance Cor por ation wher e the
assessee elects to sur r ender befor e the 1st day of October , 1992, the said annuity
plan in r espect of which he had paid any amount under clause (ii) of sub-section
(1) befor e the 1st day of Apr il, 1992.]
59
[(3) Not wit hst anding anyt hing cont ained in any ot her pr ovision of t his
Act, wher e a par tition has taken place among the member s of a Hindu
undivided family or wher e an association of per sons has been dissolved after a
deduction has been allowed under sub-section (1), the pr ovisions of sub-section
(2) shall apply as if the per son in r eceipt of income r efer r ed to ther ein is the
assessee.]
Explan ation I.For the r emoval of doubts, it is her eby declar ed that inter est on
the deposits made
60
[under the scheme r efer r ed to in clause (i) of sub-section (1)]
shall not be char geable to tax except in the manner and to the extent specified
in sub-section (2).
1.385 CH. VI-A - DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS S. 80CCA
57. Substituted for under the National Savings Scheme by the Finance (No. 2) Act, 1991,
w.e.f. 1-10-1991.
60. Substituted for under the National Savings Scheme by the Finance (No. 2) Act, 1991,
w.e.f. 1-10-1991.
S. 80CCC I.T. ACT, 1961 1.386
Explan ation II.For the pur poses of this section, Life Insur ance Cor por ation
shall have the same meaning as in clause (a) of sub-section (8) of section 80C.]
61
[Deduction in respect of investment made under Equity Linked Savings Scheme.
80CCB. (1) Wher e an assessee, being
62
[* * *]
(c)
63
[* * *]
has acquir ed in the pr evious year , out of his income char geable to tax, units of
any Mutual Fund specified under clause (23D) of section 10 or of the Unit Tr ust
of India established under the Unit Tr ust of India Act, 1963 (52 of 1963), under
any plan for mulated in accor dance with such scheme as the Centr al Gover nment
may, by notification in the Official Gazette, specify in this behalf (her eafter in this
section r efer r ed to as the Equity Linked Savings Scheme), he shall, in accor dance
with, and subject to, the pr ovisions of this section, be allowed a deduction in the
computation of his total income of so much of the amount invested as does not
exceed the amount of ten thousand r upees in the pr evious year :
64
[Provided that no deduction shall be allowed in r elation to any amount invested
under this sub-section on or after the 1st day of Apr il, 1992.]
(2) Wher e any amount invested by the assessee in the units issued under a plan
for mulated under the Equity Linked Savings Scheme in r espect of which a
deduction has been allowed under sub-section (1) is r etur ned to him in whole or
in par t either by way of r epur chase of such units or on the ter mination of the plan,
by the Fund or the Tr ust, as the case may be, in any pr evious year , it shall be
deemed to be the income of the assessee of that pr evious year and char geable
to tax accor dingly.
(3) Notwithstanding anything contained in any other pr ovision of this Act, wher e
a par tition has taken place among the member s of a Hindu undivided family or
wher e an association of per sons has been dissolved after a deduction has been
allowed under sub-section (1), the pr ovisions of sub-section (2) shall apply as if
the per son in r eceipt of income r efer r ed to ther ein is the assessee.]
65
[Deduction in respect of contribution to certain pension funds.
80CCC. (1) Wher e an assessee being an individual has in the pr evious year paid
or deposited any amount out of his income char geable to tax to effect
or keep in for ce a contr act for any annuity plan of Life Insur ance Cor por ation
of India
66
[or any other insur er ] for r eceiving pension fr om the fund r efer r ed to
in clause (23AAB) of section 10, he shall, in accor dance with, and subject to, the
pr ovisions of this section, be allowed a deduction in the computation of his total
income, of the whole of the amount paid or deposited (excluding inter est or
bonus accr ued or cr edited to the assessees account, if any) as does not exceed
the amount of
67
[one lakh] r upees in the pr evious year .
62. Wor d or omitted by the Finance Act, 1994, w.r .e.f. 1-4-1991.
63. Omitted, ibid. Pr ior to its omission, clause (c) was inser ted by the Finance Act, 1990, w.e.f.
1-4-1991.
67. Substituted for ten thousand by the Finance Act, 2006, w.e.f. 1-4-2007.
(2) Wher e any amount standing to the cr edit of the assessee in a fund, r efer r ed
to in sub-section (1) in r espect of which a deduction has been allowed under sub-
section (1), together with the inter est or bonus accr ued or cr edited to the
assessees account, if any, is r eceived by the assessee or his nominee
(a) on account of the sur r ender of the annuity plan whether in whole or
in par t, in any pr evious year , or
(b) as pension r eceived fr om the annuity plan,
an amount equal to the whole of the amount r efer r ed to in clause (a) or clause
(b) shall be deemed to be the income of the assessee or his nominee, as the case
may be, in that pr evious year in which such withdr awal is made or , as the case
may be, pension is r eceived, and shall accor dingly be char geable to tax as income
68
[(3) Wher e any amount paid or deposited by the assessee has been taken into
account for the pur poses of this section,
(a) a r ebate with r efer ence to such amount shall not be allowed under
section 88 for any assessment year ending befor e the 1st day of Apr il,
2006;
(b) a deduction with r efer ence to such amount shall not be allowed under
section 80C for any assessment year beginning on or after the 1st day
of Apr il, 2006.]]
69-70
[Deduction in respect of contribution to pension scheme of Central Government.
80CCD. (1) Wher e an assessee, being an individual employed by the Centr al
Gover nment
71
[or any other employer ] on or after the 1st day of
Januar y, 2004, has in the pr evious year paid or deposited any amount in his
account under a pension scheme notified or as may be notified by the Centr al
Gover nment, he shall, in accor dance with, and subject to, the pr ovisions of this
section, be allowed a deduction in the computation of his total income, of the
whole of the amount so paid or deposited as does not exceed ten per cent of his
salar y in the pr evious year .
(2) Wher e, in the case of an assessee r efer r ed to in sub-section (1), the Centr al
Gover nment
71
[or any other employer ] makes any contr ibution to his account
r efer r ed to in that sub-section, the assessee shall be allowed a deduction in the
computation of his total income, of the whole of the amount contr ibuted by the
Centr al Gover nment
71
[or any other employer ] as does not exceed ten per cent
of his salar y in the pr evious year .
(3) Wher e any amount standing to the cr edit of the assessee in his account
r efer r ed to in sub-section (1), in r espect of which a deduction has been allowed
under that sub-section or sub-section (2), together with the amount accr ued
1.387 CH. VI-A - DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS S. 80CCD
(3) Wher e any amount paid or deposited by the assessee has been taken into account
for the pur poses of this section, a r ebate with r efer ence to such amount shall not be
allowed under section 88.
69-70. Inser ted by the Finance (No. 2) Act, 2004, w.r .e.f. 1-4-2004.
S. 80D I.T. ACT, 1961 1.388
(4) Wher e any amount paid or deposited by the assessee has been allowed as a deduction
under sub-section (1), no r ebate with r efer ence to such amount shall be allowed under
section 88.
74. Inser ted by the Income-tax (Amendment) Act, 1986, w.e.f. 1-4-1987. Or iginal section 80D
dealing with deduction in r espect of medical tr eatment, etc., of handicapped dependants
was intr oduced by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 r eplacing old section 80B
which was inser t ed by t he Finance Act , 1965, w.e.f. 1-4-1965. Or iginal sect ion 80D,
pr ior to its omission by the Finance Act, 1984, w.e.f. 1-4-1985, was amended by the Finance
Act, 1981, w.e.f. 1-4-1982 and the Finance Act, 1968, w.e.f. 1-4-1969.
75. Substituted for paid by him by cheque by the Finance Act, 2007, w.e.f. 1-4-2008.
76. Substituted for ten, ibid. Ear lier ten was substituted for six by the Finance (No. 2) Act,
1996, w.e.f. 1-4-1997 and six was substituted for thr ee by the Finance Act, 1992, w.e.f.
1-4-1993.
ther eon, if any, is r eceived by the assessee or his nominee, in whole or in par t, in
any pr evious year ,
(a) on account of closur e or his opting out of the pension scheme r efer r ed
to in sub-section (1); or
(b) as pension r eceived fr om the annuity plan pur chased or taken on such
closur e or opting out,
the whole of the amount r efer r ed to in clause (a) or clause (b) shall be deemed
to be the income of the assessee or his nominee, as the case may be, in the
pr evious year in which such amount is r eceived, and shall accor dingly be
char ged to tax as income of that pr evious year .
72
[(4) Wher e any amount paid or deposited by the assessee has been allowed as
a deduction under sub-section (1),
(a) no r ebate with r efer ence to such amount shall be allowed under
section 88 for any assessment year ending befor e the 1st day of Apr il,
2006;
(b) no deduction with r efer ence to such amount shall be allowed under
section 80C for any assessment year beginning on or after the 1st day
of Apr il, 2006.]
Explan ation .For the pur poses of this section, salar y includes dear ness allow-
ance, if the ter ms of employment so pr ovide, but excludes all other allowances
and per quisites.]
73
[Limit on deductions under sections 80C, 80CCC and 80CCD.
80CCE. The aggr egate amount of deductions under section 80C, section 80CCC
and section 80CCD shall not, in any case, exceed one lakh r upees.]
74
[Deduction in respect of medical insurance premia.
80D. (1) In computing the total income of an assessee, ther e shall be deducted
at the following r ates, such sum as is specified in sub-section (2) and
75
[paid
by h im by an y m ode of paym en t oth er th an cash ] in the pr evious year out of his
income char geable to tax, namely :
(i) in a case wher e such sum does not exceed in the aggr egate
76
[fifteen ]
thousand r upees, the whole of such sum; and
(ii) in any other case,
76
[fifteen ] thousand r upees :
77
[Provided that wher e the sum specified in sub-section (2) is paid to effect or to
keep in for ce an insur ance on the health of the assessee, or his wife or her
husband or dependant par ents or any member of the family in case the assessee
is a Hindu undivided family, and who is a senior citizen, the pr ovisions of this
section shall have effect as if for the wor ds
78
[fifteen ] thousand r upees, the
wor ds
79
[twen ty] thousand r upees had been substituted.]
(2) The sum r efer r ed to in sub-section (1) shall be the following, namely :
(a) wher e the assessee is an individual, any sum paid to effect or to keep
in for ce an insur ance on the health of the assessee or on the health of
the wife or husband, dependent par ents or dependent childr en of the
assessee;
(b) wher e the assessee is a Hindu undivided family, any sum paid to effect
or to keep in for ce an insur ance on the health of any member of the
family :
(c)
80
[* * *]
81
[Provided that such insur ance shall be in accor dance with a scheme
82
fr amed
in this behalf by
(a) the Gener al Insur ance Cor por ation of India for med under section 9
of the Gener al Insur ance Business (Nationalisation) Act, 1972 (57 of
1972) and appr oved by the Centr al Gover nment in this behalf; or
(b) any other insur er and appr oved by the Insur ance Regulator y and
Development Author ity established under sub-section (1) of section 3
of the Insur ance Regulator y and Development Author ity Act, 1999
(41 of 1999).]]
83
[Explan ation .For the pur pose of this section, senior citizen shall have the
meaning assigned to it in the Explan ation to section 80DDB.]
1.389 CH. VI-A - DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS S. 80D
78. Substituted for ten by the Finance Act, 2007, w.e.f. 1-4-2008.
79. Substituted for fifteen, ibid.
80. Omitted by the Finance Act, 1994, w.r .e.f. 1-4-1987. Pr ior to its omission, clause (c), as
inser ted by the Income-tax (Amendment) Act, 1986, w.e.f. 1-4-1987, r ead as under :
(c) wher e the assessee is an association of per sons or a body of individuals consisting,
in either case, only of husband and wife gover ned by the system of community of
pr oper ty in for ce in the Union ter r itor ies of Dadr a and Nagar Haveli and Goa,
Daman and Diu, any sum paid to effect or to keep in for ce an insur ance on the health
of any member of such association or body or on the health of the dependent
childr en of the member s of such an association or body :
81. Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Pr ior to its substitution, pr oviso r ead
as under :
Provided that such insur ance shall be in accor dance with a scheme

fr amed in this behalf
by the Gener al Insur ance Cor por ation of India for med under section 9 of the Gener al
Insur ance Business (Nationalisation) Act, 1972 (57 of 1972) and appr oved by the Centr al
Gover nment in this behalf.
82. For a scheme pr oviding for Hospitalisation and Domiciliar y Hospitalisation Benefit, see
The following section 80D shall be substituted for section 80D by the Finance
Act, 2008, w.e.f. 1-4-2009 :
Deduction in respect of health insurance premia.
80D. (1) In com putin g th e total in com e of an assessee, bein g an in dividual or a
Hin du un divided fam ily, th ere sh all be deducted such sum , as specified in
sub-section (2) or sub-section (3), paym en t of wh ich is m ade by an y m ode, oth er
th an cash , in th e previous year out of h is in com e ch argeable to tax.
(2) Wh ere th e assessee is an in dividual, th e sum referred to in sub-section (1) sh all
be th e aggregate of th e followin g, n am ely:
(a) th e wh ole of th e am oun t paid to effect or to k eep in force an in suran ce
on th e h ealth of th e assessee or h is f am ily as does n ot exceed in th e
aggregate fifteen th ousan d rupees; an d
(b) th e wh ole of th e am oun t paid to effect or to k eep in force an in suran ce
on th e h ealth of th e paren t or paren ts of th e assessee as does n ot exceed
in th e aggregate fifteen th ousan d rupees.
Explanation.For th e purposes of clause (a), fam ily m ean s th e spouse an d
depen dan t ch ildren of th e assessee.
(3) Wh ere th e assessee is a Hin du un divided fam ily, th e sum referred to in sub-
section (1) sh all be th e wh ole of th e am oun t paid to effect or to k eep in force an
in suran ce on th e h ealth of an y m em ber of th at Hin du un divided fam ily as does
n ot exceed in th e aggregate fifteen th ousan d rupees.
(4) Wh ere th e sum specified in clause (a) or clause (b) of sub-section (2) or in sub-
section (3) is paid to effect or k eep in force an in suran ce on th e h ealth of an y
person specified th erein , an d wh o is a sen ior citizen , th e provision s of th is section
sh all h ave effect as if for th e words fifteen th ousan d rupees, th e words twen ty
th ousan d rupeesh ad been substituted.
Explanation.For th e purposes of th is sub-section , sen ior citizenm ean s an
in dividual residen t in In dia wh o is of th e age of sixty-five years or m ore at an y tim e
durin g th e relevan t previous year.
(5) Th e in suran ce ref erred to in th is section sh all be in accordan ce with a sch em e
m ade in th is beh alf by
(a) th e Gen eral In suran ce Corporation of In dia form ed un der section 9 of
th e Gen eral In suran ce Busin ess (Nation alisation ) Act, 1972 (57 of
1972) an d approved by th e Cen tral Govern m en t in th is beh alf; or
(b) an y oth er in surer an d approved by th e In suran ce Regulatory an d
Developm en t Auth ority establish ed un der sub-section (1) of section 3
of th e In suran ce Regulatory an d Developm en t Auth ority Act, 1999 (41
of 1999).
84
[Deduction in respect of maintenance including medical treatment of a dependant
who is a person with disability.
80DD. (1) Wher e an assessee, being an individual or a Hindu undivided family,
who is a r esident in India, has, dur ing the pr evious year ,
S. 80DD I.T. ACT, 1961 1.390
84. Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Pr ior to its substitution, section 80DD
was substituted for sections 80DD and 80DDA by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999. Ear lier section 80DD was inser ted by the Finance Act, 1990, w.e.f. 1-4-1991 and
(Con td. on p. 1.391)
1.391 CH. VI-A - DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS S. 80DD
ther eafter amended by the Finance Act, 1992, w.e.f. 1-4-1993 and Finance Act, 1993, w.e.f.
1-4-1994. Section 80DDA was inser ted by the Finance Act, 1995, w.e.f. 1-4-1996. Pr ior to its
substitution by the Finance Act, 2003, section 80DD, as amended by the Finance (No. 2)
80DD. Deduction in respect of main ten an ce in cludin g medical treatmen t of h an dicapped
depen den t (1) Wher e an assessee, who is a r esident in India, being an individual or a
Hindu undivided family has, dur ing the pr evious year ,
(a) incur r ed any expenditur e for the medical tr eatment (including nur sing), tr aining
and r ehabilitation of a handicapped dependant; or
(b) paid or deposited any amount under a scheme fr amed in this behalf by the Life
Insur ance Cor por ation or any other insur er or Unit Tr ust of India subject to the
conditions specified in sub-section (2) and appr oved by the Boar d in this behalf for
the maintenance of handicapped dependant,
the assessee shall, in accor dance with and subject to the pr ovisions of this section, be
allowed a deduction of a sum of for ty thousand r upees in r espect of the pr evious year .
(2) The deduction under clause (b) of sub-section (1) shall be allowed only if the following
(a) the scheme r efer r ed to in clause (b) of sub-section (1) pr ovides for payment of
annuity or lump sum amount for the benefit of a handicapped dependant in the
event of the death of the individual or the member of the Hindu undivided family
in whose name subscr iption to the scheme has been made;
(b) the assessee nominates either the handicapped dependant or any other per son or
a tr ust to r eceive the payment on his behalf, for the benefit of the handicapped
dependant .
(3) If the handicapped dependant pr edeceases the individual or the member of the Hindu
undivided family r efer r ed to in sub-section (2), an amount equal to the amount paid or
deposited under clause (b) of sub-section (1) shall be deemed to be the income of the
assessee of the pr evious year in which such amount is r eceived by the assessee and shall
accor dingly be char geable to tax as the income of that pr evious year .
(a) Gover nment hospital includes a depar tmental dispensar y whether full-time or
par t-time established and r un by a Depar tment of the Gover nment for the medical
at t endance and t r eat ment of a class or classes of Gover nment ser vant s and
member s of their families, a hospital maintained by a local author ity and any other
hospital with which ar r angements have been made by the Gover nment for the
tr eatment of Gover nment ser vants;
(b) handicapped dependant means a per son who
(i) is a r elative of the individual or , as the case may be, is a member of the Hindu
undivided family and is not dependant on any per son other than such
individual or Hindu undivided family for his suppor t or maintenance; and
(ii) is suffer ing fr om a per manent physical disability (including blindness) or is
subject t o ment al r et ar dat ion, being a per manent physical disabilit y or
mental r etar dation specified in the r ules made by the Boar d for the pur poses
of this section, which is cer tified by a physician, a sur geon, an oculist or a
psychiatr ist, as the case may be, wor king in a Gover nment hospital, and
which has the effect of r educing consider ably such per sons capacity for
nor mal wor k or engaging in a gainful employment or occupation;
(c) Life Insur ance Cor por ation shall have the same meaning as in clause (iii) of sub-
section (8) of section 88;
(d) Unit Tr ust of India means the Unit Tr ust of India established under the Unit Tr ust
of India Act, 1963 (52 of 1963).
(a) incur r ed any expenditur e for the medical tr eatment (including nur s-
ing), tr aining and r ehabilitation of a dependant, being a per son with
disability; or
(b) paid or deposited any amount under a scheme fr amed in this behalf
by the Life Insur ance Cor por ation or any other insur er or the
Administr ator or the specified company subject to the conditions
specified in sub-section (2) and appr oved by the Boar d in this behalf
for the maintenance of a dependant, being a per son with disability,
the assessee shall, in accor dance with and subject to the pr ovisions of this section,
be allowed a deduction of a sum of fifty thousand r upees fr om his gr oss total
income in r espect of the pr evious year :
Provided that wher e such dependant is a per son with sever e disability, the
pr ovisions of this sub-section shall have effect as if for the wor ds fifty thousand
r upees, the wor ds seventy-five thousand r upees had been substituted.
(2) The deduction under clause (b) of sub-section (1) shall be allowed only if the
following conditions ar e fulfilled, namely:
(a) the scheme r efer r ed to in clause (b) of sub-section (1) pr ovides for
payment of annuity or lump sum amount for the benefit of a
dependant, being a per son with disability, in the event of the death of
the individual or the member of the Hindu undivided family in whose
name subscr iption to the scheme has been made;
(b) the assessee nominates either the dependant, being a per son with
disability, or any other per son or a tr ust to r eceive the payment on his
behalf, for the benefit of the dependant, being a per son with disability.
(3) If the dependant, being a per son with disability, pr edeceases the individual or
the member of the Hindu undivided family r efer r ed to in sub-section (2), an
amount equal to the amount paid or deposited under clause (b) of sub-section (1)
shall be deemed to be the income of the assessee of the pr evious year in which
such amount is r eceived by the assessee and shall accor dingly be char geable to
tax as the income of that pr evious year .
(4) The assessee, claiming a deduction under this section, shall fur nish a copy of
the cer tificate issued by the medical author ity in the pr escr ibed for m and
manner
85
, along with the r etur n of income under section 139, in r espect of the
assessment year for which the deduction is claimed:
Provided that wher e the condition of disability r equir es r eassessment of its
extent after a per iod stipulated in the afor esaid cer tificate, no deduction under
this section shall be allowed for any assessment year r elating to any pr evious
year beginning after the expir y of the pr evious year dur ing which the afor esaid
cer tificate of disability had expir ed, unless a new cer tificate is obtained fr om the
medical author ity in the for m and manner , as may be pr escr ibed, and a copy
ther eof is fur nished along with the r etur n of income.
(a) Administr ator means the Administr ator as r efer r ed to in clause (a)
of section 2 of the Unit Tr ust of India (Tr ansfer of Under taking and
Repeal) Act, 2002 (58 of 2002)
86
;
(b) dependant means
(i) in the case of an individual, the spouse, childr en, par ents, br other s
and sister s of the individual or any of them;
S. 80DD I.T. ACT, 1961 1.392
85. See r ule 11A. For pr escr ibed for m of cer tificate, r efer For m No. 10-IA as well as For ms
pr escr ibed under Per sons with Disability (Equal Oppor tunities, Pr otection of Rights and
Full Par ticipation) Act, 1995 (see Taxmanns Income-tax Rules).
86. For text of the UTI (Tr ansfer of Under taking and Repeal) Act, 2002, see Taxmanns Dir ect
(ii) in the case of a Hindu undivided family, a member of the Hindu
undivided family,
dependant wholly or mainly on such individual or Hindu undivided
family for his suppor t and maintenance, and who has not claimed any
deduction under section 80U in computing his total income for the
assessment year r elating to the pr evious year ;
(c) disability shall have the meaning assigned to it in clause (i) of section
2
87
of the Per sons with Disabilities (Equal Oppor tunities, Pr otection of
Rights and Full Par ticipation) Act, 1995 (1 of 1996)
88
[and includes
autism, cer ebr al palsy and multiple disability r efer r ed to in
clauses (a), (c) and (h ) of section 2 of the National Tr ust for Welfar e
of Per sons with Autism, Cer ebr al Palsy, Mental Retar dation and
Multiple Disabilities Act, 1999 (44 of 1999) ];
(d) Life Insur ance Cor por ation shall have the same meaning as in
clause (iii) of sub-section (8) of section 88;
(e) medical author ity means the medical author ity as r efer r ed to in
clause (p) of section 2
89
of the Per sons with Disabilities (Equal
Oppor tunities, Pr otection of Rights and Full Par ticipation) Act, 1995
(1 of 1996)
90
[or such other medical author ity as may, by notification,
be specified by the Centr al Gover nment for cer tifying autism,
cer ebr al palsy, multiple disabilities, per son with disability and
sever e disability r efer r ed to in clauses (a), (c), (h ), (j) and (o) of section
2 of the National Tr ust for Welfar e of Per sons with Autism, Cer ebr al
Palsy, Mental Retar dation and Multiple Disabilities Act, 1999 (44 of
1999)];
(f) per son with disability means a per son as r efer r ed to in clause (t) of
section 2
89
of the Per sons with Disabilities (Equal Oppor tunities,
Pr otection of Rights and Full Par ticipation) Act, 1995 (1 of 1996)
90
[or
clause (j) of section 2 of the National Tr ust for Welfar e of Per sons with
Autism, Cer ebr al Palsy, Mental Retar dation and Multiple Disabilities
Act, 1999 (44 of 1999)];
91
[(g) per son with sever e disability means
(i) a per son with eighty per cent or mor e of one or mor e disabilities,
as r efer r ed to in sub-section (4) of section 56 of the Per sons with
1.393 CH. VI-A - DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS S. 80DD
87. See Appendix for definition of r elevant ter ms under Per sons with Disability (Equal
Oppor tunities, Pr otection of Rights and Full Par ticipation) Act, 1995 and National Tr ust
for Welfar e of Per sons with Autism, Cer ebr al Palsy, Mental Retar dation & Multiple
Disabilities Act, 1999.
89. See Appendix for definition of r elevant ter ms under Per sons with Disabilities (Equal
91. Substituted, ibid. Pr ior t o it s subst it ut ion, clause (g) r ead as under :
(g) per son with sever e disability means a per son with eighty per cent or mor e of one
or mor e disabilities, as r efer r ed to in sub-section (4) of section 56 of the Per sons with
Disabilities (Equal Oppor tunities, Pr otection of Rights and Full Par ticipation) Act,
1995 (1 of 1996);
Disabilities (Equal Oppor tunities, Pr otection of Rights and Full
Par ticipation) Act, 1995 (1 of 1996)
91a
; or
(ii) a per son with sever e disability r efer r ed to in clause (o) of section
2 of the National Tr ust for Welfar e of Per sons with Autism,
Cer ebr al Palsy, Mental Retar dation and Multiple Disabilities Act,
1999 (44 of 1999)
91a
;]
(h) specified company means a company as r efer r ed to in clause (h ) of
section 2
92
of the Unit Tr ust of India (Tr ansfer of Under taking and
Repeal) Act, 2002 (58 of 2002).]
93
[Deduction in respect of medical treatment, etc.
80DDB. Wher e an assessee who is r esident in India has, dur ing the pr evious
year , actually paid any amount for the medical tr eatment of such
disease or ailment as may be specified in the r ules
94
made in this behalf by the
Boar d
(a) for himself or a dependant, in case the assessee is an individual; or
(b) for any member of a Hindu undivided family, in case the assessee is
a Hindu undivided family,
the assessee shall be allowed a deduction of the amount actually paid or a sum
of for ty thousand r upees, whichever is less, in r espect of that pr evious year in
which such amount was actually paid :
S. 80DDB I.T. ACT, 1961 1.394
91a. See Appendix for definition of r elevant ter ms under Per sons with Disability (Equal
92. For text of the UTI (Tr ansfer of Under taking and Repeal) Act, 2002, see Taxmanns Dir ect
93. Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Pr ior to its substitution, section
80DDB, as inser ted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and later on amended
80DDB. Deduction in respect of m edical treatm en t, etc.Wher e an assessee who is
r esident in India has, dur ing the pr evious year , actually incur r ed any expenditur e for the
medical tr eatment of such disease or ailment as may be specified in the r ules made in this
behalf by the Boar d
(a) for himself or a dependant r elative, in case the assessee is an individual; or
(b) for any member of a Hindu undivided family, in case the assessee is a Hindu
undivided family,
the assessee shall be allowed a deduction of a sum of for ty thousand r upees in r espect of
that pr evious year in which such expenditur e was incur r ed :
Provided t hat no such deduct ion shall be allowed unless t he assessee fur nishes a
cer tificate in such for m and fr om such author ity as may be pr escr ibed

:
Provided further that the deduction under this section shall be r educed by the amount
r eceived, if any, under an insur ance fr om an insur er for the medical tr eatment of the
per son r efer r ed t o in clause (a) or clause (b) :
Provided also that wher e the expenditur e incur r ed is in r espect of the assessee or his
dependant r elative or any member of a Hindu undivided family of the assessee and who
is a senior citizen, the pr ovisions of this section shall have effect as if for the wor ds for ty
thousand r upees, the wor ds sixty thousand r upees had been substituted.
(i) dependant means a per son who is not dependant for his suppor t or maintenance
on any per son other than the assessee;
(ii) insur er shall have the meaning assigned to it in clause (9) of section 2 of the
Insur ance Act, 1938 (4 of 1938);
(iii) senior citizen means an individual r esident in India who is of the age of sixty-five
year s or mor e at any time dur ing the r elevant pr evious year .
94. See r ule 11DD and For m No. 10-I.
1.395 CH. VI-A - DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS S. 80E
Provided that no such deduction shall be allowed unless the assessee fur nishes
with the r etur n of income, a cer tificate in such for m, as may be pr escr ibed
94a
,
fr om a neur ologist, an oncologist, a ur ologist, a haematologist, an immunologist
or such other specialist, as may be pr escr ibed
94a
, wor king in a Gover nment
hospital :
Provided further that the deduction under this section shall be r educed by the
amount r eceived, if any, under an insur ance fr om an insur er , or r eimbur sed by
an employer , for the medical tr eatment of the per son r efer r ed to in clause (a) or
clause (b) :
Provided also that wher e the amount actually paid is in r espect of the assessee
or his dependant or any member of a Hindu undivided family of the assessee and
who is a senior citizen, the pr ovisions of this section shall have effect as if for the
wor ds for ty thousand r upees, the wor ds sixty thousand r upees had been
substituted.
(i) dependant means
(a) in the case of an individual, the spouse, childr en, par ents, br other s
and sister s of the individual or any of them,
(b) in the case of a Hindu undivided family, a member of the Hindu
undivided family,
dependant wholly or mainly on such individual or Hindu undivided
family for his suppor t and maintenance;
(ii) Gover nment hospital includes a depar tmental dispensar y whether
full-time or par t-time established and r un by a Depar tment of the
Gover nment for the medical attendance and tr eatment of a class or
classes of Gover nment ser vants and member s of their families, a
hospital maintained by a local author ity and any other hospital with
which ar r angements have been made by the Gover nment for the
tr eatment of Gover nment ser vants;
(iii) insur er
95
shall have the meaning assigned to it in clause (9) of section
2 of the Insur ance Act, 1938 (4 of 1938);
(iv) senior citizen means an individual r esident in India who is of the age
of sixty-five year s or mor e at any time dur ing the r elevant pr evious
year .]
96
[Deduction in respect of interest on loan taken for higher education.
80E. (1) In computing the total income of an assessee, being an individual, ther e
shall be deducted, in accor dance with and subject to the pr ovisions of this
section, any amount paid by him in the pr evious year , out of his income
char geable to tax, by way of inter est on loan taken by him fr om any financial
94a. See r ule 11D and For m No. 10-I.
95. For definition of insur er under section 2(9) of the Insur ance Act, 1938, see Appendix.
96. Substituted by the Finance Act, 2005, w.e.f. 1-4-2006. Pr ior to its substitution, section 80E,
as inser ted by the Finance Act, 1994, w.e.f. 1-4-1995 and amended by the Finance Act, 2000,
80E. Deduction in respect of repaym en t of loan tak en for h igh er education .(1) In
computing the total income of an assessee, being an individual, ther e shall be deducted,
in accor dance with and subject to the pr ovisions of this section, any amount paid by him
in the pr evious year , out of his income char geable to tax, by way of r epayment of loan,
taken by him fr om any financial institution or any appr oved char itable institution for the
pur pose of pur suing his higher education, or inter est on such loan :
(Con td. on p. 1.396)
institution or any appr oved char itable institution for the pur pose of pur suing his
higher education
97
[or for th e purpose of h igh er education of h is relative].
(2) The deduction specified in sub-section (1) shall be allowed in computing the
total income in r espect of the initial assessment year and seven assessment year s
immediately succeeding the initial assessment year or until the inter est r efer r ed
to in sub-section (1) is paid by the assessee in full, whichever is ear lier .
(a) appr oved char itable institution means an institution specified in, or ,
as the case may be, an institution established for char itable pur poses
and
98
[approved by th e prescribed auth ority] under clause (23C) of
section 10 or an institution r efer r ed to in clause (a) of sub-section (2)
of section 80G;
(b) financial institution means a banking company to which the Bank-
ing Regulation Act, 1949 (10 of 1949) applies (including any bank or
banking institution r efer r ed to in section 51 of that Act); or any other
financial institution which the Centr al Gover nment may, by notifica-
tion in the Official Gazette
99
, specify in this behalf;
(c) higher education means full-time studies for any gr aduate or post-
gr aduat e cour se in engineer ing, medicine, management or for
post-gr aduate cour se in applied sciences or pur e sciences including
mathematics and statistics;
S. 80E I.T. ACT, 1961 1.396
Provided that the amount which may be so deducted shall not exceed for ty thousand
r u pees.
(2) The deduction specified in sub-section (1) shall be allowed in computing the total
income in r espect of the initial assessment year and seven assessment year s immediately
succeeding the initial assessment year or until the loan r efer r ed to in sub-section (1)
together with inter est ther eon is paid by the assessee in full, whichever is ear lier .
(a) appr oved char itable institution means an institution specified in, or , as the case
may be, an institution established for char itable pur poses and notified by the
Centr al Gover nment under clause (23C) of section 10 or an institution r efer r ed to
in clause (a) of sub-section (2) of section 80G;
(b) financial institution means a banking company to which the Banking Regulation
Act, 1949 (10 of 1949) applies (including any bank or banking institution r efer r ed to
in section 51 of that Act); or any other financial institution which the Centr al
Gover nment may, by notification in the Official Gazette, specify in this behalf;
(c) higher education means full-time studies for any gr aduate or post-gr aduate
cour se in engineer ing, medicine, management or for post -gr aduat e cour se in
applied sciences or pur e sciences including mathematics and statistics;
(d) initial assessment year means the assessment year r elevant to the pr evious year ,
in which the assessee star ts r epaying the loan or inter est ther eon.
Ear lier section 80E with heading Deduction in r espect of payment for secur ing r etir ement
annuities was inser ted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Section 80E,
ther eafter , was amended by the Finance Act, 1968, w.e.f. 1-4-1969 and the Finance Act,
1984, w.e.f. 1-4-1984 and later on by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989. This topic was dealt with by or iginal section 80C which was inser ted by the
Finance Act, 1965, w.e.f. 1-4-1965.
98. Substituted for notified by the Centr al Gover nment, ibid.
99. For notified institutions and Cir cular No. 688, dated 23-8-1994, see Taxmanns Master
(d) initial assessment year means the assessment year r elevant to the
pr evious year , in which the assessee star ts paying the inter est on the
loan.]
1
[(e) relative, in relation to an in dividual, m ean s th e spouse an d ch ildren
of th at in dividual.]
Deduction in respect of educational expenses in certain cases.
80F.
2
[Om itted by th e Fin an ce Act, 1985, w.e.f. 1-4-1986. Origin al section was
in serted by th e Fin an ce (No. 2) Act, 1967, w.e.f. 1-4-1968 in place of section
87A wh ich was in serted by th e Fin an ce Act, 1964, w.e.f. 1-4-1964. It was later
am en ded by th e Fin an ce Act, 1968, w.e.f. 1-4-1969. New section 80F, dealin g with
deduction in respect of am oun ts applied for ch aritable or religious purposes, etc.,
was in serted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f. 1-4-1989. Th is
section was om itted by th e Direct Tax Laws (Am en dm en t) Act, 1989, with effect
from th e sam e date.]
Deduction in respect of expenses on higher education in certain cases.
80FF. [Om itted by th e Fin an ce (No. 2) Act, 1980, w.e.f. 1-4-1981. Origin al section
was in serted by th e Fin an ce Act, 1975, w.e.f. 1-4-1976.]
3
Deduction in respect of donations to certain funds, charitable institutions, etc.
4
80G.
5
[(1) In comput ing t he t ot al income of an assessee
6
, t her e shall
be deducted, in accor dance with and subject to the pr ovisions of this
section,
1.397 CH. VI-A - DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS S. 80G
2. Omitted section 80F, as amended by the Finance Act, 1968, w.e.f. 1-4-1969, stood as under :
80F. Deduction in respect of education al expen ses in certain cases.(1) Wher e an
individual, being a r esident, who is not a citizen of India, has expended any sum in the
pr evious year out of his income char geable to tax for the full time education of his child
wholly or mainly dependent on him and who is not mor e than twenty-one year s of age, at
any Univer sity, college, school or other educational institution situate in a countr y outside
India, he shall, in accor dance with and subject to the pr ovisions of this section, be allowed
a deduction of the amount specified in sub-section (2) in the computation of his total
income.
(2) The amount r efer r ed to in sub-section (1) shall be
(i) in the case of an individual who has one such child, one thousand five hundr ed
r upees; and
(ii) in the case of an individual who has mor e than one such child, thr ee thousand
r upees.
3. This section was inser ted in place of section 88 which was deleted by the Finance (No. 2)
Act, 1967, w.e.f. 1-4-1968. Later section 88 took place of section 80C, which is now
r eint r oduced.
4. See also Letter [F. No. 45/ 313/ 66-ITJ (61)], dated 2-12-1966, Cir cular No. 416, dated
11-4-1985, Letter [F. No. 81/ 60/ 62-IT], dated 11-12-1962, Letter [F. No. 69/ 94/ 62-IT], dated
14-1-1963, Let t er [F. No. 16/ 5/ 67-IT (A-I)], dat ed 5-4-1967, Cir cular No. 178, dat ed
23-9-1975, Letter [F. No. 69/ 22/ 63-IT], dated 28-9-1963, Letter [F. No. 69/ 13/ 62-IT], dated
20-7-1962, Letter [F. No. 69/ 34/ 62-IT], dated 11-7-1962, Letter No. W 110421/ 1/ 77-C & G
(FP), dated 11-1-1977, Cir cular No. 678, dated 10-2-1994, Cir cular No. 752, dated 26-3-1997;
Cir cular No. 777, dated 1-7-1999, Cir cular No. 782, dated 13-11-1999, Cir cular No. 4/ 2001,
dated 12-2-2001, Cir cular No. 7/ 2001, dated 21-3-2001 and Cir cular No. 2/ 2005, dated
5. Substituted by the Finance Act, 1976, w.e.f. 1-4-1977. Ear lier , it was substituted by the
6. For the meaning of the expr ession in computing the total income of an assessee, see
7
[(i) in a case wher e the aggr egate of the sums specified in sub-section (2)
includes any sum or sums of the natur e specified in
8
[sub-clause (i) or
in]
9
[sub-clause (iiia)
10
[or in sub-clause (iiiaa)
11
[or in sub-clause
(iiiab)]
12
[or in sub-clause (iiie)]
13
[or in sub-clause (iiif)]
14
[or in sub-
clause (iiig)]
15
[or in sub-clause (iiiga)] or
16
[sub-clause (iiih ) or ]
17
[sub-
clause (iiih a) or sub-clause (iiih b) or sub-clause (iiih c)
18
[or sub-clause
(iiih d)]
19
[or sub-clause (iiih e)]
20
[or sub-clause (iiih f)]
21
[or sub-clause
(iiih g) or sub-clause (iiih h )]
22
[or sub-clause (iiih i)]
23
[or sub-clause
(iiih j)] or ] in] sub-clause (vii) of clause (a)
24
[or in clause (c)]
25
[or in
clause (d)] ther eof, an amount equal to the whole of the sum or , as the
case may be, sums of such natur e plus fifty per cent of the balance of
such aggr egate; and]
(ii) in any other case, an amount equal to fifty per cent of the aggr egate
of the sums specified in sub-section (2).]
(2) The sums r efer r ed to in sub-section (1) shall be the following, namely :
(a) any sums paid
26
by the assessee in the pr evious year as donations to
(i) the National Defence Fund set up by the Centr al Gover nment; or
(ii) the Jawahar lal Nehr u Memor ial Fund r efer r ed to in the Deed of
Declar ation of Tr ust adopted by the National Committee at its
meeting held on the 17th day of August, 1964; or
(iii) the Pr ime Minister s Dr ought Relief Fund; or
27
[(iiia) the Pr ime Minister s National Relief Fund; or ]
S. 80G I.T. ACT, 1961 1.398
8. Inser ted by the Income-tax (Amendment) Act, 1999, w.e.f. 1-4-2000.
9. Restor ed to its or iginal expr ession by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989. Ear lier , this was substituted by the Dir ect Tax Laws (Amendment) Act, 1987 with
effect fr om the same date.
26. For the meaning of the expr ession any sums paid, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
27. Inser ted by the Income-tax (Amendment) Act, 1976, w.r .e.f. 9-9-1975.
28
[(iiiaa) the Pr ime Minister s Ar menia Ear thquake Relief Fund; or ]
29
[(iiiab) the Afr ica (Public Contr ibutions - India) Fund; or ]
30
[(iiib) the National Childr ens Fund; or ]
31
[(iiic) the Indir a Gandhi Memor ial Tr ust, the deed of declar ation in
r espect wher eof was r egister ed at New Delhi on the 21st day of
Febr uar y, 1985; or ]
32
[(iiid) the Rajiv Gandhi Foundation, the deed of declar ation in r espect
wher eof was r egister ed at New Delhi on the 21st day of June,
1991; or ]
33
[(iiie) the National Foundation for Communal Har mony; or ]
34
[(iiif) a Univer sity or any educational institution of national eminence
as may be appr oved
35
by the pr escr ibed author ity
36
in this behalf;
or ]
37
[(iiig) the Mahar ashtr a Chief Minister s Relief Fund dur ing the per iod
beginning on the 1st day of October , 1993 and ending on the 6th
day of October , 1993 or to the Chief Minister s Ear thquake Relief
Fund, Mahar ashtr a; or ]
38
[(iiiga) any fund set up by the State Gover nment of Gujar at exclusively
for pr oviding r elief to the victims of ear thquake in Gujar at; or ]
39
[(iiih ) any Zila Sakshar ta Samiti constituted in any distr ict under the
chair manship of the Collector of that distr ict for the pur poses of
impr ovement of pr imar y education in villages and towns in such
distr ict and for liter acy and post-liter acy activities.
Explan ation .For the pur poses of this sub-clause, town means
a town which has a population not exceeding one lakh accor ding
to the last pr eceding census of which the r elevant figur es have
been published befor e the fir st day of the pr evious year ; or ]
33. Inser ted by the Finance Act, 1993, w.e.f. 1-4-1993. Ear lier sub-clause (iiie) was omitted by
the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989 and ear lier inser ted by the
Dir ect Tax Laws (Amendment) Act, 1987, with effect fr om the same date.
35. For notified educational institution, r efer Taxmanns Dir ect Taxes Cir cular s.
36. The pr escr ibed author ity under r ule 18AAA is as follows : in r elation to a univer sity or any
non-technical institution of national eminence : Dir ector -Gener al (Income-tax Exemp-
tion) in concur r ence with the Secr etar y, Univer sity Gr ants Commission; in r elation to any
technical institution of national eminence : Dir ector -Gener al (Income-tax Exemption) in
concur r ence with the Secr etar y, All India Council of Technical Education.
40
[(iiiha) the National Blood Tr ansfusion Council or to any State Blood
Tr ansfusion Council which has its sole object the contr ol, super -
vision, r egulation or encour agement in India of the ser vices
r elated to oper ation and r equir ements of blood banks.
(a) National Blood Tr ansfusion Council means a society r egis-
ter ed under the Societies Registr ation Act, 1860 (21 of 1860)
and has an officer not below the r ank of an Additional
Secr etar y to the Gover nment of India dealing with the AIDS
Contr ol Pr oject as its Chair man, by whatever name called;
(b) State Blood Tr ansfusion Council means a society r egis-
ter ed, in consultation with the National Blood Tr ansfusion
Council, under the Societies Registr ation Act, 1860 (21 of
1860) or under any law cor r esponding to that Act in for ce in
any par t of India and has Secr etar y to the Gover nment of that
State dealing with the Depar tment of Health, as its Chair man,
by whatever name called; or
(iiih b) any fund set up by a State Gover nment to pr ovide medical r elief
to the poor ; or
(iiih c) the Ar my Centr al Welfar e Fund or the Indian Naval Benevolent
Fund or the Air For ce Centr al Welfar e Fund established by the
ar med for ces of the Union for the welfar e of the past and pr esent
member s of such for ces or their dependants; or ]
41
[(iiih d) the Andhra Pradesh Chief Ministers Cyclone Relief Fund, 1996; or ]
42
[(iiihe) the National Illness Assistance Fund; or ]
43
[(iiih f) the Chief Minister s Relief Fund or the Lieutenant Gover nor s
Relief Fund in r espect of any State or Union ter r itor y, as the case
may be :
Provided that such Fund is
(a) the only Fund of its kind established in the State or the Union
ter r itor y, as the case may be;
(b) under the over all contr ol of the Chief Secr etar y or the
Depar tment of Finance of the State or the Union ter r itor y, as
the case may be;
(c) administer ed in such manner as may be specified by the State
Gover nment or the Lieutenant Gover nor , as the case may be;
or ]
44
[(iiihg) the National Sports Fund to be set up by the Central Government; or
S. 80G I.T. ACT, 1961 1.400
44. Sub-clauses (iiih g) and (iiih h ) inser ted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
(iiih h ) the National Cultur al Fund set up by the Centr al Gover nment; or ]
45
[(iiih i) the Fund for Technology Development and Application set up by
the Centr al Gover nment; or ]
46
[(iiih j) the National Tr ust for Welfar e of Per sons with Autism, Cer ebr al
Palsy, Mental Retar dation and Multiple Disabilities constituted
under sub-section (1) of section 3 of the National Tr ust for
Welfar e of Per sons with Autism, Cer ebr al Palsy, Mental Retar da-
tion and Multiple Disabilities Act, 1999 (44 of 1999); or ]
(iv) any other fund or any institution to which this section applies; or
(v) the Gover nment or any local author ity, to be utilised for any
char itable pur pose
47
[other than the pur pose of pr omoting family
planning; or ]
48
[
49
[(vi) an author ity constituted in India by or under any law enacted
either for the pur pose of dealing with and satisfying the need for
housing accommodation or for the pur pose of planning, develop-
ment or impr ovement of cities, towns and villages, or for both;]
50
[(via) any cor por ation r efer r ed to in clause (26BB) of section 10; or ]
(vii) the Gover nment or to any such local author ity, institution or
association as may be appr oved in this behalf by the Centr al
Gover nment, to be utilised for the pur pose of pr omoting family
planning;]
(b) any sums paid by the assessee in the pr evious year as donations for
the r enovation or r epair of any such temple, mosque, gur dwar a,
chur ch or other place as is notified
51
by the Centr al Gover nment in the
Official Gazette to be of histor ic, ar chaeological or ar tistic impor tance
or to be a place of public wor ship of r enown thr oughout any State or
States;
52
[(c) any sums paid by the assessee, being a company, in the pr evious year
as donations to the Indian Olympic Association or to any other
associat ion or inst it ut ion
53
[est ablished in India, as t he Cent r al
48. Sub-clauses (vi) and (vii) inser ted, ibid.
(vi) r ead as under :
(vi) any author ity r efer r ed to in clause (20A) of section 10; or
51. For complet e list of places of public wor ship, et c., not ified under t his clause, see
Taxmanns Dir ect Taxes Cir cular s and Taxmanns Year ly Tax Digest & Refer encer .
53. Substituted for as notified by the Centr al Gover nment under clause (23) of section 10 by
Gover nment may, having r egar d to the pr escr ibed guidelines
54
, by
notification in the Official Gazette
55
, specify in this behalf ]

for
(i) the development of infr astr uctur e for spor ts and games; or
(ii) the sponsor ship of spor ts and games,
in India;]
56
[(d) any sums paid by the assessee, dur ing the per iod beginning on the
26th day of Januar y, 2001 and ending on the 30th day of September ,
2001, to any tr ust, institution or fund to which this section applies for
pr oviding r elief to the victims of ear thquake in Gujar at.]
(3)
57
58
[(4) Wher e the aggr egate of the sums r efer r ed to in sub-clauses (iv), (v), (vi)
59
[, (via)] and (vii) of clause (a) and in
60
[clauses (b) and (c)] of sub-section (2)
exceeds ten per cent of the gr oss total income (as r educed by any por tion ther eof
on which income-tax is not payable under any pr ovision of this Act and by any
amount in r espect of which the assessee is entitled to a deduction under any other
pr ovision of this Chapter ), then the amount in excess of ten per cent of the gr oss
total income shall be ignor ed for the pur pose of computing the aggr egate of the
sums in r espect of which deduction is to be allowed under sub-section (1)].
(5) This section applies to donations to any institution or fund r efer r ed to in sub-
clause (iv) of clause (a) of sub-section (2), only if it is established in India for a
char itable pur pose and if it fulfils the following conditions, namely :
61
[(i) wher e the institution or fund der ives any income, such income would
not be liable to inclusion in its total income under the pr ovisions of
sections 11 and 12
62
[* * *]
63
[
64
[***]]
65
[or clause (23AA)]
66
[or clause
(23C)] of section 10 :
S. 80G I.T. ACT, 1961 1.402
54. See r ule 18AAAAA.
55. For notified spor ts associations/ institutions, see Taxmanns Dir ect Taxes Cir cular s.
(3) No deduction shall be allowed under sub-section (1) if the aggr egate of the sums
r efer r ed to in sub-section (2) is less than two hundr ed and fifty r upees.
substitution, sub-section (4) was amended by the Taxation Laws (Amendment) Act, 1970,
with r etr ospective effect fr om 1-4-1968, Finance (No. 2) Act, 1977, w.e.f. 1-4-1978 and
substituted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981.
60. Subst it ut ed for clause (b) by the Finance Act, 2000, w.e.f. 1-4-2001.
61. Restor ed to its or iginal pr ovision by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989. Ear lier , it was substituted by the Dir ect Tax Laws (Amendment) Act, 1987, with
62. Wor ds or clause (22) or clause (22A) omitted by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999. Ear lier or clause (22A) was inser ted by the Finance Act, 1970, w.e.f. 1-4-1970.
64. Wor ds or clause (23) omitted by the Finance Act, 2002, w.e.f. 1-4-2003.
67
[Provided that wher e an institution or fund der ives any income,
being pr ofits and gains of business, the condition that such income
would not be liable to inclusion in its total income under the pr ovisions
of section 11 shall not apply in r elation to such income, if
(a) the institution or fund maintains separ ate books of account in
r espect of such business;
(b) the donations made to the institution or fund ar e not used by it,
dir ectly or indir ectly, for the pur poses of such business; and
(c) the institution or fund issues to a per son making the donation a
cer tificate to the effect that it maintains separ ate books of
account in r espect of such business and that the donations
r eceived by it will not be used, dir ectly or indir ectly, for the
pur poses of such business;]]
(ii) the instr ument under which the institution or fund is constituted does
not, or the r ules gover ning the institution or fund do not, contain any
pr ovision for the tr ansfer or application at any time of the whole or
any par t of the income or assets of the institution or fund for any
pur pose other than a char itable pur pose;
(iii) the institution or fund is not expr essed to be for the benefit of any
par ticular r eligious community or caste;
(iv) the institution or fund maintains r egular accounts of its r eceipts and
expenditur e;
68
[* * *]
(v) the institution or fund is either constituted as a public char itable tr ust
or is r egister ed under the Societies Registr ation Act, 1860 (21 of 1860),
or under any law cor r esponding to that Act in for ce in any par t of India
or under section 25
69
of the Companies Act, 1956 (1 of 1956), or is a
Univer sity established by law, or is any other educational institution
r ecognised by the Gover nment or by a Univer sity established by law,
or affiliated to any Univer sity established by law,
70
[
71
[***]] or is an
institution financed wholly or in par t by the Gover nment or a local
author ity;
72
[and]
73
[(vi) in r elation to donations made after the 31st day of Mar ch, 1992, the
institution or fund is for the time being appr oved by the Commis-
sioner in accor dance with the r ules
74
made in this behalf :
68. Wor d and omitted by the Finance Act, 1994, w.e.f. 1-4-1994.
70. Inser ted by the Finance Act, 1973, w.e.f. 1-4-1974. Restor ed to its or iginal expr ession by the
Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Ear lier , it was omitted by the
Dir ect Tax Laws (Amendment) Act, 1987, with effect fr om the same date.
71. Wor ds or is an institution appr oved by the Centr al Gover nment for the pur poses of clause
(23) of section 10, omitted by the Finance Act, 2002, w.e.f. 1-4-2003.
74. See r ule 11AA and For m No. 10G.
Provided that any appr oval shall have effect for such assessment year
or year s, not exceeding
75
[five] assessment year s, as may be specified
in the appr oval.]
76
[(5A) Wher e a deduction under this section is claimed and allowed for any
assessment year in r espect of any sum specified in sub-section (2), the sum in
r espect of which deduction is so allowed shall not qualify for deduction under
any other pr ovision of this Act for the same or any other assessment year .]
77
[(5B) Notwithstanding anything contained in clause (ii) of sub-section (5) and
Explan ation 3, an institution or fund which incur s expenditur e, dur ing any
pr evious year , which is of a r eligious natur e for an amount not exceeding five per
cent of its total income in that pr evious year shall be deemed to be an institution
or fund to which the pr ovisions of this section apply.]
78
[(5C) This
79
[section] applies in r elation to amounts r efer r ed to in clause (d) of
sub-section (2) only if the tr ust or institution or fund is established in India for a
char itable pur pose and it fulfils the following conditions, namely :
(i) it is appr oved in ter ms of clause (vi) of sub-section (5);
(ii) it maintains separ ate accounts of income and expenditur e for pr ovid-
ing r elief to the victims of ear thquake in Gujar at;
(iii) the donations made to the tr ust or institution or fund ar e applied only
for pr oviding r elief to the ear thquake victims of Gujar at on or befor e
the 31st day of Mar ch,
80
[2004];
81
[(iv) the amount of donation r emaining unutilised on the 31st day of
Mar ch,
80
[2004] is tr ansfer r ed to the Pr ime Minister s National Relief
Fund on or befor e the 31st day of Mar ch,
80
[2004];]
(v) it r ender s accounts of income and expenditur e to such author ity
82
and
in such manner as may be pr escr ibed
83
, on or befor e the 30th day of
June,
80
[2004].]
Explan ation 1.An institution or fund established for the benefit of Scheduled
Castes, backwar d classes, Scheduled Tr ibes or of women and childr en shall not
be deemed to be an institution or fund expr essed to be for the benefit of a
r eligious community or caste within the meaning of clause (iii) of sub-section (5).
S. 80G I.T. ACT, 1961 1.404
75. Substituted for thr ee by the Finance Act, 1993, w.e.f. 1-4-1993.
79. Substituted for sub-section by the Finance Act, 2002, w.r .e.f. 3-2-2001.
80. Substituted for 2003 by the Finance Act, 2003, w.r .e.f. 3-2-2001. Ear lier , 2003 was
81. Substituted by the Finance Act, 2002, w.r .e.f. 3-2-2001. Pr ior to its substitution, clause (iv)
r ead as under :
(iv ) the amount of donation r emaining unutilised on the 31st day of Mar ch, 2002 is
tr ansfer r ed to the Pr ime Minister s National Relief Fund on or befor e the 31st day
of Mar ch, 2002;
82. Pr escr ibed author ity under r ule 18AAAA, is Dir ector Gener al of Income-tax (Exemptions).
83. See r ule 18AAAA and For m No.10AA.
84
[Explan ation 2.For the r emoval of doubts, it is her eby declar ed that a
deduction to which the assessee is entitled in r espect of any donation made to an
institution or fund to which sub-section (5) applies shall not be denied mer ely on
either or both of the following gr ounds, namely :
85
[(i) that, subsequent to the donation, any par t of the income of the
institution or fund has become char geable to tax due to non-
compliance with any of the pr ovisions of section 11,
86
[section 12 or
section 12A];
(ii) that, under clause (c) of sub-section (1) of section 13, the exemption
under section 11
86
[or section 12] is denied to the institution or fund
in r elation to any income ar ising to it fr om any investment r efer r ed
to in clause (h ) of sub-section (2) of section 13 wher e the aggr egate of
the funds invested by it in a concer n r efer r ed to in the said clause (h )
does not exceed five per cent of the capital of that concer n.]]
Explan ation 3.In this section, char itable pur pose does not include any
pur pose t he whole or subst ant ially t he whole of which is of a r eligious
natur e.
87
[Explan ation 4.For the pur poses of this section, an association or institution
having as its object the contr ol, super vision, r egulation or encour agement in
India of such games or spor ts as the Centr al Gover nment may, by notification in
the Official Gazette
88
, specify in this behalf, shall be deemed to be an institution
established in India for a char itable pur pose.]
89
[Explan ation 5.For the r emoval of doubts, it is her eby declar ed that no
deduction shall be allowed under this section in r espect of any donation unless
such donation is of a sum of money.]
(6)
90
[* * *]
85. Restor ed to its or iginal position by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989. Ear lier , clauses (i) and (ii) wer e substituted by the Dir ect Tax Laws (Amendment)
Act, 1987, with effect fr om the same date.
4, as inser ted by the Finance Act, 1973, w.e.f. 1-4-1974, later on omitted by the Dir ect Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and r estor ed to its or iginal pr ovision by the
Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, r ead as under :
Explan ation 4.For the pur poses of this section, an association appr oved by the Centr al
Gover nment for the pur poses of clause (23) of section 10 shall also be deemed to be an
institution, and ever y association or institution appr oved by the Centr al Gover nment for
the pur poses of the said clause shall be deemed to be an institution established in India
for a char itable pur pose.
88. For notified games and spor ts, see Taxmanns Master Guide to Income-tax Act.
91
[Deductions in respect of rents paid.
92
80GG. In computing the total income of an assessee, not being an assessee
having any income falling within clause (13A) of section 10, ther e shall
be deducted any expenditur e incur r ed by him in excess of ten per cent of his total
income towar ds payment of r ent (by whatever name called) in r espect of any
fur nished or unfur nished accommodation occupied by him for the pur poses of
his own r esidence, to the extent to which such excess expenditur e does not
exceed two thousand r upees per month or twenty-five per cent of his total
income for the year , whichever is less, and subject to such other conditions or
limitations as may be pr escr ibed
93
, having r egar d to the ar ea or place in which
such accommodation is situated and other r elevant consider ations :
Provided that nothing in this section shall apply to an assessee in any case wher e
any r esidential accommodation is
(i) owned by the assessee or by his spouse or minor child or , wher e such
assessee is a member of a Hindu undivided family, by such family at
the place wher e he or dinar ily r esides or per for ms duties of his office
or employment or car r ies on his business or pr ofession; or
(ii) owned by the assessee at any other place, being accommodation in
the occupation of the assessee, the value of which is to be deter mined
94
[under clause (a) of sub-section (2) or , as the case may be, clause (a)
of sub-section (4) of section 23].
Explan ation .In this section, the expr essions ten per cent of his total income
and twenty-five per cent of his total income shall mean ten per cent or twenty-
five per cent, as the case may be, of the assessees total income befor e allowing
deduction for any expenditur e under this section.]
95
[Deduction in respect of certain donations for scientific research or rural
development.
80GGA. (1) In computing the total income of an assessee, ther e shall be
deducted, in accor dance with and subject to the pr ovisions of this
section, the sums specified in sub-section (2).
S. 80GGA I.T. ACT, 1961 1.406
91. Reintr oduced by the Finance (No. 2) Act, 1998, w.r .e.f. 1-4-1998. Ear lier or iginal section
80GG, as inser ted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 and
fur ther amended by the Finance Act, 1982, w.e.f. 1-4-1983, the Finance Act, 1983, w.e.f.
1-4-1984, the Finance Act, 1986, w.e.f. 1-4-1987 and the Finance (No. 2) Act, 1996, w.e.f.
1-4-1997, was omitted by the Finance Act, 1997, w.e.f. 1-4-1998.
Income-tax Act.
93. Rule 11B pr ovides that to claim deduction under section 80GG, the assessee should file
a declar ation in For m No. 10BA.
94. Substituted for under sub-clause (i) of clause (a) or , as the case may be, clause (b) of sub-
section (2) of section 23 by the Finance Act, 2001, w.e.f. 1-4-2002.
95. Inser ted by the Finance Act, 1979, w.e.f. 1-4-1980. Restor ed to its or iginal position by the
Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Ear lier section 80GGA was
omitted by the Dir ect Tax Laws (Amendment) Act, 1987, with effect fr om the same date.
(a) any sum paid by the assessee in the pr evious year to a scientific
r esear ch association which has as its object the under taking of
scientific r esear ch or to a Univer sity, college or other institution to be
used for scientific r esear ch :
Provided that such association, Univer sity, college or institution is for
the time being appr oved for the pur poses of clause (ii) of sub-section
(1) of section 35;
96
[(aa) any sum paid by the assessee in the pr evious year to a Univer sity,
college or other institution to be used for r esear ch in social science or
statistical r esear ch :
Provided that such Univer sity, college or institution is for the time
being appr oved for the pur poses of clause (iii) of sub-section (1) of
section 35.]
97
r espect of any sum paid to a scientific r esear ch association, Univer -
sity, college or other institution to which clause (a) or clause (aa)
applies, shall not be denied mer ely on the gr ound that, subsequent to
the payment of such sum by the assessee, the appr oval to such
association, Univer sity, college or other institution r efer r ed to in
clause (a) or clause (aa), as the case may be, has been withdr awn;]
(b) any sum paid by the assessee in the pr evious year
(i) to an association or institution, which has as its object the
under taking of any pr ogr amme of r ur al development, to be used
for car r ying out any pr ogr amme of r ur al development appr oved
for the pur poses of section 35CCA; or
(ii) to an association or institution which has as its object the tr aining
of per sons for implementing pr ogr ammes of r ur al development :
98
[Provided that the assessee fur nishes the cer tificate r efer r ed to in
sub-section (2) or , as the case may be, sub-section (2A) of section
35CCA fr om such association or institution.]
97
r espect of any sum paid to an association or institution for car r ying
out the pr ogr amme of r ur al development to which this clause applies,
shall not be denied mer ely on the gr ound that subsequent to the
payment of such sum by the assessee, the appr oval gr anted to such
pr ogr amme, or as the case may be, to the association or institution has
been withdr awn;]
99
[(bb) any sum paid by the assessee in the pr evious year to a public sector
company or a local author ity or to an association or institution
1.407 CH. VI-A - DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS S. 80GGA
appr oved by the National Committee, for car r ying out any eligible
pr oject or scheme :
Provided that the assessee fur nishes the cer tificate r efer r ed to in
clause (a) of sub-section (2) of section 35AC fr om such public sector
company or local author ity or , as the case may be, association or
institution.
1
[Explan ation 1. The deduction, to which the assessee is entitled in
r espect of any sum paid to a public sector company, or to a local
author ity or to an association or institution for car r ying out the
eligible pr oject or scheme r efer r ed to in section 35AC, shall not be
denied mer ely on the gr ound that subsequent to the payment of such
sum by the assessee,
(a) the appr oval gr anted to such association or institution has been
withdr awn; or
(b) the notification notifying the eligible pr oject or scheme r efer r ed
to in section 35AC car r ied out by the public sector company, or
local author ity or association or institution has been withdr awn.]
Explan ation
2
[2].For the pur poses of this clause, the expr essions
National Committee and eligible pr oject or scheme shall have the
meanings r espectively assigned to them in the Explan ation to section
35AC;]
3
[(c)
4
[any sum paid by the assessee in any pr evious year ending on or
befor e the 31st day of Mar ch, 2002] to an association or institution,
which has as its object the under taking of any pr ogr amme of conser -
vation of natur al r esour ces
5
[or of affor estation], to be used for
car r ying out any pr ogr amme of conser vation of natur al r esour ces
5
[or of affor estation] appr oved for the pur poses of section 35CCB :
Provided that the association or institution is for the time being
appr oved for the pur poses of sub-section (2) of section 35CCB;]
5
[(cc)
4
[any sum paid by the assessee in any pr evious year ending on or
befor e the 31st day of Mar ch, 2002] to such fund for affor estation as
is notified by the Centr al Gover nment under clause (b) of sub-section
(1) of section 35CCB;]
6
[(d) any sum paid by the assessee in the pr evious year to a r ur al develop-
ment fund set up and notified by the Centr al Gover nment for the
pur poses of clause (c) of sub-section (1) of section 35CCA;]
S. 80GGA I.T. ACT, 1961 1.408
2. Renumber ed as Explan ation 2, ibid.
4. Substituted for any sum paid by the assessee in the pr evious year by the Finance Act,
2002, w.e.f. 1-4-2003.
7
[(e) any sum paid by the assessee in the pr evious year to the National
Ur ban Pover ty Er adication Fund set up and notified by the Centr al
Gover nment for the pur poses of clause (d) of sub-section (1) of section
35CCA.]
(3) Notwithstanding anything contained in sub-section (1), no deduction under
this section shall be allowed in the case of an assessee whose gr oss total income
includes income which is char geable under the head Pr ofits and gains of
assessment year in r espect of any payments of the natur e specified in sub-section
(2), deduction shall not be allowed in r espect of such payments under any other
pr ovision of this Act for the same or any other assessment year .]]
8
[Deduction in respect of contributions given by companies to political parties.
80GGB. In computing the total income of an assessee, being an Indian company,
ther e shall be deducted any sum contr ibuted by it, in the pr evious year
to any political par ty.
Explan ation .For the r emoval of doubts, it is her eby declar ed that for the
pur poses of this section, the wor d contr ibute, with its gr ammatical var iation,
has the meaning assigned to it under section 293A
9
of the Companies Act, 1956
(1 of 1956).
Deduction in respect of contributions given by any person to political parties.
80GGC. In computing the total income of an assessee, being any per son, except
local author ity and ever y ar tificial jur idical per son wholly or par tly
funded by the Gover nment, ther e shall be deducted any amount of contr ibution
made by him, in the pr evious year , to a political par ty.
Explan ation .For the pur poses of sections 80GGB and 80GGC, political par ty
means a political par ty r egister ed under section 29A of the Repr esentation of the
People Act, 1951 (43 of 1951).]
C.Deduction s in respect of certain in com es
Deduction in case of new industrial undertakings employing displaced persons,
etc.
80H. [Om itted by th e Taxation Laws (Am en dm en t) Act, 1975, w.e.f. 1-4-1976.
Origin ally, it was in serted by th e Fin an ce (No. 2) Act, 1967, w.e.f. 1-4-1968.]
10
[Deduction in respect of profits and gains from newly established industrial
undertakings or hotel business in backward areas.
11
80HH. (1) Wher e the gr oss total income of an assessee includes any pr ofits
and gains der ived
12
fr om an industr ial under taking
12
, or the business of
1.409 CH. VI-A - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80HH
11. See also Cir cular No. 484, dated 1-5-1987. For details, see Taxmanns Dir ect Taxes Cir cular s.
12. For the meaning of the ter ms/ expr essions der ived, industr ial under taking, manufac-
tur e or pr oduce, ar ticles and it employs, see Taxmanns Dir ect Taxes Manual, Vol. 3.
a hotel, to which this section applies, ther e shall, in accor dance with and subject
to the pr ovisions of this section, be allowed, in computing the total income of the
assessee, a deduction fr om such pr ofits and gains of an amount equal to twenty
per cent ther eof.
(i) it has begun or begins to manufactur e or pr oduce
13
ar ticles
13
after the
31st day of December , 1970
14
[but befor e the 1st day of Apr il, 1990],
in any backwar d ar ea;
alr eady in existence in any backwar d ar ea :
Provided that this condition shall not apply in r espect of any industr ial
under taking which is for med as a r esult of the r e-establishment,
stances and within the per iod specified in that section;
pr eviously used for any pur pose in any backwar d ar ea;
(iv)
13
it employs ten or mor e wor ker s
15
in a manufactur ing pr ocess car r ied
on with the aid of power , or employs twenty or mor e wor ker s in a
manufactur ing pr ocess car r ied on without the aid of power .
Explan ation .Wher e any machiner y or plant or any par t ther eof pr eviously
used for any pur pose in any backwar d ar ea is tr ansfer r ed to a new business in
that ar ea or in any other backwar d ar ea and the total value of the machiner y or
plant or par t so tr ansfer r ed does not exceed twenty per cent of the total value of
the machiner y or plant used in the business, then, for the pur poses of clause (iii)
of this sub-section, the condition specified ther ein shall be deemed to have been
fulfilled.
(3) This section applies to the business of any hotel, wher e all the following
(i) the business of the hotel has star ted or star ts functioning after the 31st
day of December , 1970
16
[but befor e the 1st day of Apr il, 1990], in any
backwar d ar ea;
(ii) the business of the hotel is not for med by the splitting up, or the
r econstr uction, of a business alr eady in existence;
(iii) the hotel is for the time being appr oved for the pur poses of this
sub-section by the Centr al Gover nment.
total income in r espect of each of the ten assessment year s beginning with the
assessment year r elevant to the pr evious year in which the industr ial under tak-
S. 80HH I.T. ACT, 1961 1.410
13. For the meaning of the ter ms/ expr essions der ived, industr ial under taking, manufac-
tur e or pr oduce, ar ticles and it employs, see Taxmanns Dir ect Taxes Manual, Vol. 3.
15. For the meaning of the ter m wor ker s, see Taxmanns Dir ect Taxes Manual, Vol. 3.
ing begins to manufactur e or pr oduce ar ticles or the business of the hotel star ts
functioning :
Provided that,
(i) in the case of an industr ial under taking which has begun to manufac-
tur e or pr oduce ar ticles, and
(ii) in the case of the business of a hotel which has star ted functioning,
after the 31st day of December , 1970, but befor e the 1st day of Apr il, 1973, this
sub-section shall have effect as if the r efer ence to ten assessment year s wer e a
r efer ence to ten assessment year s as r educed by the number of assessment year s
which expir ed befor e the 1st day of Apr il, 1974.
the deduction under sub-section (1) shall not be admissible unless the accounts
of the industr ial under taking or the business of the hotel for the pr evious year
r elevant to the assessment year for which the deduction is claimed have been
audited by an accountant as defined in the Explan ation below sub-section (2) of
section 288 and the assessee fur nishes, along with his r etur n of income, the r epor t
of such audit in the prescribed form
17
duly signed and verified by such accountant.
(6) Wher e any goods held for the pur poses of the business of the industr ial
under taking or the hotel ar e tr ansfer r ed to any other business car r ied on by the
assessee, or wher e any goods held for the pur poses of any other business car r ied
on by the assessee ar e tr ansfer r ed to the business of the industr ial under taking
or the hotel and, in either case, the consider ation, if any, for such tr ansfer as
r ecor ded in the accounts of the business of the industr ial under taking or the hotel
does not cor r espond to the mar ket value of such goods as on the date of the
tr ansfer , then, for the pur poses of the deduction under this section, the pr ofits
and gains of the industr ial under taking or the business of the hotel shall be
computed as if the tr ansfer , in either case, had been made at the mar ket value
of such goods as on that date :
Provided that wher e, in the opinion of the
18
[Assessing] Officer , the computation
of the pr ofits and gains of the industr ial under taking or the business of the hotel
in the manner her einbefor e specified pr esents exceptional difficulties, the
18
[Assessing] Officer may compute such pr ofits and gains on such r easonable
basis as he may deem fit.
Explan ation .In this sub-section, mar ket value in r elation to any goods means
the pr ice that such goods would or dinar ily fetch on sale in the open mar ket.
(7) Wher e it appear s to the
18
[Assessing] Officer that, owing to the close
connection between the assessee car r ying on the business of the industr ial
under taking or the hotel to which this section applies and any other per son, or
for any other r eason, the cour se of business between them is so ar r anged that
the business tr ansacted between them pr oduces to the assessee mor e than the
or dinar y pr ofits which might be expected to ar ise in the business of the industr ial
1.411 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80HH
17. See r ule 18B and For m No. 10C for for m of audit r epor t.
1-4-1988.
under taking or the hotel, the
19
[Assessing] Officer shall, in computing the pr ofits
and gains of the industr ial under taking or the hotel for the pur poses of the
deduction under this section, take the amount of pr ofits as may be r easonably
deemed to have been der ived ther efr om.
(8)
20
[***]
(9) In a case wher e the assessee is entitled also to the deduction under
21
[section
80-I or ] section 80J in r elation to the pr ofits and gains of an industr ial under taking
or the business of a hotel to which this section applies, effect shall fir st be given
to the pr ovisions of this section.
22
[(9A) Wher e a deduction in r elation to the pr ofits and gains of a small-scale
industr ial under taking to which section 80HHA applies is claimed and allowed
under that section for any assessment year , deduction in r elation to such pr ofits
and gains shall not be allowed under this section for the same or any other
assessment year .]
(10) Nothing contained in this section shall apply in r elation to any under taking
engaged in mining.
23
[(11) For the pur poses of this section, backwar d ar ea means such ar ea as the
Centr al Gover nment may, having r egar d to the stage of development of that
ar ea, by notification
24
in the Official Gazette, specify in this behalf :
Provided that any notification under this sub-section may be issued so as to have
r etr ospective effect to a date not ear lier than the 1st day of Apr il, 1983.]
25
[Deduction in respect of profits and gains from newly established small-scale
industrial undertakings in certain areas.
26
80HHA. (1) Wher e the gr oss total income of an assessee includes any pr ofits
and gains der ived fr om a small-scale industr ial under taking to which
this section applies, ther e shall, in accor dance with and subject to the pr ovisions
of this section, be allowed, in computing the total income of the assessee, a
deduction fr om such pr ofits and gains of an amount equal to twenty per cent
ther eof.
(2) This section applies to any small-scale industr ial under taking which fulfils
all the following conditions, namely :
(i) it begins to manufactur e or pr oduce ar ticles after the 30th day of
September , 1977
27
[but befor e the 1st day of Apr il, 1990], in any r ur al
ar ea ;
S. 80HHA I.T. ACT, 1961 1.412
1-4-1988.
w.e.f. 10-9-1986.
24. For notified backwar d ar eas, see Taxmanns Dir ect Taxes Cir cular s.
Provided that this condition shall not apply in r espect of any small-
scale industr ial under taking which is for med as a r esult of the r e-
establishment, r econstr uction or r evival by the assessee of the busi-
ness of any such industr ial under taking as is r efer r ed to in section
33B, in the cir cumstances and within the per iod specified in that
section ;
pr eviously used for any pur pose ;
(iv) it employs ten or mor e wor ker s in a manufactur ing pr ocess car r ied
on with the aid of power , or employs twenty or mor e wor ker s in a
Explan ation .Wher e in the case of a small-scale industr ial under taking, any
machiner y or plant or any par t ther eof pr eviously used for any pur pose is
tr ansfer r ed to a new business and the total value of the machiner y or plant or par t
so tr ansfer r ed does not exceed twenty per cent of the total value of the
machiner y or plant used in the business, then, for the pur poses of clause (iii) of
this sub-section, the condition specified ther ein shall be deemed to have been
fulfilled.
(3) The deduction specified in sub-section (1) shall be allowed in computing
the total income
28
[of each of the ten pr evious year s beginning with the pr evious
year in which the industr ial under taking] begins to manufactur e or pr oduce
ar ticles:
29
[Provided that such deduction shall not be allowed in computing the total
income of any of the ten pr evious year s afor esaid in r espect of which the
industr ial under taking is not a small-scale industr ial under taking within the
meaning of clause (b) of the Explan ation below sub-section (8).]
(4) Wher e the assessee is a per son, other than a company or a co-oper ative
society, the deduction under sub-section (1) shall not be admissible unless the
accounts of the small-scale industr ial under taking for the pr evious year r elevant
to the assessment year for which the deduction is claimed have been audited by
an accountant as defined in the Explan ation below sub-section (2) of section 288
30
(5) The pr ovisions of sub-sections (6) and (7) of section 80HH shall, so far as may
be, apply in r elation to the computation of the pr ofits and gains of a small-scale
industr ial under taking for the pur poses of the deduction under this section as
they apply in r elation to the computation of the pr ofits and gains of an industr ial
under taking for the pur poses of the deduction under that section.
31
[section
80-I or ] section 80J in r elation to the pr ofits and gains of a small-scale industr ial
1.413 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80HHA
28. Substituted for in r espect of each of the ten assessment year s beginning with the
assessment year r elevant t o t he pr evious year in which t he small-scale indust r ial
under taking by the Finance Act, 1981, w.e.f. 1-4-1981.
30. See r ule 18BB and For m No. 10CC for for m of audit r epor t.
S. 80HHB I.T. ACT, 1961 1.414
under taking to which this section applies, effect shall fir st be given to the
(7) Wher e a deduction in r elation to the pr ofits and gains of a small-scale
industr ial under taking to which section 80HH applies is claimed and allowed
under that section for any assessment year , deduction in r elation to such pr ofits
and gains shall not be allowed under this section for the same or any other
assessment year .
(8) Nothing contained in this section shall apply in r elation to any small-scale
industr ial under taking engaged in mining.
32
[(a) r ur al ar ea means any ar ea other than
(i) an ar ea which is compr ised within the jur isdiction of a municipa-
lity (whether known as a municipality, municipal cor por ation,
notified ar ea committee, town ar ea committee, town committee
or by any other name) or a cantonment boar d and which has a
population of not less than ten thousand accor ding to the last
pr eceding census of which the r elevant figur es have been pub-
lished befor e the fir st day of the pr evious year ; or
(ii) an ar ea within such distance, not being mor e than fifteen kilo-
metr es fr om the local limits of any municipality or cantonment
boar d r efer r ed to in sub-clause (i), as the Centr al Gover nment
may, having r egar d to the stage of development of such ar ea
(including the extent of, and scope for , ur banisation of such ar ea)
and other r elevant consider ations specify in this behalf by notifi-
cation
33
in the Official Gazette ;]
34
[(b) an industr ial under taking shall be deemed to be a small-scale indus-
tr ial under taking which is, on the last day of the pr evious year ,
r egar ded as a small-scale industr ial under taking under section 11B
35
of the Industr ies (Development and Regulation) Act, 1951 (65 of
1951)].
36
[Deduction in respect of profits and gains from projects outside India.
37
80HHB. (1) Wher e the gr oss total income of an assessee being an Indian
company or a per son (other than a company) who is r esident in India
includes any pr ofits and gains der ived fr om the business of
38
33. For specified ar eas, see Taxmanns Dir ect Taxes Cir cular s.
34. Substituted by the Finance Act, 1999, w.r .e.f. 1-4-1978. Pr ior to its substitution, clause (b)
was amended by the Finance Act, 1981, w.e.f. 1-4-1981 and Finance Act, 1986, w.r .e.f.
1-4-1985.
35. For text of section 11B of the Industr ies (Development and Regulation) Act, 1951, see
Appendix.
38. For the meaning of the expr ession business of the execution of a for eign pr oject, see
(a) the execution of a for eign pr oject
39
under taken by the assessee in
pur suance of a contr act enter ed into by him, or
(b) the execution of any wor k under taken by him and for ming par t of a
for eign pr oject
39
under taken by any other per son in pur suance of a
contr act enter ed into by such other per son,
with the Gover nment of a for eign State or any statutor y or other public author ity
or agency in a for eign State, or a for eign enter pr ise, ther e shall, in accor dance
with and subject to the pr ovisions of this section, be allowed, in computing the
total income of the assessee,
40
[a deduction fr om such pr ofits and gains of an
amount equal to
(i) for ty per cent ther eof for an assessment year beginning on the 1st day
of Apr il, 2001;
(ii) thir ty per cent ther eof for an assessment year beginning on the 1st day
of Apr il, 2002;
(iii) twenty per cent ther eof for an assessment year beginning on the 1st
day of Apr il, 2003;
(iv) ten per cent ther eof for an assessment year beginning on the 1st day
of Apr il, 2004,
and no deduction shall be allowed in r espect of the assessment year beginning
on the 1st day of Apr il, 2005 and any subsequent assessment year ] :
Provided that the consider ation for the execution of such pr oject or , as the case
may be, of such wor k is payable in conver tible for eign exchange.
tion Act, 1973 (46 of 1973), and any r ules made ther eunder ;
(b) for eign pr oject means a pr oject for
(i) the constr uction of any building, r oad, dam, br idge or other
str uctur e outside India ;
(ii) the assembly or installation of any machiner y or plant outside
India ;
(iii) the execution of such other wor k (of whatever natur e) as may be
pr escr ibed
41
.
(3) The deduction under this section shall be allowed only if the following
(i) the assessee maintains separ ate accounts in r espect of the pr ofits and
gains der ived fr om the business of the execution of the for eign
1.415 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80HHB
39. For the meaning of the expr ession business of the execution of a for eign pr oject, see
40. Substituted for a deduction fr om such pr ofits and gains of an amount equal to fifty per
cent ther eof by the Finance Act, 2000, w.e.f. 1-4-2001. Pr ior to its substitution, the quoted
por tion was amended by the Income-tax (Amendment) Act, 1986, w.e.f. 1-4-1987.
41. See r ule 17D.
pr oject, or , as the case may be, of the wor k for ming par t of the for eign
pr oject under taken by him and, wher e the assessee is a per son other
than an Indian company or a co-oper ative society, such accounts
have been audited by an accountant as defined in the Explan ation
below sub-section (2) of section 288 and the assessee fur nishes, along
with his r etur n of income, the r epor t of such audit in the pr escr ibed
for m
42
duly signed and ver ified by such accountant ;
43
[(ia) the assessee fur nishes, along with his r etur n of income, a cer tificate
44
fr om an accountant as defined in the
Explan ation below sub-section (2) of section 288, duly signed and
ver ified by such accountant, cer tifying that the deduction has been
cor r ectly claimed in accor dance with the pr ovisions of this section ; ]
(ii) an amount equal to
45
[such per centage of the pr ofits and gains as is
r efer r ed to in sub-section (1) in r elation to the r elevant assessment
year ] is debited to the pr ofit and loss account of the pr evious year in
r espect of which the deduction under this section is to be allowed and
cr edited to a r eser ve account (to be called the For eign Pr ojects
Reser ve Account) to be utilised by the assessee dur ing a per iod of five
year s next following for the pur poses of his business other than for
distr ibution by way of dividends or pr ofits ;
(iii) an amount equal to
46
year ] is br ought by the assessee in conver tible for eign exchange into
India, in accor dance with the pr ovisions of the For eign Exchange
Regulation Act, 1973 (46 of 1973), and any r ules made ther eunder ,
within a per iod of six months fr om the end of the pr evious year
r efer r ed to in clause (ii) or ,
47
[within such fur ther per iod as the
competent author ity may allow in this behalf ] :
Provided that wher e the amount cr edited by the assessee to the For eign Pr ojects
Reser ve Account in pur suance of clause (ii) or the amount br ought into India by
S. 80HHB I.T. ACT, 1961 1.416
42. See r ule 18BBA(1) and For m No. 10CCA for for m of audit r epor t.
44. See r ule 18BBA(1B) and For m No. 10CCAH.
45. Substituted for fifty per cent of the pr ofits and gains r efer r ed to in sub-section (1) by the
Finance Act, 2000, w.e.f. 1-4-2001. Ear lier the quoted por tion was amended by the Income-
tax (Amendment) Act, 1986, w.e.f. 1-4-1987.
47. Substituted for the por tion beginning with the wor ds wher e the Chief Commissioner and
ending with the wor ds may allow in this behalf by the Finance Act, 1999, w.e.f. 1-6-1999.
Pr ior to its substitution, the said por tion, as amended by the Dir ect Tax Laws (Amendment)
wher e the Chief Commissioner or Commissioner is satisfied (for r easons to be r ecor ded
in wr iting) that the assessee is, for r easons beyond his contr ol, unable to do so within the
said per iod of six months, within such fur ther per iod as the Chief Commissioner or
Commissioner may allow in this behalf :
the assessee in pur suance of clause (iii) or each of the said amounts is less than
48
[such per centage of the pr ofits and gains as is r efer r ed to in sub-section (1) in
r elation to the r elevant assessment year ], the deduction under that sub-section
shall be limited to the amount so cr edited in pur suance of clause (ii) or the
amount so br ought into India in pur suance of clause (iii), whichever is less.
49
[Explan ation .For the pur poses of clause (iii), the expr ession competent
dealings in for eign exchange.]
(4) If at any time befor e the expir y of five year s fr om the end of the pr evious year
in which the deduction under sub-section (1) is allowed, the assessee utilises the
amount cr edited to the For eign Pr ojects Reser ve Account for distr ibution by way
of dividends or pr ofits or for any other pur pose which is not a pur pose of the
business of the assessee, the deduction or iginally allowed under sub-section (1)
shall be deemed to have been wr ongly allowed, and the
50
[Assessing] Officer may,
notwithstanding anything contained in this Act, r ecompute the total income of
the assessee for the r elevant pr evious year and make the necessar y amendment;
and the pr ovisions of section 154 shall, so far as may be, apply ther eto, the per iod
of four year s specified in sub-section (7) of that section being r eckoned fr om the
end of the pr evious year in which the money was so utilised.
(5) Notwithstanding anything contained in any other pr ovision of this Chapter
under the heading C.Deduction s in respect of certain in com es, no par t of the
consider ation or of the income compr ised in the consider ation payable to the
assessee for the execution of a for eign pr oject r efer r ed to in clause (a) of sub-
section (1) or of any wor k r efer r ed to in clause (b) of that sub-section shall qualify
for deduction for any assessment year
51
under any such other pr ovision.]
52
[Deduction in respect of profits and gains from housing projects in certain cases.
80HHBA. (1) Wher e the gr oss total income of an assessee being an Indian
company or a per son (other than a company) who is a r esident in
India includes any pr ofits and gains der ived fr om the execution of a housing
pr oject awar ded to the assessee on the basis of global tender and such pr oject is
aided by the Wor ld Bank, ther e shall, in accor dance with and subject to the
pr ovisions of this section, be allowed, in computing the total income of the
assessee,
53
[a deduction fr om such pr ofits and gains of an amount equal to
(i) for ty per cent ther eof for an assessment year beginning on the 1st day
of Apr il, 2001;
1.417 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80HHBA
1-4-1988.
51. For the meaning of the expr ession any assessment year , see Taxmanns Dir ect Taxes
Manual, Vol. 3.
53. Substituted for a deduction fr om such pr ofits and gains of an amount equal to fifty per
cent ther eof by the Finance Act, 2000, w.e.f. 1-4-2001.
(ii) thir ty per cent ther eof for an assessment year beginning on the 1st day
of Apr il, 2002;
(iii) twenty per cent ther eof for an assessment year beginning on the 1st
(iv) ten per cent ther eof for an assessment year beginning on the 1st day
of Apr il, 2004,
on the 1st day of Apr il, 2005 and any subsequent assessment year ].
(2) The deductions under this section shall be allowed only if the following
(i) the assessee maintains separ ate accounts in r espect of the pr ofits and
gains der ived fr om the business of the execution of the housing
pr oject under taken by him and, wher e the assessee is a per son other
than an Indian company or a co-oper ative society, such accounts
have been audited by an accountant as defined in the Explan ation
below sub-section (2) of section 288 and the assessee fur nishes along
with his r etur n of income the r epor t of such audit in the pr escr ibed
for m
54
duly signed and ver ified by such accountant;
(ii) an amount equal to
55
year ] is debited to the pr ofit and loss account of the pr evious year in
r espect of which the deduction under this section is to be allowed and
cr edited to a r eser ve account (to be called the Housing Pr ojects
Reser ve Account) to be utilised by the assessee dur ing a per iod of five
year s next following for the pur poses of his business other than for
distr ibution by way of dividends or pr ofit :
Provided that wher e the amount cr edited by the assessee to the Housing Pr ojects
Reser ve Account in pur suance of clause (ii) is less than
55
[such per centage of the
pr ofits and gains as is r efer r ed to in sub-section (1) in r elation to the r elevant
assessment year ], the deduction under this section shall be limited to the amount
so cr edited in pur suance of clause (ii).
(3) If at any time befor e the expir y of five year s fr om the end of the pr evious year
in which the deduction under sub-section (1) is allowed, the assessee utilises the
amount cr edited to the Housing Pr ojects Reser ve Account for distr ibution by
way of dividends or pr ofit or for any other pur pose which is not a pur pose of the
business of the assessee, the deduction or iginally allowed under sub-section (1)
shall be deemed to have been wr ongly allowed and the Assessing Officer may,
notwithstanding anything contained in this Act, r ecompute the total income of
the assessee for the r elevant pr evious year and make necessar y amendment and
the pr ovision of section 154 shall, so far as may be, apply ther eto, the per iod of
four year s specified in sub-section (7) of that section being r eckoned fr om the
end of the pr evious year in which the money was so utilised.
S. 80HHBA I.T. ACT, 1961 1.418
54. See r ule 18BBA(1A) and For m No. 10CCAA.
Finance Act, 2000, w.e.f. 1-4-2001.
(4) Notwithstanding anything contained in any other pr ovision of this Chapter
under heading C.Deduction in respect of certain in com es, no par t of the
income payable to the assessee for the execution of a housing pr oject under sub-
section (1) shall qualify for deduction for any assessment year under any other
pr ovision.
(a) housing pr oject means a pr oject for
(i) the constr uction of any building, r oad, br idge or other str uctur e
in any par t of India;
(ii) the execution of such other wor k (of whatever natur e) as may be
pr escr ibed;
(b) Wor ld Bank means the Inter national Bank for Reconstr uction and
Development Bank r efer r ed to in the Inter national Monetar y Fund
and Bank Act, 1945.]
56
[Deduction in respect of profits retained for export business.
57
80HHC.
58
[(1) Wher e an assessee, being an Indian company or a per son
(other than a company) r esident in India, is engaged in the business of
expor t out of India of any goods or mer chandise to which this section applies,
ther e shall, in accor dance with and subject to the pr ovisions of this section, be
allowed, in computing the total income of the assessee,
59
[a deduction to the
extent of pr ofits
60
, r efer r ed to in sub-section (1B),] der ived by the assessee fr om
the expor t of such goods or mer chandise:
Provided that if the assessee, being a holder of an Expor t House Cer tificate or a
Tr ading House Cer tificate (her eafter in this section r efer r ed to as an Expor t
House or a Tr ading House, as the case may be,) issues a cer tificate r efer r ed to
in clause (b) of sub-section (4A), that in r espect of the amount of the expor t
tur nover specified ther ein, the deduction under this sub-section is to be allowed
to a suppor ting manufactur er , then the amount of deduction in the case of the
1.419 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80HHC
56. Substituted by the Finance Act, 1985, w.e.f. 1-4-1986. Or iginal section was inser ted by the
Finance Act, 1983, w.e.f. 1-4-1983.
57. See also Letter [F.No. 178/ 206/ 83-IT (A-I)], dated 22-5-1984, Cir cular No. 466, dated
14-8-1986, Cir cular No. 562, dated 23-5-1990, Cir cular No. 571, dated 1-8-1990, Cir cular No.
575, dated 31-8-1990, Cir cular No. 600, dated 23-4-1991, Cir cular No. 624, dated 23-1-1992,
Cir cular No. 693, dated 17-11-1994, Cir cular No. 729, dated 1-11-1995, Cir cular No. 1/ 2001,
dated 17-1-2001, Cir cular No. Nil, dated 17-2-2004, Clar ifications dated 12-4-2005, 29-6-
2005 & 31-10-2005, Cir cular No. 2/ 2006, dated 17-1-2006 and Cir cular No. 5/ 2006, dated
(1) was amended by the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act,
1986, w.e.f. 1-4-1987.
59. Substituted for a deduction of the pr ofits by the Finance Act, 2000, w.e.f. 1-4-2001. Ear lier
the quoted por tion was amended by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
60. For the meaning of ter m pr ofits and der ived fr om, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
assessee shall be r educed by such amount which bear s to the
61
[total pr ofits
der ived by the assessee fr om the expor t of tr ading goods, the same pr opor tion
as the amount of expor t tur nover specified in the said cer tificate bear s to the total
expor t tur nover of the assessee in r espect of such tr ading goods].
(1A) Wher e the assessee, being a suppor ting manufactur er , has dur ing the
pr evious year , sold goods or mer chandise to any Expor t House or Tr ading House
in r espect of which the Expor t House or Tr ading House has issued a cer tificate
under the pr oviso to sub-section (1), ther e shall, in accor dance with and subject
to the pr ovisions of this section, be allowed in computing the total income of the
assessee,
62
[a deduction to the extent of pr ofits, r efer r ed to in sub-section (1B),]
der ived by the assessee fr om the sale of goods or mer chandise to the Expor t
House or Tr ading House in r espect of which the cer tificate has been issued by
the Expor t House or Tr ading House.]
63
[(1B) For the pur poses of sub-sections (1) and (1A), the extent of deduction of
the pr ofits shall be an amount equal to
(i) eighty per cent ther eof for an assessment year beginning on the 1st
64
[(ii) seventy per cent ther eof for an assessment year beginning on the 1st
(iii) fifty per cent ther eof for an assessment year beginning on the 1st day
of Apr il, 2003;
(iv) thir ty per cent ther eof for an assessment year beginning on the 1st day
of Apr il, 2004,]
on the 1st day of Apr il, 2005 and any subsequent assessment year .]
(2)(a) This section applies to all goods or mer chandise, other than those specified
in clause (b), if the sale pr oceeds
65
of such goods or mer chandise expor ted out of
India ar e
66
[r eceived in, or br ought into, India] by the assessee
67
[(other than the
S. 80HHC I.T. ACT, 1961 1.420
61. Substituted for the wor ds total pr ofits of the expor t business of the assessee the same
pr opor tion as the amount of expor t tur nover specified in the said cer tificate bear s to the
total expor t tur nover of the assessee by the Finance Act, 1992, w.e.f. 1-4-1992.
62. Substituted for a deduction of the pr ofits by the Finance Act, 2000, w.e.f. 1-4-2001. Ear lier
the quoted por tion was amended by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
64. Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Pr ior to their substitution, clauses (ii),
(iii) and (iv) r ead as under :
(ii) sixty per cent ther eof for an assessment year beginning on the 1st day of Apr il, 2002;
(iii) for ty per cent ther eof for an assessment year beginning on the 1st day of Apr il, 2003;
(iv ) twenty per cent ther eof for an assessment year beginning on the 1st day of Apr il,
2004,
65. For the meaning of the expr ession sale pr oceeds .... assessee, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
66. Substituted for r eceivable by the Finance Act, 1990, w.e.f. 1-4-1991.
suppor ting manufactur er )] in conver tible for eign exchange
68
[, within a per iod of
six months fr om the end of the pr evious year or ,
69
[within such fur ther per iod as
the competent author ity may allow in this behalf ].]
70
[Explan ation .For the pur poses of this clause, the expr ession competent
(b) This sect ion does not apply t o t he following goods or mer chandise,
namely :
(i) miner al oil ; and
(ii) miner als
71
and or es
72
[(other than
71
pr ocessed miner als and or es
specified in the Twelfth Schedule)].
73
[Explan ation 1.The sale pr oceeds r efer r ed to in clause (a) shall be deemed to
have been r eceived in India wher e such sale pr oceeds ar e cr edited to a separ ate
account maintained for the pur pose by the assessee with any bank outside India
with the appr oval of the Reser ve Bank of India.
Explan ation 2.For the r emoval of doubts, it is her eby declar ed that wher e any
goods or mer chandise ar e tr ansfer r ed by an assessee to a br anch, office,
war ehouse or any other establishment of the assessee situate outside India and
such goods or mer chandise ar e sold fr om such br anch, office, war ehouse or
establishment, then, such tr ansfer shall be deemed to be expor t out of India of
such goods and mer chandise and the value of such goods or mer chandise
declar ed in the shipping bill or bill of expor t as r efer r ed to in sub-section (1) of
section 50
74
of the Customs Act, 1962 (52 of 1962), shall, for the pur poses of this
section, be deemed to be the sale pr oceeds ther eof.]
75
[(3) For the pur poses of sub-section (1),
(a) wher e the expor t out of India is of goods or mer chandise manufac-
tur ed
76
[or pr ocessed] by the assessee, the pr ofits
77
der ived fr om such
Pr ior to substitution, the said por tion, as inser ted by the Finance Act, 1990, w.e.f. 1-4-1991,
r ead as under :
Commissioner may allow in this behalf.
71. For meaning of the ter m miner als and other than, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
74. For text of section 50 of the Customs Act, 1962, see Appendix.
75. Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Pr ior to substitution, sub-
section (3) was substituted by the Finance Act, 1990, w.e.f. 1-4-1991.
77. For the meaning of the ter m pr ofits, see Taxmanns Dir ect Taxes Manual, Vol. 3.
S. 80HHC I.T. ACT, 1961 1.422
expor t shall be the amount which bear s to the pr ofits
78
of the
business
78
, the same pr opor tion as the expor t tur nover in r espect of
such goods bear s to the total tur nover of the business car r ied on by
the assessee;
(b) wher e the expor t out of India is of tr ading goods, the pr ofits der ived
fr om such expor t shall be the expor t tur nover
78
in r espect of such
tr ading goods as r educed by the dir ect costs and indir ect costs
attr ibutable to such expor t ;
(c) wher e the expor t out of India is of goods or mer chandise manufac-
tur ed
79
[or pr ocessed] by the assessee and of tr ading goods, the pr ofits
der ived fr om such expor t shall,
(i) in r espect of the goods or mer chandise manufactur ed
79
[or
pr ocessed] by the assessee, be the amount which bear s to the
adjusted pr ofits of the business, the same pr opor tion as the
adjusted expor t tur nover in r espect of such goods bear s to the
adjust ed t ot al t ur nover of t he business car r ied on by t he
assessee; and
(ii) in r espect of tr ading goods, be the expor t tur nover in r espect of
such tr ading goods as r educed by the dir ect and indir ect costs
attr ibutable to expor t of such tr ading goods :
Provided that the pr ofits computed under clause (a) or clause (b) or clause (c) of
this sub-section shall be fur ther incr eased by the amount which bear s to ninety
per cent of any sum r efer r ed to in clause (iiia) (not being pr ofits on sale of a
licence acquir ed fr om any other per son), and clauses (iiib) and (iiic) of section 28,
the same pr opor tion as the expor t tur nover bear s to the total tur nover of the
business car r ied on by the assessee :
80
[Provided further that in the case of an assessee having expor t tur nover not
exceeding r upees ten cr or es dur ing the pr evious year , the pr ofits computed
under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect
to the fir st pr oviso, as the case may be, shall be fur ther incr eased by the amount
which bear s to ninety per cent of any sum r efer r ed to in clause (iiid) or clause
(iiie), as the case may be, of section 28, the same pr opor tion as the expor t tur nover
bear s to the total tur nover of the business car r ied on by the assessee :
Provided also that in the case of an assessee having expor t tur nover exceeding
r upees ten cr or es dur ing the pr evious year , the pr ofits computed under clause
(a) or clause (b) or clause (c) of this sub-section or after giving effect to the fir st
pr oviso, as the case may be, shall be fur ther incr eased by the amount which bear s
to ninety per cent of any sum r efer r ed to in clause (iiid) of section 28, the same
pr opor tion as the expor t tur nover bear s to the total tur nover of the business
car r ied on by the assessee, if the assessee has necessar y and sufficient evidence
to pr ove that,
78. For the meaning of the ter ms pr ofits, business and tur nover , see Taxmanns Dir ect
80. Second, thir d and four th pr ovisos inser ted by the Taxation Laws (Amendment) Act, 2005,
w.r .e.f. 1-4-1998.
(a) he had an option to choose either the duty dr awback or the Duty
Entitlement Pass Book Scheme, being the Duty Remission Scheme;
and
(b) the r ate of dr awback cr edit attr ibutable to the customs duty was
higher than the r ate of cr edit allowable under the Duty Entitlement
Pass Book Scheme, being the Duty Remission Scheme :
Provided also that in the case of an assessee having expor t tur nover exceeding
r upees ten cr or es dur ing the pr evious year , the pr ofits computed under clause
(a) or clause (b) or clause (c) of this sub-section or after giving effect to the fir st
pr oviso, as the case may be, shall be fur ther incr eased by the amount which bear s
to ninety per cent of any sum r efer r ed to in clause (iiie) of section 28, the same
pr opor tion as the expor t tur nover bear s to the total tur nover of the business
car r ied on by the assessee, if the assessee has necessar y and sufficient evidence
to pr ove that,
(a) he had an option to choose either the duty dr awback or the Duty Fr ee
Replenishment Cer tificate, being the Duty Remission Scheme; and
(b) the r ate of dr awback cr edit attr ibutable to the customs duty was
higher than the r ate of cr edit allowable under the Duty Fr ee Replen-
ishment Cer tificate, being the Duty Remission Scheme.
Explan ation .For the pur poses of this clause, r ate of cr edit allowable means
the r ate of cr edit allowable under the Duty Fr ee Replenishment Cer tificate, being
the Duty Remission Scheme calculated in the manner as may be notified by the
Centr al Gover nment :]
81
[Provided also that in case the computation under clause (a) or clause (b) or
clause (c) of this sub-section is a loss, such loss shall be set off against the amount
which bear s to ninety per cent of
(a) any sum r efer r ed to in clause (iiia) or clause (iiib) or clause (iiic), as the
case may be, or
(b) any sum r efer r ed to in clause (iiid) or clause (iiie), as the case may be,
of section 28, as applicable in the case of an assessee r efer r ed to in the
second or the thir d or the four th pr oviso, as the case may be,
the same pr opor tion as the expor t tur nover bear s to the total tur nover of the
business car r ied on by the assessee.]
(a) adjusted expor t tur nover means the expor t tur nover as r educed by
the expor t tur nover in r espect of tr ading goods ;
(b) adjusted pr ofits of the business means the pr ofits of the business as
r educed by the pr ofits der ived fr om the business of expor t out of India
of tr ading goods as computed in the manner pr ovided in clause (b) of
sub-section (3) ;
(c) adjusted total tur nover means the total tur nover of the business as
r educed by the expor t tur nover in r espect of tr ading goods ;
81. Fifth pr oviso inser ted by the Taxation Laws (Amendment) Act, 2005, w.r .e.f. 1-4-1992.
(d) dir ect costs means costs dir ectly attr ibutable to the tr ading goods
expor ted out of India including the pur chase pr ice of such goods ;
(e) indir ect costs means costs, not being dir ect costs, allocated in the
r atio of the expor t tur nover in r espect of tr ading goods to the total
tur nover ;
(f) tr ading goods means goods which ar e not manufactur ed
82
[or
pr ocessed] by the assessee.]
83
[(3A) For the pur poses of sub-section (1A), pr ofits der ived by a suppor ting
manufactur er fr om the sale of goods or mer chandise shall be,
(a) in a case where the business carried on by the supporting manufacturer
consists exclusively of sale of goods or mer chandise to one or mor e
Expor t Houses or Tr ading Houses, the pr ofits of the business
84
[***] ;
(b) in a case wher e the business car r ied on by the suppor ting manufac-
tur er does not consist exclusively of sale of goods or mer chandise to
one or mor e Expor t Houses or Tr ading Houses, the amount which
bear s to the pr ofits of the business
84
[***] the same pr opor tion as the
tur nover in r espect of sale to the r espective Expor t House or Tr ading
House bear s to the total tur nover of the business car r ied on by the
assessee.]
85
[(4) The deduction under sub-section (1) shall not be admissible unless the
86
section 288, cer tifying that the deduction has been cor r ectly claimed
87
[in
accor dance with the pr ovisions of this section:]]
88
[Provided that in the case of an under taking r efer r ed to in sub-section (4C), the
assessee shall also fur nish along with the r etur n of income, a cer tificate fr om the
under taking in the special economic zone containing such par ticular s as may be
pr escr ibed
89
, duly cer tified by the auditor auditing the accounts of the under -
taking in the special economic zone under the pr ovisions of this Act or under any
other law for the time being in for ce.]
S. 80HHC I.T. ACT, 1961 1.424
84. Wor ds as computed under the head Pr ofits and gains of business or pr ofession omitted
by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992.
1-4-1987.
86. See r ule 18BBA(3) and For m No. 10CCAC for for m of r epor t of accountant.
87. Substituted for on the basis of the amount of expor t tur nover by the Finance (No. 2) Act,
1991, w.e.f. 1-4-1992. Ear lier , wor ds expor t tur nover wer e substituted for net for eign
exchange r ealisation as deter mined in accor dance with the Impor t and Expor t Policy of
the Gover nment of India for the r elevant per iod by the Dir ect Tax Laws (Amendment)
Act, 1989, w.e.f. 1-4-1989.
89. See r ule 18BBA(2A) and For m No. 10CCABA.
90
[(4A) The deduction under sub-section (1A) shall not be admissible unless the
suppor ting manufactur er fur nishes in the pr escr ibed for m along with his r etur n
of income,
(a) the r epor t of an accountant
91
, as defined in the Explan ation below
sub-section (2) of section 288, cer tifying that the deduction has been
cor r ectly claimed on the basis of the
92
[pr ofits] of the suppor ting
manufactur er in r espect of his sale of goods or mer chandise to the
Expor t House or Tr ading House ; and
(b) a cer tificate fr om the Expor t House or Tr ading House containing
such par ticular s as may be pr escr ibed and ver ified in the manner
pr escr ibed
93
that in r espect of the expor t tur nover mentioned in the
cer tificate, the Expor t House or Tr ading House has not claimed the
deduction under this section :
Provided that the certificate specified in clause (b) shall be duly certified
by the auditor auditing the accounts of the Expor t House or Tr ading
House under the pr ovisions of this Act or under any other law.]
94
[(4B) For the pur poses of computing the total income under sub-section (1) or
sub-section (1A), any income not char ged to tax under this Act shall be excluded.]
95
[(4C) The pr ovisions of this section shall apply to an assessee,
(a) for an assessment year beginning after the 31st day of Mar ch, 2004
and ending befor e the 1st day of Apr il, 2005;
(b) who owns any under taking which manufactur es or pr oduces goods
or mer chandise anywher e in India (outside any special economic
zone) and sells the same to any under taking situated in a special
economic zone which is eligible for deduction under section 10A and
such sale shall be deemed to be expor t out of India for the pur poses
of this section.]
96
[(aa) expor t out of India shall not include any tr ansaction by way of sale
or other wise
97
, in a shop,
98
empor ium or any other establishment
91. See r ule 18BBA(3) and For m No. 10CCAC for for m of r epor t of accountant.
92. Substituted for income by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
93. See r ule 18BBA(2) and For m No. 10CCAB for for m of cer tificate fr om expor t/ tr ading
house to suppor ting manufactur er .
97. For the meaning of expr ession or other wise, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
tax Act.
situate in India, not involving clear ance at any customs station
99
as
defined in the Customs Act, 1962 (52 of 1962) ;]
(b) expor t tur nover means the sale pr oceeds
1
[, r eceived in, or br ought
into, India] by the assessee in conver tible for eign exchange
2
[in
accor dance with clause (a) of sub-section (2)] of any goods or
mer chandise to which this section applies and which ar e expor ted out
of India, but does not include fr eight or insur ance attr ibutable to the
tr anspor t of the goods or mer chandise beyond the customs station
99
as defined in the Customs Act, 1962 (52 of 1962) ;]
3
[(ba) total tur nover shall not include fr eight or insur ance attr ibutable to
the tr anspor t of the goods or mer chandise beyond the customs station
as defined in the Customs Act, 1962 (52 of 1962)
99
:
Provided that in r elation to any assessment year commencing on or
after the 1st day of Apr il, 1991, the expr ession total tur nover shall
have effect as if it also excluded any sum r efer r ed to in clauses (iiia),
(iiib)
4
[, (iiic), (iiid) and (iiie)] of section 28 ;]
5
[(baa) pr ofits of the business means the pr ofits of the business as computed
under the head Pr ofits and gains of business or pr ofession as
r educed by
(1) ninety per cent of any sum r efer r ed to in clauses (iiia), (iiib)
6
[, (iiic), (iiid) and (iiie)] of section 28 or of any r eceipts by way of
br oker age, commission, inter est, r ent, char ges or any other r e-
ceipt of a similar natur e included in such pr ofits
7
; and
(2) t he pr ofit s of any br anch, office, war ehouse or any ot her
establishment of the assessee situate outside India ;]
(bb)
8
[***]
9
[
10
[(c)] Expor t House Cer tificate or Tr ading House Cer tificate means a
valid Expor t House Cer tificate or Tr ading House Cer tificate, as the
S. 80HHC I.T. ACT, 1961 1.426
99. Section 2(13) of the Customs Act, 1962, defines customs station as follows :
(13) customs station means any customs por t, customs air por t or land customs station;
1. Substituted for r eceivable by the Finance Act, 1990, w.e.f. 1-4-1991.
2. Inser ted, ibid.
4. Su bst it u t ed for and (iiic) by t he Taxat ion Laws (Amendment ) Act , 2005, w.r .e.f.
1-4-1998.
6. Su bst it u t ed for and (iiic) by t he Taxat ion Laws (Amendment ) Act , 2005, w.r .e.f.
1-4-1998.
7. For t he meaning of expr ession such pr ofit s, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
8. Omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. Pr ior to its omission, clause (bb)
9. Inser ted by the Finance Act, 1988, w.e.f. 1-4-1989. Clause (c) was ear lier omitted by the
Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Or iginal clause (c) was inser ted
by the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1987.
10. Reletter ed by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
case may be, issued by the Chief Contr oller of Impor ts and Expor ts,
Gover nment of India ;
11
[(d)] suppor ting manufactur er means a per son being an Indian company
or a per son (other than a company) r esident in India,
12
[manufactur -
ing (including pr ocessing) goods] or mer chandise and selling such
goods or mer chandise to an Expor t House or a Tr ading House for the
pur poses of expor t;]
13
[(e) special economic zone shall have the meaning assigned to it in
clause (viii) of the Explan ation 2 to section 10A.]
14
[Deduction in respect of earnings in convertible foreign exchange.
80HHD. (1) Wher e an assessee, being an Indian company or a per son (other
than a company) r esident in India, is engaged in the business of a hotel
or of a tour oper ator , appr oved by the pr escr ibed author ity
15
in this behalf or of
a tr avel agent, ther e shall, in accor dance with and subject to the pr ovisions of this
section, be allowed,
16
[in computing the total income of the assessee
(a) for an assessment year beginning on the 1st day of Apr il, 2001, a
deduction of a sum equal to the aggr egate of
(i) for ty per cent of the pr ofits der ived by him fr om ser vices pr o-
vided to for eign tour ists; and
(ii) so much of the amount not exceeding for ty per cent of the pr ofits
r efer r ed to in sub-clause (i) as is debited to the pr ofit and loss
account of the pr evious year in r espect of which the deduction is
to be allowed and cr edited to a r eser ve account to be utilised for
the pur poses of the business of the assessee in the manner laid
down in sub-section (4);
(b) for an assessment year beginning on the 1st day of Apr il, 2002, a
(i) thir ty per cent of the pr ofits der ived by him fr om ser vices
pr ovided to for eign tour ists; and
1.427 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80HHD
12. Substituted for manufactur ing goods by the Finance Act, 1990, w.e.f. 1-4-1991.
15. The pr escr ibed author ity under r ule 18BBA(5) is Dir ector Gener al, Dir ector ate Gener al of
Tour ism, Gover nment of India.
16. Substituted for the por tion beginning with the wor ds in computing the total income of
the assessee, a deduction of a sum equal to the aggr egate of and ending with the wor ds
manner laid down in sub-section (4) : by the Finance Act, 2000, w.e.f. 1-4-2001. Pr ior to
its substitution, the quoted por tion r ead as under :
in computing the total income of the assessee, a deduction of a sum equal to the aggr egate
of
(a) fifty per cent of the pr ofits der ived by him fr om ser vices pr ovided to for eign
t our ist s ; and
(b) so much of the amount out of the r emaining pr ofits r efer r ed to in clause (a) as is
debited to the pr ofit and loss account of the pr evious year in r espect of which
the deduction is to be allowed and cr edited to a r eser ve account to be utilised for
the pur poses of the business of the assessee in the manner laid down in sub-section
(4) :
(ii) so much of the amount not exceeding thir ty per cent of the pr ofits
r efer r ed to in sub-clause (i) as is debited to the pr ofit and loss
account of the pr evious year in r espect of which the deduction is
to be allowed and cr edited to a r eser ve account to be utilised for
the pur poses of the business of the assessee in the manner laid
down in sub-section (4);
(c) for an assessment year beginning on the 1st day of Apr il, 2003, a
(i)
17
[twenty-five] per cent of the pr ofits der ived by him fr om ser -
vices pr ovided to for eign tour ists; and
(ii) so much of the amount not exceeding
17
[twenty-five] per cent of
the pr ofits r efer r ed to in sub-clause (i) as is debited to the pr ofit
and loss account of the pr evious year in r espect of which the
deduction is to be allowed and cr edited to a r eser ve account to be
utilised for the pur poses of the business of the assessee in the
manner laid down in sub-section (4);
(d) for an assessment year beginning on the 1st day of Apr il, 2004, a
(i)
18
[fifteen] per cent of the pr ofits der ived by him fr om ser vices
pr ovided to for eign tour ists; and
(ii) so much of the amount not exceeding
18
[fifteen] per cent of the
pr ofits r efer r ed to in sub-clause (i) as is debited to the pr ofit and
loss account of the pr evious year in r espect of which the deduc-
tion is to be allowed and cr edited to a r eser ve account to be
utilised for the pur poses of the business of the assessee in the
manner laid down in sub-section (4),
19
[Provided that a hotel or , as the case may be, a tour oper ator appr oved by the
pr escr ibed author ity on or after the 30th day of November , 1989 and befor e the
1st day of October , 1991, shall be deemed to have been appr oved by the
pr escr ibed author ity for the pur poses of this section in r elation to the assessment
year commencing on the 1st day of Apr il, 1989 or the 1st day of Apr il, 1990 or , as
the case may be, the 1st day of Apr il, 1991 if the assessee was engaged in the
business of such hotel or as such tour oper ator dur ing the pr evious year r elevant
to any of the said assessment year s.]
(2) This section applies only to ser vices pr ovided to for eign tour ists the r eceipts
in r elation to which ar e r eceived
20
[in, or br ought into, India by the assessee in
conver tible for eign exchange within a per iod of six months fr om the end of the
S. 80HHD I.T. ACT, 1961 1.428
17. Substituted for twenty by the Finance Act, 2002, w.e.f. 1-4-2003.
18. Substituted for ten, ibid.
20. Substituted for by the assessee in conver tible for eign exchange by the Finance Act, 1990,
w.e.f. 1-4-1991.
pr evious year or ,
21
[within such fur ther per iod as the competent author ity may
allow in this behalf ].]
22
[Explan ation
23
[1].For the pur poses of this sub-section, any payment r eceived
by an assessee, engaged in the business of a hotel or of a tour oper ator or of a
tr avel agent, in Indian cur r ency obtained by conver sion of for eign exchange
br ought into India thr ough an author ised dealer ,
24
[fr om another hotelier , tour
oper ator or tr avel agent, as the case may be,] on behalf of a for eign tour ist or
gr oup of for eign tour ists, shall be deemed to have been r eceived by the assessee
in conver tible for eign exchange if the per son making the payment fur nishes to
the assessee a cer tificate specified in sub-section (2A).
25
[Explan ation 2.For the pur poses of this sub-section, the expr ession compe-
tent author ity means the Reser ve Bank of India or such other author ity as is
(2A) Ever y per son making payment to an assessee r efer r ed to in the Explan ation
25
[1] to sub-section (2) out of Indian cur r ency obtained by conver sion of for eign
exchange r eceived fr om or on behalf of a for eign tour ist or a gr oup of for eign
tour ists shall fur nish to that assessee a cer tificate in the pr escr ibed for m
26
indicating the amount r eceived in for eign exchange, its conver sion into Indian
cur r ency and such other par ticular s as may be pr escr ibed.]
27
[(3) For the pur poses of sub-section (1), pr ofits der ived fr om ser vices pr ovided
to for eign tour ists shall be the amount which bear s to the pr ofits of the business
(as computed under the head Pr ofits and gains of business or pr ofession) the
same pr opor tion as the r eceipts specified in sub-section (2)
28
[[as r educed by any
payment, r efer r ed to in sub-section (2A), made by the assessee]] bear to the total
r eceipts of the business car r ied on by the assessee.]
(4) The amount cr edited to the r eser ve account under clause (b) of sub-section
(1), shall be utilised by the assessee befor e the expir y of a per iod of five year s next
following the pr evious year in which the amount was cr edited for the following
pur poses, namely :
Pr ior to substitution, the quoted por tion, as amended by the Finance Act, 1990, w.e.f.
Commissioner may allow in this behalf.
24. Substituted for fr om a tour oper ator or , as the case may be, a tr avel agent by the Finance
Act, 1994, w.e.f. 1-4-1995.
26. See r ule 18BBA(6) and For m No. 10CCAE for cer tificate fr om per son making payment to
an assessee engaged in business of tour oper ator / hotel/ tr avel agent.
(a) constr uction of new hotels appr oved by the pr escr ibed author ity in
this behalf or expansion of facilities in existing hotels alr eady so
appr oved;
(b) pur chase of new car s and new coaches by tour oper ator s alr eady so
appr oved or by tr avel agents ;
(c) pur chase of spor ts equipment for mountaineer ing, tr ekking, golf,
r iver -r afting and other spor ts in or on water ;
(d) constr uction of confer ence or convention centr es ;
(e) pr ovision of such new facilities for the gr owth of Indian tour ism as the
Centr al Gover nment may, by notification in the Official Gazette,
specify in this behalf;
29
[(f) subscr iption to equity shar es for ming par t of any eligible issue of
capital made by a public company:]
Provided that wher e any of the activities r efer r ed to in clauses (a) to
30
[(f)] would
r esult in cr eation of any asset owned by the assessee outside India, such asset
should be cr eated only after obtaining pr ior appr oval of the pr escr ibed author ity.
(5) Wher e any amount cr edited to the r eser ve account under clause (b) of sub-
section (1),
section (4), the amount so utilised; or
(b) has not been utilised in the manner specified in sub-section (4), the
amount not so utilised,
so utilised; or
the per iod of five year s specified in sub-section (4),
and shall be char ged to tax accor dingly.
31
[(5A) Wher e any amount cr edited to the r eser ve account under clause (b) of
sub-section (1) has been utilised for subscr iption to any equity shar es r efer r ed to
in clause (f) of sub-section (4) and either whole or any par t of such equity shar es
ar e tr ansfer r ed or conver ted into money by the assessee at any time within a
per iod of thr ee year s fr om the date of their acquisition, the aggr egate amount so
utilised in r espect of such equity shar es shall be deemed to be the pr ofits of the
pr evious year in which the equity shar es ar e tr ansfer r ed or conver ted into money.
Explan ation .A per son shall be tr eated as having acquir ed any shar es on the
date on which his name is enter ed in r elation to those shar es in the r egister of
member s of the public company.]
S. 80HHD I.T. ACT, 1961 1.430
30. Substituted for (e), ibid.
32
section 288, cer tifying that the deduction has been cor r ectly claimed on the basis
of the
33
[
34
[***] amount of conver tible for eign exchange r eceived by the assessee
for ser vices pr ovided by him to for eign tour ists
35
[, payments made by him to any
assessee r efer r ed to in sub-section (2A)] and the payments r eceived by him in
Indian cur r ency as r efer r ed to in the Explan ation
36
[1] to sub-section (2).]
37
[(7) Wher e a deduction under sub-section (1) is claimed and allowed in r espect
of pr ofits der ived fr om the business of a hotel, such par t of pr ofits shall not
qualify to that extent for deduction for any assessment year under any other
pr ovisions of this Chapter under the heading C.Deduction s in respect of certain
in com es, and shall in no case exceed the pr ofits and gains of such hotel.]
(a) tr avel agent means a tr avel agent or other per son (not being an
air line or a shipping company) who holds a valid licence gr anted by
the Reser ve Bank of India under section 32
38
of the For eign Exchange
Regulation Act, 1973 (46 of 1973);
(b) conver tible for eign exchange shall have the meaning assigned to it
in clause (a) of the Explan ation to section 80HHC;
(c) ser vices pr ovided to for eign tour ists shall not include ser vices by
way of sale in any shop owned or managed by the per son who car r ies
on the business of a hotel or of a tour oper ator or of a tr avel agent;
39
[(d)
40
author ised dealer ,
41
for eign exchange and
42
Indian cur r ency
shall have the meanings r espectively assigned to them in clauses (b),
32. See r ule 18BBA(4) and For m No. 10CCAD for for m of r epor t of accountant.
33. Subst it ut ed for amount of conver t ible for eign exchange r eceived by t he assessee
for ser vices pr ovided by him to the for eign tour ists by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1992.
34. Wor ds aggr egate of the omitted by the Finance Act, 1994, w.e.f. 1-4-1995.
38. Section 32 of FERA, 1973 was omitted by the For eign Exchange Regulation (Amendment)
Act, 1993, w.r .e.f. 8-1-1993.
40. Section 2(b) of the For eign Exchange Regulation Act, 1973, defines author ised dealer as
under :
(b) author ised dealer means a per son for the time being author ised under section 6
to deal in for eign exchange;
For the definition of ter m under FEMA, 1999, see Appendix.
41. Clause (h ) of section 2 of the For eign Exchange Regulation Act, 1973, defines for eign
exchange as follows :
(h ) for eign exchange means for eign cur r ency and includes
(i) all deposits, cr edits and balances payable in any for eign cur r ency, and any dr afts,
tr aveller s cheques, letter s of cr edit and bills of exchange, expr essed or dr awn in
Indian cur r ency but payable in any for eign cur r ency;
(Con td. on p. 1.432)
S. 80HHE I.T. ACT, 1961 1.432
(h ) and (k) of section 2 of the For eign Exchange Regulation Act, 1973
(46 of 1973);]
43
[(e) eligible issue of capital means an issue made by a public company
for med and r egister ed in India and the entir e pr oceeds of the issue is
utilised wholly and exclusively for the pur pose of car r ying on the
business of
(i) setting up and r unning of new hotels appr oved by the pr escr ibed
author ity; or
(ii) pr oviding such new facility for the gr owth of tour ism in India, as
the Centr al Gover nment may, by notification in the Official
Gazette, specify.]
44
[Deduction in respect of profits from export of computer software, etc.
45
80HHE. (1) Wher e an assessee, being an Indian company or a per son (other
than a company) r esident in India, is engaged in the business of,
(i) expor t out of India of computer softwar e or its tr ansmission fr om
India to a place outside India by any means;
(ii) pr oviding technical ser vices outside India in connection with the
development or pr oduction of computer softwar e,
ther e shall, in accor dance with and subject to the pr ovisions of this section, be
allowed, in computing the total income of the assessee,
46
[a deduction to the
extent of the pr ofits, r efer r ed to in sub-section (1B),] der ived by the assessee fr om
such business :
47
[***]
48
[Provided that if the assessee, being a company, engaged in the expor t out of
India of computer softwar e, issues a cer tificate r efer r ed to in clause (b) of sub-
section (4A), that in r espect of the amount of the expor t specified ther ein, the
(ii) any instr ument payable, at the option of the dr awee or holder ther eof or any other
par ty ther eto, either in Indian cur r ency or in for eign cur r ency or par tly in one and
par tly in the other ;
42. Section 2(k) of the For eign Exchange Regulation Act, 1973, defines Indian cur r ency as
under :
(k ) Indian cur r ency means cur r ency which is expr essed or dr awn in Indian r upees
45. See also Cir cular No. 3/ 2004, dated 12-2-2004. For details, see Taxmanns Master Guide to
Income-tax Act.
46. Substituted for a deduction of the pr ofits by the Finance Act, 2000, w.e.f. 1-4-2001.
47. Pr oviso omitted by the Finance Act, 1995, w.e.f. 1-4-1996. Pr ior to its omission, the pr oviso
was amended by the Finance Act, 1993, w.e.f. 13-5-1993 and the Finance Act, 1994, w.e.f.
13-5-1994.
48. Pr oviso and sub-section (1A) inser ted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
deduction under this sub-section is to be allowed to a suppor ting softwar e
developer , then the amount of deduction in the case of an assessee shall be
r educed by such amount which bear s to the total pr ofits der ived by the assessee
fr om the expor t, the same pr opor tion as the amount of the expor t tur nover
specified in such cer tificate bear s to the total expor t tur nover of the assessee.
49
[Explan ation .For the r emoval of doubts, it is her eby declar ed that the pr ofits
and gains der ived fr om on site development of computer softwar e (including
ser vices for development of softwar e) outside India shall be deemed to be the
pr ofits and gains der ived fr om the expor t of computer softwar e outside India.]
(1A) Wher e the assessee, being a suppor ting softwar e developer , has dur ing the
pr evious year , developed and sold computer softwar e to an expor ting company
in r espect of which the said company has issued a cer tificate under the pr oviso
to sub-section (1), ther e shall, in accor dance with and subject to the pr ovisions
of this section, be allowed in computing the total income of the assessee a
deduction of the pr ofits der ived by the assessee fr om the developing and selling
of computer softwar e to the expor ting company in r espect of which the
cer tificate has been issued by the said company
50
[to such extent and for such
year s as specified in sub-section (1B)].]
50
[(1B) For the pur poses of sub-sections (1) and (1A), the extent of deduction of
pr ofits shall be an amount equal to
(i) eighty per cent of such pr ofits for an assessment year beginning on
the 1st day of Apr il, 2001;
51
of Apr il, 2003;
of Apr il, 2004,]
(2) The deduction specified in sub-section (1) shall be allowed only if the
consider ation in r espect of the computer softwar e r efer r ed to in that sub-section
is r eceived in, or br ought into, India by the assessee in conver tible for eign
1.433 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80HHE
49. Inser ted by the Finance Act, 2001, w.e.f. 1-4-2001. See also Cir cular No. 3/ 2004, dated
(ii) sixty per cent of such pr ofits for an assessment year beginning on the 1st day of
Apr il, 2002;
(iii) for ty per cent of such pr ofits for an assessment year beginning on the 1st day of
Apr il, 2003;
(iv ) twenty per cent of such pr ofits for an assessment year beginning on the 1st day of
Apr il, 2004,
exchange, within a per iod of six months fr om the end of the pr evious year
or ,
52
[within such fur ther per iod as the competent author ity may allow in
this behalf].
Explan ation
53
[1].The said consider ation shall be deemed to have been r e-
ceived in India wher e it is cr edited to a separ ate account maintained for the
pur pose by the assessee with any bank outside India with the appr oval of the
Reser ve Bank of India.
53
[Explan ation 2.For the pur poses of this sub-section, the expr ession compe-
tent author ity means the Reser ve Bank of India or such other author ity as is
(3) For the pur poses of sub-section (1), pr ofits der ived fr om the business r efer r ed
to in that sub-section shall be the amount which bear s to the pr ofits of the
business, the same pr opor tion as the expor t tur nover bear s to the total tur nover
of the business car r ied on by the assessee.
54
[(3A) For the pur poses of sub-section (1A), pr ofits der ived by a suppor ting
softwar e developer shall be,
(i) in a case wher e the business car r ied on by the suppor ting softwar e
developer consists exclusively of developing and selling of computer
softwar e to one or mor e expor ting companies solely engaged in
expor ts, the pr ofits of such business;
(ii) in a case wher e the business car r ied on by a suppor ting softwar e
developer does not consist exclusively of developing and selling of
computer softwar e to one or mor e expor ting companies, the amount
which bear s to the pr ofits of the business, the same pr opor tion as the
tur nover in r espect of sale to the r espective expor ting company bear s
to the total tur nover of the business car r ied on by the assessee.]
55
56
[(4A) The deduction under sub-section (1A) shall not be admissible unless the
suppor ting softwar e developer fur nishes in the pr escr ibed for m along with his
r etur n of income,
S. 80HHE I.T. ACT, 1961 1.434
52. Substituted for the por tion beginning with the wor ds wher e the Commissioner and
Pr ior to substitution, the said por tion was inser ted by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1991.
55. See r ule 18BBA(7) and For m No. 10CCAF for for m of r epor t of accountant.
*(i) the r epor t of an accountant
57
, as defined in the Explan ation below
sub-section (2) of section 288, cer tifying that the deduction has been
cor r ectly claimed on the basis of the pr ofits of the suppor ting soft-
war e developer in r espect of sale of computer softwar e to the
expor ting company; and
(ii) a cer tificate
58
fr om the expor ting company containing such par ticu-
lar s as may be pr escr ibed and ver ified in the manner pr escr ibed that
in r espect of the expor t tur nover mentioned in the cer tificate, the
expor ting company has not claimed deduction under this section :
Provided that the cer tificate specified in clause (b) shall be duly cer tified by the
auditor auditing the accounts of the expor ting assessee under the pr ovisions of
this Act or under any other law.]
(5) Wher e a deduction under this section is claimed and allowed in r espect of
pr ofits of the business r efer r ed to in sub-section (1) for any assessment year , no
deduction shall be allowed in r elation to such pr ofits under any other pr ovision
of this Act for the same or any other assessment year .
(a) conver tible for eign exchange shall have the meaning assigned to it
59
[(b) computer softwar e means,
(i) any computer pr ogr amme r ecor ded on any disc, tape, per for ated
(ii) any customised electr onic data or any pr oduct or ser vice of
similar natur e as may be notified
60
by the Boar d,
which is tr ansmitted or expor ted fr om India to a place outside India
by any means;]
(c) expor t tur nover means the consider ation in r espect of computer
softwar e r eceived in, or br ought into, India by the assessee in conver -
tible for eign exchange in accor dance with sub-section (2), but does
not include fr eight, telecommunication char ges or insur ance attr i-
butable to the deliver y of the computer softwar e outside India or
1.435 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80HHE
57. See r ule 18BBA(7) and For m No. 10CCAF for for m of r epor t of accountant.
58. See r ule 18BBA(8) and For m No. 10CCAG.
59. Substituted by the Finance Act, 2000, w.e.f. 1-4-2001. Pr ior to its substitution, item (b), as
(b) computer softwar e means any computer pr ogr amme r ecor ded on any disc, tape,
per for ated media or other infor mation stor age device and includes any such
pr ogr amme or any customised electr onic data which is tr ansmitted fr om India to
a place outside India by any means;
60. For notified infor mation technology enabled pr oducts/ ser vices, see Taxmanns Master
*(i) should be r ead as (a).
(ii) should be r ead as (b).
S. 80HHF I.T. ACT, 1961 1.436
expenses, if any, incur r ed in for eign exchange in pr oviding the
61
[(ca) expor ting company means a company r efer r ed to in sub-section (1)
making actual expor t of computer softwar e;]
(d) pr ofits of the business means the pr ofits of the business as computed
r educed by
(1) ninety per cent of any r eceipts by way of br oker age, commission,
inter est, r ent, char ges or any other r eceipt of a similar natur e
included in such pr ofits; and
(2) the pr ofits of any br anch, office, war ehouse or any other esta-
blishment of the assessee situate outside India;
(e) total tur nover shall not include
(i) any sum r efer r ed to in clauses (iiia), (iiib) and (iiic) of section 28;
(ii) any fr eight , t elecommunicat ion char ges or insur ance at t r i-
butable to the deliver y of the computer softwar e outside India;
and
(iii) expenses, if any, incur r ed in for eign exchange in pr oviding the
technical ser vices outside India;]
61
[(ea) supporting software developer means an Indian company or a per son
(other than a company) r esident in India, developing and selling
computer softwar e to an expor ting company for the pur poses of
expor t.]
62
[Deduction in respect of profits and gains from export or transfer of film
software, etc.
80HHF. (1) Wher e an assessee, being an Indian company
63
[or a per son (other
than a company) r esident in India], is engaged in the business of expor t
or tr ansfer by any means out of India, of any film softwar e, television softwar e,
music softwar e, television news softwar e, including telecast r ights (her eafter in
this section r efer r ed to as the softwar e or softwar e r ights), ther e shall, in
accor dance with and subject to the pr ovisions of this section, be allowed, in
computing the total income of the assessee,
64
[a deduction to the extent of
profits, referred to in sub-section (1A),] derived by the assessee from such business.
65
[(1A) For the pur poses of sub-section (1), the extent of deduction of pr ofits shall
be an amount equal to
(i) eighty per cent of such pr ofits for an assessment year beginning on
64. Substituted for a deduction of the pr ofits, ibid., w.e.f. 1-4-2001.
66
of Apr il, 2003;
of Apr il, 2004,]
(2) The deduction specified in sub-section (1) shall be allowed only if the
consider ation in r espect of the softwar e or softwar e r ights r efer r ed to in that sub-
section is r eceived in, or br ought into, India by the assessee in conver tible for eign
exchange, within a per iod of six months fr om the end of the pr evious year or
within such fur ther per iod as the competent author ity may allow in this behalf.
(3) For the pur poses of sub-section (1), pr ofits der ived fr om the business r efer r ed
to in that sub-section shall be the amount which bear s to the pr ofits of the
business, the same pr opor tion as the expor t tur nover bear s to the total tur nover
of the business car r ied on by the assessee.
67
(5) Wher e a deduction under this section is claimed and allowed in r espect of
pr ofits of the business r efer r ed to in sub-section (1) for any assessment year , no
deduction shall be allowed in r elation to such pr ofits under any other pr ovision
of this Act for the same or any other assessment year .
(6) Notwithstanding anything contained in this section, no deduction shall be
allowed in r espect of the softwar e or softwar e r ights r efer r ed to in sub-section
(1), if such business is pr ohibited by any law for the time being in for ce.
(a) competent author ity means the Reser ve Bank of India or such other
author ity as is author ised under any law for the time being in for ce
for r egulating payments and dealings in for eign exchange;
(b) conver tible for eign exchange shall have the meaning assigned to it
1.437 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80HHF
(ii) sixty per cent of such pr ofits for an assessment year beginning on the 1st day of
Apr il, 2002;
(iii) for ty per cent of such pr ofits for an assessment year beginning on the 1st day of
Apr il, 2003;
(iv ) twenty per cent of such pr ofits for an assessment year beginning on the 1st day of
Apr il, 2004,
67. See r ule 18BBA(9) and For m No. 10CCAI.
(c) expor t tur nover means the consider ation in r espect of the softwar e
or softwar e r ights specified in clauses (d), (e), (g), (h ) and (i), r eceived
deliver y of such softwar e outside India or expenses, if any, incur r ed
in for eign exchange in pr oviding the technical ser vices outside India;
(d) film softwar e means a copy of a cinematogr aph film made by any
pr ocess analogous to cinematogr aphy on acetate polyester or cellu-
loid film positive, magnetic tape, digital media or other optical or
magnetic devices and cer tified by the Boar d of film cer tification
constituted by the Centr al Gover nment under section 3 of the
Cinematogr aph Act, 1952 (37 of 1952);
(e) music softwar e includes ser ies of sounds or music r ecor ded on
magnetic tape, cassette, compact discs and digital media which can be
played or r epr oduced on any appr opr iate appar atus;
(f) pr ofits of the business means the pr ofits of the business as computed
r educed by
(A) ninety per cent of any r eceipts by way of br oker age, commission,
inter est, r ent, char ges or any other r eceipt of a similar natur e
included in such pr ofits; and
(B) the pr ofits of any br anch, office, war ehouse or any other esta-
blishment of the assessee situated outside India;
(g) telecast r ights means a licence or contr act to exhibit motion pictur es
or television pr ogr ammes over a television networ k either thr ough
ter r estr ial tr ansmission or thr ough a satellite br oadcast in a specified
ter r itor y;
(h ) television news softwar e means a collection of sounds and images,
r epor tage, data and voice of actualities br oadcast either thr ough
ter r estr ial tr ansmission, wir e or satellite, live or pr e-r ecor ded on video
cassettes or digital media;
(i) television softwar e means any pr ogr amme or ser ies of sounds and
images r ecor ded on film or tape or digital media or br oadcast thr ough
ter r estr ial tr ansmitter , satellite or any other means of diffusion;
(j) total tur nover shall not include
(A) any sum r efer r ed to in clauses (iiia), (iiib) and (iiic) of section 28;
(B) any fr eight, telecommunication char ges or insur ance attr ibut-
able to the deliver y of the film softwar e, music softwar e, telecast
r ights, television news softwar e, or television softwar e as defined
in clause (d), (e), (g), (h ) or (i), as the case may be, outside India;
(C) expenses, if any, incur r ed in for eign exchange in pr oviding the
technical ser vices outside India.]
S. 80HHF I.T. ACT, 1961 1.438
1.439 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80-I
68
[Deduction in respect of profits and gains from industrial undertakings after a
certain date, etc.
69
80-I. (1) Wher e the gr oss total income of an assessee includes any pr ofits and
gains der ived fr om an industr ial under taking
70
or a ship or the business of
a hotel
71
[or the business of r epair s to ocean-going vessels or other power ed
cr aft], to which this section applies, ther e shall, in accor dance with and subject
to the pr ovisions of this section, be allowed, in computing the total income of the
assessee, a deduction fr om such pr ofits and gains of an amount equal to twenty
per cent ther eof :
Provided that in the case of an assessee, being a company, the pr ovisions of this
sub-section shall have effect
71
[in r elation to pr ofits and gains der ived fr om an
industr ial under taking or a ship or the business of a hotel] as if for the wor ds
twenty per cent, the wor ds twenty-five per cent had been substituted.
72
[(1A) Notwithstanding anything contained in sub-section (1), in r elation to any
pr ofits and gains der ived by an assessee fr om
(i) an industr ial under taking which begins to manufactur e or pr oduce
ar ticles or things or to oper ate its cold stor age plant or plants; or
(ii) a ship which is fir st br ought into use; or
(iii) the business of a hotel which star ts functioning,
on or after the 1st day of Apr il, 1990,
73
[but befor e the 1st day of Apr il, 1991], ther e
shall, in accor dance with and subject to the pr ovisions of this section, be allowed
in computing the total income of the assessee, a deduction fr om such pr ofits and
gains of an amount equal to twenty-five per cent ther eof :
Provided that in the case of an assessee, being a company, the pr ovisions of this
sub-section shall have effect in r elation to pr ofits and gains der ived fr om an
industr ial under taking or a ship or the business of a hotel as if for the wor ds
twenty-five per cent, the wor ds thir ty per cent had been substituted.]
(i) it is not for med
74
by the splitting up
74
, or the r econstr uction
74
, of a
business alr eady in existence;
68. Inser ted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981. Or iginally, pr ovision r elating to
pr ior ity industr ies was dealt with by section 80E which was inser ted by the Finance Act,
1966, w.e.f. 1-4-1966. That section was omitted and in its place section 80-I was intr oduced
by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Section 80-I was also omitted by the
Finance Act, 1972, w.e.f. 1-4-1973.
70. For the meaning of the expr ession industr ial under taking, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
74. For the meaning of the ter ms/ expr essions for med, splitting up and r econstr uction,
(ii) it is not for med by the tr ansfer
75
to a new business of machiner y or
plant pr eviously used for any pur pose;
(iii) it manufactur es or pr oduces
75
any ar ticle
75
or thing, not being any
ar ticle or thing specified in the list in the Eleventh Schedule, or
oper ates one or mor e cold stor age plant or plants, in any par t of India,
and begins to manufactur e or pr oduce ar ticles or things or to oper ate
such plant or plants, at any time within the per iod of
76
[ten] year s next
following the 31st day of Mar ch, 1981, or such fur ther per iod as the
specify with r efer ence to any par ticular industr ial under taking;
(iv) in a case wher e the industr ial under taking manufactur es or pr oduces
ar ticles or things, the under taking employs ten or mor e wor ker s in a
manufactur ing pr ocess car r ied on with the aid of power , or employs
twenty or mor e wor ker s in a manufactur ing pr ocess car r ied on
without the aid of power :
Provided that the condition in clause (i) shall not apply in r espect of any industr ial
under taking which is for med as a r esult of the r e-establishment, r econstr uction
or r evival by the assessee of the business of any such industr ial under taking as
is r efer r ed to in section 33B, in the cir cumstances and within the per iod specified
in that section :
Provided further that the condition in clause (iii) shall, in r elation to a small-scale
industr ial under taking, apply as if the wor ds not being any ar ticle or thing
specified in the list in the Eleventh Schedule had been omitted.
Explan ation 1.For the pur poses of clause (ii) of this sub-section, any machiner y
or plant which was used outside India by any per son other than the assessee shall
not be r egar ded as machiner y or plant pr eviously used for any pur pose, if the
(a) such machiner y or plant was not, at any time pr evious to the date of
the installation by the assessee, used in India;
outside India; and
(c) no deduction on account of depr eciation in r espect of such machi-
ner y or plant has been allowed or is allowable under the pr ovisions of
this Act in computing the total income of any per son for any per iod
pr ior to the date of the installation of the machiner y or plant by the
assessee.
Explan ation 2.Wher e in the case of an industr ial under taking, any machiner y
or plant or any par t ther eof pr eviously used for any pur pose is tr ansfer r ed to a
new business and the total value of the machiner y or plant or par t so tr ansfer r ed
does not exceed twenty per cent of the total value of the machiner y or plant used
S. 80-I I.T. ACT, 1961 1.440
75. For t he meaning of t he t er ms/ expr essions t r ansfer , manufact ur es or pr oduces,
ar ticles and wor ker s, see Taxmanns Dir ect Taxes Manual, Vol. 3.
76. Subst it ut ed for four t een by t he Finance (No. 2) Act , 1991, w.e.f. 1-4-1991. Ear lier
four teen was substituted for nine by the Finance Act, 1990, w.e.f. 1-4-1990 which was
ear lier substituted for four by the Finance Act, 1985, w.e.f. 1-4-1985.
in the business, then, for the pur poses of clause (ii) of this sub-section, the
condition specified ther ein shall be deemed to have been complied with.
Explan ation 3.For the pur poses of this sub-section, small-scale industr ial
under taking shall have the same meaning as in clause (b) of the Explan ation
below sub-section (8) of section 80HHA.
(3) This section applies to any ship, wher e all the following conditions ar e fulfilled,
namely :
(i) it is owned by an Indian company and is wholly used for the pur poses
of the business car r ied on by it;
(ii) it was not, pr evious to the date of its acquisition by the Indian
company, owned or used in Indian ter r itor ial water s by a per son
r esident in India; and
(iii) it is br ought into use by the Indian company at any time within the
per iod of
77
[ten] year s next following the 1st day of Apr il, 1981.
(4) This section applies to the business of any hotel, wher e all the following
(i) the business of the hotel is not for med by the splitting up, or the
r econstr uction, of a business alr eady in existence or by the tr ansfer
to a new business of a building pr eviously used as a hotel or of any
machiner y or plant pr eviously used for any pur pose;
(ii) the business of the hotel is owned and car r ied on by a company
r egister ed in India with a paid-up capital of not less than five hundr ed
thousand r upees;
(iii) the hotel is for the time being appr oved for the pur poses of this sub-
section by the Centr al Gover nment;
(iv) the business of the hotel star ts functioning after the 31st day of Mar ch,
1981, but befor e the 1st day of Apr il,
78
[1991].
79
[(4A) This section applies to the business of r epair s to ocean-going vessels or
other power ed cr aft which fulfils all the following conditions, namely :
(i) the business is not for med by the splitting up, or the r econstr uction,
of a business alr eady in existence;
pr eviously used for any pur pose;
(iii) it is car r ied on by an Indian company and the wor k by way of r epair s
to ocean-going vessels or other power ed cr aft has been commenced
by such company after the 31st day of Mar ch, 1983, but befor e the 1st
day of Apr il, 1988; and
77. Subst it ut ed for four t een by t he Finance (No. 2) Act , 1991, w.e.f. 1-4-1991. Ear lier
four teen was substituted for nine by the Finance Act, 1990, w.e.f. 1-4-1990 which was
ear lier substituted for four by the Finance Act, 1985, w.e.f. 1-4-1985.
78. Substituted for 1995 by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. Ear lier 1995 was
subst it ut ed for 1990 by t he Finance Act , 1990, w.e.f. 1-4-1990 which was ear lier
substituted for 1985 by the Finance Act, 1985, w.e.f. 1-4-1985.
(iv) it is for the time being appr oved for the pur poses of this sub-section
by the Centr al Gover nment.]
total income in r espect of the assessment year r elevant to the pr evious year in
which the industr ial under taking begins to manufactur e or pr oduce ar ticles or
things, or to oper ate its cold stor age plant or plants or the ship is fir st br ought
into use or the business of the hotel star ts functioning
80
[or the company
commences wor k by way of r epair s to ocean-going vessels or other power ed
cr aft] (such assessment year being her eafter in this section r efer r ed to as the
initial assessment year ) and each of the seven assessment year s immediately
succeeding the initial assessment year :
Provided that in the case of an assessee, being a co-oper ative society, the
pr ovisions of this sub-section shall have effect as if for the wor ds seven
assessment year s, the wor ds nine assessment year s had been substituted :
80
[Provided further that in the case of an assessee car r ying on the business of
r epair s to ocean-going vessels or other power ed cr aft, the pr ovisions of this sub-
section shall have effect as if for the wor ds seven assessment year s, the wor ds
four assessment year s had been substituted:]
81
[Provided also that in the case of
(i) an industr ial under taking which begins to manufactur e or pr oduce
ar ticles or things or to oper ate its cold stor age plant or plants; or
(ii) a ship which is fir st br ought into use; or
(iii) the business of a hotel which star ts functioning,
on or after the 1st day of Apr il, 1990
82
[but befor e the 1st day of Apr il, 1991],
pr ovisions of this sub-section shall have effect as if for the wor ds seven
assessment year s, the wor ds nine assessment year s had been substituted :
Provided also that in the case of an assessee, being a co-oper ative society,
der iving pr ofits and gains fr om an industr ial under taking or a ship or a hotel
r efer r ed to in the thir d pr oviso, the pr ovisions of that pr oviso shall have effect as
if for the wor ds nine assessment year s, the wor ds eleven assessment year s had
been substituted.]
(6) Notwithstanding anything contained in any other pr ovision of this Act, the
pr ofits and gains of an industr ial under taking or a ship or the business of a hotel
83
[or the business of r epair s to ocean-going vessels or other power ed cr aft] to
which the pr ovisions of sub-section (1) apply shall, for the pur poses of deter -
mining the quantum of deduction under sub-section (1) for the assessment year
immediately succeeding the initial assessment year or any subsequent assess-
ment year , be computed as if such industr ial under taking or ship or the business
of the hotel
83
[or the business of r epair s to ocean-going vessels or other power ed
cr aft] wer e the only sour ce of income of the assessee dur ing the pr evious year s
r elevant to the initial assessment year and to ever y subsequent assessment year
S. 80-I I.T. ACT, 1961 1.442
up to and including the assessment year for which the deter mination is to be
made.
the deduction under sub-section (1) fr om pr ofits and gains der ived fr om an
industr ial under taking shall not be admissible unless the accounts of the
industr ial under taking for the pr evious year r elevant to the assessment year
for which the deduction is claimed have been audited by an accountant, as
defined in the Explan ation below sub-section (2) of section 288, and the assessee
fur nishes, along with his r etur n of income, the r epor t of such audit in the
pr escr ibed for m
84
(8) Wher e any goods held for the pur poses of the business of the industr ial
under taking or the hotel or the oper ation of the ship
85
[or the business of r epair s
to ocean-going vessels or other power ed cr aft] ar e tr ansfer r ed to any other
business car r ied on by the assessee, or wher e any goods held for the pur poses of
any other business car r ied on by the assessee ar e tr ansfer r ed to the business of
the industr ial under taking or the hotel or the oper ation of the ship
85
[or the
business of r epair s to ocean-going vessels or other power ed cr aft] and, in either
case, the consider ation, if any, for such tr ansfer as r ecor ded in the accounts of
the business of the industr ial under taking or the hotel or the oper ation of the ship
85
[or the business of r epair s to ocean-going vessels or other power ed cr aft] does
not cor r espond to the mar ket value of such goods as on the date of the tr ansfer ,
then, for the pur poses of the deduction under this section, the pr ofits and gains
of the industr ial under taking or the business of the hotel or the oper ation of the
ship
85
[or the business of r epair s to ocean-going vessels or other power ed cr aft]
shall be computed as if the tr ansfer , in either case, had been made at the mar ket
value of such goods as on that date :
Provided that wher e, in the opinion of the
86
[Assessing] Officer , the computation
of the pr ofits and gains of the industr ial under taking or the business of the hotel
or the oper ation of the ship
85
[or the business of r epair s to ocean-going vessels or
other power ed cr aft] in the manner her einbefor e specified pr esents exceptional
difficulties, the
86
[Assessing] Officer may compute such pr ofits and gains on such
r easonable basis as he may deem fit.
Explan ation .In this sub-section, mar ket value, in r elation to any goods,
means the pr ice that such goods would or dinar ily fetch on sale in the open
market.
(9) Wher e it appear s to the
86
[Assessing] Officer that, owing to the close
connection between the assessee car r ying on the business of the industr ial
under taking or the hotel or the oper ation of the ship
85
[or the business of r epair s
to ocean-going vessels or other power ed cr aft] to which this section applies and
any other per son, or for any other r eason, the cour se of business between them
is so ar r anged that the business tr ansacted between them pr oduces to the
assessee mor e than the or dinar y pr ofits which might be expected to ar ise in the
84. See r ule 18BBB and For m No. 10CCB for for m of audit r epor t.
1-4-1988.
business of the industr ial under taking or the hotel or the oper ation of the ship
87
[or the business of r epair s to ocean-going vessels or other power ed cr aft], the
88
[Assessing] Officer shall, in computing the pr ofits and gains of the industr ial
under taking or the hotel or the ship
89
[or the business of r epair s to ocean-going
vessels or other power ed cr aft] for the pur poses of the deduction under this
section, take the amount of pr ofits as may be r easonably deemed to have been
der ived ther efr om.
dir ect, by notification in the Official Gazette, that the exemption confer r ed by this
section shall not apply to any class of industr ial under takings with effect fr om
such date as it may specify in the notification.]
90
[Deductions in respect of profits and gains from industrial undertakings or
enterprises engaged in infrastructure development, etc.
91
80-IA.
92
[(1) Wher e the gr oss total income of an assessee includes any pr ofits
and gains der ived by an under taking or an enter pr ise fr om any business
r efer r ed to in sub-section (4) (such business being her einafter r efer r ed to as the
eligible business), ther e shall, in accor dance with and subject to the pr ovisions of
this section, be allowed, in computing the total income of the assessee, a
deduction of an amount equal to hundr ed per cent of the pr ofits and gains
der ived fr om such business for ten consecutive assessment year s.]
(2) The deduction specified in sub-section (1) may, at the option of the assessee,
be claimed by him for any ten consecutive assessment year s out of fifteen year s
beginning fr om the year in which the under taking or the enter pr ise develops and
begins to operate any infrastructure facility or starts providing telecommunication
S. 80-IA I.T. ACT, 1961 1.444
1-4-1988.
90. Sections 80-IA and 80-IB substituted for section 80-IA by the Finance Act, 1999, w.e.f.
1-4-2000. Pr ior to its substitution, section 80-IA, as inser ted by the Finance (No. 2) Act, 1991,
w.e.f. 1-4-1991 and later on amended by the Finance Act, 1992, w.e.f. 1-4-1993, Finance Act,
1993, w.e.f. 1-4-1994, Finance Act, 1994, w.e.f. 1-4-1994/ 1-4-1995, Finance Act, 1995, w.e.f.
1-4-1996, Finance (No. 2) Act, 1996, w.e.f. 1-4-1997, Finance Act, 1997, w.r .e.f. 1-4-1996/
w.e.f. 1-4-1998, Income-tax (Amendment) Act, 1998, w.r .e.f. 1-4-1995/ w.e.f. 1-4-1998 and
Finance (No. 2) Act, 1998, w.r .e.f. 1-4-1998/ w.e.f. 1-4-1999, r ead as under :
80-IA. Deduction in respect of profits an d gain s from in dustrial un dertak in gs, etc., in
certain cases.(1) Wher e the gr oss total income of an assessee includes any pr ofits and
gains der ived fr om any business of an industr ial under taking or a hotel or oper ation of a
ship or developing, maintaining and oper ating any infr astr uctur e facility or scientific and
industr ial r esear ch and development or pr oviding telecommunication ser vices whether
basic or cellular including r adio paging, domestic satellite ser vice or networ k of tr unking
and electr onic data inter change ser vices or constr uction and development of housing
pr ojects or oper ating an industr ial par k or commer cial pr oduction or r efining of miner al
oil in the Nor th Easter n Region or in any par t of India on or after the 1st day of Apr il, 1997
(such business being her einafter r efer r ed to as the eligible business), to which this section
applies, ther e shall, in accor dance with and subject to the pr ovisions of this section, be
allowed, in computing the total income of the assessee, a deduction fr om such pr ofits and
gains of an amount equal to the per centage specified in sub-section (5) and for such
number of assessment year s as is specified in sub-section (6).
(Con td. on p. 1.445)
1.445 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80-IA
(2) This section applies to any industr ial under taking which fulfils all the following
(i) it is not for med by splitting up, or the r econstr uction, of a business alr eady in
exist ence:
Provided that this condition shall not apply in r espect of an industr ial under taking
which is for med as a r esult of the r e-establishment, r econstr uction or r evival by the
assessee of the business of any such industr ial under taking as is r efer r ed to in
section 33B, in the cir cumstances and within the per iod specified in that section;
(ii) it is not for med by the tr ansfer to a new business of machiner y or plant pr eviously
used for any pur pose;
(iii) it manufactur es or pr oduces any ar ticle or thing, not being any ar ticle or thing
specified in the list in the Eleventh Schedule, or oper ates one or mor e cold stor age
plant or plants, in any par t of India :
Provided that the condition in this clause shall, in r elation to a small scale industr ial
under taking or an industr ial under taking r efer r ed to in sub-clause (b) of clause (iv)
which begins to manufactur e or pr oduce an ar ticle or thing dur ing the per iod
beginning on the 1st day of Apr il, 1993 and ending on the 31st day of Mar ch, 2000,
apply as if the wor ds not being any ar ticle or thing specified in the list in the
Eleventh Schedule had been omitted;
(iv ) (a) in the case of an industr ial under taking not specified in sub-clause (b) or sub-
clause (c), it begins to manufactur e or pr oduce ar ticles or things or to oper ate
such plant or plants, at any time dur ing the per iod beginning on the 1st day
of Apr il, 1991 and ending on the 31st day of Mar ch, 1995, or such fur ther
per iod as the Centr al Gover nment may, by notification in the Official Gazette,
specify with r efer ence to any par ticular industr ial under taking;
(b) in the case of an industr ial under taking located in an industr ially backwar d
State specified in the Eighth Schedule or set up in any par t of India for the
gener ation, or gener ation and distr ibution, of power , it begins to manufac-
tur e or pr oduce ar ticles or things or to oper ate its cold stor age plant or plants
or to gener ate power at any time dur ing the per iod beginning on the 1st day
of Apr il, 1993 and ending on the 31st day of Mar ch, 2000 :
Provided that in the case of an industr ial under taking set up in any par t of
India for the gener ation, or gener ation and distr ibution, of power , the per iod
ending shall have effect as if for the figur es 1998, the figur es 2003 had
been substituted;
(c) in the case of an industr ial under taking located in such industr ially back-
war d distr ict as the Centr al Gover nment may, having r egar d to the pr e-
scr ibed guidelines, by notification

behalf, as an industr ially backwar d distr ict of Categor y A or an industr ially
backwar d distr ict of Categor y B, and, it begins to manufactur e or pr oduce
ar ticles or things or to oper ate its cold stor age plant or plants at any time
dur ing the per iod beginning on the 1st day of October , 1994, and ending on
the 31st day of Mar ch, 2000;
(d) in t he case of an indust r ial under t aking being a small scale indust r ial
under taking, not specified in sub-clause (b) or in sub-clause (c), it begins to
manufactur e or pr oduce ar ticles or things or to oper ate its cold stor age plant
at any time dur ing the per iod beginning on the 1st day of Apr il, 1995 and
ending on the 31st day of Mar ch, 2000;
(v) in a case wher e the industr ial under taking manufactur es or pr oduces ar ticles or
things, the under taking employs ten or mor e wor ker s in a manufactur ing pr ocess
car r ied on wit h t he aid of power , or employs t went y or mor e wor ker s in a
(Con td. on p. 1.446)
S. 80-IA I.T. ACT, 1961 1.446
Explan ation 1.For the pur poses of clause (ii) of this sub-section, any machiner y or plant
which was used outside India by any per son other than the assessee shall not be r egar ded
as machiner y or plant pr eviously used for any pur pose, if the following conditions ar e
fulfilled, namely :
(a) such machiner y or plant was not, at any time pr evious to the date of the installation
by the assessee, used in India;
(b) such machiner y or plant is impor ted into India fr om any countr y outside India; and
(c) no deduction on account of depr eciation in r espect of such machiner y or plant has
been allowed or is allowable under the pr ovisions of this Act in computing the total
income of any per son for any per iod pr ior to the date of the installation of the
machiner y or plant by the assessee.
Explan ation 2.Wher e in the case of an industr ial under taking, any machiner y or plant
or any par t ther eof pr eviously used for any pur pose is tr ansfer r ed to a new business and
the total value of the machiner y or plant or par t so tr ansfer r ed does not exceed twenty per
cent of the total value of the machiner y or plant used in the business, then, for the pur poses
of clause (ii) of this sub-section, the condition specified ther ein shall be deemed to have
been complied with.
(3) This section applies to any ship, wher e all the following conditions ar e fulfilled,
namely:
(i) it is owned by an Indian company and is wholly used for the pur poses of the business
car r ied on by it;
(ii) it was not, pr evious to the date of its acquisition by the Indian company, owned or
used in Indian ter r itor ial water s by a per son r esident in India; and
(iii) it is br ought into use by the Indian company at any time dur ing the per iod beginning
on the 1st day of Apr il, 1991 and ending on the 31st day of Mar ch, 1995.
(4) This section applies to the business of any hotel
(a) wher e condit ions (i), (ii) and (v); and
(b) either of the conditions (iii) or (iv); or
(c) either of the conditions (iiia) or (iva),
ar e fulfilled, namely :
(i) the business of the hotel is not for med by the splitting up, or the r econstr uction, of
a business alr eady in existence or by the tr ansfer to a new business of a building
pr eviously used as a hotel or of any machiner y or plant pr eviously used for any
pur pose;
(ii) the business of the hotel is owned and car r ied on by a company r egister ed in India
with a paid-up capital of not less than five hundr ed thousand r upees;
(iii) the business of the hotel, located in a hilly ar ea or a r ur al ar ea or a place of
pilgr image or such other place as the Centr al Gover nment may having r egar d to the
need for development of infr astr uctur e for tour ism in any place and other r elevant
consider ations specify for the pur pose of this clause, star ts functioning at any time
dur ing the per iod beginning on the 1st day of Apr il, 1990 and ending on the 31st day
of Mar ch, 1994;
(iiia) the business of the hotel, located in a hilly ar ea or a r ur al ar ea or a place of
pilgr image or such other place as the Centr al Gover nment may, having r egar d to
the need for development of infr astr uctur e for tour ism in any place and other
r elevant consider ations, specify for the pur pose of this clause, star ts functioning at
any time dur ing the per iod beginning on the 1st day of Apr il, 1997 and ending on the
31st day of Mar ch, 2001 :
Provided that nothing contained in this clause shall apply to any hotel located at a
place within the municipal jur isdiction (whether known as a municipality, munici-
pal cor por ation, notified ar ea committee, town ar ea committee or a cantonment
boar d or by any other name) of Calcutta, Chennai, Delhi and Mumbai;
(Con td. on p. 1.447)
(iv ) the business of the hotel
(1) located in any place, or
(2) located in a place other than a place r efer r ed to in clause (iii) of t his sub-
sect ion,
star ts functioning at any time dur ing the per iod beginning on the 1st day of Apr il,
1991 and ending on the 31st day of Mar ch, 1995;
(iva) the business of the hotel, located in a place other than a place r efer r ed to in clause
(iiia) of this sub-section and not being located at a place within the municipal
jur isdiction (whether known as a municipality, municipal cor por ation, notified ar ea
committee, town ar ea committee or a cantonment boar d or by any other name) of
Calcutta, Chennai, Delhi and Mumbai, star ts functioning at any time dur ing the
per iod beginning on the 1st day of Apr il, 1997 and ending on the 31st day of Mar ch,
2001;
(v) the hotel is for the time being appr oved by the pr escr ibed author ity.
(4A) This sect ion applies t o any ent er pr ise car r ying on t he business of developing,
maint aining and oper at ing any infr ast r uct ur e facilit y which fulfils all t he following
(i) the enter pr ise is owned by a company r egister ed in India or by a consor tium of such
companies;
(ii) the enter pr ise has enter ed into an agr eement with the Centr al Gover nment or a
State Gover nment or a local author ity or any other statutor y body for developing,
maintaining and oper ating a new infr astr uctur e facility subject to the condition
that such infr astr uctur e facility shall be tr ansfer r ed to the Centr al Gover nment,
State Gover nment, local author ity or such other statutor y body, as the case may be,
within the per iod stipulated in the agr eement;
(iii) the enter pr ise star ts oper ating and maintaining the infr astr uctur e facility on or
after the 1st day of Apr il, 1995.
(4B) This section applies to any company r egister ed in India car r ying on scientific and
industr ial r esear ch and development which fulfils all the following conditions, namely :
(i) the company has the main object of scientific and industr ial r esear ch and develop-
ment ;
(ii) the company is for the time being appr oved by the pr escr ibed author ity at any time
befor e the 1st day of Apr il, 1999.
(4C) This section applies to any under taking which star ts pr oviding telecommunication
ser vices whether basic or cellular including r adiopaging, domestic satellite ser vice or
networ k of tr unking and electr onic data inter change ser vices at any time on or after the
1st day of Apr il, 1995 but befor e the 31st day of Mar ch, 2000.
(4D) This section applies to any under taking which begins to oper ate an industr ial par k
notified by the Centr al Gover nment in accor dance with the scheme fr amed and notified
by that Gover nment for the per iod beginning on the 1st day of Apr il, 1997 and ending on
the 31st day of Mar ch, 2002.
(4E) This section applies to any under taking which begins commer cial pr oduction or
r efining of miner al oil in the Nor th-Easter n Region or in any par t of India on or after the
1st day of Apr il, 1997 :
Provided that the pr ovisions of this section shall apply in case of r efining of miner al oil
wher e the under taking begins r efining on or after the 1st day of October , 1998.
(4F) This section applies to an under taking, engaged in developing and building housing
pr ojects appr oved by a local author ity subject to the condition that the size of the plot of
land has a minimum ar ea of one acr e, and the r esidential unit has a built up ar ea not
exceeding one thousand squar e feet :
Provided that the under taking commences development and constr uction of the housing
pr oject on or after the 1st day of October , 1998 and completes the same befor e the 31st
day of Mar ch, 2001.
(Con td. on p. 1.448)
S. 80-IA I.T. ACT, 1961 1.448
(5) The amount r efer r ed to in sub-section (1) shall be
(i) (a) in the case of an industr ial under taking r efer r ed to in sub-clause (a) or sub-clause
(d) of clause (iv) of sub-section (2), twenty-five per cent of the pr ofits and gains
der ived fr om such industr ial under takings;
(b) in the case of an industr ial under taking r efer r ed to in sub-clause (b) or sub-
clause (c) of clause (iv) of sub-section (2), hundr ed per cent of the pr ofits and gains
der ived fr om such industr ial under taking for the initial five assessment year s and
ther eafter twenty-five per cent of the pr ofits and gains der ived fr om such industr ial
under taking :
Provided that wher e the assessee is a company, the pr ovisions of this clause shall
have effect as if for the wor ds twenty-five per cent, the wor ds thir ty per cent had
been subst it ut ed :
Provided further that in case of an industr ial under taking located in an industr ially
backwar d distr ict of Categor y B, the pr ovisions of this clause shall have effect as if
for the wor ds five assessment year s, the wor ds thr ee assessment year shad been
subst it ut ed;
(ia) in the case of an enter pr ise r efer r ed to in sub-section (4A), hundr ed per cent of the
pr ofits and gains der ived fr om such business for the initial five assessment year s
and ther eafter , thir ty per cent of such pr ofits and gains;
(ib) in the case of a company r efer r ed to in sub-section (4B), hundr ed per cent of the
pr ofits and gains der ived fr om such business;
(ic) in the case of an under taking r efer r ed to in sub-section (4C), hundr ed per cent of
the pr ofits and gains der ived fr om such business for the initial five assessment year s
and ther eafter , twenty-five per cent of the pr ofits and gains der ived fr om such
business :
been substituted;
(id) in the case of an industr ial par k r efer r ed to in sub-section (4D), hundr ed per cent
of the pr ofits and gains der ived fr om such business for the initial five assessment
year s and ther eafter , twenty-five per cent of the pr ofits and gains der ived fr om such
business :
been substituted;
(ii) in the case of a hotel r efer r ed to in clause (iii) of sub-section (4), fifty per cent of the
pr ofits and gains der ived fr om the business of such hotel :
Provided that the said hotel is appr oved by the pr escr ibed author ity for the pur pose
of this clause in accor dance with the r ules

made under t his Act :
Provided further that the said hotel appr oved by the pr escr ibed author ity befor e the
31st day of Mar ch, 1992, shall be deemed to have been appr oved by the pr escr ibed
aut hor it y for t he pur poses of t his sect ion in r elat ion t o t he assessment year
commencing on the 1st day of Apr il, 1991;
(iia) in the case of a hotel r efer r ed to in clause (iiia) of sub-section (4), fifty per cent of
the pr ofits and gains der ived fr om the business of such hotel :
Provided t hat t he said hot el is appr oved by t he pr escr ibed aut hor it y for t he
pur poses of this clause in accor dance with the r ules made under this Act;
(iii) in the case of a hotel r efer r ed to in clause (iv) or clause (iva) of sub-section (4), thir ty
per cent of the pr ofits and gains der ived fr om the business of such hotel;
(iv ) in the case of a ship, thir ty per cent of the pr ofits and gains der ived fr om such ship;
(v) in the case of under taking r efer r ed to in sub-section (4E) hundr ed per cent of pr ofits
and gains der ived fr om such business for the initial seven assessment year s;
(Con td. on p. 1.449)
(vi) in the case of a housing pr oject r efer r ed to in sub-section (4F), hundr ed per cent of
pr ofits and gains der ived fr om such business.
(6) The number of assessment year s r efer r ed to in sub-section (1) shall, including the initial
assessment year , be
(i) twelve in the case of an assessee, being a co-oper ative society, der iving pr ofits and
gains fr om an industr ial under taking;
(ii) ten in the case of an assessee, not being a co-oper ative society, der iving pr ofits and
gains fr om an industr ial under taking specified in sub-clause (a) or sub-clause (b) or
sub-clause (d) of clause (iv) of sub-section (2) or located in an industr ially backwar d
distr ict of Categor y A specified in sub-clause (c) of clause (iv) of that sub-section;
(iia) eight in the case of an assessee der iving pr ofits and gains fr om an industr ial
under taking located in an industr ially backwar d distr ict of Categor y B specified in
sub-clause (c) of clause (iv) of sub-section (2) and such an under taking is not
cover ed under clauses (i) and (ii) of this sub-section;
(iii) ten in the case of any other assessee der iving pr ofits and gains, fr om a ship or the
business of a hotel;
(iv ) any ten consecutive assessment year s falling within a per iod of twelve assessment
year s beginning with the assessment year in which an assessee begins oper ating and
maintaining infr astr uctur e facility :
Provided that wher e the assessee begins oper ating and maintaining any infr astr uc-
tur e facility r efer r ed to in sub-clause (ii) of clause (ca) of sub-section (12), the
pr ovisions of this clause shall have effect as if for the wor d twelve, the wor d
twenty had been substituted;
(v) five in the case of an assessee, being a company r efer r ed to in sub-section (4B),
der iving pr ofits and gains fr om scientific and industr ial r esear ch and development;
(vi) ten in the case of an assessee, being an under taking r efer r ed to in sub-section (4C),
der iving pr ofits and gains fr om telecommunication ser vices whether basic or
cellular including r adio-paging and domestic satellite ser vice;
(vii) ten in the case of an assessee, being an under taking r efer r ed to in sub-section (4D),
der iving pr ofits and gains fr om oper ating an industr ial par k;
(viii) seven in the case of an assessee being an under taking r efer r ed to in sub-section (4E)
der iving pr ofits and gains fr om commer cial pr oduction or r efining of miner al oil in
the Nor th-Easter n Region and other par ts of the countr y on or after the 1st day of
Apr il, 1997.
(7) Notwithstanding anything contained in any other pr ovision of this Act, the pr ofits and
gains of an eligible business to which the pr ovisions of sub-section (1) apply shall, for the
pur poses of det er mining t he quant um of deduct ion under sub-sect ion (5) for t he
assessment year immediately succeeding the initial assessment year or any subsequent
assessment year , be computed as if such eligible business wer e the only sour ce of income
of the assessee dur ing the pr evious year r elevant to the initial assessment year and to ever y
subsequent assessment year up to and including the assessment year for which the
deter mination is to be made.
(7A) Notwithstanding anything contained in sub-section (4A), wher e housing or other
activities ar e an integr al par t of the highway pr oject and the pr ofits of which ar e computed
on such basis and manner as may be pr escr ibed, such pr ofit shall not be liable to tax wher e
the pr ofit has been tr ansfer r ed to a special r eser ve account and the same is actually
utilised for the highway pr oject excluding housing and other activities befor e the expir y
of thr ee year s following the year in which such amount was tr ansfer r ed to the r eser ve
account; and the amount r emaining unutilised shall be char geable to tax as income of the
year in which tr ansfer to r eser ve account took place.
(8) Wher e the assessee is a per son other than a company or a co-oper ative society, the
deduct ion under sub-sect ion (1) fr om pr ofit s and gains der ived fr om an indust r ial
under taking shall not be admissible unless the accounts of the industr ial under taking for
(Con td. on p. 1.450)
S. 80-IA I.T. ACT, 1961 1.450
the pr evious year r elevant to the assessment year for which the deduction is claimed have
been audited by an accountant, as defined in the Explan ation below sub-section (2) of
section 288, and the assessee fur nishes, along with his r etur n of income, the r epor t of such

(9) Wher e any goods held for the pur poses of the eligible business ar e tr ansfer r ed to any
other business car r ied on by the assessee, or wher e any goods held for the pur poses of any
other business car r ied on by the assessee ar e tr ansfer r ed to the eligible business and, in
either case, the consider ation, if any, for such tr ansfer as r ecor ded in the accounts of the
eligible business does not cor r espond to the mar ket value of such goods as on the date of
the tr ansfer , then, for the pur poses of the deduction under this section, the pr ofits and
gains of such eligible business shall be computed as if the tr ansfer , in either case, had been
made at the mar ket value of such goods as on that date :
Provided that wher e, in the opinion of the Assessing Officer , the computation of the pr ofits
and gains of the eligible business in the manner her einbefor e specified pr esents exception-
al difficult ies, t he Assessing Officer may comput e such pr ofit s and gains on such
Explan ation .In this sub-section, mar ket value, in r elation to any goods, means the pr ice
that such goods would or dinar ily fetch on sale in the open mar ket.
(9A) Wher e any amount of pr ofits and gains of an industr ial under taking or of a hotel in
the case of an assessee is claimed and allowed under this section for any assessment year ,
deduction to the extent of such pr ofits and gains shall not be allowed under any other
pr ovisions of t his Chapt er under t he heading C.Deduction s in respect of certain
in comes, and shall in no case exceed the pr ofits and gains of the under taking or hotel, as
the case may be.
(10) Wher e it appear s to the Assessing Officer that, owing to the close connection between
the assessee car r ying on the eligible business to which this section applies and any other
per son, or for any other r eason, the cour se of business between them is so ar r anged that
the business tr ansacted between them pr oduces to the assessee mor e than the or dinar y
pr ofits which might be expected to ar ise in such eligible business, the Assessing Officer
shall, in computing the pr ofits and gains of such eligible business for the pur poses of the
deduction under this section, take the amount of pr ofits as may be r easonably deemed to
have been der ived ther efr om.
(11) The Centr al Gover nment may, after making such inquir y as it may think fit, dir ect, by
notification in the Official Gazette, that the exemption confer r ed by this section shall not
apply to any class of industr ial under taking with effect fr om such date as it may specify
in the notification.
(a) domestic satellite means a satellite owned and oper ated by an Indian company for
pr oviding telecommunication ser vice;
(aa) hilly ar ea means any ar ea located at a height of one thousand metr es or mor e
above the sea level;
(b) industr ial under taking shall have the meaning assigned to it in the Explan ation to
section 33B;
(c) initial assessment year
(1) in the case of an industr ial under taking or cold stor age plant or ship or hotel,
means the assessment year r elevant to the pr evious year in which the
industr ial under taking begins to manufactur e or pr oduce ar ticles or things,
or to oper ate its cold stor age plant or plants or the ship is fir st br ought into
use or the business of the hotel star ts functioning;
(2) in the case of an enter pr ise, car r ying on the business of developing, oper ating
and maint aining any infr ast r uct ur e facilit y, means t he assessment year
specified by the assessee at his option to be the initial year , not falling beyond
(Con td. on p. 1.451)
the twelfth assessment year star ting fr om the pr evious year in which the
enter pr ise begins oper ating and maintaining the infr astr uctur e facility;
(3) in the case of a company car r ying on scientific and industr ial r esear ch and
development, means the assessment year r elevant to the pr evious year in
which the company is appr oved by the pr escr ibed author ity for the pur poses
of sub-section (4B);
(4) in the case of an under taking r efer r ed to in sub-section (4C) means the
assessment year r elevant to the pr evious year in which the under taking star ts
to pr ovide the telecommunication ser vices whether basic or cellular includ-
ing r adio-paging and domestic satellite ser vice;
(5) in the case of an under taking oper ating an industr ial par k r efer r ed to in sub-
section (4D) means the assessment year r elevant to the pr evious year in
which the under taking star ts oper ating such industr ial par k notified for the
pur poses of the said sub-section;
(6) in t he case of an under t aking engaged in t he business of commer cial
pr oduction or r efining of miner al oil r efer r ed to in sub-section (4E) means the
assessment year r elevant to the pr evious year in which the under taking
commences the commer cial pr oduction of miner al oil;
(ca) infr astr uctur e facility means
(i) a r oad, br idge, air por t, por t, inland water ways and inland por ts, r ail system
or any other public facility of a similar natur e as may be notified by the Boar d
in this behalf in the Official Gazette;
(ii) a highway pr oject including housing or other activities being an integr al par t
of the highway pr oject; and
(iii) a water supply pr oject, ir r igation pr oject, sanitation and sewer age system;
(d) place of pilgr image means a place wher e any temple, mosque, gur dwar a, chur ch or
other place of public wor ship of r enown thr oughout any State or States is situated;
(e) r ur al ar ea means any ar ea other than
(i) an ar ea which is compr ised within the jur isdiction of a municipality (whether
known as a municipality, municipal cor por ation, notified ar ea committee,
town ar ea committee or by any other name) or a cantonment boar d and
which has a population of not less than ten thousand accor ding to the
pr eceding census of which r elevant figur es have been published befor e the
fir st day of the pr evious year ; or
(ii) an ar ea within such distance not being mor e than fifteen kilometr es fr om the
local limits of any municipality or cantonment boar d r efer r ed to in sub-
clause (i), as the Centr al Gover nment may, having r egar d to the stage of
development of such ar ea (including the extent of, and scope for , ur banisation
of such ar ea) and other r elevant consider ations specify in this behalf by
notification in the Official Gazette;
(f ) small-scale industr ial under taking means an industr ial under taking which is, as
on the last day of the pr evious year , r egar ded as a small-scale industr ial under taking
under section 11B

of the Industr ies (Development and Regulation) Act, 1951 (65 of
1951);
(g) Nor th Easter n Region means the r egion compr ising of the States of Ar unachal
Pr adesh, Assam, Manipur , Meghalaya, Mizor am, Nagaland and Tr ipur a.
91. See Cir cular No. 7/ 2002, dated 26-8-2002, Cir cular No. 10/ 2005, dated 16-12-2005 and
Cir cular No. 1/ 2006, dated 12-1-2006. For details, see Taxmanns Master Guide to Income-
tax Act.
(Con td. on p. 1.452)
S. 80-IA I.T. ACT, 1961 1.452
ser vice or develops an industr ial par k
93
[or develops
94
[***] a special economic
zone r efer r ed to in clause (iii) of sub-section (4)] or gener ates power or com-
mences tr ansmission or distr ibution of power
95
[or under takes substantial
r enovation and moder nisation of the existing tr ansmission or distr ibution lines
96
[or lays an d begin s to operate a cross-coun try n atural gas distribution n etwork]] :
97
[Provided that wher e the assessee develops or oper ates and maintains or
develops, oper ates and maintains any infr astr uctur e facility r efer r ed to in clause
(a) or clause (b) or clause (c) of the Explan ation to clause (i) of sub-section (4),
the pr ovisions of this sub-section shall have effect as if for the wor ds fifteen
year s, the wor ds twenty year s had been substituted.]
98
[(2A) Notwithstanding anything contained in sub-section (1) or sub-section (2),
the deduction in computing the total income of an under taking pr oviding
telecommunication ser vices, specified in clause (ii) of sub-section (4), shall be
hundr ed per cent of the pr ofits and gains of the eligible business for the fir st five
assessment year s commencing at any time dur ing the per iods as specified in sub-
section (2) and ther eafter , thir ty per cent of such pr ofits and gains for fur ther five
assessment year s.]
(3) This section applies to
99
[an
1
[under taking] r efer r ed to in
2
[clause (ii) or ] clause
(iv)
3
[or clause (vi)] of sub-section (4)] which fulfils all the following conditions,
namely :
(1) Wher e the gr oss total income of an assessee includes any pr ofits and gains der ived
fr om any business of an industr ial under taking or an enter pr ise r efer r ed to in sub-section
(4) (such business being her einafter r efer r ed to as the eligible business), ther e shall, in
accor dance with and subject to the pr ovisions of this section, be allowed, in computing the
total income of the assessee, a deduction fr om such pr ofits and gains of an amount equal
to hundr ed per cent of pr ofits and gains der ived fr om such business for the fir st five
assessment year s commencing at any time dur ing the per iods as specified in sub-section
(2) and ther eafter , twenty-five per cent of the pr ofits and gains for fur ther five assessment
year s:
Provided that wher e the assessee is a company, the pr ovisions of this sub-section shall
have effect as if for the wor ds twenty-five per cent, the wor ds thir ty per cent had been
subst it ut ed.
94. Wor ds or develops and oper ates or maintains and oper ates omitted by the Finance Act,
2003, w.r .e.f. 1-4-2002.
as under :
Provided that wher e the assessee begins oper ating and maintaining any infr astr uctur e
facility r efer r ed to in clause (b) of Explan ation to clause (i) of sub-section (4), the pr ovisions
of this sub-section shall have effect as if for the wor ds fifteen year s, the wor ds twenty
year s had been substituted.
99. Substituted for any industr ial under taking by the Finance Act, 2000, w.e.f. 1-4-2000.
1. Substituted for industr ial under taking by the Finance Act, 2001, w.e.f. 1-4-2002.
(i) it is not for med by splitting up, or the r econstr uction, of a business
Provided t hat t his condit ion shall not apply in r espect of an
4
[under taking] which is for med as a r esult of the r e-establishment,
4
[under taking] as is r efer r ed to in section 33B, in the cir cumstances
and within the per iod specified in that section;
pr eviously used for any pur pose:
5
[Provided that nothing contained in this sub-section shall apply in the case of
tr ansfer , either in whole or in par t, of machiner y or plant pr eviously used by a
State Electr icity Boar d r efer r ed to in clause (7) of section 2 of the Electr icity Act,
2003 (36 of 2003), whether or not such tr ansfer is in pur suance of the splitting up
or r econstr uction or r eor ganisation of the Boar d under Par t XIII of that Act.]
Explan ation 1.For the pur poses of clause (ii), any machiner y or plant which
was used outside India by any per son other than the assessee shall not be
r egar ded as machiner y or plant pr eviously used for any pur pose, if the following
(a) such machiner y or plant was not, at any time pr evious to the date of
the installation by the assessee, used in India;
outside India; and
(c) no deduction on account of depr eciation in r espect of such machiner y
or plant has been allowed or is allowable under the pr ovisions of this
Act in computing the total income of any per son for any per iod pr ior
to the date of the installation of machiner y or plant by the assessee.
Explan ation 2.Wher e in the case of an
6
[under taking], any machiner y or plant
or any par t ther eof pr eviously used for any pur pose is tr ansfer r ed to a new
business and the total value of the machiner y or plant or par t so tr ansfer r ed does
not exceed twenty per cent of the total value of the machiner y or plant used in
the business, then, for the pur poses of clause (ii) of this sub-section, the condition
specified ther ein shall be deemed to have been complied with.
(4) This section applies to
(i) any enter pr ise car r ying on the business
7
[of (i) developing or (ii)
oper ating and maintaining or (iii) developing, oper ating and main-
taining] any infr astr uctur e facility which fulfils all the following
(a) it is owned by a company r egister ed in India or by a consor tium
of such companies
8
[or by an author ity or a boar d or a cor por a-
7. Subst it ut ed for of (i) developing, (ii) maint aining and oper at ing or (iii) developing,
maintaining and oper ating by the Finance Act, 2001, w.e.f. 1-4-2002.
S. 80-IA I.T. ACT, 1961 1.454
tion or any other body established or constituted under any
Centr al or State Act;]
9
[(b) it has enter ed into an agr eement with the Centr al Gover nment or
a State Government or a local authority or any other statutory body
for (i) developing or (ii) oper ating and maintaining or (iii)
developing, oper ating and maintaining a new infr astr uctur e
facility;]
(c) it has star ted or star ts oper ating and maintaining the infr astr uc-
tur e facility on or after the 1st day of Apr il, 1995:
Provided that wher e an infr astr uctur e facility is tr ansfer r ed on
or after the 1st day of Apr il, 1999 by an enter pr ise which
developed such infr astr uctur e facility (her eafter r efer r ed to in
this section as the tr ansfer or enter pr ise) to another enter pr ise
(her eafter in this section r efer r ed to as the tr ansfer ee enter pr ise)
for the pur pose of oper ating and maintaining the infr astr uctur e
facility on its behalf in accor dance with the agr eement with the
Centr al Gover nment, State Gover nment, local author ity or statu-
tor y body, the pr ovisions of this section shall apply to the tr ans-
fer ee enter pr ise as if it wer e the enter pr ise to which this clause
applies and the deduction fr om pr ofits and gains would be
available to such tr ansfer ee enter pr ise for the unexpir ed per iod
dur ing which the tr ansfer or enter pr ise would have been entitled
to the deduction, if the tr ansfer had not taken place.
10
[Explan ation .For the pur poses of this clause, infr astr uctur e facil-
ity means
(a) a r oad including toll r oad, a br idge or a r ail system;
(b) r ead as under :
(b) it has enter ed into an agr eement with the Centr al Gover nment or a State Gover n-
ment or a local author ity or any other statutor y body for (i) developing, (ii)
maintaining and oper ating or (iii) developing, maintaining and oper ating a new
infr astr uctur e facility subject to the condition that such infr astr uctur e facility shall
be tr ansfer r ed to the Centr al Gover nment, State Gover nment, local author ity or
such other statutor y body, as the case may be, within the per iod stipulated in the
agr eement ;
as amended by the Finance Act, 2000, w.e.f. 1-4-2001, r ead as under :
Explan ation .For the pur poses of this clause, infr astr uctur e facility means,
(a) a r oad, br idge, air por t, por t, inland water ways and inland por ts, r ail system or any
other public facility of a similar natur e as may be notified by the Boar d in this behalf
in the Official Gazette;
(b) a highway pr oject including housing or other activities being an integr al par t of the
highway pr oject; and
(c) a water supply pr oject, water tr eatment system, ir r igation pr oject, sanitation and
sewer age system or solid waste management system;
See also Cir cular No. 7/ 2002, dated 26-8-2002. For details, see Taxmanns Master Guide to
Income-tax Act.
(b) a highway pr oject including housing or other activities being an
integr al par t of the highway pr oject;
(c) a water supply pr oject, water tr eatment system, ir r igation pr oject,
sanitation and sewer age system or solid waste management
system;
(d) a por t
11
, air por t, inland water way
12
[,in lan d port or n avigation al
ch an n el in th e sea];]
13
[(ii) any under taking which has star ted or star ts pr oviding telecommuni-
cation ser vices, whether basic or cellular , including r adio paging,
domestic satellite ser vice, networ k of tr unking, br oadband networ k
and inter net ser vices on or after the 1st day of Apr il, 1995, but on or
befor e the 31st day of Mar ch,
14
[2005].]
Explan ation .For the pur poses of this clause, domestic satellite
means a satellite owned and oper ated by an Indian company for
pr oviding telecommunication ser vice;
(iii) any under taking which develops, develops and oper ates or maintains
and oper ates an industr ial par k
15
[or special economic zone] notified
16
by the Centr al Gover nment in accor dance with the scheme fr amed
16
and notified
17
by that Gover nment for the per iod beginning on the 1st
day of Apr il, 1997 and ending on the 31st day of Mar ch,
18
[2006] :
19
[Provided that in a case wher e an under taking develops an industr ial
par k on or after the 1st day of Apr il, 1999 or a special economic zone
on or after the 1st day of Apr il, 2001 and tr ansfer s the oper ation and
11. For definition of por t, see Cir cular No. 793, dated 23-6-2000. For details, see Taxmanns
12. Substituted for or inland por t by the Finance Act, 2007, w.e.f. 1-4-2008.
13. Substituted by the Finance Act, 2001, w.e.f. 1-4-2001. Pr ior to its substitution, clause (ii)
r ead as under :
(ii) any under taking which has star ted or star ts pr oviding telecommunication ser vices
whether basic or cellular , including r adio-paging, domestic satellite ser vice or
networ k of tr unking and electr onic data inter change ser vices at any time on or after
the 1st day of Apr il, 1995, but befor e the 31st day of Mar ch, 2000.
14. Substituted for 2004 by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. Ear lier 2004 was
16. For notified Industr ial Par k Scheme, 2008, and notified Scheme for Special Economic
Zones, see Taxmanns Income-tax Rules. For notified under takings, etc., see Taxmanns
Dir ect Taxes Cir cular s and Taxmanns Year ly Tax Digest & Refer encer .
17. See r ule 18C.
19. Substituted by the Finance Act, 2003, w.r .e.f. 1-4-2002. Pr ior to its substitution, the pr oviso
r ead as under :
Provided that in a case wher e an under taking develops an industr ial par k on or after the
1st day of Apr il, 1999 and tr ansfer s the oper ation and maintenance of such industr ial par k
to another under taking (her eafter in this section r efer r ed to as the tr ansfer ee under taking)
the deduction under sub-section (1), shall be allowed to such tr ansfer ee under taking for
the r emaining per iod in the ten consecutive assessment year s in a manner as if the
oper ation and maintenance wer e not so tr ansfer r ed to the tr ansfer ee under taking;
S. 80-IA I.T. ACT, 1961 1.456
maintenance of such industr ial par k or such special economic zone,
as the case may be, to another under taking (her eafter in this section
r efer r ed to as the tr ansfer ee under taking), the deduction under sub-
section (1) shall be allowed to such tr ansfer ee under taking for the
r emaining per iod in the ten consecutive assessment year s as if the
oper ation and maintenance wer e not so tr ansfer r ed to the tr ansfer ee
under taking :
20
[Provided further that in the case of any under taking which deve-
lops, develops and oper ates or maintains and oper ates an industr ial
par k, the pr ovisions of this clause shall have effect as if for the figur es,
letter s and wor ds 31st day of Mar ch, 2006, the figur es, letter s and
wor ds 31st day of Mar ch, 2009" had been substituted;]
(iv) an
21
[under taking] which,
(a) is set up in any par t of India for the gener ation or gener ation and
distr ibution of power if it begins to gener ate power at any time
dur ing the per iod beginning on the 1st day of Apr il, 1993 and
ending on the 31st day of Mar ch,
22
[2010];
(b) star ts tr ansmission or distr ibution by laying a networ k of new
tr ansmission or distr ibution lines at any time dur ing the per iod
beginning on the 1st day of Apr il, 1999 and ending on the 31st day
of Mar ch,
22
[2010] :
Provided that the deduction under this section to an
23
[under tak-
ing] under sub-clause (b) shall be allowed only in r elation to the
pr ofits der ived fr om laying of such networ k of new lines for
tr ansmission or distr ibution;
24
[(c) under takes substantial r enovation and moder nisation of the
existing networ k of tr ansmission or distr ibution lines at any time
dur ing the per iod beginning on the 1st day of Apr il, 2004 and
ending on the 31st day of Mar ch,
25
[2010].
Explan ation .For the pur poses of this sub-clause, substantial
r enovation and moder nisation means an incr ease in the plant
and machiner y in the networ k of tr ansmission or distr ibution
lines by at least fifty per cent of the book value of such plant and
machiner y as on the 1st day of Apr il, 2004;]
26
[(v) an under taking owned by an Indian company and set up for r econ-
str uction or r evival of a power gener ating plant, if
(a) such Indian company is for med befor e the 30th day of November ,
2005 with major ity equity par ticipation by public sector compa-
nies for the pur poses of enfor cing the secur ity inter est of the
lender s to the company owning the power gener ating plant and
such Indian company is notified
27
befor e the 31st day of Decem-
ber , 2005 by the Centr al Gover nment for the pur poses of this
clause;
(b) such under taking begins to gener ate or tr ansmit or distr ibute
power befor e the 31st day of Mar ch,
28
[2008];]
29
[(vi) an y un dertak in g carryin g on th e busin ess of layin g an d operatin g a
cross-coun try n atural gas distribution n etwork , in cludin g pipelin es
an d storage facilities bein g an in tegral part of such n etwork , wh ich
fulfils th e followin g con dition s, n am ely:
(a) it is own ed by a com pan y registered in In dia or by a con sor-
tium of such com pan ies or by an auth ority or a board or a
corporation establish ed or con stituted un der an y Cen tral or
State Act;
(b) it h as been approved by th e Petroleum an d Natural Gas
Regulatory Board establish ed un der sub-section (1) of section
3 of th e Petroleum an d Natural Gas Regulatory Board Act,
2006 (19 of 2006) an d n otified by th e Cen tral Govern m en t in
th e Official Gazette;
(c) on e-th ird of its total pipelin e capacity is available for use on
com m on carrier basis by an y person oth er th an th e assessee
or an associated person ;
(d) it h as started or starts operatin g on or after th e 1st day of April,
2007; an d
(e) an y oth er con dition wh ich m ay be prescribed.
Explanation.For th e purposes of th is clause, an associated person
in relation to th e assessee m ean s a person
(i) wh o participates directly or in directly or th rough on e or m ore
in term ediaries in th e m an agem en t or con trol or capital of th e
assessee;
(ii) wh o h olds, directly or in directly, sh ares carryin g n ot less th an
twen ty-six per cen t of th e votin g power in th e assessee;
(iii) wh o appoin ts m ore th an h alf of th e Board of directors or
m em bers of th e govern in g board, or on e or m ore executive
directors or executive m em bers of th e govern in g board of th e
assessee; or
(iv) wh o guaran tees n ot less th an ten per cen t of th e total
borrowin gs of th e assessee.]
27. For notified Indian company, see Taxmanns Master Guide to Income-tax Act.
S. 80-IA I.T. ACT, 1961 1.458
(5) Notwithstanding anything contained in any other pr ovision of this Act, the
pr ofits and gains of an eligible business to which the pr ovisions of sub-section (1)
apply shall, for the pur poses of deter mining the quantum of deduction under that
sub-section for the assessment year immediately succeeding the initial as-
sessment year or any subsequent assessment year , be computed as if such
eligible business wer e the only sour ce of income of the assessee dur ing the
pr evious year r elevant to the initial assessment year and to ever y subsequent
assessment year up to and including the assessment year for which the deter mi-
nation is to be made.
(6) Notwithstanding anything contained in sub-section (4), wher e housing or
other activities ar e an integr al par t of the highway pr oject and the pr ofits of
which ar e computed on such basis and manner as may be pr escr ibed
30
, such
pr ofit shall not be liable to tax wher e the pr ofit has been tr ansfer r ed to a special
r eser ve account and the same is actually utilised for the highway pr oject
excluding housing and other activities befor e the expir y of thr ee year s following
the year in which such amount was tr ansfer r ed to the r eser ve account; and the
amount r emaining unutilised shall be char geable to tax as income of the year in
which such tr ansfer to r eser ve account took place.
(7)
31
[The deduction] under sub-section (1) fr om pr ofits and gains der ived
fr om an
32
[under taking] shall not be admissible unless the accounts of the
32
[under taking] for the pr evious year r elevant to the assessment year for which
the deduction is claimed have been audited by an accountant, as defined in the
Explan ation below sub-section (2) of section 288, and the assessee fur nishes,
along with his r etur n of income, the r epor t of such audit in the pr escr ibed for m
33
(8) Wher e any goods
34
[or ser vices] held for the pur poses of the eligible business
ar e tr ansfer r ed to any other business car r ied on by the assessee, or wher e any
goods
34
[or ser vices] held for the pur poses of any other business car r ied on by the
assessee ar e tr ansfer r ed to the eligible business and, in either case, the consider -
ation, if any, for such tr ansfer as r ecor ded in the accounts of the eligible business
does not cor r espond to the mar ket value of such goods
34
[or ser vices] as on the
date of the tr ansfer , then, for the pur poses of the deduction under this section,
the pr ofits and gains of such eligible business shall be computed as if the tr ansfer ,
in either case, had been made at the mar ket value of such goods
34
[or ser vices]
as on that date :
Provided that wher e, in the opinion of the Assessing Officer , the computation of
the pr ofits and gains of the eligible business in the manner her einbefor e specified
pr esents exceptional difficulties, the Assessing Officer may compute such pr ofits
and gains on such r easonable basis as he may deem fit.
30. See r ule 18BBE and For m No. 10CCC.
31. Substituted for Wher e the assessee is a per son other than a company or a co-oper ative
society, the deduction by the Finance Act, 2002, w.e.f. 1-4-2003.
33. See r ule 18BBB and For m No. 10CCB.
35
[Explan ation .For the pur poses of this sub-section, mar ket value, in r elation
to any goods or ser vices, means the pr ice that such goods or ser vices would
or dinar ily fetch in the open mar ket.]
(9) Wher e any amount of pr ofits and gains of an
36
[under taking] or of an
enter pr ise in the case of an assessee is claimed and allowed under this section for
any assessment year , deduction to the extent of such pr ofits and gains shall not
be allowed under any other pr ovisions of this Chapter under the heading
C.Deduction s in respect of certain in com es, and shall in no case exceed the
pr ofits and gains of such eligible business of
36
[under taking] or enter pr ise, as the
case may be.
(10) Wher e it appear s to the Assessing Officer that, owing to the close connection
between the assessee car r ying on the eligible business to which this section
applies and any other per son, or for any other r eason, the cour se of business
between them is so ar r anged that the business tr ansacted between them
pr oduces to the assessee mor e than the or dinar y pr ofits which might be expected
to ar ise in such eligible business, the Assessing Officer shall, in computing the
pr ofits and gains of such eligible business for the pur poses of the deduction
under this section, take the amount of pr ofits as may be r easonably deemed to
have been der ived ther efr om.
dir ect, by notification in the Official Gazette, that the exemption confer r ed by this
section shall not apply to any class of industr ial under taking or enter pr ise with
effect fr om such date as it may specify in the notification.
(12) Wher e any under taking of an Indian company which is entitled to the
or demer ger
demer ger had not taken place.
37
[(12A) Noth in g con tain ed in sub-section (12) sh all apply to an y en terprise or
un dertak in g wh ich is tran sferred in a sch em e of am algam ation or dem erger on
or after th e 1st day of April, 2007.]
r ead as under :
Explan ation .For the pur poses of this sub-section, mar ket value, in r elation to any
goods, means the pr ice that such goods would or dinar ily fetch on sale in the open mar ket.
38
[(13) Nothing contained in this section shall apply to any Special Economic
Zones notified on or after the 1st day of Apr il, 2005 in accor dance with the
scheme r efer r ed to in sub-clause (iii) of clause (c) of sub-section (4).]
39
contained in this section shall apply to a per son who executes a wor ks contr act
enter ed into with the under taking or enter pr ise, as the case may be.]
38
[Deductions in respect of profits and gains by an undertaking or enterprise
engaged in development of Special Economic Zone.
80-IAB. (1) Wher e the gr oss total income of an assessee, being a Developer ,
includes any pr ofits and gains der ived by an under taking or an enter -
pr ise fr om any business of developing a Special Economic Zone, notified on or
after the 1st day of Apr il, 2005 under the Special Economic Zones Act, 2005, ther e
shall, in accor dance with and subject to the pr ovisions of this section, be allowed,
in computing the total income of the assessee, a deduction of an amount equal
to one hundr ed per cent of the pr ofits and gains der ived fr om such business for
ten consecutive assessment year s.
(2) The deduction specified in sub-section (1) may, at the option of the assessee,
be claimed by him for any ten consecutive assessment year s out of fifteen year s
beginning fr om the year in which a Special Economic Zone has been notified by
the Centr al Gover nment:
Provided that wher e in computing the total income of any under taking, being a
Developer for any assessment year , its pr ofits and gains had not been included
by application of the pr ovisions of sub-section (13) of section 80-IA, the under tak-
ing being the Developer shall be entitled to deduction r efer r ed to in this section
only for the unexpir ed per iod of ten consecutive assessment year s and ther eafter
it shall be eligible for deduction fr om income as pr ovided in sub-section (1) or
sub-section (2), as the case may be:
Provided further that in a case wher e an under taking, being a Developer who
develops a Special Economic Zone on or after the 1st day of Apr il, 2005 and
tr ansfer s the oper ation and maintenance of such Special Economic Zone to
another Developer (her eafter in this section r efer r ed to as the tr ansfer ee
Developer ), the deduction under sub-section (1) shall be allowed to such tr ans-
fer ee Developer for the r emaining per iod in the ten consecutive assessment
year s as if the oper ation and maintenance wer e not so tr ansfer r ed to the
tr ansfer ee Developer .
(3) The pr ovisions of sub-section (5) and sub-sections (7) to (12) of section 80-IA
shall apply to the Special Economic Zones for the pur pose of allowing deductions
under sub-section (1).
Explan ation .For the pur poses of this section, Developer and Special Eco-
nomic Zone shall have the same meanings r espectively as assigned to them in
clauses (g) and (za) of section 2 of the Special Economic Zones Act, 2005
40
.]
S. 80-IAB I.T. ACT, 1961 1.460
40. For text of section 2(g) and (za) of Special Economic Zones Act, 2005, see Appendix.
1.461 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80-IB
Deduction in respect of profits and gains from certain industrial undertakings
other than infrastructure development undertakings.
80-IB. (1) Wher e the gr oss total income of an assessee includes any pr ofits
and gains der ived fr om any business r efer r ed to in sub-sections (3) to
41
[(11), (11A) and (11B) ] (such business being her einafter r efer r ed to as the
eligible business), ther e shall, in accor dance with and subject to the pr ovisions of
this section, be allowed, in computing the total income of the assessee, a
deduction fr om such pr ofits and gains of an amount equal to such per centage
and for such number of assessment year s as specified in this section.
(i ) it is not for med
42
by splitting up
42
, or the r econstr uction
42
, of a business
Provided that this condition shall not apply in r espect of an industr ial
under taking which is for med as a r esult of the r e-establishment,
stances and within the per iod specified in that section;
pr eviously used for any pur pose;
(iii) it manufactur es or pr oduces any ar ticle or thing, not being any ar ticle
or thing specified in the list in the Eleventh Schedule, or oper ates one
or mor e cold stor age plant or plants, in any par t of India :
Provided that the condition in this clause shall, in r elation to a small
scale industr ial under taking or an industr ial under taking r efer r ed to
in sub-section (4) shall apply as if the wor ds not being any ar ticle or
thing specified in the list in the Eleventh Schedule had been omitted.
Explan ation 1.For the pur poses of clause (ii), any machiner y or
plant which was used outside India by any per son other than the
assessee shall not be r egar ded as machiner y or plant pr eviously used
for any pur pose, if the following conditions ar e fulfilled, namely :
(a) such machiner y or plant was not, at any time pr evious to the date
of the installation by the assessee, used in India;
outside India; and
(c) no deduction on account of depr eciation in r espect of such
machiner y or plant has been allowed or is allowable under the
pr ovisions of this Act in computing the total income of any per son
for any per iod pr ior to the date of the installation of the machin-
er y or plant by the assessee.
Explan ation 2.Wher e in the case of an industr ial under taking, any
machiner y or plant or any par t ther eof pr eviously used for any
41. Substituted for (11) and (11A) by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. Ear lier
and (11A) was inser ted by the Finance Act, 2001, w.e.f. 1-4-2002.
42. For the meaning of the ter ms/ expr essions for med, splitting up and r econstr uction,
pur pose is tr ansfer r ed to a new business and the total value of the
machiner y or plant or par t so tr ansfer r ed does not exceed twenty per
cent of the total value of the machiner y or plant used in the business,
then, for the pur poses of clause (ii) of this sub-section, the condition
specified ther ein shall be deemed to have been complied with;
(iv) in a case wher e the industr ial under taking manufactur es or pr oduces
ar ticles or things, the under taking employs ten or mor e wor ker s in a
manufactur ing pr ocess car r ied on with the aid of power , or employs
twenty or mor e wor ker s in a manufactur ing pr ocess car r ied on
without the aid of power .
(3) The amount of deduction in the case of an industr ial under taking shall be
twenty-five per cent (or thir ty per cent wher e the assessee is a company), of the
pr ofits and gains der ived fr om such industr ial under taking for a per iod of ten
consecutive assessment year s (or twelve consecutive assessment year s wher e
the assessee is a co-oper ative society) beginning with the initial assessment year
subject to the fulfilment of the following conditions, namely :
(i) it begins to manufactur e or pr oduce, ar ticles or things or to oper ate
such plant or plants at any time dur ing the per iod beginning fr om the
1st day of Apr il, 1991 and ending on the 31st day of Mar ch, 1995 or
such fur ther per iod as the Centr al Gover nment may, by notification
in the Official Gazette, specify with r efer ence to any par ticular
under taking;
(ii) wher e it is an industr ial under taking being a small scale industr ial
under taking, it begins to manufactur e or pr oduce ar ticles or things or
to oper ate its cold stor age plant [not specified in sub-section (4) or sub-
section (5)] at any time dur ing the per iod beginning on the 1st day of
Apr il, 1995 and ending on the 31st day of Mar ch,
43
[2002].
44
(4) The amount of deduction in the case of an industr ial under taking in an
industr ially backwar d State specified in the Eighth Schedule shall be hundr ed
per cent of the pr ofits and gains der ived fr om such industr ial under taking for five
assessment year s beginning with the initial assessment year and ther eafter
twenty-five per cent (or thir ty per cent wher e the assessee is a company) of the
pr ofits and gains der ived fr om such industr ial under taking :
Provided that the total per iod of deduction does not exceed ten consecutive
assessment year s (or twelve consecutive assessment year s wher e the assessee is
a co-oper ative society) subject to fulfilment of the condition that it begins to
manufactur e or pr oduce ar ticles or things or to oper ate its cold stor age plant or
plants dur ing the per iod beginning on the 1st day of Apr il, 1993 and ending on the
31st day of Mar ch,
45
[2004] :
Provided further that in the case of such industr ies in the Nor th-Easter n Region,
as may be notified
46
by the Centr al Gover nment, the amount of deduction shall
S. 80-IB I.T. ACT, 1961 1.462
43. Substituted for 2000by the Finance Act, 2000, w.e.f. 1-4-2001.
Income-tax Act.
46. For notified industr ies, see Taxmanns Master Guide to Income-tax Act.
be hundr ed per cent of pr ofits and gains for a per iod of ten assessment year s, and
the total per iod of deduction shall in such a case not exceed ten assessment
year s :
47
[Provided also that no deduction under this sub-section shall be allowed for the
assessment year beginning on the 1st day of Apr il, 2004 or any subsequent year
to any under taking or enter pr ise r efer r ed to in sub-section (2) of section 80-IC:]
48
[Provided also that in the case of an industr ial under taking in the State of
Jammu and Kashmir , the pr ovisions of the fir st pr oviso shall have effect as if for
the figur es, letter s and wor ds 31st day of Mar ch, 2004, the figur es, letter s and
wor ds 31st day of Mar ch,
49
[2012] had been substituted :
Provided also that no deduction under this sub-section shall be allowed to an
industr ial under taking in the State of Jammu and Kashmir which is engaged in
the manufactur e or pr oduction of any ar ticle or thing specified in Par t C of the
Thir teenth Schedule.]
(5) The amount of deduction in the case of an industr ial under taking located in
such industr ially backwar d distr icts as the Centr al Gover nment may, having
r egar d to the pr escr ibed guidelines
50
, by notification
51
in the Official Gazette,
specify in this behalf as industr ially backwar d distr ict of categor y A or an
industr ially backwar d distr ict of categor y B shall be,
(i) hundr ed per cent of the pr ofits and gains der ived fr om an industr ial
under taking located in a backwar d distr ict of categor y A for five
assessment year s beginning with the initial assessment year and
ther eafter , twenty-five per cent (or thir ty per cent wher e the assessee
is a company) of the pr ofits and gains of an industr ial under taking :
Provided that the total per iod of deduction shall not exceed ten
consecutive assessment year s or wher e the assessee is a co-oper ative
society, twelve consecutive assessment year s :
Provided further that the industr ial under taking begins to manu-
factur e or pr oduce ar ticles or things or to oper ate its cold stor age
plant or plants at any time dur ing the per iod beginning on the 1st day
of October , 1994 and ending on the 31st day of Mar ch,
52
[2004];
(ii) hundr ed per cent of the pr ofits and gains der ived fr om an industr ial
under taking located in a backwar d distr ict of categor y B for thr ee
assessment year s beginning with the initial assessment year and
ther eafter , twenty-five per cent (or thir ty per cent wher e the assessee
is a company) of the pr ofits and gains of an industr ial under taking :
48. Four th and fifth pr ovisos inser ted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.
50. See r ule 11EA and Appendix III of Income-tax Rules.
51. For notified industr ially backwar d distr icts, see Taxmanns Master Guide to Income-tax
Act .
substituted for 2000by the Finance Act, 2000, w.e.f. 1-4-2001.
Provided that the total per iod of deduction does not exceed eight
consecutive assessment year s (or wher e the assessee is a co-oper ative
society, twelve consecutive assessment year s) :
Provided further that the industr ial under taking begins to manu-
factur e or pr oduce ar ticles or things or to oper ate its cold stor age
plant or plants at any time dur ing the per iod beginning on the 1st day
of October , 1994 and ending on the 31st day of Mar ch,
53
[2004].
(6) The amount of deduction in the case of the business of a ship shall be thir ty
per cent of the pr ofits and gains der ived fr om such ship for a per iod of ten
consecutive assessment year s including the initial assessment year pr ovided that
the ship
(i) is owned by an Indian company and is wholly used for the pur poses
of the business car r ied on by it;
(ii) was not, pr evious to the date of its acquisition by the Indian company,
owned or used in Indian ter r itor ial water s by a per son r esident in
India; and
(iii) is br ought into use by the Indian company at any time dur ing the
per iod beginning on the 1st day of Apr il, 1991 and ending on the 31st
day of Mar ch, 1995.
(7) The amount of deduction in the case of any hotel shall be
(a) fifty per cent of the pr ofits and gains der ived fr om the business of
such hotel for a per iod of ten consecutive year s beginning fr om the
initial assessment year as is located in a hilly ar ea or a r ur al ar ea or
a place of pilgr image or such other place as the Centr al Gover nment
may, having r egar d to the need for development of infr astr uctur e for
tour ism in any place and other r elevant consider ations, specify by
notification in the Official Gazette and such hotel star ts functioning
at any time dur ing the per iod beginning on the 1st day of Apr il, 1990
and ending on t he 31st day of Mar ch, 1994 or beginning on
the 1st day of Apr il, 1997 and ending on the 31st day of Mar ch, 2001:
Provided that nothing contained in this clause shall apply to a hotel
located at a place within the municipal jur isdiction (whether known
as a municipality, municipal cor por ation, notified ar ea committee or
a cantonment boar d or by any other name) of Calcutta, Chennai,
Delhi or Mumbai, which has star ted or star ts functioning on or after
the 1st day of Apr il, 1997 and befor e the 31st day of Mar ch, 2001:
Provided further that the said hotel is appr oved by the pr escr ibed
author ity for the pur pose of this clause in accor dance with the r ules
54
made under this Act and wher e the said hotel is appr oved by the
pr escr ibed author ity befor e the 31st day of Mar ch, 1992, shall be
deemed to have been appr oved by the pr escr ibed author ity for the
pur pose of this section in r elation to the assessment year commencing
S. 80-IB I.T. ACT, 1961 1.464
substituted for 2000by the Finance Act, 2000, w.e.f. 1-4-2001.
54. See r ule 18BBC.
(b) thir ty per cent of the pr ofits and gains der ived fr om the business of
such hotel as is located in any place other than those mentioned in
sub-clause (a) for a per iod of ten consecutive year s beginning fr om
the initial assessment year if such hotel has star ted or star ts function-
ing at any time dur ing the per iod beginning on the 1st day of Apr il,
1991 and ending on the 31st day of Mar ch, 1995 or beginning on the
1st day of Apr il, 1997 and ending on the 31st day of Mar ch, 2001:
Provided that nothing contained in this clause shall apply to a hotel
located at a place within the municipal jur isdiction (whether known
as a municipality, municipal cor por ation, notified ar ea committee,
town ar ea committee or a cantonment boar d or by any other name)
of Calcutta, Chennai, Delhi or Mumbai, which has star ted or star ts
functioning on or after the 1st day of Apr il, 1997 and befor e the 31st
(c) the deduction under clause (a) or clause (b) shall be available only if
(i) the business of the hotel is not for med by the splitting up, or the
r econstr uction, of a business alr eady in existence or by the
tr ansfer to a new business of a building pr eviously used as a hotel
or of any machiner y or plant pr eviously used for any pur pose;
(ii) the business of the hotel is owned and car r ied on by a company
r egister ed in India with a paid-up capital of not less than five
hundr ed thousand r upees;
(iii) the hotel is for the time being appr oved by the pr escr ibed autho-
r ity
55
:
Provided that any hotel appr oved by the pr escr ibed author ity
55
befor e the 1st day of Apr il, 1999 shall be deemed to have been
appr oved under this sub-section.
56
[(7A) The amount of deduction in the case of any multiplex theatr e shall be
(a) fifty per cent of the pr ofits and gains der ived, fr om the business of
building, owning and oper ating a multiplex theatr e, for a per iod of five
consecutive year s beginning fr om the initial assessment year in any
place :
Provided that nothing contained in this clause shall apply to a
multiplex theatr e located at a place within the municipal jur isdiction
(whether known as a municipality, municipal cor por ation, notified
ar ea committee or a cantonment boar d or by any other name) of
Chennai, Delhi, Mumbai or Kolkata;
(b) the deduction under clause (a) shall be allowable only if
(i) such multiplex theatr e is constr ucted at any time dur ing the
per iod beginning on the 1st day of Apr il, 2002 and ending on the
55. See r ule 18BBC.
56. Sub-sections (7A) and (7B) inser ted by the Finance Act, 2002, w.e.f. 1-4-2003.
(ii) the business of the multiplex theatr e is not for med by the splitting
up, or the r econstr uction, of a business alr eady in existence or by
the tr ansfer to a new business of any building or of any machiner y
or of plant pr eviously used for any pur pose;
(iii) the assessee fur nishes alongwith the r etur n of income, the r epor t
of an audit in such for m and containing such par ticular s as may
be pr escr ibed
57
and duly signed and ver ified by an accountant, as
defined in the Explan ation below sub-section (2) of section 288,
cer tifying that the deduction has been cor r ectly claimed.
(7B) The amount of deduction in the case of any convention centr e shall be
(a) fifty per cent of the pr ofits and gains der ived, by the assessee fr om the
business of building, owning and oper ating a convention centr e, for
a per iod of five consecutive year s beginning fr om the initial assess-
ment year ;
(b) the deduction under clause (a) shall be allowable only if
(i) such convention centr e is constr ucted at any time dur ing the
per iod beginning on the 1st day of Apr il, 2002 and ending on the
(ii) the business of the convention centr e is not for med by the
splitting up, or the r econstr uction, of a business alr eady in
existence or by the tr ansfer to a new business of any building or
of any machiner y or plant pr eviously used for any pur pose;
(iii) the assessee fur nishes alongwith the r etur n of income, the r epor t
of an audit in such for m and containing such par ticular s as may
be pr escr ibed
58
, and duly signed and ver ified by an accountant, as
cer tifying that the deduction has been cor r ectly claimed.]
(8) The amount of deduction in the case of any company car r ying on scientific
r esear ch and development shall be hundr ed per cent of the pr ofits and gains of
such business for a per iod of five assessment year s beginning fr om the initial
assessment year if such company
(a) is r egister ed in India;
(b) has the main object of scientific and industr ial r esear ch and develop-
ment;
(c) is for the time being appr oved by the pr escr ibed author ity
59
at any
time befor e the 1st day of Apr il, 1999.
60
[(8A) The amount of deduction in the case of any company car r ying on
scientific r esear ch and development shall be hundr ed per cent of the pr ofits and
gains of such business for a per iod of ten consecutive assessment year s,
beginning fr om the initial assessment year , if such company
(i) is r egister ed in India;
S. 80-IB I.T. ACT, 1961 1.466
57. See r ule 18DB and For m No. 10CCBA.
58. See r ule 18DC and For m No. 10CCBB.
59. See r ule 18BBD.
(ii) has its main object the scientific and industr ial r esear ch and develop-
ment;
(iii) is for the time being appr oved by the pr escr ibed author ity
61
at any
time after the 31st day of Mar ch, 2000 but befor e the 1st day of Apr il,
62
[2007];
(iv) fulfils such other conditions as may be pr escr ibed
63
.]
(9) The amount of deduction to an under taking which begins commer cial
pr oduction or r efining of miner al oil shall be hundr ed per cent of the pr ofits for
a per iod of seven consecutive assessment year s including the initial assessment
year :
Provided that wher e the under taking is located in Nor th-Easter n Region, it has
begun or begins commer cial pr oduction of miner al oil befor e the 1st day of Apr il,
1997 and wher e it is located in any par t of India, it begins commer cial pr oduction
of miner al oil on or after the 1st day of Apr il, 1997 :
Provided further that wher e the under taking is engaged in r efining of miner al
oil, it begins r efining on or after the 1st day of October , 1998:
63a
[Provided also th at wh ere such un dertak in g begin s refin in g of m in eral oil on
or after th e 1st day of April, 2009, n o deduction un der th is section sh all be allowed
in respect of such un dertak in g un less such un dertak in g fulfils all th e followin g
con dition s, n am ely:
(i) it is wh olly own ed by a public sector com pan y or an y oth er com pan y in
wh ich a public sector com pan y or com pan ies h old at least forty-n in e per
cen t of th e votin g righ ts;
(ii) it is n otified by th e Cen tral Govern m en t in th is beh alf on or before th e 31st
day of May, 2008; an d
(iii) it begin s refin in g n ot later th an th e 31st day of March , 2012.]
64
[(10) The amount of deduction in the case of an under taking developing and
building housing pr ojects appr oved befor e the 31st day of Mar ch, 2007 by a local
61. Pr escr ibed author ity is Secr etar y, Depar tment of Scientific and Industr ial Resear ch,
Ministr y of Science and Technology, Govt. of India.
substituted for 2004 by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005 and 2004 was
63. See r ule 18DA.
64. Substituted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. Pr ior to its substitution, sub-
section (10), as amended by the Finance Act, 2000, w.e.f. 1-4-2001 and Finance Act, 2003,
w.r .e.f. 1-4-2002, r ead as under :
(10) The amount of pr ofits in case of an under taking developing and building housing
pr ojects appr oved befor e the 31st day of Mar ch, 2005 by a local author ity, shall be hundr ed
per cent of the pr ofits der ived in any pr evious year r elevant to any assessment year fr om
such housing pr oject if,
(a) such under taking has commenced or commences development and constr uction
of the housing pr oject on or after the 1st day of October , 1998;
(b) the pr oject is on the size of a plot of land which has a minimum ar ea of one acr e;
and
(c) the r esidential unit has a maximum built-up ar ea of one thousand squar e feet wher e
such r esidential unit is situated within the cities of Delhi or Mumbai or within
twenty-five kilometr es fr om the municipal limits of these cities and one thousand
and five hundr ed squar e feet at any other place.
author ity shall be hundr ed per cent of the pr ofits der ived in the pr evious year
r elevant to any assessment year fr om such housing pr oject if,
(a) such under taking has commenced or commences development and
constr uction of the housing pr oject on or after the 1st day of October ,
1998 and completes such constr uction,
(i) in a case wher e a housing pr oject has been appr oved by the local
author ity befor e the 1st day of Apr il, 2004, on or befor e the 31st
(ii) in a case wher e a housing pr oject has been, or , is appr oved by the
local author ity on or after the 1st day of Apr il, 2004, within four
year s fr om the end of the financial year in which the housing
pr oject is appr oved by the local author ity.
(i) in a case wher e the appr oval in r espect of the housing pr oject is
obtained mor e than once, such housing pr oject shall be deemed
to have been appr oved on the date on which the building plan of
such housing pr oject is fir st appr oved by the local author ity;
(ii) the date of completion of constr uction of the housing pr oject shall
be taken to be the date on which the completion cer tificate in
r espect of such housing pr oject is issued by the local author ity;
(b) the pr oject is on the size of a plot of land which has a minimum ar ea
of one acr e:
Provided that nothing contained in clause (a) or clause (b) shall apply
to a housing pr oject car r ied out in accor dance with a scheme fr amed
by the Centr al Gover nment or a State Gover nment for r econstr uction
or r edevelopment of existing buildings in ar eas declar ed to be slum
ar eas under any law for the time being in for ce and such scheme is
notified by the Boar d in this behalf;
(c) the r esidential unit has a maximum built-up ar ea of one thousand
squar e feet wher e such r esidential unit is situated within the city of
Delhi or Mumbai or within twenty-five kilometr es fr om the municipal
limits of these cities and one thousand and five hundr ed squar e feet
at any other place; and
(d) the built-up ar ea of the shops and other commer cial establishments
included in the housing pr oject does not exceed five per cent of the
aggr egate built-up ar ea of the housing pr oject or two thousand
squar e feet, whichever is less.]
(11) Notwithstanding anything contained in clause (iii) of sub-section (2) and sub-
sections (3), (4) and (5), the amount of deduction in a case of industr ial
under taking der iving pr ofit fr om the business of setting up and oper ating a cold
chain facility for agr icultur al pr oduce, shall be hundr ed per cent of the pr ofits
and gains der ived fr om such industr ial under taking for five assessment year s
beginning with the initial assessment year and ther eafter , twenty-five per cent
(or thir ty per cent wher e the assessee is a company) of the pr ofits and gains
der ived fr om the oper ation of such facility in a manner that the total per iod of
deduction does not exceed ten consecutive assessment year s (or twelve consecu-
tive assessment year s wher e the assessee is a co-oper ative society) and subject
S. 80-IB I.T. ACT, 1961 1.468
to fulfilment of the condition that it begins to oper ate such facility on or after the
1st day of Apr il, 1999 but befor e the
65
[1st day of Apr il, 2004].
66
[(11A) The amount of deduction in a case of
67
[an under taking der iving pr ofit
from the business of processing, preservation and packaging of fruits or vegetables
or fr om] the integr ated business of handling, stor age and tr anspor tation of
foodgr ains, shall be hundr ed per cent of the pr ofits and gains der ived fr om such
under taking for five assessment year s beginning with the initial assessment year
and ther eafter , twenty-five per cent (or thir ty per cent wher e the assessee is a
company) of the pr ofits and gains der ived fr om the oper ation of such business
in a manner that the total per iod of deduction does not exceed ten consecutive
assessment year s and subject to fulfilment of the condition that it begins to
oper ate such business on or after the 1st day of Apr il, 2001.]
68
[(11B) The amount of deduction in the case of an under taking der iving pr ofits
fr om the business of oper ating and maintaining a hospital in a r ur al ar ea shall be
hundr ed per cent of the pr ofits and gains of such business for a per iod of five
consecutive assessment year s, beginning with the initial assessment year , if
(i) such hospital is constructed at any time during the period beginning on
the 1st day of October , 2004 and ending on the 31st day of Mar ch,
2008;
(ii) the hospital has at least one hundr ed beds for patients;
(iii) the constr uction of the hospital is in accor dance with the r egulations,
for the time being in for ce, of the local author ity; and
(iv) the assessee fur nishes along with the r etur n of income, the r epor t of
audit in such for m and containing such par ticular s as may be
pr escr ibed
69
, and duly signed and ver ified by an accountant, as
cer tifying that the deduction has been cor r ectly claimed.
Explan ation .For the pur poses of this sub-section, a hospital shall be deemed to
have been constr ucted on the date on which a completion cer tificate in r espect
of such constr uction is issued by the concer ned local author ity.]
The following sub-section (11C) shall be inserted after sub-section (11B) of
section 80-IB by the Finance Act, 2008, w.e.f. 1-4-2009 :
(11C) Th e amoun t of deduction in th e case of an un dertakin g derivin g profits from
th e busin ess of operatin g an d m ain tain in g a h ospital located an ywh ere in In dia,
oth er th an th e excluded area, sh all be h un dred per cen t of th e profits an d gain s
derived from such busin ess for a period of five con secutive assessm en t years,
begin n in g with th e in itial assessm en t year, if
(i) th e h ospital is con structed an d h as started or starts fun ction in g at an y
tim e durin g th e period begin n in g on th e 1st day of April, 2008 an d
en din g on th e 31st day of March , 2013;
65. Substituted for 31st day of Mar ch, 2003 by the Finance Act, 2003, w.e.f. 1-4-2004.
67. Substituted for an under taking der iving pr ofit fr om by the Finance (No. 2) Act, 2004,
w.e.f. 1-4-2005.
69. See r ule 18DD and For m No. 10CCBC. Rule 12 pr ovides that the r etur n of income shall not
be accompanied by any document or copy of any account or for m or r epor t of audit
r equir ed to be attached with r etur n of income under any of the pr ovisions of the Act.
(ii) th e h ospital h as at least on e h un dred beds for patien ts;
(iii) th e con struction of th e h ospital is in accordan ce with th e regulation s
or bye-laws of th e local auth ority; an d
(iv) th e assessee furn ish es alon g with th e return of in com e*, a report of
audit in such form an d con tain in g such particulars, as m ay be
prescribed, an d duly sign ed an d verified by an accoun tan t, as defin ed
in th e Explanation to sub-section (2) of section 288, certifyin g th at th e
deduction h as been correctly claim ed.
Explanation.For th e purposes of th is sub-section ,
(a) a h ospital sh all be deem ed to h ave been con structed on th e date on
wh ich a completion certificate in respect of such con struction is issued
by th e local auth ority con cern ed;
(b) in itial assessm en t yearm ean s th e assessm en t year relevan t to th e
previous year in wh ich th e busin ess of th e h ospital starts fun ction in g;
(c) excluded areash all m ean an area com prisin g
(i) Greater Mum bai urban agglom eration ;
(ii) Delh i urban agglom eration ;
(iii) Kolk ata urban agglom eration ;
(iv) Ch en n ai urban agglom eration ;
(v) Hyderabad urban agglom eration ;
(vi) Ban galore urban agglom eration ;
(vii) Ah m edabad urban agglom eration ;
(viii) District of Faridabad;
(ix) District of Gurgaon ;
(x) District of Gautam Budh Nagar;
(xi) District of Gh aziabad;
(xii) District of Gan dh in agar; an d
(xiii) City of Secun derabad;
(d) th e area comprisin g an urban agglomeration sh all be th e area in cluded
in such urban agglom eration on th e basis of th e 2001 cen sus.
(12) Wher e any under taking of an Indian company which is entitled to the
or demer ger
demer ger had not taken place.
S. 80-IB I.T. ACT, 1961 1.470
*Rule 12 pr ovides that the r etur n of income shall not be accompanied by any document or copy
of any account or for m or r epor t of audit r equir ed to be attached with r etur n of income under
any of the pr ovisions of the Act.
(13) The pr ovisions contained in sub-section (5) and sub-sections (7) to (12) of
section 80-IA shall, so far as may be, apply to the eligible business under this
section
70
.
71
[(a) built-up ar ea means the inner measur ements of the r esidential unit
at the floor level, including the pr ojections and balconies, as incr eased
by the thickness of the walls but does not include the common ar eas
shar ed with other r esidential units;]
72
[(aa)] cold chain facility means a chain of facilities for stor age or tr anspor -
tation of agr icultur al pr oduce under scientifically contr olled condi-
tions including r efr iger ation and other facilities necessar y for the
pr eser vation of such pr oduce;
73
[
74
[(ab)] convention centr e means a building of a pr escr ibed ar ea compr ising
of convention halls to be used for the pur pose of holding confer ences
and seminar s, being of such size and number and having such other
facilities and amenities, as may be pr escr ibed
75
;]
(b) hilly ar ea means any ar ea located at a height of one thousand metr es
or mor e above the sea level;
(c) initial assessment year
(i) in the case of an industr ial under taking or cold stor age plant or
ship or hotel, means the assessment year r elevant to the pr evious
year in which the industr ial under taking begins to manufactur e
or pr oduce ar ticles or things, or to oper ate its cold stor age plant
or plants or the cold chain facility or the ship is fir st br ought into
use or the business of the hotel star ts functioning;
(ii) in the case of a company car r ying on scientific and industr ial
r esear ch and development, means the assessment year r elevant
to the pr evious year in which the company is appr oved by the
pr escr ibed author ity for the pur poses of sub-section (8);
(iii) in the case of an under taking engaged in the business of commer -
cial pr oduction or r efining of miner al oil r efer r ed to in sub-
section (9), means the assessment year r elevant to the pr evious
year in which the under taking commences the commer cial
pr oduction or r efining of miner al oil;
76
[(iv) in the case of an under taking engaged
77
[in the business of
pr ocessing, pr eser vation and packaging of fr uits or vegetables or ]
72. Clause (a) r e-let t er ed as clause (aa), ibid.
74. Clause (aa) r e-let t er ed as clause (ab) by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.
75. See r ule 18DC and For m No. 10CCBB.
S. 80-IB I.T. ACT, 1961 1.472
in the integr ated business of handling, stor age and tr anspor tation
of foodgr ains, means the assessment year r elevant to the pr evi-
ous year in which the under taking begins such business;]
78
[(v) in the case of a multiplex theatr e, means the assessment year
r elevant to the pr evious year in which a cinema hall, being a par t
of the said multiplex theatr e, star ts oper ating on a commer cial
basis;
(vi) in the case of a convention centr e, means the assessment year
r elevant to the pr evious year in which the convention centr e
star ts oper ating on a commer cial basis;]
79
[(vii) in the case of an under taking engaged in oper ating and maintain-
ing a hospital in a r ur al ar ea, means the assessment year r elevant
to the pr evious year in which the under taking begins to pr ovide
medical ser vices;]
(d) Nor th-Easter n Region means the r egion compr ising the States of
Ar unachal Pr adesh, Assam, Manipur , Meghalaya, Mizor am, Nagaland,
Sikkim and Tr ipur a;
80
[(da) multiplex theatr e means a building of a pr escr ibed ar ea, compr ising
of two or mor e cinema theatr es and commer cial shops of such size
and number and having such other facilities and amenities as may be
pr escr ibed
81
;]
(e) place of pilgr image means a place wher e any temple, mosque,
gur dwar a, chur ch or other place of public wor ship of r enown thr ough-
out any State or States is situated;
(f) r ur al ar ea means any ar ea other than
(i) an ar ea which is compr ised within the jur isdiction of a municipal-
ity (whether known as a municipality, municipal cor por ation,
notified ar ea committee, town ar ea committee or by any other
name) or a cantonment boar d and which has a population of not
less than ten thousand accor ding to the pr eceding census of
which r elevant figur es have been published befor e the fir st day
of the pr evious year ; or
(ii) an area within such distance not being more than fifteen kilometres
fr om the local limits of any municipality or cantonment boar d
r efer r ed to in sub-clause (i), as the Centr al Gover nment may,
having r egar d to the stage of development of such ar ea including
the extent of, and scope for , ur banisation of such ar ea and other
r elevant consider ations specify in this behalf by notification in
the Official Gazette
82
;
78. Sub-clauses (v) and (vi) inser ted by the Finance Act, 2002, w.e.f. 1-4-2003.
81. See r ule 18DB.
82. For notified ar eas falling outside local limits of municipality or cantonment boar d, see
1.473 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80-IC
(g) small-scale industr ial under taking means an industr ial under taking
which is, as on the last day of the pr evious year , r egar ded as a small-
scale industr ial under taking under section 11B
83
of the Industr ies
(Development and Regulation) Act, 1951 (65 of 1951).]
84
[Special provisions in respect of certain undertakings or enterprises in certain
special category States
85
.
80-IC. (1) Wher e the gr oss total income of an assessee includes any pr ofits and
gains der ived by an under taking or an enter pr ise fr om any business
r efer r ed to in sub-section (2), ther e shall, in accor dance with and subject to the
pr ovisions of this section, be allowed, in computing the total income of the
assessee, a deduction fr om such pr ofits and gains, as specified in sub-section (3).
(2) This section applies to any under taking or enter pr ise,
(a) which has begun or begins to manufactur e or pr oduce any ar ticle or
thing, not being any ar ticle or thing specified in the Thir teenth
Schedule, or which manufactur es or pr oduces any ar ticle or thing,
not being any ar ticle or thing specified in the Thir teenth Schedule and
under takes substantial expansion dur ing the per iod beginning
(i) on the 23r d day of December , 2002 and ending befor e the 1st day
of Apr il,
86
[2007], in any Expor t Pr ocessing Zone or Integr ated
Infr astr uctur e Development Centr e or Industr ial Gr owth Centr e
or Industr ial Estate or Industr ial Par k or Softwar e Technology
Par k or Industr ial Ar ea or Theme Par k, as notified by the Boar d
in accor dance with the scheme fr amed and notified
85
by the
Centr al Gover nment in this r egar d, in the State of Sikkim; or
(ii) on the 7th day of Januar y, 2003 and ending befor e the 1st day of
Apr il, 2012, in any Expor t Pr ocessing Zone or Integr ated Infr a-
str uctur e Development Centr e or Industr ial Gr owth Centr e or
Industr ial Estate or Industr ial Par k or Softwar e Technology Par k
or Industr ial Ar ea or Theme Par k, as notified by the Boar d in
accor dance with the scheme fr amed and notified
85
by the Centr al
Gover nment in this r egar d, in the State of Himachal Pr adesh or
the State of Uttar anchal; or
(iii) on the 24th day of December , 1997 and ending befor e the 1st day
of Apr il, 2007, in any Expor t Pr ocessing Zone or Integr ated
Infr astr uctur e Development Centr e or Industr ial Gr owth Centr e
or Industr ial Estate or Industr ial Par k or Softwar e Technology
83. For the text of section 11B of the Industr ies (Development & Regulation) Act, 1951, and
notification issued ther eunder , see Appendix.
85. Notified centr e/ Par k/ Ar eas, etc., u/ s 80-IC(2)
n Sikkim [Notification No. SO 169(E), dated 6-2-2004, as cover ed by Notification No. 55/
2004 [F. No. 142/ 35/ 2003-TPL], dated 19-2-2004].
n Assam, Tr ipur a, Meghalaya, Mizor am, Nagaland, Manipur , Ar unachal Pr adesh -
Notification No. 116/ 2004 [F. No. 142/ 49/ 2003-TPL], dated 26-3-2004.
n Uttar anchal - Notification No. 177/ 2004 [F. No. 142/ 47/ 2003-TPL], dated 20-6-2004.
n Himachal Pr adesh - Notification No. SO 1269(E), dated 4-11-2003.
S. 80-IC I.T. ACT, 1961 1.474
Par k or Industr ial Ar ea or Theme Par k, as notified
87
by the Boar d
in accor dance with the scheme fr amed and notified by the
Centr al Gover nment in this r egar d, in any of the Nor th-Easter n
States;
(b) which has begun or begins to manufactur e or pr oduce any ar ticle or
thing, specified in the Four teenth Schedule or commences any
oper ation specified in that Schedule, or which manufactur es or
pr oduces any ar ticle or thing, specified in the Four teenth Schedule or
commences any oper ation specified in that Schedule and under takes
substantial expansion dur ing the per iod beginning
(i) on the 23r d day of December , 2002 and ending befor e the 1st day
of Apr il,
88
[2007], in the State of Sikkim; or
(ii) on the 7th day of Januar y, 2003 and ending befor e the 1st day of
Apr il, 2012, in the State of Himachal Pr adesh or the State of
Uttar anchal; or
(iii) on the 24th day of December , 1997 and ending befor e the 1st day
of Apr il, 2007, in any of the Nor th-Easter n States.
(3) The deduction r efer r ed to in sub-section (1) shall be
(i) in the case of any under taking or enter pr ise r efer r ed to in sub-clauses
(i) and (iii) of clause (a) or sub-clauses (i) and (iii) of clause (b), of sub-
section (2), one hundr ed per cent of such pr ofits and gains for ten
assessment year s commencing with the initial assessment year ;
(ii) in the case of any under taking or enter pr ise r efer r ed to in sub-clause
(ii) of clause (a) or sub-clause (ii) of clause (b), of sub-section (2), one
hundr ed per cent of such pr ofits and gains for five assessment year s
commencing with the initial assessment year and ther eafter , twenty-
five per cent (or thir ty per cent wher e the assessee is a company) of
the pr ofits and gains.
(4) This section applies to any under taking or enter pr ise which fulfils all the
following conditions, namely:
(i) it is not for med by splitting up, or the r econstr uction, of a business
Provided that this condition shall not apply in r espect of an under tak-
ing which is for med as a r esult of the r e-establishment, r econstr uction
or r evival by the assessee of the business of any such under taking as
is r efer r ed to in section 33B, in the cir cumstances and within the
per iod specified in that section;
Explan ation .The pr ovisions of Explan ation s 1 and 2 to sub-section (3) of
section 80-IA shall apply for the pur poses of clause (ii) of this sub-section as they
apply for the pur poses of clause (ii) of that sub-section.
87. See footnote No. 85 on page 1.473.
computing the total income of the assessee, no deduction shall be allowed under
any other section contained in Chapter VIA or in section 10A or section 10B, in
r elation to the pr ofits and gains of the under taking or enter pr ise.
(6) Notwithstanding anything contained in this Act, no deduction shall be allowed
to any under taking or enter pr ise under this section, wher e the total per iod of
deduction inclusive of the per iod of deduction under this section, or under the
second pr oviso to sub-section (4) of section 80-IB or under section 10C, as the
case may be, exceeds ten assessment year s.
(7) The pr ovisions contained in sub-section (5) and sub-sections (7) to (12) of
section 80-IA shall, so far as may be, apply to the eligible under taking or
enter pr ise under this section
89
.
(i) Industr ial Ar ea means such ar eas, which the Boar d, may, by notifi-
cation in the Official Gazette, specify in accor dance with the scheme
fr amed and notified by the Centr al Gover nment;
(ii) Industr ial Estate means such estates, which the Boar d, may, by
notification in the Official Gazette, specify in accor dance with the
scheme fr amed and notified by the Centr al Gover nment;
(iii) Industr ial Gr owth Centr e means such centr es, which the Boar d,
may, by notification in the Official Gazette, specify in accor dance with
the scheme fr amed and notified by the Centr al Gover nment;
(iv) Industr ial Par k means such par ks, which the Boar d, may, by notifi-
cation in the Official Gazette, specify in accor dance with the scheme
fr amed and notified by the Centr al Gover nment;
(v) Initial assessment year means the assessment year r elevant to the
pr evious year in which the under taking or the enter pr ise begins to
manufactur e or pr oduce ar ticles or things, or commences oper ation
or completes substantial expansion;
(vi) Integr ated Infr astr uctur e Development Centr e means such centr es,
which the Boar d, may, by notification in the Official Gazette, specify
in accor dance with the scheme fr amed and notified by the Centr al
Gover nment;
(vii) North-Eastern States means the States of Arunachal Pradesh, Assam,
Manipur , Meghalaya, Mizor am, Nagaland and Tr ipur a;
(viii) Softwar e Technology Par k means any par k set up in accor dance
with the Softwar e Technology Par k Scheme notified by the Gover n-
ment of India in the Ministr y of Commer ce and Industr y;
(ix) substantial expansion means incr ease in the investment in the plant
and machiner y by at least fifty per cent of the book value of plant and
machiner y (befor e taking depr eciation in any year ), as on the fir st day
of the pr evious year in which the substantial expansion is under taken;
1.475 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80-IC
S. 80-ID I.T. ACT, 1961 1.476
(x) Theme Par k means such par ks, which the Boar d, may, by notifica-
tion in the Official Gazette, specify in accor dance with the scheme
fr amed and notified by the Centr al Gover nment.]
90
[Deduction in respect of profits and gains from business of hotels and convention
centres in specified area.
80-ID. (1) Wh ere th e gross total in com e of an assessee in cludes an y prof its an d
gain s derived by an un dertak in g from an y busin ess referred to in sub-
section (2) (such busin ess bein g h erein after referred to as th e eligible busin ess),
th ere sh all, in accordan ce with an d subject to th e provision s of th is section , be
allowed, in com putin g th e total in com e of th e assessee, a deduction of an am oun t
equal to h un dred per cen t of th e profits an d gain s derived from such busin ess for
f ive con secutive assessm en t years begin n in g f rom th e in itial assessm en t year.
(2) Th is section applies to an y un dertak in g,
(i) en gaged in th e busin ess of h otel located in th e specified area, if such
h otel is con structed an d h as started or starts fun ction in g at an y tim e
durin g th e period begin n in g on th e 1st day of April, 2007 an d en din g
on th e 31st day of March , 2010; or
(ii) en gaged in th e busin ess of buildin g, own in g an d operatin g a con ven -
tion cen tre, located in th e specified area, if such con ven tion cen tre is
con structed at an y tim e durin g th e period begin n in g on th e 1st day of
April, 2007 an d en din g on th e 31st day of March , 2010.
The following clause (iii) shall be inserted after clause (ii) of sub-
section (2) of section 80-ID by the Finance Act, 2008, w.e.f. 1-4-2009 :
(iii) en gaged in th e busin ess of h otel located in th e specified district h avin g
a World Heritage Site, if such h otel is con structed an d h as started or
starts fun ction in g at an y tim e durin g th e period begin n in g on th e 1st
day of April, 2008 an d en din g on th e 31st day of March , 2013.
(3) Th e deduction un der sub-section (1) sh all be available on ly if
(i) th e eligible busin ess is n ot form ed by th e splittin g up, or th e recon -
struction , of a busin ess already in existen ce;
(ii) th e eligible busin ess is n ot form ed by th e tran sfer to a n ew busin ess of
a buildin g previously used as a h otel or a con ven tion cen tre, as th e case
m ay be;
(iii) th e eligible busin ess is n ot form ed by th e tran sfer to a n ew busin ess of
m ach in ery or plan t previously used for an y purpose.
Explanation.Th e provision s of Explanations 1 an d 2 to sub-section
(3) of section 80-IA sh all apply for th e purposes of clause (iii) of th is sub-
section as th ey apply for th e purposes of clause (ii) of th at sub-section ;
(iv) th e assessee furn ish es alon g with th e return of in com e, th e report of
an audit in such form an d con tain in g such particulars as m ay be
prescribed
90a
, an d duly sign ed an d verified by an accoun tan t, as
defin ed in th e Explanation below sub-section (2) of section 288,
certifyin g th at th e deduction h as been correctly claim ed.
90a. See r ule 18DE and For m No. 10CCBBA.
(4) Notwith stan din g an yth in g con tain ed in an y oth er provision of th is Act, in
com putin g th e total in com e of th e assessee, n o deduction sh all be allowed un der
an y oth er section con tain ed in Ch apter VIA or section 10AA, in relation to th e
profits an d gain s of th e un dertak in g.
(5) Th e provision s con tain ed in sub-section (5) an d sub-section s (8) to (11) of
section 80-IA sh all, so far as m ay be, apply to th e eligible busin ess un der th is
section .
(a) con ven tion cen trem ean s a buildin g of a prescribed area com prisin g
of con ven tion h alls to be used for th e purpose of h oldin g con feren ces
an d sem in ars, bein g of such size an d n um ber an d h avin g such oth er
facilities an d am en ities, as m ay be prescribed
90b
;
(b) h otelm ean s a h otel of two-star, th ree-star or four-star category as
classified by th e Cen tral Govern m en t;
(c) in itial assessm en t year
(i) in th e case of a h otel, m ean s th e assessm en t year relevan t to th e
previous year in wh ich th e busin ess of th e h otel starts fun ction in g;
(ii) in th e case of a con ven tion cen tre, m ean s th e assessm en t year
relevan t to th e previous year in wh ich th e con ven tion cen tre starts
operatin g on a com m ercial basis;
(d) specified aream ean s th e Nation al Capital Territory of Delh i an d th e
districts of Faridabad, Gurgaon , Gautam Budh Nagar an d Gh aziabad.]
The following clause (e) shall be inserted after clause (d) of sub-
section (6) of section 80-ID by the Finance Act, 2008, w.e.f. 1-4-2009 :
(e) specified district h avin g a World Heritage Site m ean s districts,
specified in column (2) of th e Table below, of th e States, specified in th e
correspon din g en try in colum n (3) of th e said Table:
TABLE
S.No. Name of distr ict Name of State
(1) (2) (3)
1. Agra Uttar Pradesh
2. Jalgaon Mah arash tra
3. Auran gabad Mah arash tra
4. Kan ch eepuram Tam il Nadu
5. Puri Orissa
6. Bh aratpur Rajasth an
7. Ch h atarpur Madh ya Pradesh
8. Th an javur Tam il Nadu
9. Bellary Karn ataka
1.477 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80-ID
90b. See r ule 18DE.
S. 80-IE I.T. ACT, 1961 1.478
10. South 24 Pargan as West Ben gal
(excludin g areas fallin g with in th e
Kolk ata urban agglom eration
on th e basis of th e 2001 cen sus)
11. Ch amoli Uttarakh an d
12. Raisen Madh ya Pradesh
13. Gaya Bih ar
14. Bh opal Madh ya Pradesh
15. Pan ch mah al Gujarat
16. Kamrup Assam
17. Goalpara Assam
18. Nagaon Assam
19. North Goa Goa
20. South Goa Goa
21. Darjeelin g West Ben gal
22. Nilgiri Tam il Nadu.
91
[Special provisions in respect of certain undertakings in North-Eastern States.
80-IE. (1) Wh ere th e gross total in com e of an assessee in cludes an y profits an d
gain s derived by an un dertak in g, to wh ich th is section applies, from an y
busin ess referred to in sub-section (2), th ere sh all be allowed, in com putin g th e
total in com e of th e assessee, a deduction of an am oun t equal to h un dred per cen t
of th e profits an d gain s derived from such busin ess for ten con secutive assess-
m en t years com m en cin g with th e in itial assessm en t year.
(2) Th is section applies to an y un dertak in g wh ich h as, durin g th e period begin -
n in g on th e 1st day of April, 2007 an d en din g before th e 1st day of April, 2017,
begun or begin s, in an y of th e North -Eastern States,
(i) to m an ufacture or produce an y eligible article or th in g;
(ii) to un dertak e substan tial expan sion to m an ufacture or produce an y
eligible article or th in g;
(iii) to carry on an y eligible busin ess.
(3) Th is section applies to an y un dertak in g wh ich fulfils all th e followin g
con dition s, n am ely:
(i) it is n ot form ed by splittin g up, or th e recon struction , of a busin ess
already in existen ce :
Provided th at th is con dition sh all n ot apply in respect of an un dertak -
in g wh ich is form ed as a result of th e re-establish m en t, recon struction
or revival by th e assessee of th e busin ess of an y such un dertak in g as
referred to in section 33B, in th e circum stan ces an d with in th e period
specified in th e said section ;
S.No. Name of distr ict Name of State
(1) (2) (3)
(ii) it is n ot form ed by th e tran sfer to a n ew busin ess of m ach in ery or plan t
previously used for an y purpose.
Explanation.Th e provision s of Explanations 1 an d 2 to sub-section (3) of
section 80-IA sh all apply for th e purposes of clause (ii) of th is sub-section as th ey
apply for th e purposes of clause (ii) of th at sub-section .
(4) Notwith stan din g an yth in g con tain ed in an y oth er provision of th is Act, in
com putin g th e total in com e of th e assessee, n o deduction sh all be allowed un der
an y oth er section con tain ed in Ch apter VIA or in section 10A or section 10AA or
section 10B or section 10BA, in relation to th e profits an d gain s of th e un dertak in g.
(5) Notwith stan din g an yth in g con tain ed in th is Act, n o deduction sh all be allowed
to an y un dertak in g un der th is section , wh ere th e total period of deduction
in clusive of th e period of deduction un der th is section , or un der section 80-IC or
un der th e secon d proviso to sub-section (4) of section 80-IB or un der section 10C,
as th e case m ay be, exceeds ten assessm en t years.
(6) Th e provision s con tain ed in sub-section (5) an d sub-section s (7) to (12) of
section 80-IA sh all, so far as m ay be, apply to th e eligible un dertak in g un der th is
section .
(i) in itial assessm en t yearm ean s th e assessm en t year relevan t to th e
previous year in wh ich th e un dertak in g begin s to m an ufacture or
produce articles or th in gs, or com pletes substan tial expan sion ;
(ii) North -Eastern Statesmean s th e States of Arun ach al Pradesh , Assam,
Man ipur, Megh alaya, Mizoram , Nagalan d, Sik k im an d Tripura;
(iii) substan tial expan sion m ean s in crease in th e in vestm en t in th e plan t
an d m ach in ery by at least twen ty-five per cen t of th e book value of
plan t an d mach in ery (before takin g depreciation in an y year), as on th e
first day of th e previous year in wh ich th e substan tial expan sion is
un dertaken ;
(iv) eligible article or th in gm ean s th e article or th in g oth er th an th e
followin g :
(a) goods fallin g un der Ch apter 24 of th e First Sch edule to th e Cen tral
Excise Tariff Act, 1985 (5 of 1986) wh ich pertain s to tobacco an d
m an ufactured tobacco substitutes;
(b) pan m asala as covered un der Ch apter 21 of th e First Sch edule to
th e Cen tral Excise Tariff Act, 1985 (5 of 1986);
(c) plastic carry bags of less th an 20 m icron s as specified by th e
Min istry of En viron m en t an d Forests vide Notification No. S.O.
705(E), dated th e 2n d Septem ber, 1999 an d S.O. 698(E), dated th e
17th Jun e, 2003; an d
(d) goods fallin g un der Ch apter 27 of th e First Sch edule to th e Cen tral
Excise Tariff Act, 1985 (5 of 1986), produced by petroleum oil or gas
refin eries;
(v) eligible busin essm ean s th e busin ess of,
(a) h otel (n ot below two star category);
1.479 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80-IE
(b) adven ture an d leisure sports in cludin g ropeways;
(c) providin g m edical an d h ealth services in th e n ature of n ursin g
h om e with a m in im um capacity of 25 beds;
(d) run n in g an old-age h om e;
(e) operatin g vocation al train in g in stitute for h otel m an agem en t,
caterin g an d food craft, en trepren eursh ip developm en t, n ursin g
an d para-m edical, civil aviation related train in g, fash ion design -
in g an d in dustrial train in g;
(f) run n in g in form ation tech n ology related train in g cen tre;
(g) m an ufacturin g of in form ation tech n ology h ardware; an d
(h) bio-tech n ology.]
Deduction in respect of profits and gains from newly established industrial
undertakings or ships or hotel business in certain cases.
80J.
92
Deduction in respect of profits and gains from business of poultry farming.
80JJ.
93
94
[Deduction in respect of profits and gains from business of collecting and
processing of bio-degradable waste.
80JJA. Wher e the gr oss total income of an assessee includes any pr ofits and
gains der ived fr om the business of collecting and pr ocessing or tr eating
of bio-degr adable waste for gener ating power
95
[or pr oducing bio-fer tilizer s, bio-
pesticides or other biological agents or for pr oducing bio-gas or ] making pellets
92. Pr ior to its omission, section 80J was inser ted in place of section 84 (which was omitted
by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968), and later amended by the Finance Act,
Dir ect Taxes (Amendment) Act, 1974, w.e.f. 1-4-1974, Finance Act, 1975, w.e.f. 1-4-1975/
1-4-1976, Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976, Finance (No. 2) Act, 1977,
w.e.f. 1-4-1978, Finance Act, 1979, w.e.f. 1-4-1979, Finance (No. 2) Act, 1980, w.r .e.f.
1-4-1972, Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 and Finance Act, 1988,
w.e.f. 1-4-1988.
93. Pr ior to its omission, section 80JJ, as inser ted by the Finance Act, 1989, w.e.f.1-4-1990, r ead
as under :
80JJ. Deduction in respect of profits an d gain s from busin ess of poultry farm in g.Wher e
the gr oss total income of an assessee includes any pr ofits and gains der ived fr om business
of poultr y far ming, ther e shall be allowed, in computing the total income of the assessee,
a deduction fr om such pr ofits and gains of an amount equal to thir ty-thr ee and one-thir d
per cent ther eof.
Ear lier section 80JJ was inser ted by the Finance Act, 1975, w.e.f. 1-4-1976, amended by the
Finance (No. 2) Act, 1980, w.e.f. 1-4-1981 and the Finance Act, 1983, w.e.f. 1-4-1984 and later
on omitted by the Finance Act, 1985, w.e.f. 1-4-1986.
94. Inser ted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Ear lier section 80JJA was inser ted
by the Finance Act, 1979, w.e.f. 1-4-1980 and later on omitted by the Finance Act, 1983,
w.e.f. 1-4-1984.
95. Substituted for , pr oducing bio-gas, by the Finance Act, 1999, w.e.f. 1-4-2000.
S. 80JJA I.T. ACT, 1961 1.480
1.481 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80JJAA
or br iquettes for fuel or or ganic manur e, ther e shall be allowed, in computing the
total income of the assessee,
96
[a deduction of an amount equal to the whole of
such pr ofits and gains for a per iod of five consecutive assessment year s
beginning with the assessment year r elevant to the pr evious year in which such
business commences].]
97
[Deduction in respect of employment of new workmen.
80JJAA. (1) Wher e the gr oss total income of an assessee, being an Indian
company, includes any pr ofits and gains der ived fr om any industr ial
under taking engaged in the manufactur e or pr oduction of ar ticle or thing, ther e
shall, subject to the conditions specified in sub-section (2), be allowed a deduction
of an amount equal to thir ty per cent of additional wages paid to the new r egular
wor kmen employed by the assessee in the pr evious year for thr ee assessment
year s including the assessment year r elevant to the pr evious year in which such
employment is pr ovided.
(2) No deduction under sub-section (1) shall be allowed
(a) if the industr ial under taking is for med by splitting up or r econstr uc-
tion of an existing under taking or amalgamation with another indus-
tr ial under taking;
(b) unless the assessee fur nishes along with the r etur n of income the
r epor t of the accountant, as defined in the Explan ation below sub-
section (2) of section 288 giving such par ticular s in the r epor t as may
be pr escr ibed
98
.
Explan ation .For the pur poses of this section, the expr essions,
(i) additional wages means the wages paid to the new r egular wor kmen
in excess of one hundr ed wor kmen employed dur ing the pr evious
year :
Provided that in the case of an existing under taking, the additional
wages shall be n il if the incr ease in the number of r egular wor kmen
employed dur ing the year is less than ten per cent of existing number
of wor kmen employed in such under taking as on the last day of the
pr eceding year ;
(ii) r egular wor kman, does not include
(a) a casual wor kman; or
(b) a wor kman employed thr ough contr act labour ; or
(c) any other wor kman employed for a per iod of less than thr ee
hundr ed days dur ing the pr evious year ;
(iii) wor kman shall have the meaning assigned to it in clause (s) of
section 2
99
of the Industr ial Disputes Act, 1947 (14 of 1947).]
96. Substituted for a deduction fr om such pr ofits and gains of an amount equal to the whole
of such income, or five lakh r upees, whichever is less by the Finance Act, 1999, w.e.f.
1-4-2000.
98. See r ule 19AB and For m No. 10DA for for m of r epor t.
99. For text of clause (s) of section 2 of the Industr ial Disputes Act, 1947, defining wor kman,
see Appendix.
S. 80LA I.T. ACT, 1961 1.482
1. Omitted section 80K was or iginally inser ted fr om 1-4-1968 by the Finance (No. 2) Act, 1967,
and amended fr om t he same dat e. Lat er it was subst it ut ed by t he Taxat ion Laws
(Amendment) Act, 1970, w.r .e.f. 1-4-1968 and amended by the Finance Act, 1975, w.e.f.
1-4-1975.
2. Pr ior to its omission, section 80L, as inser ted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-
1968 and substituted by the Finance Act, 1968, w.e.f. 1-4-1969 and Finance Act, 1970, w.e.f.
1-4-1971 and fur ther amended by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972, Finance
Act, 1972, w.e.f. 1-4-1973, Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976, Finance
(No. 2) Act, 1980, w.e.f. 1-4-1981, Finance Act, 1982, w.e.f. 1-4-1983, Finance Act, 1983, w.e.f.
1-4-1984, Finance Act, 1984, w.e.f. 1-4-1985, Taxation Laws (Amendment) Act, 1984, w.r .e.f.
1-4-1972/ 1-4-1976, Finance Act, 1986, w.e.f. 1-4-1987, Finance Act, 1987, w.e.f. 1-4-1987,
Dir ect Tax Laws (Amendment ) Act , 1987, w.e.f. 1-4-1988, Finance Act , 1988, w.e.f.
1-4-1988/ 1-4-1989, Dir ect Tax Laws (Second Amendment) Act, 1989, w.r .e.f. 1-4-1984,
1992, w.e.f. 1-4-1993, Finance Act, 1993, w.e.f. 1-4-1994, Finance Act, 1994, w.r .e.f. 1-4-1968,
Finance Act, 2001, w.e.f. 1-4-2002, Finance Act, 2002, w.e.f. 1-4-2003 and Finance Act, 2003,
w.e.f. 1-4-2003/ 1-4-2004, r ead as under :
*80L. Deduction s in respect of in terest on certain securities, dividen ds, etc.(1) Wher e the
gr oss total income of an assessee, being
(a) an individual**, or
(c) [***]
includes any income by way of
(i) inter est on any secur ity of the Centr al Gover nment or a State Gover nment;
(ia) inter est on National Savings Cer tificates (VI Issue) or National Savings Cer tificates
(VII Issue) or National Savings Cer tificates (VIII Issue) issued under the Gover n-
ment Savings Cer tificates Act, 1959 (46 of 1959);
(ii) inter est on such debentur es, issued by any institution or author ity or any public
sector company, or any co-oper ative society (including a co-oper ative land mor t-
gage bank or a co-oper ative land development bank), as the Centr al Gover nment
may, by notification*** in the Official Gazette, specify in this behalf;
[***]
(iia) inter est on deposits under such National Deposit Scheme as may be fr amed by the
Centr al Gover nment and notified by it in this behalf in the Official Gazette;
(iii) inter est on deposits under any other scheme fr amed by the Centr al Gover nment
and notified by it in this behalf in the Official Gazette;
(iiia) inter est on deposits under the Post Office (Monthly Income Account) Rules, 1987;
(iv ) [***]
(v) [***]
(Con td. on p. 1.483)
Deduction in respect of dividends attributable to profits and gains from new
industrial undertakings or ships or hotel business.
80K.
1
in serted, in place of section 85 wh ich was deleted, by th e Fin an ce (No. 2)
Act, 1967, w.e.f. 1-4-1968.]
Deductions in respect of interest on certain securities, dividends, etc.
80L.
2
3
[Deductions in respect of certain incomes of Offshore Banking Units and
International Financial Services Centre.
80LA. (1) Wher e the gr oss total income of an assessee,
1.483 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80LA
(i) being a scheduled bank, or , any bank incor por ated by or under the
laws of a countr y outside India; and having an Offshor e Banking Unit
in a Special Economic Zone; or
(ii) being a Unit of an Inter national Financial Ser vices Centr e,
includes any income r efer r ed to in sub-section (2), ther e shall be allowed, in
accor dance with and subject to the pr ovisions of this section, a deduction fr om
such income, of an amount equal to
(a) one hundr ed per cent of such income for five consecutive assessment
year s beginning with the assessment year r elevant to the pr evious
(va) [***]
(vi) inter est on deposits with a banking company to which the Banking Regulation Act,
1949 (10 of 1949), applies (including any bank or banking institution r efer r ed to in
section 51 of that Act) or a co-oper ative society engaged in car r ying on the business
of banking (including a co-oper ative land mor tgage bank or a co-oper ative land
development bank);
(via) inter est on deposits with any such bank, not being a banking company or a co-
oper ative society r efer r ed to in clause (vi) but being a bank established by or under
any law made by Par liament, as may be appr oved by the Centr al Gover nment
for the pur poses of this clause;
(vii) inter est on deposits with a financial cor por ation which is engaged in pr oviding long-
ter m finance for industr ial development in India and which is eligible for deduction
under clause (viii) of sub-section (1) of section 36;
(viia) inter est on deposits with any author ity constituted in India by or under any law
enacted either for the pur pose of dealing with and satisfying the need for housing
accommodation or for the pur pose of planning, development or impr ovement of
cities, towns and villages, or for both;
(viii) inter est on deposits with a co-oper ative society, not being a co-oper ative society
r efer r ed t o in clause (vi), made by a member of the society;
(ix) dividends fr om any co-oper ative society; or
(x) inter est on deposits with any public company for med and r egister ed in India with
the main object of car r ying on the business of pr oviding long-ter m finance for
constr uction or pur chase of houses in India for r esidential pur poses and which is
eligible for deduction under clause (viii) of sub-section (1) of section 36,
ther e shall, in accor dance with and subject to the pr ovisions of this section, be allowed, in
computing the total income of the assessee, a deduction as specified her eunder , namely :
(1) in a case wher e the amount of such income does not exceed in the aggr egate twelve
thousand r upees, the whole of such amount; and
(2) in any other case, twelve thousand r upees :
Provided that wher e any income r efer r ed to in clause (1) r emains unallowed after the
deduct ion under t he for egoing pr ovision of t his sect ion, t her e shall be allowed in
computing the total income of the assessee, an additional deduction of an amount equal
to so much of such income as has r emained unallowed; so, however , that the amount of
such additional deduction shall not exceed thr ee thousand r upees.
Explan ation .For the pur poses of this sub-section, the expr ession secur ity means a
Gover nment secur ity as defined in clause (2) of section 2 of the Public Debt Act, 1944 (18
of 1944).
(2) [***]
(3) For the r emoval of doubts, it is her eby declar ed that wher e the income r efer r ed to in
sub-section (1) is der ived fr om any asset held by, or on behalf of, a fir m, an association of
per sons or a body of individuals, no deduction shall be allowed under the said sub-section
in r espect of such income in computing the total income of any par tner of the fir m or any
member of the association or body.
(Con td. on p. 1.484)
S. 80LA I.T. ACT, 1961 1.484
*See also Pr ess Note, dated 30-3-1982, issued by Pr ess Infor mation Bur eau, Cir cular No.
243, dated 22-6-1978, Cir cular No. 406, dated 15-1-1985, Cir cular No. 64, dated 25-8-1971
and Cir cular No. 687, dat ed 19-8-1994. For det ails and for r elevant case laws, see
**For the meaning of the ter m individual, see Taxmanns Dir ect Taxes Manual, Vol. 3.
***For complete list of notified debentur es, bonds or institutions, see Taxmanns Dir ect
Taxes Cir cular s and Taxmanns Year ly Tax Digest & Refer encer .
For National Deposits Scheme, r efer Taxmanns Dir ect Taxes Cir cular s. It has since been
discontinued on and fr om 1-4-1987 vide Notification No. F. 4(13) W & M/ 87, dated
31-3-1987. See Taxmanns Dir ect Taxes Cir cular s.
For other notified schemes, see Taxmanns Dir ect Taxes Cir cular s.
For notified banks, see Taxmanns Dir ect Taxes Cir cular s.
Clause (2) of section 2 of the Public Debt Act, 1944, defines Gover nment secur ity as
follows:
(2) Gover nment secur ity means
(a) a secur ity, cr eated and issued, whether befor e or after the commencement of this
Act, by the Centr al Gover nment for the pur pose of r aising a public loan, and having
one of the following for ms, namely :
(i) stock tr ansfer able by r egistr ation in the books of the Bank; or
(ii) a pr omissor y note payable to or der ; or
(iii) a bear er bond payable to bear er ; or
(iv ) a for m pr escr ibed in this behalf;
(b) any other secur ity cr eated and issued by the Centr al Gover nment in such for m and
for such of the pur poses of this Act as may be pr escr ibed;
3. Subst it ut ed by t he Special Economic Zones Act , 2005, w.e.f. 10-2-2006. Pr ior t o it s
substitution, section 80LA, as inser ted by the Finance Act, 2003, w.e.f. 1-4-2004, r ead as
under :
80LA. Deduction in respect of certain in com es of Offsh ore Ban k in g Un its.(1) Wher e the
gr oss total income of an assessee,
(i) being a scheduled bank (not being a bank incor por ated by or under the laws of a
countr y outside India);
(ii) owning an offshor e banking unit in a special economic zone,
includes any income r efer r ed to in sub-section (2), ther e shall be allowed, in accor dance
with and subject to the pr ovisions of this section, a deduction fr om such income, of an
amount equal to
(a) one hundr ed per cent of such income for thr ee consecutive assessment year s
per mission, under clause (a) of sub-sect ion (1) of sect ion 23 of t he Banking
Regulation Act, 1949 (10 of 1949), was obtained, and ther eafter ;
(b) fifty per cent of such income for two consecutive assessment year s.
(2) The income r efer r ed to in sub-section (1) shall be the income
(a) fr om an offshor e banking unit in a special economic zone;
(b) fr om the business, r efer r ed to in sub-section (1) of section 6 of the Banking
Regulation Act, 1949 (10 of 1949), with an under taking located in a special economic
zone or any other under taking which develops, develops and oper ates or oper ates
and maintains a special economic zone;
(c) r eceived in conver tible for eign exchange, in accor dance with the r egulations made
under the For eign Exchange Management Act, 1999 (42 of 1999).
(3) No deduction under this section shall be allowed unless the assessee fur nishes along
with the r etur n of income,
(i) in the pr escr ibed for m, the r epor t of an accountant as defined in the Explan ation
below sub-sect ion (2) of sect ion 288, cer t ifying t hat t he deduct ion has been
cor r ectly claimed in accor dance with the pr ovisions of this section; and
(Con td. on p. 1.485)
1.485 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80LA
year in which the per mission, under clause (a) of sub-section (1) of
section 23 of the Banking Regulation Act, 1949 (10 of 1949) or
per mission or r egistr ation under the Secur ities and Exchange Boar d
of India Act, 1992 (15 of 1992) or any other r elevant law was obtained,
and ther eafter ;
(b) fifty per cent of such income for five consecutive assessment year s.
(2) The income r efer r ed to in sub-section (1) shall be the income
(a) fr om an Offshor e Banking Unit in a Special Economic Zone; or
(b) fr om the business r efer r ed to in sub-section (1) of section 6 of the
Banking Regulation Act, 1949 (10 of 1949) with an under taking
located in a Special Economic Zone or any other under taking which
develops, develops and oper ates or develops, oper ates and maintains
a Special Economic Zone; or
(c) fr om any Unit of the Inter national Financial Ser vices Centr e fr om its
business for which it has been appr oved for setting up in such a Centr e
in a Special Economic Zone.
(3) No deduction under this section shall be allowed unless the assessee fur nishes
along with the r etur n of income,
(i) the r epor t, in the for m specified by the Centr al Boar d of Dir ect Taxes
under clause (i) of sub-section (2)
4
of section 80LA, as it stood
immediately befor e its substitution by this section, of an accountant
as defined in the Explan ation below sub-section (2) of section 288,
cer tifying that the deduction has been cor r ectly claimed in accor -
dance with the pr ovisions of this section
5
; and
(ii) a copy of the per mission obtained under clause (a) of sub-section (1)
of section 23 of the Banking Regulation Act, 1949 (10 of 1949).
(a) Inter national Financial Ser vices Centr e shall have the same mean-
ing as assigned to it in clause (q) of section 2 of the Special Economic
Zones Act, 2005
6
;
(ii) a copy of the per mission obtained under clause (a) of sub-section (1) of section 23
of the Banking Regulation Act, 1949 (10 of 1949).
(a) conver tible for eign exchange shall have the same meaning assigned to it in clause
(a) of the Explan ation below sub-section (4C) of section 80HHC;
(b) Offshor e Banking Unit means a br anch of a bank in India located in the special
economic zone and has obtained the per mission under clause (a) of sub-section (1)
of section 23 of the Banking Regulation Act, 1949 (10 of 1949);
(c) scheduled bank shall have the same meaning assigned to it in clause (e) of section
2 of the Reser ve Bank of India Act, 1934 (2 of 1934);
(d) special economic zone shall have the same meaning assigned to it in clause (viii)
of the Explan ation 2 to section 10A.
4. Should be r ead as (3).
5. See r ule 19AE and For m No. 10CCF.
6. For text of section 2(q), 2(za) and 2(zc) of the Special Economic Zones Act, 2005, see
Appendix.
(b) scheduled bank shall have the same meaning as assigned to it in
clause (e) of section 2 of the Reser ve Bank of India Act, 1934 (2 of
1934)
7
;
(c) Special Economic Zone shall have the same meaning as assigned to
it in clause (za)
8
of section 2 of the Special Economic Zones Act, 2005;
(d) Unit shall have the same meaning as assigned to it in clause (zc)
8
of
section 2 of the Special Economic Zones Act, 2005.]
9
[Deduction in respect of certain inter-corporate dividends.
80M. [Om itted by th e Fin an ce Act, 2003, w.e.f. 1-4-2004.]
Deduction in the case of an Indian company in respect of royalties, etc., received
from any concern in India.
80MM.
10
[Omitted by th e Fin an ce Act, 1983, w.e.f. 1-4-1984. Origin al section was
Deduction in respect of dividends received from certain foreign companies.
80N.
11
[Om itted by th e Fin an ce Act, 1985, w.e.f. 1-4-1986. Th is topic was
origin ally dealt with by section 85B wh ich was in serted by th e Fin an ce Act,
1966, w.e.f. 1-4-1966. Om itted section 80N was in serted in place of section 85B
wh ich was deleted by th e Fin an ce (No. 2) Act, 1967, w.e.f. 1-4-1968.]
S. 80N I.T. ACT, 1961 1.486
7. For text of section 2(e) of the Reser ve Bank of India Act, 1934, see Appendix.
8. For text of section 2(q), 2(za) and 2(zc) of the Special Economic Zones Act, 2005, see
Appendix.
9. Pr ior to its omission, section 80M, as inser ted by the Finance Act, 2002, w.e.f. 1-4-2003, r ead
as under :
80M. Deduction in respect of certain in ter-corporate dividen ds.(1) Wher e the gr oss total
income of a domestic company, in any pr evious year , includes any income by way of
dividends fr om another domestic company, ther e shall, in accor dance with and subject to
the pr ovisions of this section, be allowed, in computing the total income of such domestic
company, a deduction of an amount equal to so much of the amount of income by way
of dividends fr om another domestic company as does not exceed the amount of dividend
distr ibuted by the fir st-mentioned domestic company on or befor e the due date.
(2) Wher e any deduction, in r espect of the amount of dividend distr ibuted by the domestic
company, has been allowed under sub-section (1) in any pr evious year , no deduction shall
be allowed in r espect of such amount in any other pr evious year .
Explan ation .For the pur poses of this section, the expr ession due date means the date
for fur nishing the r etur n of income under sub-section (1) of section 139.
Ear lier or iginal section 80M was intr oduced in place of section 85A (inser ted by the
Finance Act, 1965, w.e.f. 1-4-1965) by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Section
80M, which had ear lier under gone sever al amendments by the Finance Act, 1968, w.e.f.
1-4-1968, Finance Act, 1970, w.e.f. 1-4-1971, Finance (No. 2) Act, 1971, w.e.f. 1-4-1972,
w.e.f. 1-4-1982, Finance Act, 1982, w.e.f. 1-4-1983, Finance Act, 1984, w.e.f. 1-4-1985 and
Finance Act, 1986, w.e.f. 1-4-1987, was substituted by the Finance Act, 1990, w.e.f. 1-4-1991
and fur ther amended by the Finance Act, 1993, w.e.f. 1-4-1994, and later on omitted by the
Finance Act, 1997, w.e.f. 1-4-1998.
10. Pr ior to its omission, section 80MM was amended by the Finance Act, 1970, w.e.f. 1-4-1970,
the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972 and the Finance Act, 1974, w.e.f. 1-4-1975.
11. Omitted section was amended by the Finance Act, 1968, w.e.f. 1-4-1969, the Finance
(No. 2) Act, 1971, w.e.f. 1-4-1972, the Finance Act, 1974, w.r .e.f. 1-4-1969/ w.e.f. 1-4-1975 and
1.487 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80-O
12
[
13
Deduction in respect of royalties, etc., from certain foreign enterprises.
14
80-O.
15
[Wher e t he gr oss t ot al income of an assessee, being an Indian
company
16
[or a per son (other than a company) who is r esident in
India]], includes
17
[any income r eceived by the assessee fr om the Gover nment of
a for eign State or for eign enter pr ise
18
in consider ation for the use
18
outside
India of any patent, invention, design or r egister ed tr ade mar k]
19
[***]
20
[and such
income is r eceived in conver tible for eign exchange in India, or having been
r eceived in conver tible for eign exchange outside India, or having been con-
ver ted into conver tible for eign exchange outside India, is br ought into India, by
or on behalf of the assessee in accor dance with any law for the time being in for ce
for r egulating payments and dealings in for eign exchange, ther e shall be allowed,
in accor dance with and subject to the pr ovisions of this section,
21
[a deduction of
an amount equal to
(i) for ty per cent for an assessment year beginning on the 1st day of Apr il,
2001;
(ii) thir ty per cent for an assessment year beginning on the 1st day of
Apr il, 2002;
12. Substituted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972. This topic was or iginally dealt
with by section 85C which was inser ted by the Finance Act, 1966, w.e.f. 1-4-1966. Section
80-O was inser ted, in place of section 85C which was deleted by the Finance (No. 2) Act,
1967, w.e.f. 1-4-1968. Section 80-O was later on amended by the Finance Act, 1968, w.e.f.
1-4-1969.
15. Substituted for (1) Wher e the gr oss total income of an assessee, being an Indian company
or a per son (other than a company) who is r esident in India, by the Finance Act, 1974, w.e.f.
1-4-1975.
17. Substituted for the por tion beginning with the wor ds any income by way of r oyalty and
ending with the wor ds outside India to such Gover nment or enter pr ise by the assessee,
by the Finance Act, 1997, w.e.f. 1-4-1998. Ear lier the quoted por tion was amended by the
18. For the meaning of the ter ms/ expr essions for eign enter pr ise and use, see Taxmanns
19. Wor ds under an agr eement appr oved in this behalf by the Chief Commissioner or the
Dir ector Gener al; omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Ear lier t hese
wor ds wer e substituted for under an agr eement appr oved by the Boar d in this behalf by
20. Substituted for and such income is r eceived in conver tible for eign exchange in India,
ther e shall be allowed, in accor dance with and subject to the pr ovisions of this section, a
deduction of an amount equal to fifty per cent of the income so r eceived in India in
computing the total income of the assessee (as it stood after the amendment made by the
Finance Act, 1987) by the Finance Act, 1988, w.e.f. 1-4-1988. Ear lier , this por tion of the
section was amended by the Finance Act, 1974, with r etr ospective effect fr om 1-4-1972
and later on by the Finance Act, 1984, w.e.f. 1-4-1985.
21. Substituted for the por tion beginning with the wor ds a deduction of an amount and
ending with the wor ds total income of the assessee by the Finance Act, 2000, w.e.f.
a deduction of an amount equal to fifty per cent of the income so r eceived in, or br ought
into, India, in computing the total income of the assessee.
(iii) twenty per cent for an assessment year beginning on the 1st day of
Apr il, 2003;
(iv) ten per cent for an assessment year beginning on the 1st day of Apr il,
2004,
of the income so r eceived in, or br ought into, India, in computing the total
income of the assessee and no deduction shall be allowed in r espect of the
assessment year beginning on the 1st day of Apr il, 2005 and any subsequent
assessment year ]] :
22
[***]
23
[Provided
24
[***] that such income is r eceived in India within a per iod of six
months fr om the end of the pr evious year , or
25
[within such fur ther per iod as the
competent author ity may allow in this behalf]:]
26
[Provided further that no deduction under this section shall be allowed unless
the assessee fur nishes a cer tificate, in the pr escr ibed for m
27
, along with the
r etur n of income, cer tifying that the deduction has been cor r ectly claimed in
accor dance with the pr ovisions of this section.]
28
[Explan ation .For the pur poses of this section,
(i) conver tible for eign exchange means for eign exchange which is for
for eign exchange for the pur poses of the law for the time being in
for ce for r egulating payments and dealings in for eign exchange;
29
[(ii) for eign enter pr ise means a per son who is a non-r esident;]]
30
[(iii) ser vices r ender ed or agr eed to be r ender ed outside India shall include
ser vices r ender ed fr om India but shall not include ser vices r ender ed
in India;]
31
[(iv) competent author ity means the Reser ve Bank of India or such other
for r egulating payments and dealings in for eign exchange.]
S. 80-O I.T. ACT, 1961 1.488
22. Omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Pr ior to omission, the pr ovisos
as substituted by the Finance Act, 1988, w.e.f. 1-4-1989.
24. Wor d also omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992.
Pr ior to its substitution, the said por tion, as amended by the Dir ect Tax Laws (Amendment)
Commissioner may allow in this behalf .
27. See r ule 29AA and For m No. 10HA.
28. Substituted by the Finance Act, 1985, w.e.f. 1-4-1986. Ear lier the Explan ation was inser ted
by the Finance Act, 1974, w.r .e.f. 1-4-1972.
(2)
32
[***]]
33
[Deduction in respect of income of co-operative societies.
34
80P. (1) Wher e, in the case of an assessee being a co-oper ative society, the
gr oss total income includes any income r efer r ed to in sub-section (2),
ther e shall be deducted, in accor dance with and subject to the pr ovisions of this
section, the sums specified in sub-section (2), in computing the total income of the
assessee.
(a) in the case of a co-oper ative society engaged in
(i) car r ying on the business of banking or pr oviding cr edit facilities
35
to its member s
35
, or
(ii) a cottage industr y
36
, or
37
[(iii) the marketing
36
of agricultural produce grown by its members, or ]
(iv) the pur chase of agr icultur al implements, seeds, livestock or other
ar ticles intended for agr icultur e for the pur pose of supplying
them to its member s, or
(v) the pr ocessing, without the aid of power , of the agr icultur al
pr oduce of its member s,
38
[or ]
38
[(vi) the collective disposal of the labour of its member s, or
(vii) fishing or allied activities, that is to say, the catching, cur ing,
pr ocessing, pr eser ving, stor ing or mar keting of fish or the pur -
chase of mater ials and equipment in connection ther ewith for the
pur pose of supplying them to its member s,]
the whole of the amount of pr ofits and gains of business attr ibutable
to any one or mor e of such activities
39
:
40
[Provided that in the case of a co-oper ative society falling under sub-
clause (vi), or sub-clause (vii), the r ules and bye-laws of the society
1.489 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80P
33. Inser ted in place of section 81, which was deleted, by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1968.
35. For the meaning of the ter ms/ expr essions pr oviding cr edit facilities and member s, see
36. For t he meaning of t he t er ms/ expr essions cot t age indust r y and mar ket ing see
37. Substituted by the Income-tax (Second Amendment) Act, 1998, w.r .e.f. 1-4-1968. Pr ior to
its substitution, sub-clause (iii), as inser ted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968,
r ead as under :
(iii) the mar keting of the agr icultur al pr oduce of its member s, or
39. For the meaning of the expr ession the whole of the amount of . . . such activities, see
r estr ict the voting r ights to the following classes of its member s,
namely:
(1) the individuals who contr ibute their labour or , as the case may be,
car r y on the fishing or allied activities;
(2) the co-oper ative cr edit societies which pr ovide financial assis-
tance to the society;
(3) the State Gover nment;]
41
[(b) in the case of a co-oper ative society, being a pr imar y society engaged
in supplying milk, oilseeds, fr uits or vegetables r aised or gr own by its
member s to
(i) a feder al co-oper ative society, being a society engaged in the
business of supplying milk, oilseeds, fr uits, or vegetables, as the
case may be; or
(ii) the Gover nment or a local author ity; or
(iii) a Gover nment company
42
as defined in section 617 of the Compa-
nies Act, 1956 (1 of 1956), or a cor por ation established by or under
a Centr al, State or Pr ovincial Act (being a company or cor por a-
tion engaged in supplying milk, oilseeds, fr uits or vegetables, as
the case may be, to the public),
the whole of the amount of pr ofits and gains of such business;]
(c) in the case of a co-oper ative society engaged in activities
43
other than
those specified in clause (a) or clause (b) (either independently of, or
in addition to, all or any of the activities so specified), so much of
its pr ofits and gains attr ibutable
44
to such activities as
45
[does not
exceed,
(i) wher e such co-oper ative society is a consumer s co-oper ative
society,
46
[one hundr ed] thousand r upees; and
(ii) in any other case,
47
[fifty] thousand r upees.
Explan ation .In this clause, consumer s co-oper ative society means
a society for the benefit of the consumer s;]
(d) in r espect of any income by way of inter est or dividends der ived by
the co-oper ative society fr om its investments with any other co-
oper ative society, the whole of such income;
S. 80P I.T. ACT, 1961 1.490
41. Substituted by the Finance Act, 1983, w.e.f. 1-4-1984. Ear lier it was substituted by the
Finance Act, 1978, w.e.f. 1-4-1979.
43. For the meaning of the ter m activities, see Taxmanns Dir ect Taxes Manual, Vol. 3.
44. For the meaning of the ter m attr ibutable, see Taxmanns Dir ect Taxes Manual, Vol. 3.
45. Substituted for does not exceed twen ty th ousan d rupeesby the Finance Act, 1979, w.e.f.
1-4-1980. Italicised wor ds wer e substituted for fifteen thousand by the Finance Act, 1969,
w.e.f. 1-4-1970.
46. Substituted for for ty by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
47. Substituted for twenty, ibid.
(e) in r espect of any income der ived by the co-oper ative society fr om the
letting of godowns or war ehouses
48
for stor age, pr ocessing or facili-
tating the mar keting of commodities
48
, the whole of such income;
(f) in the case of a co-oper ative society, not being a housing society or an
ur ban consumer s society or a society car r ying on tr anspor t business
or a society engaged in the per for mance of any manufactur ing
oper ations with the aid of power , wher e the gr oss total income does
not exceed twenty thousand r upees, the amount of any income by
way of inter est on secur ities
49
[***] or any income fr om house
pr oper ty char geable under section 22.
Explan ation .For the pur poses of this section, an ur ban consumer s co-oper a-
tive society means a society for the benefit of the consumer s within the limits
of a municipal cor por ation, municipality, municipal committee, notified ar ea
committee, town ar ea or cantonment.
50
[***]
51
[sect ion 80HH]
52
[or sect ion 80HHA]
53
[or sect ion 80HHB]
54
[or sect ion
80HHC]
55
[or section 80HHD]
56
[or section 80-I]
57
[or section 80-IA] or section
58
80J
59
[***]
60
[***], the deduction under sub-section (1) of this section, in r elation
to the sums specified in clause (a) or clause (b) or clause (c) of sub-section (2), shall
be allowed with r efer ence to the income, if any, as r efer r ed to in those clauses
included in the gr oss total income as r educed by the deductions under
61
[***]
62
[section 80HH,]
63
[section 80HHA,]
64
[section 80HHB,]
65
[section 80HHC,]
1.491 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80P
48. For t he meaning of t he expr essions godowns or war ehouses and facilit at ing t he
mar keting of commodities, see Taxmanns Dir ect Taxes Manual, Vol. 3.
49. char geable under section 18 omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
50. section 80H or omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
58. Section 80J has now been omitted by the Finance (No. 2) Act, 1996, w.r .e.f. 1-4-1989.
59. Wor ds or section 80JJ omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Ear lier the
quoted wor ds wer e inser ted by the Finance Act, 1975, w.e.f. 1-4-1976 and later on omitted
by the Finance Act, 1985, w.e.f. 1-4-1986 and again inser ted by the Finance Act, 1989, w.e.f.
1-4-1990.
60. or section 80JJA, which expr ession was ear lier inser ted by the Finance Act, 1979, w.e.f.
1-4-1980, omitted by the Finance Act, 1983, w.e.f. 1-4-1984.
61. section 80H, omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
66
[section 80HHD,]
67
[section 80-I,]
68
[section 80-IA,]
69
[
70
[section 80J
71
and section
80JJ]].]
72
[(4) The pr ovisions of this section shall not apply in r elation to any co-oper ative
bank other than a pr imar y agr icultur al cr edit society or a pr imar y co-oper ative
agr icultur al and r ur al development bank.
(a) co-oper ative bank and pr imar y agr icultur al cr edit society shall
have the meanings r espectively assigned to them in Par t V of the
Banking Regulation Act, 1949 (10 of 1949);
(b) pr imar y co-oper ative agr icultur al and r ur al development bank
means a society having its ar ea of oper ation confined to a taluk and
the pr incipal object of which is to pr ovide for long-ter m cr edit for
agr icultur al and r ur al development activities.]
73
[Deduction in respect of profits and gains from the business of publication of
books.
74
80Q. (1) Wher e in the case of an assessee the gr oss total income of the pr evious
year r elevant to the assessment year commencing on the 1st day of Apr il,
1992, or to any one of the four assessment year s next following that assessment
year , includes any pr ofits and gains der ived fr om a business car r ied on in India
of pr inting and publication of books or publication of books, ther e shall, in
computing the total income of the assessee, a deduction fr om such pr ofits and
gains of an amount equal to twenty per cent ther eof.
(2) In a case wher e the assessee is entitled also to the deduction under section
80HH or section 80HHA or section 80HHC or section 80-I or section 80-IA or
section 80J
75
or section 80P, in r elation to any par t of the pr ofits and gains
r efer r ed to in sub-section (1), the deduction under sub-section (1) shall be
S. 80Q I.T. ACT, 1961 1.492
69. Substituted for section 80J and section 80JJ by the Finance Act, 1985, w.e.f. 1-4-1986.
Ear lier , section 80J and section 80JJ was substituted for section 80J, section 80JJ and
section 80JJA by the Finance Act, 1983, w.e.f. 1-4-1984, section 80J, section 80JJ and
section 80JJA substituted for section 80J and section 80JJ by the Finance Act, 1979, w.e.f.
1-4-1980 and sections 80J and 80JJ substituted for and section 80J by the Finance Act,
1975, w.e.f. 1-4-1976.
70. Substituted for and section 80J by the Finance Act, 1989, w.e.f. 1-4-1990.
72. Inser ted by the Finance Act, 2006, w.e.f. 1-4-2007. Ear lier sub-section (4) was omitted by
73. Inser ted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Ear lier section 80Q was omitted
by the Finance Act, 1972, w.e.f. 1-4-1973. Or iginally, it was inser ted in place of section 82
which was deleted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
74. See also Cir cular No. 706, dated 26-6-1995, as cor r ected by Cir cular No. 746, dated
26-7-1996. For details, see Taxmanns Dir ect Taxes Cir cular s.
allowed with r efer ence to such pr ofits and gains included in the gr oss total
income as r educed by the deductions under section 80HH, section 80HHA,
section 80HHC, section 80-I, section 80-IA, section 80J
76
and section 80P.
(3) For the pur poses of this section, books shall not include newspaper s,
jour nals, magazines, diar ies, br ochur es, tr acts, pamphlets and other publications
of a similar natur e by whatever name called.]
Deduction in respect of profits and gains from the business of publication of
books.
80QQ.
77
[Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f .
1-4-1989. Origin al section was in serted by th e Taxation Laws (Am en d-
m en t) Act, 1970, w.e.f. 1-4-1971.]
78
[Deduction in respect of professional income of authors of text books in Indian
languages.
80QQA. (1) Wher e, in the case of an individual r esident in India, being an
author , the gr oss total income of the pr evious year r elevant to the
assessment year
79
[commencing on
(a) the 1st day of Apr il, 1980, or to any one of the nine assessment year s
next following that assessment year ; or
(b) the 1st day of Apr il, 1992, or to any one of the four assessment year s
next following that assessment year ,
includes] any income der ived by him in the exer cise of his pr ofession on account
of any lump sum consider ation for the assignment or gr ant of any of his
inter ests in the copyr ight of any book, or of r oyalties or copyr ight fees (whether
r eceivable in lump sum or other wise) in r espect of such book, ther e shall, in
computing the total income of the assessee, a deduction fr om such income of an
amount equal to twenty-five per cent ther eof.
(2) No deduction under sub-section (1) shall be allowed unless
(a) t he book is eit her in t he nat ur e of a dict ionar y, t hesaur us or
encyclopaedia or is one that has been pr escr ibed or r ecommended as
a text book, or included in the cur r iculum, by any Univer sity, for a
degr ee or post-gr aduate cour se of that Univer sity; and
(b) the book is wr itten in any language specified in the Eighth Schedule
to the Constitution
80
or in any such other language as the Centr al
1.493 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80QQA
77. Pr ior to its omission, section 80QQ, was amended by the Dir ect Taxes (Amendment) Act,
1974, w.e.f. 1-4-1974, Finance Act, 1975, w.e.f. 1-4-1975, Taxation Laws (Amendment) Act,
1975, w.e.f. 1-4-1976, Finance (No. 2) Act, 1977, w.e.f. 1-4-1978, Finance Act, 1979, w.e.f.
1-4-1980 and Finance Act, 1981, w.e.f. 1-4-1981.
79. Substituted for the wor ds commencing on the 1st day of Apr il, 1980, or to any one of the
nine assessment year s next following that assessment year , includes by the Finance
(No. 2) Act, 1991, w.e.f. 1-4-1992. Ear lier , wor d nine was substituted for four by the
Finance Act, 1985, w.e.f. 1-4-1985.
80. For text of Eighth Schedule to the Constitution, see Appendix.
S. 80QQB I.T. ACT, 1961 1.494
Gover nment may, by notification in the Official Gazette, specify in
this behalf having r egar d to the need for pr omotion of publication of
books of the natur e r efer r ed to in clause (a) in that language and other
r elevant factor s.
(i) author includes a joint author ;
(ii) lump sum, in r egar d to r oyalties or copyr ight fees, includes an
advance payment on account of such r oyalties or copyr ight fees
which is not r etur nable;
(iii) Univer sity shall have the same meaning as in the Explan ation to
clause (ix) of section 47.]
81
[Deduction in respect of royalty income, etc., of authors of certain books other
than text-books.
80QQB. (1) Wher e, in the case of an individual r esident in India, being an author ,
the gr oss total income includes any income, der ived by him in the
exer cise of his pr ofession, on account of any lump sum consider ation for the
assignment or gr ant of any of his inter ests in the copyr ight of any book being a
wor k of liter ar y, ar tistic or scientific natur e, or of r oyalty or copyr ight fees
(whether r eceivable in lump sum or other wise) in r espect of such book, ther e
shall, in accor dance with and subject to the pr ovisions of this section, be allowed,
in computing the total income of the assessee, a deduction fr om such income,
computed in the manner specified in sub-section (2).
(2) The deduction under this section shall be equal to the whole of such income
r efer r ed to in sub-section (1), or an amount of thr ee lakh r upees, whichever is
less :
Provided that wher e the income by way of such r oyalty or the copyr ight fee, is
not a lump sum consider ation in lieu of all r ights of the assessee in the book, so
much of the income, befor e allowing expenses attr ibutable to such income, as is
in excess of fifteen per cent of the value of such books sold dur ing the pr evious
year shall be ignor ed :
Provided further that in r espect of any income ear ned fr om any sour ce outside
India, so much of the income shall be taken into account for the pur pose of this
section as is br ought into India by, or on behalf of, the assessee in conver tible
for eign exchange within a per iod of six months fr om the end of the pr evious year
in which such income is ear ned or within such fur ther per iod as the competent
a cer tificate in the pr escr ibed for m
82
and in the pr escr ibed manner , duly ver ified
by any per son r esponsible for making such payment to the assessee as r efer r ed
to in sub-section (1), along with the r etur n of income, setting for th such
par ticular s as may be pr escr ibed
82
.
(4) No deduction under this section shall be allowed in r espect of any income
ear ned fr om any sour ce outside India, unless the assessee fur nishes a cer tificate,
82. See r ule 19AC and For m 10CCD.
1.495 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80R
83
fr om the pr escr ibed author ity
84
income in the pr escr ibed manner .
(5) Wher e a deduction for any pr evious year has been claimed and allowed in
r espect of any income r efer r ed to in this section, no deduction in r espect of such
income shall be allowed under any other pr ovision of this Act in any assessment
year .
(a) author includes a joint author ;
(b) books shall not include br ochur es, commentar ies, diar ies, guides,
jour nals, magazines, newspaper s, pamphlets, text-books for schools,
tr acts and other publications of similar natur e, by whatever name
called;
(c) competent author ity means the Reser ve Bank of India or such other
for r egulating payments and dealings in for eign exchange;
(d) lump sum, in r egar d to r oyalties or copyr ight fees, includes an
advance payment on account of such r oyalties or copyr ight fees
which is not r etur nable.]
85
[Deduction in respect of remuneration from certain foreign sources in the case
of professors, teachers, etc.
86
80R. Wher e the gr oss total income of an individual who is a citizen of India
includes any r emuner ation r eceived by him outside India fr om any
Univer sity or other educational institution established outside India or
87
[any
other association or body established outside India], for any ser vice r ender ed by
him dur ing his stay outside India in his capacity as a pr ofessor , teacher or
r esear ch wor ker in such Univer sity, institution, association or body, ther e shall
be
88
[allowed, in computing the total income of the individual,
89
[a deduction fr om
such r emuner ation of an amount equal to
83. See r ule 29A(1) and For m No. 10H.
84. See r ule 29A(2).
85. This topic was dealt with by or iginal section 80F which was inser ted by the Finance
(No. 2) Act, 1967, w.r .e.f. 1-4-1966. Section 80R was intr oduced in place of section 80F,
which was deleted, by the Finance Act, 1967, w.e.f. 1-4-1968.
87. Substituted for such other association or body established outside India as may be
notified in this behalf by the Centr al Gover nment in the Official Gazette by the Finance
Act, 1983, w.e.f. 1-4-1984.
88. Substituted for the wor ds allowed a deduction fr om such r emuner ation of an amount
equal to fifty per cent ther eof, in computing the total income of the individual : by the
Finance Act, 1990, w.e.f. 1-4-1991.
89. Substituted for the por tion beginning with the wor ds a deduction fr om such r emuner a-
tion of an amount and ending with the wor ds competent author ity may allow in this
behalf by the Finance Act, 2000, w.e.f. 1-4-2001. Pr ior to its substitution, the quoted
por tion, as amended by the Finance Act, 1990, w.e.f. 1-4-1991, Finance (No. 2) Act, 1996,
a deduction fr om such r emuner ation of an amount equal to seventy-five per cent of such
r emuner ation, as is br ought into India by, or on behalf of, the assessee in conver tible
for eign exchange within a per iod of six months fr om the end of the pr evious year or within
such fur ther per iod as the competent author ity may allow in this behalf.
(i) sixty per cent of such r emuner ation for an assessment year beginning
(ii) for ty-five per cent of such r emuner ation for an assessment year
beginning on the 1st day of Apr il, 2002;
(iii) thir ty per cent of such r emuner ation for an assessment year begin-
ning on the 1st day of Apr il, 2003;
(iv) fifteen per cent of such r emuner ation for an assessment year begin-
ning on the 1st day of Apr il, 2004,
as is br ought into India by, or on behalf of, the assessee in conver tible for eign
exchange within a per iod of six months fr om the end of the pr evious year or
within such fur ther per iod as the competent author ity may allow in this behalf
on the 1st day of Apr il, 2005 and any subsequent assessment year ]] :
90
[Provided that no deduction under this section shall be allowed unless the
assessee fur nishes a cer tificate, in the pr escr ibed for m
91
income, cer tifying that the deduction has been cor r ectly claimed in accor dance
with the pr ovisions of this section.]]
92
[***]
93
[Explan ation .For the pur poses of this section, the expr ession competent
author ised under any law for the time being in for ce for r egulating payments
and dealings in for eign exchange.]
94
[Deduction in respect of professional income from foreign sources in certain
cases.
95
80RR. Wher e the gr oss total income of an individual r esident in India, being
an author , playwr ight, ar tist,
96
[musician, actor or spor tsman (including
an athlete)], includes any income der ived by him in the exer cise of his pr ofession
from the Government of a foreign State or any person not resident in India,
97
[there
S. 80RR I.T. ACT, 1961 1.496
91. See r ule 29A and For m No. 10H.
96. Substituted for musician or actor by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1980.
97. Substituted for the wor ds and such income is r eceived in, or br ought into, India by him
or on his behalf in accor dance with the For eign Exchange Regulation Act, 1947 (7 of 1947),
and any r ules made ther eunder , ther e shall be allowed a deduction fr om such income of
an amount equal to twenty-five per cent of the income so r eceived or br ought, in
computing the total income of the individual by the Finance Act, 1990, w.e.f. 1-4-1991.
shall be allowed, in computing the total income of the individual,
98
[a deduction
fr om such income of an amount equal to
(i) sixty per cent of such income for an assessment year beginning on the
1st day of Apr il, 2001;
(ii) for ty-five per cent of such income for an assessment year beginning
(iii) thir ty per cent of such income for an assessment year beginning on
(iv) fifteen per cent of such income for an assessment year beginning on
the 1st day of Apr il, 2004,
on the 1st day of Apr il, 2005 and any subsequent assessment year ]] :
99
[Provided that no deduction under this section shall be allowed unless the
1
2
[Explan ation .For the pur poses of this section, the expr ession competent
3
[Deduction in respect of remuneration received for services rendered outside
India.
4
80RRA. (1) Wher e the gr oss total income of an individual who is a citizen of
India includes any r emuner ation
5
r eceived by him in for eign cur -
r ency fr om any employer
5
(being a for eign employer or an Indian concer n) for
1.497 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80RRA
98. Substituted for the por tion beginning with the wor ds a deduction fr om such income of
an amount and ending with the wor ds competent author ity may allow in this behalf by
the Finance Act, 2000, w.e.f. 1-4-2001. Pr ior to its substitution, the quoted por tion, as
amended by the Finance Act, 1990, w.e.f. 1-4-1991, Finance (No. 2) Act, 1996, w.e.f. 1-4-1997
and Finance Act, 1999, w.e.f. 1-6-1999, r ead as under :
a deduction fr om such income of an amount equal to seventy-five per cent of such
income, as is br ought into India by, or on behalf of, the assessee in conver tible for eign
exchange within a per iod of six months fr om the end of the pr evious year or within such
fur ther per iod as the competent author ity may allow in this behalf
3. Substituted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978. Or iginal section was inser ted
5. For the meaning of the ter ms employer and r emuner ation, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
any ser vice r ender ed by him outside India, ther e shall, in accor dance with and
subject to the pr ovisions of this section, be allowed, in computing the total
income of the individual,
6
[a deduction fr om such r emuner ation of an amount
equal to
(i) sixty per cent of such r emuner ation for an assessment year beginning
(ii) for ty-five per cent of such r emuner ation for an assessment year
beginning on the 1st day of Apr il, 2002;
(iii) thir ty per cent of such r emuner ation for an assessment year begin-
ning on the 1st day of Apr il, 2003;
(iv) fifteen per cent of such r emuner ation for an assessment year begin-
ning on the 1st day of Apr il, 2004,
7
[Provided that no deduction under this sub-section shall be allowed unless the
8
9
[***]
(2) The deduction under this section shall be allowed
(i) in the case of an individual who is or was, immediately befor e
under taking such ser vice, in the employment of the Centr al Gover n-
ment or any State Gover nment, only if such ser vice is sponsor ed by
the Centr al Gover nment;
(ii) in the case of any other individual, only if he is a technician and the
ter ms and conditions of his ser vice outside India ar e appr oved in this
behalf by the Centr al Gover nment or the pr escr ibed author ity.
(a) for eign cur r ency
10
shall have the meaning assigned to it in the
For eign Exchange Regulation Act, 1973 (46 of 1973);
S. 80RRA I.T. ACT, 1961 1.498
6. Substituted for the por tion beginning with the wor ds a deduction fr om such r emuner a-
tion and ending with the wor ds author ity may allow in this behalf by the Finance Act,
2000, w.e.f. 1-4-2001. Pr ior to its substitution, the quoted por tion, as amended by the
Finance Act, 1987, w.e.f. 1-4-1988, Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and Finance
a deduction fr om such r emuner ation of an amount equal to seventy-five per cent of such
r emuner ation, as is br ought into India by, or on behalf of, the assessee in conver tible
for eign exchange within a per iod of six months fr om the end of the pr evious year or within
such fur ther per iod as the competent author ity may allow in this behalf
10. For definition of for eign cur r ency, see footnote 41 on p. 1.65 an te.
(b) for eign employer means,
(i) the Gover nment of a for eign State; or
(ii) a for eign enter pr ise; or
(iii) any association or body established outside India;
(c) technician means a per son having specialised knowledge and
exper ience in
(i) constr uctional or manufactur ing oper ations or mining or the
gener ation or distr ibution of electr icity or any other for m of
power ; or
(ii) agr icultur e, animal husbandr y, dair y far ming, deep sea fishing or
ship building; or
(iii) public administr ation or industr ial or business management; or
(iv) accountancy; or
(v) any field of natur al or applied science (including medical science)
or social science; or
(vi) any other field which the Boar d may pr escr ibe
11
in this behalf,
who is employed in a capacity in which such specialised knowledge
and exper ience ar e actually utilised;]
12
[(d) competent author ity means the Reser ve Bank of India or such other
for r egulating payments and dealings in for eign exchange.]
13
[Deduction in respect of royalty on patents.
80RRB. (1) Wher e in the case of an assessee, being an individual, who is
(a) r esident in India;
(b) a patentee;
(c) in r eceipt of any income by way of r oyalty in r espect of a patent
r egister ed on or after the 1st day of Apr il, 2003 under the Patents Act,
1970 (39 of 1970), and
his gr oss total income of the pr evious year includes r oyalty, ther e shall, in
accor dance with and subject to the pr ovisions of this section, be allowed a
deduction, fr om such income, of an amount equal to the whole of such income
or thr ee lakh r upees, whichever is less:
Provided that wher e a compulsor y licence is gr anted in r espect of any patent
under the Patents Act, 1970 (39 of 1970), the income by way of r oyalty for the
pur pose of allowing deduction under this section shall not exceed the amount of
1.499 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80RRB
11. Pr escr ibed fields under r ule 11C ar e as follows :
1. Pr ofession of actuar ies;
2. Banking;
3. Insur ance;
4. Jour nalism.
r oyalty under the ter ms and conditions of a licence settled by the Contr oller
under that Act :
Provided further that in r espect of any income ear ned fr om any sour ce outside
India, so much of the income, shall be taken into account for the pur pose of this
section as is br ought into India by, or on behalf of, the assessee in conver tible
for eign exchange within a per iod of six months fr om the end of the pr evious year
in which such income is ear ned or within such fur ther per iod as the competent
author ity r efer r ed to in clause (c) of the Explan ation to section 80QQB may allow
in this behalf.
a cer tificate in the pr escr ibed for m
14
, duly signed by the pr escr ibed author ity
15
,
along with the r etur n of income setting for th such par ticular s as may be
pr escr ibed.
(3) No deduction under this section shall be allowed in r espect of any income
ear ned fr om any sour ce outside India, unless the assessee fur nishes a cer tificate
16
, fr om the author ity or author ities, as may be pr e-
scr ibed
17
, along with the r etur n of income.
(4) Wher e a deduction for any pr evious year has been claimed and allowed in
r espect of any income r efer r ed to in this section, no deduction in r espect of such
income shall be allowed, under any other pr ovision of this Act in any assessment
year .
(a) Contr oller shall have the meaning assigned to it in clause (b) of sub-
section (1) of section 2 of the Patents Act, 1970 (39 of 1970)
18
;
(b) lump sum includes an advance payment on account of such r oyal-
ties which is not r etur nable;
(c) patent means a patent (including a patent of addition) gr anted under
the Patents Act, 1970 (39 of 1970);
(d) patentee means the per son, being the tr ue and fir st inventor of the
invention, whose name is enter ed on the patent r egister as the
patentee, in accor dance with the Patents Act, 1970 (39 of 1970), and
includes ever y such per son, being the tr ue and fir st inventor of the
invention, wher e mor e than one per son is r egister ed as patentee
under that Act in r espect of that patent;
(e) patent of addition shall have the meaning assigned to it in clause (q)
of sub-section (1) of section 2 of the Patents Act, 1970 (39 of 1970)
19
;
S. 80RRB I.T. ACT, 1961 1.500
14. See r ule 19AD(2) and For m No. 10CCE.
15. Pr escr ibed author ity is Contr oller Gener al of Patents, Designs & Tr ade Mar ks, see r ule
19AD(1).
16. See r ule 29A(1) and For m No. 10H.
17. See r ule 29A(2).
18. For text of section 2(1)(b) of the Patents Act, 1970, see Appendix.
19. For text of section 2(1)(q) of the Patents Act, 1970, see Appendix.
(f) patented ar ticle and patented pr ocess shall have the meanings
r espectively assigned to them in clause (o) of sub-section (1) of section
2 of the Patents Act, 1970 (39 of 1970)
20
;
(g) r oyalty, in r espect of a patent, means consider ation (including any
lump sum consider ation but excluding any consider ation which
would be the income of the r ecipient char geable under the head
Capital gains or consider ation for sale of pr oduct manufactur ed
with the use of patented pr ocess or of the patented ar ticle for
commer cial use) for
(i) the tr ansfer of all or any r ights (including the gr anting of a
licence) in r espect of a patent; or
(ii) the impar ting of any infor mation concer ning the wor king of, or
the use of, a patent; or
(iii) the use of any patent; or
(iv) the r ender ing of any ser vices in connection with the activities
r efer r ed to in sub-clauses (i) to (iii);
(h) tr ue and fir st inventor shall have the meaning assigned to it in
clause (y) of sub-section (1) of section 2 of the Patents Act, 1970 (39 of
1970)
20
.]
Deduction in respect of compensation for termination of managing agency, etc.,
in the case of assessees other than companies.
80S.
21
in troduced in place of old section 112 by th e Fin an ce (No. 2) Act, 1967,
w.e.f. 1-4-1968.]
Deduction in respect of long-term capital gains in the case of assessees other than
companies.
80T.
22
in serted by th e Fin an ce (No. 2) Act, 1967, w.e.f. 1-4-1968 in replacem en t of
section 114.]
Deduction in respect of winnings from lottery.
80TT. [Om itted by th e Fin an ce Act, 1986, w.e.f. 1-4-1987. Origin al section was
in serted by th e Fin an ce Act, 1972, w.e.f. 1-4-1972 an d am en ded by th e
Fin an ce (No. 2) Act, 1980, w.e.f. 1-4-1981.]
1.501 CH. VIA - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES S. 80TT
20. For text of section 2(1)(o)/ (y) of the Patents Act, 1970, see Appendix.
21. Omitted section 80S was ear lier amended by the Finance Act, 1973, w.r .e.f. 1-4-1972.
22. Pr ior to its omission, section 80T was amended by the Finance (No. 2) Act, 1971, w.e.f.
1-4-1972, the Finance (No. 2) Act, 1974, w.e.f. 1-4-1975, the Finance (No. 2) Act, 1980, w.e.f.
1-4-1981, the Finance Act, 1982, w.e.f. 1-4-1983 and the Finance Act, 1986, w.e.f. 1-4-1987.
S. 80U I.T. ACT, 1961 1.502
23
[D.Oth er deduction s
24
[Deduction in case of a person with disability.
80U. (1) In computing the total income of an individual, being a r esident, who, at
any time dur ing the pr evious year , is cer tified by the medical author ity to
be a per son with disability, ther e shall be allowed a deduction of a sum of fifty
thousand r upees :
Provided that wher e such individual is a per son with sever e disability, the
pr ovisions of this sub-section shall have effect as if for the wor ds fifty thousand
r upees, the wor ds seventy-five thousand r upees had been substituted.
(2) Ever y individual claiming a deduction under this section shall fur nish a copy
of the cer tificate issued by the medical author ity in the for m and manner , as may
be pr escr ibed
25
, along with the r etur n of income under section 139, in r espect of
the assessment year for which the deduction is claimed :
Provided that wher e the condition of disability r equir es r eassessment of its
extent after a per iod stipulated in the afor esaid cer tificate, no deduction under
this section shall be allowed for any assessment year r elating to any pr evious
year beginning after the expir y of the pr evious year dur ing which the afor esaid
cer tificate of disability had expir ed, unless a new cer tificate is obtained fr om the
medical author ity in the for m and manner , as may be pr escr ibed
25
, and a copy
ther eof is fur nished along with the r etur n of income under section 139.
24. Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Pr ior to its substitution, section 80U,
as substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992 and later on amended by
the Finance Act, 1995, w.e.f. 1-4-1996, r ead as under :
80U. Deduction in th e case of perman en t ph ysical disability (in cludin g blin dn ess).In
computing the total income of an individual, being a r esident, who, at the end of the
pr evious year , is suffer ing fr om a per manent physical disability (including blindness) or
is subject to mental r etar dation, being a per manent physical disability or mental r etar da-
tion specified in the r ules

made in this behalf by the Boar d, which is cer tified by a
physician, a sur geon, an oculist or a psychiatr ist, as the case may be, wor king in a
Gover nment hospital, and which has the effect of r educing consider ably such individuals
capacity for nor mal wor k or engaging in a gainful employment or occupation, ther e shall
be allowed a deduction of a sum of for ty thousand r upees :
Provided that such individual pr oduces the afor esaid cer tificate befor e the Assessing
Officer in r espect of the fir st assessment year for which he claims deduction under this
sect ion :
Provided further that the r equir ement of pr oducing the afor esaid cer tificate fr om a
physician, a sur geon, an oculist or a psychiatr ist, as the case may be, wor king in a
Gover nment hospit al shall not apply t o an individual who has alr eady pr oduced a
cer tificate befor e the Assessing Officer under the pr ovisions of this section as they stood
immediately befor e the 1st day of Apr il, 1992.
Explan ation .For the pur poses of this section, the expr ession Gover nment hospital shall
have the meaning assigned to it in the Explan ation to section 80DD.
Ear lier section 80U was amended by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971, Finance (No. 2) Act, 1980, w.e.f. 1-4-1981, Finance Act, 1984, w.e.f. 1-4-1985,
Finance Act, 1987, w.e.f. 1-4-1988, Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988
and the Finance Act, 1989, w.e.f. 1-4-1990.
25. See r ule 11A. For pr escr ibed For ms, see For m No. 10-IA and For ms pr escr ibed under
Per sons with Disabilities (Equal Oppor tunities, Pr otection of Rights & Full Par ticipation)
Act , 1995 [see Taxmanns Income-tax Rules].
26
(a) disability shall have the meaning assigned to it in clause (i) of section
2 of the Per sons with Disabilities (Equal Oppor tunities, Pr otection of
Rights and Full Par ticipation) Act, 1995 (1 of 1996)
27
, and includes
autism, cer ebr al palsy and multiple disabilities r efer r ed to in
clauses (a), (c) and (h ) of section 2
28
of the National Tr ust for Welfar e
of Per sons with Autism, Cer ebr al Palsy, Mental Retar dation and
Multiple Disabilities Act, 1999 (44 of 1999);
(b) medical author ity means the medical author ity as r efer r ed to
in clause (p) of section 2 of the Per sons with Disabilities (Equal
Oppor tunities, Pr otection of Rights and Full Par ticipation) Act, 1995
(1 of 1996)
29
, or such other medical author ity as may, by notification,
be specified by the Centr al Gover nment for cer tifying autism,
cer ebr al palsy, multiple disabilities, per son with disability and
sever e disability r efer r ed to in clauses (a), (c), (h ), (j) and (o) of section
2 of the National Tr ust for Welfar e of Per sons with Autism, Cer ebr al
Palsy, Mental Retar dation and Multiple Disabilities Act, 1999 (44 of
1999)
30
;
(c) per son with disability means a per son r efer r ed to in clause (t) of
section 2 of the Per sons with Disabilities (Equal Oppor tunities,
Pr otection of Rights and Full Par ticipation) Act, 1995 (1 of 1996)
29
, or
clause (j) of section 2 of the National Tr ust for Welfar e of Per sons with
Autism, Cer ebr al Palsy, Mental Retar dation and Multiple Disabilities
Act, 1999 (44 of 1999)
30
;
1.503 CH. VIA - OTHER DEDUCTIONS S. 80U
(a) disability shall have the meaning assigned to it in clause (i) of section 2 of the
Per sons wit h Disabilit ies (Equal Oppor t unit ies, Pr ot ect ion of Right s and Full
Par ticipation) Act, 1995 (1 of 1996);
(b) medical author ity means the medical author ity as r efer r ed to in clause (p) of
section 2 of the Per sons with Disabilities (Equal Oppor tunities, Pr otection of Rights
and Full Par ticipation) Act, 1995 (1 of 1996);
(c) per son with disability means a per son r efer r ed to in clause (t) of section 2 of the
Per sons wit h Disabilit ies (Equal Oppor t unit ies, Pr ot ect ion of Right s and Full
Par ticipation) Act, 1995 (1 of 1996);
(d) per son with sever e disability means a per son with eighty per cent or mor e of one
or mor e disabilities, as r efer r ed to in sub-section (4) of section 56 of the Per sons with
Disabilities (Equal Oppor tunities, Pr otection of Rights and Full Par ticipation) Act,
1995 (1 of 1996).
27. For text of section 2(i) of the Per sons with Disabilities (Equal Oppor tunities, Pr otection of
Rights and Full Par ticipation) Act, 1995, see Appendix.
28. For r elevant text of section 2 of the National Tr ust for Welfar e of Per sons with Autism,
Cer ebr al Palsy, Mental Retar dation & Multiple Disabilities Act, 1999, see Appendix.
29. For r elevant text of section 2 and section 56(4) of the Per sons with Disabilities (Equal
Oppor tunities, Pr otection of Rights and Full Par ticipation) Act, 1995, see Appendix.
(d) per son with sever e disability means
(i) a per son with eighty per cent or mor e of one or mor e disabilities,
as r efer r ed to in sub-section (4) of section 56 of the Per sons with
Disabilities (Equal Oppor tunities, Pr otection of Rights and Full
Par ticipation) Act, 1995 (1 of 1996)
31
; or
(ii) a per son with sever e disability r efer r ed to in clause (o) of section
2 of the National Tr ust for Welfar e of Per sons with Autism,
Cer ebr al Palsy, Mental Retar dation and Multiple Disabilities Act,
1999 (44 of 1999)
32
.]]
Deduction from gross total income of the parent in certain cases.
80V.
33
Deduction in respect of expenses incurred in connection with certain proceedings
under the Act.
80VV. [Om itted by th e Fin an ce Act, 1985, w.e.f. 1-4-1986. Origin al section was
in serted by th e Taxation Laws (Am en dm en t) Act, 1975, w.e.f. 1-4-1976.]
CHAPTER VI -B
RESTRICTION ON CERTAIN DEDUCTIONS IN
THE CASE OF COMPANIES
[Ch apter VI-B con sistin g of section 80VVA om itted by th e Fin an ce Act, 1987,
w.e.f. 1-4-1988. Origin al Ch apter was in serted by th e Fin an ce Act, 1983, w.e.f.
1-4-1984 an d am en ded by th e Fin an ce Act, 1985, w.e.f. 1-4-1986 an d Fin an ce Act,
1986, w.e.f. 1-4-1987.]
CHAPTER VI I
INCOMES FORMING PART OF TOTAL INCOME ON WHICH NO
INCOME-TAX IS PAYABLE
81. to 85C. [Om itted by th e Fin an ce (No. 2) Act, 1967, w.e.f. 1-4-1968. Provision s
of section s 81, 82, 83, 84, 85, 85A, 85B an d 85C were in corporated from
th e sam e date in section s 80P, 80Q, 10(29), 80J (n ow om itted), 80K (n ow om itted),
80M (n ow om itted), 80N (n ow om itted) an d 80-O, respectively.]
34
[Share of member of an association of persons or body of individuals in the
income of the association or body.
86. Wher e the assessee is a member of an association of per sons or body of
individuals (other than a company or a co-oper ative society or a society
r egister ed under the Societies Registr ation Act, 1860 (21 of 1860), or under any
S. 86 I.T. ACT, 1961 1.504
31. For r elevant text of section 2 and section 56(4) of the Per sons with Disabilities (Equal
Oppor tunities, Pr otection of Rights and Full Par ticipation) Act, 1995, see Appendix.
33. Pr ior to omission, section 80V was inser ted by the Finance Act, 1993, w.e.f. 1-4-1994.
34. Substituted by the Finance Act, 1992, w.e.f. 1-4-1993. Pr ior to substitution, section 86 was
amended by the Finance Act, 1964, w.e.f. 1-4-1964, the Finance Act, 1965, w.e.f. 1-4-1965,
the Finance Act, 1968, w.e.f. 1-4-1969, the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971,
the Finance Act, 1981, w.e.f. 1-4-1981, the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989 and the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
law cor r esponding to that Act in for ce in any par t of India), income-tax shall not
be payable by the assessee in r espect of his shar e in the income of the association
or body computed in the manner pr ovided in section 67A :
Provided that,
(a) wher e the association or body is char geable to tax on its total income
at the maximum mar ginal r ate or any higher r ate under any of the
pr ovisions of this Act, the shar e of a member computed as afor esaid
shall not be included in his total income;
(b) in any other case, the shar e of a member computed as afor esaid shall
for m par t of his total income :
Provided further that wher e no income-tax is char geable on the total income of
the association or body, the shar e of a member computed as afor esaid shall be
char geable to tax as par t of his total income and nothing contained in this section
shall apply to the case.]
Deduction from tax on certain securities.
86A.
35
CHAPTER VI I I
36
[REBATES AND RELIEFS]
37
[A.Rebate of in com e-tax
Rebate to be allowed in computing income-tax.
87. (1) In computing the amount of income-tax on the total income of an
assessee with which he is char geable for any assessment year , ther e shall be
allowed fr om the amount of income-tax (as computed befor e allowing the
deductions under this Chapter ), in accor dance with and subject to the pr ovisions
of
38
[sections 88, 88A, 88B, 88C, 88D and 88E], the deductions specified in those
sections.
(2) The aggr egate amount of the deductions under section 88 or section 88A
39
[or
section 88B]
40
[or section 88C]
41
[or section 88D or section 88E] shall not, in any
case, exceed the amount of income-tax (as computed befor e allowing the
deductions under this Chapter ) on the total income of the assessee with which
he is char geable for any assessment year .
Rebate on educational expenses in certain cases.
87A. [Om itted by th e Fin an ce (No. 2) Act, 1967, w.e.f. 1-4-1968.]
1.505 CH. VIII - REBATES AND RELIEFS S. 87A
35. Pr ior to its omission, section 86A was amended by the Finance Act, 1966, w.e.f. 1-4-1966.
36. Substituted for Relief in r espect of income-tax by the Finance Act, 1990, w.e.f. 1-4-1991.
Ear lier existing heading was amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
38. Substituted for sections 88, 88A, 88B and 88C by the Finance (No. 2) Act, 2004, w.e.f.
1-4-2005. Ear lier the quoted por tion was amended by the Finance Act, 1992, w.e.f. 1-4-1993
S. 88 I.T. ACT, 1961 1.506
Rebate on life insurance premia, contribution to provident fund, etc.
42
88.
43
[(1) Subject to the pr ovisions of this section, an assessee, being an
individual, or a Hindu undivided family, shall be entitled to a deduction,
fr om the amount of income-tax (as computed befor e allowing the deductions
under this Chapter ) on his total income with which he is char geable for any
assessment year , of an amount equal to
(i) in the case of an individual or a Hindu undivided family, whose gr oss
total income befor e giving effect to deductions under Chapter VI-A,
is one lakh fifty thousand r upees or less, twenty per cent of the
aggr egate of the sums r efer r ed to in sub-section (2):
Provided that an individual shall be entitled to a deduction of an
amount equal to thir ty per cent of the aggr egate of the sums r efer r ed
to in sub-section (2) if his income under the head Salar ies
(a) does not exceed one lakh r upees dur ing the pr evious year befor e
allowing the deduction under section 16; and
(b) is not less than ninety per cent of his gr oss total income, as defined
in sub-section (5) of section 80B;
(ii) in the case of an individual or a Hindu undivided family, whose gr oss
is mor e than one lakh fifty thousand r upees but does not exceed five
lakh r upees, fifteen per cent of the aggr egate of the sums r efer r ed to
in sub-section (2);
(1), as amended by the Finance Act, 1990, w.e.f. 1-4-1991, Finance Act, 1992, w.e.f. 1-4-1993,
Finance Act, 1994, w.r .e.f. 1-4-1991 and Finance Act, 2001, w.e.f. 1-4-2002, r ead as under :
(1) Subject to the pr ovisions of this section, an assessee, being
(b) a Hindu undivided family, [***]
(c) [***]
shall be entitled to a deduction, fr om the amount of income-tax (as computed befor e
allowing t he deduct ions under t his Chapt er ) on his t ot al income wit h which he is
char geable for any assessment year , of an amount equal to twenty per cent of the
aggr egate of the sums r efer r ed to in sub-section (2) :
Provided that in the case of an individual, whose income, der ived fr om the exer cise of his
pr ofession as an author , playwr ight, ar tist, musician, actor or spor tsman (including an
athlete), is twenty-five per cent or mor e of his total income, the pr ovisions of this sub-
section shall have effect as if for the wor ds twenty per cent, the wor ds twenty-five per
cent had been subst it ut ed :
Provided further that an individual shall be entitled to a deduction of an amount equal to
thir ty per cent of the aggr egate of the sums r efer r ed to in sub-section (2) if his income
char geable under the head Salar ies
(a) does not exceed one lakh r upees dur ing the pr evious year befor e allowing deduc-
tion under section 16; and
(b) is not less than ninety per cent of his gr oss total income as defined in sub-section
(5) of section 80B.
(iii) in the case of an individual or a Hindu undivided family, whose gr oss
exceeds five lakh r upees, n il.]
(2) The sums r efer r ed to in sub-section (1) shall be any sums paid or deposited
in the pr evious year by the assessee
44
[***]
(i) to effect or to keep in for ce an insur ance on the life of per sons
(ii) to effect or to keep in for ce a contr act for a defer r ed annuity,
45
[not
being an annuity plan r efer r ed to in clause (xiiia)], on the life of
per sons specified in sub-section (4) :
Provided that such contr act does not contain a pr ovision for the
exer cise by the insur ed of an option to r eceive a cash payment in lieu
of the payment of the annuity;
(iii) by way of deduction fr om the salar y payable by or on behalf of the
Gover nment to any individual being a sum deducted in accor dance
with the conditions of his ser vice, for the pur pose of secur ing to him
a defer r ed annuity or making pr ovision for his wife or childr en, in so
far as the sum so deducted does not exceed one-fifth of the salar y;
(iv) as a contr ibution by an individual to any pr ovident fund to which the
Pr ovident Funds Act, 1925 (19 of 1925), applies;
(v) as a contr ibution to any pr ovident fund set up by the Centr al
Gover nment and notified
46
by it in this behalf in the Official Gazette,
wher e such contr ibution is to an account standing in the name of any
per son specified in sub-section (4);
(vi) as a contr ibution by an employee to a r ecognised pr ovident fund;
(vii) as a contribution by an employee to an approved superannuation fund;
(viii) in a ten-year account or a fifteen-year account under the Post Office
Savings Bank (Cumulative Time Deposits) Rules, 1959, as amended
fr om time to time, wher e such sums ar e deposited in an account
standing in the name of the per sons specified in sub-section (4);
(ix) as subscr iption to any such secur ity of the Centr al Gover nment
47
[or
any such deposit scheme] as that Gover nment may, by notification
48
1.507 CH. VIII - REBATES AND RELIEFS S. 88
44. Wor ds out of his income char geable to tax omitted by the Finance Act, 2002, w.e.f.
1-4-2003.
45. Substituted for not being an annuity plan r efer r ed to in clause (ii) of sub-section (1) of
section 80CCA by the Finance Act, 1992, w.e.f. 1-4-1993.
46. Public pr ovident fund has been notified - Vide SO 55(E), dated 31-1-1991. See Taxmanns
48. National Savings Scheme has been notifiedVide GSR 819(E), dated 21-10-1992. See also
Taxmanns Master Guide to Income-tax Act. Scheme is discontinued with effect fr om
1-11-2002 - [Vide GSR 710(E), dated 17-10-2002.]
(x) as subscr iption to the National Savings Cer tificates (VI Issue) and
National Savings Certificates (VII Issue) issued under theGovernment
Savings Cer tificates Act, 1959 (46 of 1959);
(xi) as subscr iption to any such savings cer tificate
49
as defined in clause
(c) of section 2 of the Gover nment Savings Cer tificates Act, 1959 (46
of 1959), as the Centr al Gover nment may, by notification
50
in the
(xii) as a contr ibution,
51
[in the name of any per son] specified in sub-
section (4), for par ticipation in the Unit-linked Insur ance Plan, 1971
(her eafter in this section r efer r ed to as the Unit-linked Insur ance
Plan) deemed to have been made under sub-clause (a) of clause (8) of
section 19 of the Unit Tr ust of India Act, 1963 (52 of 1963);
(xiii) as a contr ibution
52
[in the name of any per son specified in sub-section
(4)] for par ticipation in any such unit-linked insur ance plan of the LIC
Mutual Fund notified under clause (23D) of section 10, as the Centr al
53
this behalf;
54
[(xiiia) to effect or to keep in for ce a contr act for such annuity plan of the Life
Insur ance Cor por at ion
55
[or any ot her insur er ] as t he Cent r al
56
in the Official Gazette, specify;
(xiiib) as subscr iption, not exceeding ten thousand r upees, to any units of
any Mutual Fund notified under clause (23D) of section 10 or the Unit
Tr ust of India established under the Unit Tr ust of India Act, 1963 (52
of 1963), under any plan for mulated in accor dance with such scheme
as the Centr al Gover nment may, by notification in the Official
(xiiic) as a contr ibution by an individual to any pension fund set up by any
Mutual Fund notified under clause (23D) of section 10
57
[or by the
Unit Tr ust of India established under the Unit Tr ust of India Act, 1963
S. 88 I.T. ACT, 1961 1.508
49. For definition of savings cer tificate, see footnote 57 on p. 1.130 an te.
50. NSC (VIII Issue) has been notified - Vide SO 54(E), dated 31-1-1991. See Taxmanns Master
51. Substituted for by any per son by the Finance Act, 1994, w.r .e.f. 1-4-1991.
52. Substituted for by any individual, ibid.
53. Dhanar aksha 1989 Plan of LIC Mutual Fund - Vide SO 56(E), dated 31-1-1991. See
56. Jeevan Dhar a and Jeevan Akshay Plans of LIC - Vide Notification No. GSR 801(E), dated
7-10-1992. New Jeevan Dhar a/ New Jeevan Akshay Plans of LIC - Vide Notification No.
71/ 2002 [F. No. 174/ 9/ 2001-IT(A-I)], dated 2-4-2002. New Jeewan Dhar a I and New Akshay
Plan I of LIC - Vide Notification No. SO 306(E), dated 18-3-2003/ New Jeewan Akshay-II -
Vide Notification No. SO 569(E), dated 13-5-2004. See Taxmanns Master Guide to Income-
tax Act.
(52 of 1963)], as the Centr al Gover nment may, by notification
58
in the
Official Gazette, specify in this behalf;]
(xiv) as subscr iption to any such deposit scheme of
59
[, or as a contr ibution
to any such pension fund set up by,] the National Housing Bank
established under section 3 of the National Housing Bank Act, 1987
(53 of 1987) (her eafter in this section r efer r ed to as the National
Housing Bank), as the Centr al Gover nment may, by notification
60
in
the Official Gazette, specify in this behalf;
61
[(xiva) as subscr iption to any such deposit scheme of
(a) a public sector company which is engaged in pr oviding long-ter m
finance for constr uction or pur chase of houses in India for
r esidential pur poses; or
(b) any author ity constituted in India by or under any law enacted
housing accommodation or for the pur pose of planning, develop-
ment or impr ovement of cities, towns and villages, or for both,
not being a scheme the inter est on deposits wher eunder qualifies for
the pur poses of computing the deduction under section 80L, as the
specify in this behalf;]
62
[(xivb) as tuition fees (excluding any payment towar ds any development fees
or donation or payment of similar natur e), whether at the time of
admission or ther eafter ,
(a) to any univer sity, college, school or other educational institution
situated within India;
(b) for the pur pose of full-time education of any of the per sons
specified in sub-section (4);]
(xv) for the pur poses of pur chase or constr uction of a r esidential house
pr oper ty the
63
[* * *] income fr om which is char geable to tax under the
head Income fr om house pr oper ty (or which would, if it had not
been used for the assessees own r esidence, have been char geable to
tax under that head), wher e such payments ar e made towar ds or by
way of
(a) any instalment or par t payment of the amount due under any self-
financing or other scheme of any development author ity, housing
58. Retir ement Benefit Unit Scheme of UTI - Vide Notification No. 9598 [F. No. 149/ 100/ 94-
TPL], dated 1-9-1994/ Kothar i Pioneer Pension PlanNotification No. SO 76(E), dated
30-1-1997. See Taxmanns Master Guide to Income-tax Act.
60. Home Loan Account Scheme of National Housing Bank has been notified - Vide SO 57(E),
63. Wor ds constr uction of which is completed after the 31st day of Mar ch, 1987, and the
omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992.
boar d or other author ity engaged in the constr uction and sale of
house pr oper ty on owner ship basis; or
(b) any instalment or par t payment of the amount due to any
company or co-oper ative society of which the assessee is a
shar eholder or member towar ds the cost of the house pr oper ty
allotted to him; or
(c) r epayment of the amount bor r owed by the assessee fr om
(1) the Centr al Gover nment or any State Gover nment, or
(2) any bank, including a co-oper ative bank, or
(3) the Life Insur ance Cor por ation, or
(4) the National Housing Bank, or
(5) any public company for med and r egister ed in India with the
for r esidential pur poses
64
[which is eligible for deduction
under clause (viii) of sub-section (1) of section 36], or
(6) any company in which the public ar e substantially inter ested
or any co-oper ative society, wher e such company or co-
oper ative society is engaged in the business of financing the
constr uction of houses, or
65
[(6A) the assessees employer wher e such employer is an author ity
or a boar d or a cor por ation or any other body established or
constituted under a Centr al or State Act, or ]
(7) the assessees employer wher e such employer is a public
company or a public sector company or a Univer sity esta-
blished by law or a college affiliated to such Univer sity or a
local author ity
66
[or a co-oper ative society];
(d) stamp duty, r egistr ation fee and other expenses for the pur pose
of tr ansfer of such house pr oper ty to the assessee,
but shall not include any payment towar ds or by way of
(A) the admission fee, cost of shar e and initial deposit which a
shar eholder of a company or a member of a co-oper ative society
has to pay for becoming such shar eholder or member ; or
(B) [Om itted by th e Fin an ce (No. 2) Act, 1991, w.e.f. 1-4-1992;]
(C) the cost of any addition or alter ation to, or r enovation or r epair of,
the house pr oper ty which is car r ied out after the issue of the
completion cer tificate in r espect of the house pr oper ty by the
author ity competent to issue such cer tificate or after the house
S. 88 I.T. ACT, 1961 1.510
64. Substituted for which is appr oved for the pur poses of clause (viii) of sub-section (1) of
section 36by the Finance Act, 2000, w.e.f. 1-4-2000.
pr oper ty or any par t ther eof has either been occupied by the
assessee or any other per son on his behalf or been let out; or
(D) any expenditur e in r espect of which deduction is allowable under
the pr ovisions of section 24;
67
[(xvi) as subscr iption to equity shar es or debentur es for ming par t of any
eligible issue of capital appr oved by the Boar d on an application made
by a public company
68
[or as subscr iption to any eligible issue of
capital by any public financial institution] in the pr escr ibed for m
69
:
Provided that wher e a deduction is claimed and allowed under this
clause with r efer ence to the cost of any equity shar es or debentur es,
the cost of such shar es or debentur es shall not be taken into account
for the pur poses of sections 54EA and 54EB.
70
[Explan ation .For the pur poses of this clause,
(i) eligible issue of capital means an issue made by a public
company for med and r egister ed in India or a public financial
institution and the entir e pr oceeds of the issue ar e utilised wholly
and exclusively for the pur poses of any business r efer r ed to in
(ii) public company
71
section 3 of the Companies Act, 1956 (1 of 1956);
(iii) public financial institution
72
shall have the meaning assigned to
it in section 4A of the Companies Act, 1956 (1 of 1956);]
(xvii) as subscr iption to any units of any mutual fund r efer r ed to in clause
(23D) of section 10 and appr oved by the Boar d on an application made
by such mutual fund in the pr escr ibed for m
73
:
as amended by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997, Finance Act, 1997, w.e.f.
(i) eligible issue of capital means an issue made by a public company for med and
r egister ed in India or a public financial institution and the entir e pr oceeds of the
issue is utilised wholly and exclusively either for the pur poses of developing,
maint aining and oper at ing an infr ast r uct ur e facilit y or for gener at ing, or for
gener ating and distr ibuting, power or for pr oviding telecommunication ser vices
whether basic or cellular ;
(ii) infr astr uctur e facility shall have the meaning assigned to it in the Explan ation to
(iii) public companyshall have the meaning assigned to it in section 3 of the Companies
Act, 1956 (1 of 1956);
(iv ) public financial institution shall have the meaning assigned to it in section 4A of
the Companies Act, 1956 (1 of 1956);
72. For text of section 4A of the Companies Act, see Appendix.
73. See r ule 20A and For m No. 59A.
Provided that wher e a deduction is claimed and allowed under this
clause with r efer ence to the cost of units, the cost of such units shall
not be taken into account for the pur poses of sections 54EA and
54EB:
Provided further that this clause shall apply if the amount of subscr ip-
tion to such units is subscr ibed only in the eligible issue of capital of
any company.
Explan ation .For the pur poses of this clause eligible issue of capi-
tal means an issue r efer r ed to in clause (i) of the Explan ation to
clause (xvi) of sub-section (2) of section 88.]
74
[(2A) The pr ovisions of sub-section (2) shall apply only to so much of any
pr emium or other payment made on an insur ance policy other than a contr act
for a defer r ed annuity as is not in excess of twenty per cent of the actual capital
sum assur ed.
Explan ation .In calculating any such actual capital sum, no account shall be
taken
(i) of the value of any pr emiums agr eed to be r etur ned, or
(ii) of any benefit by way of bonus or other wise over and above the sum
actually assur ed, which is to be, or , may be, r eceived under the policy
by any per son.]
75
[(3) The sums r efer r ed to in sub-section (2) shall be paid or deposited at any time
dur ing the pr evious year , and the assessee, being an individual or a Hindu
undivided family, shall be entitled to a deduction under sub-section (1) on so
much of the aggr egate of such sums paid or deposited as does not exceed the
total income of the assessee, char geable to tax dur ing the r elevant pr evious year .]
(4) The per sons r efer r ed to in sub-section (2) shall be the following, namely :
76
[(a) for the pur poses of clauses (i), (v), (xii) and (xiii) of that sub-section,
(ii) in the case of a Hindu undivided family, any member ther eof;]
(b) for the pur poses of clause (ii) of that sub-section,
(ii)
77
[***]
(c) for the pur poses of
78
[clause (viii)] of that sub-section,
(i) in the case of an individual, such individual or a minor of whom
he is the guar dian;
S. 88 I.T. ACT, 1961 1.512
75. Inser ted by the Finance Act, 2002, w.e.f. 1-4-2003. Ear lier existing sub-section (3) was
omitted by the Finance Act, 1995, w.e.f. 1-4-1996.
77. Omitted, ibid.
78. Subst it ut ed for clauses (v) and (viii), ibid.
79. Omitted by the Finance Act, 1994, w.r .e.f. 1-4-1991.
80. Inser ted by the Finance Act, 2003, w.e.f. 1-4-2004. Ear lier clause (d) was omitted by the
Finance Act, 1994, w.r .e.f. 1-4-1991.
(5), as amended by the Finance Act, 2000, w.e.f. 1-4-2001, r ead as under :
(5) Wher e the aggr egate of any sums specified in clause (xv) of sub-section (2) exceeds an
amount of twenty thousand r upees, a deduction under sub-section (1) shall be allowed
with r efer ence to so much of the aggr egate as does not exceed an amount of twenty
thousand r upees.
83. Pr ior to its omission, sub-section (5A), as inser ted by the Finance (No. 2) Act, 1996, w.e.f.
(5A) Wher e the aggr egate of any sums specified in clause (i) to clause (xv) of sub-section
(2) exceeds an amount of sixty thousand r upees, a deduction under sub-section (1) shall
be allowed with r efer ence to so much of the aggr egate as does not exceed an amount of
sixt y t housand r upees :
Provided that, in the case of an individual r efer r ed to in the pr oviso to sub-section (1), the
pr ovisions of this sub-section shall have effect as if for the wor ds sixty thousand r upees,
the wor ds seventy thousand r upees had been substituted.
(ii) in the case of a Hindu undivided family, any member of the
family;
(iii)
79
[***]
80
[(d) for the pur pose of clause (xivb) of that sub-section, in the case of an
individual, any two childr en of such individual.]
81
[(5) Wher e the aggr egate of any sums specified in clause (i) to clause (xvii) of
sub-section (2) exceeds an amount of one hundr ed thousand r upees, a deduction
under sub-section (1) shall be allowed with r efer ence to so much of the aggr egate
as does not exceed an amount of one hundr ed thousand r upees:
Provided that wher e the aggr egate of any sums specified in clause (i) to clause
(xv) of sub-section (2) exceeds an amount of seventy thousand r upees, a
deduction under sub-section (1) in r espect of such sums shall be allowed with
r efer ence to so much of the aggr egate as does not exceed an amount of seventy
thousand r upees:
Provided further that wher e the aggr egate of any sums specified in clause (xv)
of sub-section (2) exceeds an amount of twenty thousand r upees, a deduction
under sub-section (1) in r espect of such sums shall be allowed with r efer ence to
so much of the aggr egate as does not exceed an amount of twenty thousand
r upees:
82
[Provided also that wher e the aggr egate of any sum specified in clause (xivb)
of sub-section (2) exceeds an amount of twelve thousand r upees in r espect of a
child, a deduction under sub-section (1) in r espect of such sum shall be allowed
with r efer ence to so much of the aggr egate as does not exceed an amount of
twelve thousand r upees in r espect of such child.]
(5A)
83
S. 88 I.T. ACT, 1961 1.514
(6)
84
(7) Wher e, in any pr evious year , an assessee
(i) ter minates his contr act of insur ance r efer r ed to in clause (i) of sub-
section (2), by notice to that effect or wher e the contr act ceases to be
in for ce by r eason of failur e to pay any pr emium, by not r eviving
85
[contr act of insur ance,
(a) in case of any single pr emium policy, within two year s after the
date of commencement of insur ance; or
(b) in any other case, befor e pr emiums have been paid for two year s;
or ]
(ii) ter minates his par ticipation in any unit-linked insur ance plan r e-
fer r ed to in clause (xii) or clause (xiii) of sub-section (2), by notice to
that effect or wher e he ceases to par ticipate by r eason of failur e to pay
any contr ibution, by not r eviving his par ticipation, befor e contr ibu-
tions in r espect of such par ticipation have been paid for five year s; or
(iii) tr ansfer s the house pr oper ty r efer r ed to in clause (xv) of sub-section
(2) befor e the expir y of five year s fr om the end of the financial year
in which possession of such pr oper ty is obtained by him, or r eceives
back, whether by way of r efund or other wise, any sum specified in
that clause,
then,
(a) no deduction shall be allowed to the assessee under sub-section (1)
with r efer ence to any of the sums, r efer r ed to in clauses (i), (xii), (xiii)
and (xv) of sub-section (2), paid in such pr evious year ; and
(b) the aggr egate amount of the deductions of income-tax so allowed in
r espect of the pr evious year or year s pr eceding such pr evious year ,
shall be deemed to be tax payable by the assessee in the assessment
year r elevant to such pr evious year and shall be added to the tax on
the total income of the assessee with which he is char geable for such
assessment year .
86
[(7A) If any equity shar es or debentur es, with r efer ence to the cost of which a
deduction is allowed under sub-section (1), ar e sold or other wise tr ansfer r ed by
the assessee to any per son at any time within a per iod of thr ee year s fr om the date
84. Pr ior to its omission, sub-section (6), as amended by the Finance Act, 1992, w.e.f. 1-4-1993,
Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and Finance Act, 2000, w.e.f. 1-4-2001, r ead as
under :
(6) The deduct ion fr om t he amount of income-t ax under sub-sect ion (1) shall not
exceed
(i) in the case of an individual, whose income, der ived fr om the exer cise of his
pr ofession as an author , playwr ight, ar tist, musician, actor or spor tsman (including
an athlete), is twenty-five per cent or mor e of his total income, seventeen thousand
five hundr ed r upees;
(ii) in any other case, sixteen thousand r upees.
85. Substituted for contr act of insur ance, befor e pr emiums have been paid for two year s; or
of their acquisition, the aggr egate amount of the deductions of income-tax so
allowed in r espect of such equity shar es or debentur es in the pr evious year or
year s pr eceding the pr evious year in which such sale or tr ansfer has taken place
shall be deemed to be tax payable by the assessee for the assessment year
r elevant to such pr evious year and shall be added to the amount of income-tax
on the total income of the assessee with which he is char geable for such
assessment year .
Explan ation .A per son shall be tr eated as having acquir ed any shar es or
debentur es on the date on which his name is enter ed in r elation to those shar es
or debentur es in the r egister of member s or of debentur e-holder s, as the case
may be, of the public company.]
(i) contr ibution to any fund shall not include any sums in r epayment of
loan;
(ii) insur ance shall include
(a) a policy of insur ance on the life of an individual or the spouse or
the child of such individual or a member of a Hindu undivided
family secur ing the payment of specified sum on the stipulated
date of matur ity, if such per son is alive on such date notwith-
standing that the policy of insur ance pr ovides only for the r etur n
of pr emiums paid (with or without any inter est ther eon) in the
event of such per son dying befor e the said stipulated date;
(b) a policy of insur ance effected by an individual or a member of a
Hindu undivided family for the benefit of a minor with the object
of enabling the minor , after he has attained major ity to secur e
insur ance on his own life by adopting the policy and on his being
alive on a date (after such adoption) specified in the policy in this
behalf;
(iii) Life Insur ance Cor por ation means the Life Insur ance Cor por ation
of India established under the Life Insur ance Cor por ation Act, 1956
(31 of 1956);
(iv) public company
87
shall have the same meaning as in section 3 of the
(v) secur ity means a Gover nment secur ity
88
as defined in clause (2) of
section 2 of the Public Debt Act, 1944 (18 of 1944);
(vi) tr ansfer shall be deemed to include also the tr ansactions r efer r ed to
in clause (f) of section 269UA.
89
[(9) No deduction fr om the amount of income-tax shall be allowed under this
section to an assessee, being an individual or a Hindu undivided family for the
assessment year beginning on the 1st day of Apr il, 2006 and subsequent year s.]
88. For definition of Gover nment secur ity, see footnote 2 on p. 1.482 an te.
S. 88A I.T. ACT, 1961 1.516
90. Pr ior to its omission, section 88A, as amended by the Finance Act, 1990, w.e.f. 1-4-1991 and
88A. Rebate in respect of in vestm en t in certain n ew sh ares or un its.(1) Wher e an assessee
being
(a) an individual; or
(b) a Hindu undivided family;
(c) [***]
has acquir ed, in the pr evious year , out of his income char geable to tax,
(i) equity shar es for ming par t of any eligible issue of capital; or
(ii) units issued under any scheme of any Mutual Fund specified under clause (23D) of
section 10 or of the Unit Tr ust of India, established under section 3 of the Unit Tr ust
of India Act, 1963 (52 of 1963), if the amount of subscr iption to such units is
subscr ibed, within a per iod of six months fr om the close of subscr iption under such
scheme, only to eligible issue of capital,
he shall be entitled to a deduction, fr om the amount of income-tax (as computed befor e
allowing t he deduct ions under t his Chapt er ) on his t ot al income wit h which he is
char geable for any assessment year , of an amount equal to twenty per cent of the cost of
such shar es or unit s t o such assessee :
Provided that the amount of subscr iption to such units may be subscr ibed, for a per iod
not exceeding six months fr om the close of subscr iption under any scheme r efer r ed to in
clause (ii) in such secur ities of the Centr al Gover nment, as may be appr oved by the Boar d
in t his behalf :
Provided further that no deduction shall be allowed in r espect of units issued under any
scheme r efer r ed to in clause (ii) wher e the subscr iption under such scheme closes after
the 30th day of September , 1990.
Explan ation .Wher e in any pr evious year , the assessee has acquir ed any shar es or units
r efer r ed to in this sub-section and has, within a per iod of six months fr om the end of that
pr evious year paid the whole or a par t of the amount, if any, r emaining unpaid on such
shar es or units, the amount so paid shall be deemed to have been paid by the assessee
towar ds the cost of such shar es or units in the pr evious year .
(2) Wher e the aggr egate cost to the assessee of the shar es or units r efer r ed to in sub-section
(1) which ar e acquir ed by him in the pr evious year exceeds twenty-five thousand r upees,
the deduction under that sub-section shall be allowed only with r efer ence to such of those
shar es or units (being shar es or units the aggr egate cost wher eof to the assessee does not
exceed twenty-five thousand r upees) as ar e specified by him in this behalf.
(3) For the pur poses of this section, eligible issue of capital means an issue of equity
shar es which satisfies the following conditions, namely :
(a) the issue is made by a public company for med and r egister ed in India and the issue
is wholly and exclusively for the pur poses of car r ying on the business of
(i) constr uction, manufactur e or pr oduction of any ar ticle or thing, not being an
ar ticle or thing specified in the list in the Eleventh Schedule; or
(ii) pr oviding long-ter m finance for constr uction or pur chase of houses in India
for r esident ial pur poses :
Provided that in the case of a public company car r ying on the business
r efer r ed to in this sub-clause, such company is appr oved by the Centr al
Gover nment for the pur poses of this section; or
(iii) a hospital; or
(iv ) a hotel appr oved by the pr escr ibed author ity; or
(v) oper ation of ships;
(Con td. on p. 1.517)
Rebate in respect of investment in certain new shares or units.
88A.
90
1.517 CH. VIII - REBATES AND RELIEFS S. 88B
Rebate of income-tax in case of individuals of sixty-five years or above.
88B.
91
(b) the issue is an issue of capital made by the company for the fir st time :
Provided that this clause shall not apply in the case of an issue of equity shar es made
by a public company for med and r egister ed in India with the main object of
car r ying on the business of oper ation of ships;
(c) the shar es for ming par t of the issue ar e offer ed for subscr iption to the public and
such offer for subscr iption is made by the company befor e the 1st day of Apr il, 1991;
(d) such other conditions as may be pr escr ibed :
Provided that in the case of a company which had or iginally been incor por ated
as a pr ivate company but has become a public company under the pr ovisions of
the Companies Act, 1956 (1 of 1956), an issue of equity shar es made by it for the
fir st time after it has become a public company shall not be r egar ded as an
eligible issue of capital, if
(i) such company had declar ed, distr ibuted or paid any dividend when it was a
pr ivate company; or
(ii) any of the shar es for ming par t of such issue is offer ed for subscr iption at a
pr emiu m.
Explan ation 1.If any question ar ises as to whether any issue of equity shar es would
constitute an eligible issue of capital for the pur poses of this section, the question shall be
r efer r ed to the Centr al Gover nment whose decision ther eon shall be final.
Explan ation 2.In this sub-section and sub-section (4), public company shall have the
meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956).
(4) The deduction under sub-section (1) shall not be allowed unless the assessee has
(i) subscr ibed to the shar es in pur suance of an offer for subscr iption to the public
made by the public company or in pur suance of a r eser vation or an option in his
favour by r eason of his being a pr omoter of the company; or
(ii) pur chased the shar es fr om a per son who is specified as an under wr iter in r espect
of the issue of such shar es in pur suance of clause 11 of Par t I of Schedule II to the
Companies Act, 1956 (1 of 1956) and who has acquir ed such shar es by vir tue of his
obligation as such under wr iter .
(5) If any equity shar es or units, with r efer ence to the cost of which a deduction is allowed
under sub-section (1), ar e sold or other wise tr ansfer r ed by the assessee to any per son at
any time within a per iod of thr ee year s fr om the date of their acquisition, the aggr egate
amount of the deductions of income-tax so allowed in r espect of such equity shar es or
units in the pr evious year or year s pr eceding the pr evious year in which such sale or
tr ansfer has taken place shall be deemed to be tax payable by the assessee for the
assessment year r elevant to such pr evious year and shall be added to the amount of
income-tax on the total income of the assessee with which he is char geable for such
assessment year .
Explan ation .A per son shall be tr eated as having acquir ed any shar es or units on the date
on which his name is enter ed in r elation to those shar es or units in the r egister of member s
of the company or in the r elevant r ecor ds of any Mutual Fund or Unit Tr ust of India,
r efer r ed to in sub-section (1).
(6) Wher e a deduction is claimed and allowed under sub-section (1) with r efer ence to the
cost of any equity shar es, the cost of such shar es shall not be taken into account for the
pur poses of section 54E.
91. Pr ior to its omission, section 88B, as inser ted by the Finance Act, 1992, w.e.f. 1-4-1993 and
later on amended by the Finance Act, 1993, w.e.f. 1-4-1994, Finance Act, 1994, w.e.f. 1-4-
1995 and Finance (No. 2) Act, 1996, w.e.f. 1-4-1997, substituted by the Finance Act, 1997,
w.e.f. 1-4-1998 and fur ther amended by the Finance Act, 2000, w.e.f. 1-4-2001 and Finance
(Con td. on p. 1.518)
Rebate of income-tax in case of women below sixty-five years.
88C.
92
Rebate of income-tax in case of certain individuals.
88D.
93
94
[Rebate in respect of securities transaction tax.
88E. (1) Wher e the total income of an assessee in a pr evious year includes any
income, char geable under the head Pr ofits and gains of business or
pr ofession, ar ising fr om taxable secur ities tr ansactions, he shall be entitled to a
deduction, fr om the amount of income-tax on such income ar ising fr om such
tr ansactions, computed in the manner pr ovided in sub-section (2), of an amount
equal to the secur ities tr ansaction tax paid by him in r espect of the taxable
secur ities tr ansactions enter ed into in the cour se of his business dur ing that
pr evious year :
Provided that no deduction under this sub-section shall be allowed unless the
assessee fur nishes along with the r etur n of income, evidence of payment of
secur ities tr ansaction tax in the pr escr ibed for m
95
:
S. 88E I.T. ACT, 1961 1.518
88B. Rebate of in come-tax in case of in dividuals of sixty-five years or above.An assessee,
being an individual r esident in India, who is of the age of sixty-five year s or mor e at any
time dur ing the pr evious year shall be entitled to a deduction fr om the amount of income-
tax (as computed befor e allowing the deductions under this Chapter ) on his total income,
with which he is char geable for any assessment year , of an amount equal to hundr ed per
cent of such income-tax or an amount of twenty thousand r upees, whichever is less.
92. Pr ior to its omission, section 88C, as inser ted by the Finance Act, 2000, w.e.f. 1-4-2001, r ead
as under :
88C. Rebate of in come-tax in case of women below sixty-five years.An assessee,
(a) being a woman r esident in India; and
(b) below the age of sixty-five year s, at any time dur ing the pr evious year ,
shall be entitled to a deduction fr om the amount of income-tax (as computed befor e
allowing the deductions under this Chapter ) on her total income, with which she is
char geable for any assessment year , of an amount equal to hundr ed per cent of such
income-tax or an amount of five thousand r upees, whichever is less.
93. Pr ior to its omission, section 88D, as inser ted by the Finance (No. 2) Act, 2004, w.e.f.
88D. Rebate of in come-tax in case of certain in dividuals.An assessee, being an individual
r esident in India,
(a) whose total income does not exceed one hundr ed thousand r upees, shall be entitled
to a deduction fr om the amount of income-tax (as computed befor e allowing the
deductions under this Chapter ) on his total income with which he is char geable for
any assessment year , of an amount equal to hundr ed per cent of such income-tax;
(b) whose total income exceeds one hundr ed thousand r upees and the income-tax
payable on such total income (as computed befor e allowing the deductions under
this Chapter ) exceeds the amount by which such total income is in excess of one
hundr ed thousand r upees, shall be entitled to a deduction fr om the amount of
income-tax on his total income, of an amount equal to the amount by which the
income-tax payable on such total income is in excess of the amount by which the
total income exceeds one hundr ed thousand r upees.
95. See r ule 20AB and For m Nos. 10DB & 10DC.
1.519 CH. IX - DOUBLE TAXATION RELIEF S. 90
Provided further that the amount of deduction under this sub-section shall not
exceed the amount of income-tax on such income computed in the manner
pr ovided in sub-section (2).
(2) For the pur poses of sub-section (1), the amount of income-tax on the income
ar ising fr om the taxable secur ities tr ansactions, r efer r ed to in that sub-section,
shall be equal to the amount calculated by applying the aver age r ate of income-
tax on such income.
95a
[(3) No deduction un der th is section sh all be allowed in , or after, th e assessm en t
year begin n in g on th e 1st day of April, 2009.]
Explan ation .For the pur poses of this section, the expr essions, taxable secur i-
ties tr ansaction and secur ities tr ansaction tax shall have the same meanings
r espectively assigned to them under Chapter VII of the Finance (No. 2) Act, 2004.]
B.Relief for in com e-tax]
96
[Relief when salary, etc., is paid in arrears or in advance.
89. Wher e an assessee is in r eceipt of a sum in the natur e of salar y, being paid
in ar r ear s or in advance or is in r eceipt, in any one financial year , of salar y
for mor e than twelve months or a payment which under the pr ovisions of clause
(3) of section 17 is a pr ofit in lieu of salar y, or is in r eceipt of a sum in the natur e
of family pension as defined in the Explan ation to clause (iia) of section 57,
being paid in ar r ear s, due to which his total income is assessed at a r ate higher
than that at which it would other wise have been assessed, the Assessing Officer
shall, on an application made to him in this behalf, gr ant such r elief as may be
pr escr ibed
97
.]
Tax relief in relation to export turnover.
89A. [Om itted by th e Fin an ce Act, 1983, w.e.f. 1-4-1983. Th e provision s of th is
section were later substituted by sch em e con tain ed in section 80HHC,
in serted by th e Fin an ce Act, 1983, w.e.f. 1-4-1983. Origin ally section 89A was
CHAPTER I X
DOUBLE TAXATION RELIEF
98
[Agreement with foreign countries.
99
90.
1
[(1)] The Centr al Gover nment may enter into an agr eement with the
Gover nment of any countr y outside India
96. Substituted by the Finance Act, 2002, w.r .e.f. 1-4-1996. Pr ior to its substitution, section 89
was amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, the Dir ect Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 and the Finance Act, 1988, w.e.f. 1-4-1989.
97. See r ule 21A for r ules for computation of r elief. See r ule 21AA and For m No. 10E for
pr escr ibed par ticular s for claiming r elief under section 89.
See also Cir cular No. 331, dated 22-3-1982 and Cir cular No. 431, dated 12-9-1985. For
99. For notified agr eements for avoidance of double taxation, r efer Taxmanns Dir ect Taxes
Cir cular s and Taxmanns Year ly Tax Digest & Refer encer .
(Con td. on p. 1.520)
S. 90 I.T. ACT, 1961 1.520
2
[(a) for the gr anting of r elief in r espect of
(i) income on which have been paid both income-tax under this Act
and income-tax in that countr y; or
(ii) income-tax char geable under this Act and under the cor r es-
ponding law in for ce in that countr y to pr omote mutual economic
r elations, tr ade and investment, or ]
(b) for the avoidance of double taxation of income under this Act and
under the cor r esponding law in for ce in that countr y, or
(c) for exchange of infor mation for the pr evention of evasion or avoid-
ance of income-tax char geable under this Act or under the cor r es-
ponding law in for ce in that countr y, or investigation of cases of such
evasion or avoidance, or
(d) for r ecover y of income-tax under this Act and under the cor r es-
ponding law in for ce in that countr y,
and may, by notification in the Official Gazette, make such pr ovisions as may be
necessar y for implementing the agr eement.]
3
[(2) Wher e the Centr al Gover nment has enter ed into an agr eement with the
Gover nment of any countr y outside India under sub-section (1) for gr anting
r elief of tax, or as the case may be, avoidance of double taxation, then, in r elation
to the assessee to whom such agr eement applies, the pr ovisions of this Act shall
apply to the extent they ar e mor e beneficial to that assessee.]
4
[(3) Any ter m used but not defined in this Act or in the agr eement r efer r ed to in
sub-section (1) shall, unless the context other wise r equir es, and is not inconsis-
tent with the pr ovisions of this Act or the agr eement, have the same meaning as
assigned to it in the notification issued by the Centr al Gover nment in the Official
Gazette in this behalf.]
5
[Explan ation .For the r emoval of doubts, it is her eby declar ed that the char ge
of tax in r espect of a for eign company at a r ate higher than the r ate at which a
See also Cir cular No. 333, dated 2-4-1982, Cir cular No. 638, dated 28-10-1992, Cir cular
No. 659, dated 8-9-1993, Cir cular No. 682, dated 30-3-1994, Cir cular No. 789, dated 13-4-
2000, Cir cular No. 1/ 2003, dated 10-2-2003, Instr uction No. 3/ 2004, dated 19-3-2004 and
Instr uction No. 10/ 2007, dated 23-10-2007. For details, see Taxmanns Master Guide to
Income-tax Act.
See also r ules 44G & 44H & For m No. 34F.
1. Renumber ed by the Finance (No. 2) Act, 1991, w.r .e.f. 1-4-1972.
2. Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Pr ior to its substitution, clause (a)
r ead as under :
(a) for the gr anting of r elief in r espect of income on which have been paid both income-
tax under this Act and income-tax in that countr y, or
1.521 CH. IX - DOUBLE TAXATION RELIEF S. 90A
domestic company is char geable, shall not be r egar ded as less favour able char ge
or levy of tax in r espect of such for eign company
6
[***].]
7
[Adoption by Central Government of agreement between specified associations
for double taxation relief.
90A. (1) Any specified association in India may enter into an agr eement with any
specified association in the specified ter r itor y outside India and the Centr al
Gover nment may, by notification in the Official Gazette, make such pr ovisions
as may be necessar y for adopting and implementing such agr eement
(a) for the gr anting of r elief in r espect of
(i) income on which have been paid both income-tax under this Act
and income-tax in any specified ter r itor y outside India; or
(ii) income-tax char geable under this Act and under the cor r es-
ponding law in for ce in that specified ter r itor y outside India to
pr omote mutual economic r elations, tr ade and investment, or
(b) for the avoidance of double taxation of income under this Act and
under the cor r esponding law in for ce in that specified ter r itor y
outside India, or
(c) for exchange of infor mation for the pr evention of evasion or avoid-
ance of income-tax char geable under this Act or under the cor r es-
ponding law in for ce in that specified ter r itor y outside India, or
investigation of cases of such evasion or avoidance, or
(d) for r ecover y of income-tax under this Act and under the cor r es-
ponding law in for ce in that specified ter r itor y outside India.
(2) Wher e a specified association in India has enter ed into an agr eement with a
specified association of any specified ter r itor y outside India under sub-section
(1) and such agr eement has been notified under that sub-section, for gr anting
r elief of tax, or as the case may be, avoidance of double taxation, then, in r elation
to the assessee to whom such agr eement applies, the pr ovisions of this Act shall
apply to the extent they ar e mor e beneficial to that assessee.
(3) Any ter m used but not defined in this Act or in the agr eement r efer r ed to in
sub-section (1) shall, unless the context other wise r equir es, and is not inconsis-
tent with the pr ovisions of this Act or the agr eement, have the same meaning as
assigned to it in the notification issued by the Centr al Gover nment in the Official
Gazette in this behalf.
Explan ation 1.For the r emoval of doubts, it is her eby declar ed that the char ge
of tax in r espect of a company incor por ated in the specified ter r itor y outside
India at a r ate higher than the r ate at which a domestic company is char geable,
shall not be r egar ded as less favour able char ge or levy of tax in r espect of such
company.
6. Wor ds , wher e such for eign company has not made the pr escr ibed ar r angement for
declar ation and payment within India, of the dividends (including dividends on pr efer ence
shar es) payable out of its income in India omitted by the Finance (No. 2) Act, 2004, w.r .e.f.
1-4-1962.
Explan ation 2.For the pur poses of this section, the expr essions
(a) specified association means any institution, association or body,
whether incor por ated or not, functioning under any law for the time
being in for ce in India or the laws of the specified ter r itor y outside
India and which may be notified as such by the Centr al Gover nment
for the pur poses of this section;
(b) specified ter r itor y means any ar ea outside India which may be
notified as such by the Centr al Gover nment for the pur poses of this
section.]
Countries with which no agreement exists.
8
91. (1) If any per son who is r esident in India in any pr evious year pr oves that,
in r espect of his income which accr ued or ar ose dur ing that pr evious year
outside India (and which is not deemed to accr ue or ar ise in India), he has paid
in any countr y with which ther e is no agr eement under section 90 for the r elief
or avoidance of double taxation, income-tax, by deduction or other wise, under
the law in for ce in that countr y, he shall be entitled to the deduction fr om the
Indian income-tax payable by him of a sum calculated on such doubly taxed
income
9
at the Indian r ate of tax or the r ate of tax of the said countr y, whichever
is the lower , or at the Indian r ate of tax if both the r ates ar e equal.
(2) If any per son who is r esident in India in any pr evious year pr oves that in
r espect of his income which accr ued or ar ose to him dur ing that pr evious year
in Pakistan he has paid in that countr y, by deduction or other wise, tax payable
to the Gover nment under any law for the time being in for ce in that countr y
r elating to taxation of agr icultur al income, he shall be entitled to a deduction
fr om the Indian income-tax payable by him
(a) of the amount of the tax paid in Pakistan under any law afor esaid on
such income which is liable to tax under this Act also; or
(b) of a sum calculated on that income at the Indian r ate of tax;
whichever is less.
(3) If any non-r esident per son is assessed on his shar e in the income of a
r egister ed fir m assessed as r esident in India in any pr evious year and such shar e
includes any income accr uing or ar ising outside India dur ing that pr evious year
(and which is not deemed to accr ue or ar ise in India) in a countr y with which
ther e is no agr eement under section 90 for the r elief or avoidance of double
taxation and he pr oves that he has paid income-tax by deduction or other wise
under the law in for ce in that countr y in r espect of the income so included he shall
be entitled to a deduction fr om the Indian income-tax payable by him of a sum
calculated on such doubly taxed income so included at the Indian r ate of tax or
the r ate of tax of the said countr y, whichever is the lower , or at the Indian r ate
of tax if both the r ates ar e equal.
8. See also Cir cular No. 11/ 68/ 63-TPL, dated 13-12-1963 and Instr uction No. 992, dated
9. For the meaning of the expr ession such doubly taxed income, see Taxmanns Dir ect
S. 91 I.T. ACT, 1961 1.522
(i) the expr ession Indian income-tax means income-tax
10
[***] char ged
in accor dance with the pr ovisions of this Act;
(ii) the expr ession Indian r ate of tax means the r ate deter mined by
dividing the amount of Indian income-tax after deduction of any
r elief due under the pr ovisions of this Act but befor e deduction of any
r elief due under this
11
[Chapter ], by the total income;
(iii) the expr ession r ate of tax of the said countr y means income-tax and
super -tax actually paid in the said countr y in accor dance with the
cor r esponding laws in for ce in the said countr y after deduction of all
r elief due, but befor e deduction of any r elief due in the said countr y
in r espect of double taxation, divided by the whole amount of the
income as assessed in the said countr y;
(iv) the expr ession income-tax in r elation to any countr y includes any
excess pr ofits tax or business pr ofits tax char ged on the pr ofits by the
Gover nment of any par t of that countr y or a local author ity in that
countr y.
CHAPTER X
SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX
12
[
13
[Computation of income from international transaction having regard to
arms length price.
92. (1) Any income ar ising fr om an inter national tr ansaction shall be computed
having r egar d to the ar ms length pr ice.
Explan ation .For the r emoval of doubts, it is her eby clar ified that the allowance
for any expense or inter est ar ising fr om an inter national tr ansaction shall also be
deter mined having r egar d to the ar ms length pr ice.
1.523 CH. X - SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX S. 92
10. and super -tax omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
11. Substituted for section by the Finance Act, 1964, w.e.f. 1-4-1964.
12. Sections 92 to 92F substituted for section 92 by the Finance Act, 2001, w.e.f. 1-4-2002. See
also Cir cular No. 12/ 2001, dat ed 23-8-2001, Inst r uct ion No. 3, dat ed 20-5-2003 and
Income-tax Act.
as substituted by the Finance Act, 2001, w.e.f. 1-4-2002, r ead as under :
92. Com putation of in com e from in tern ation al tran saction h avin g regard to arm s len gth
price.(1) Any income ar ising fr om an inter national tr ansaction shall be computed having
r egar d to the ar ms length pr ice.
(2) In computing income under sub-section (1), the allowance for any expense or inter est
shall also be deter mined having r egar d to the ar ms length pr ice.
(3) Wher e in an inter national tr ansaction, two or mor e associated enter pr ises enter into
a mutual agr eement or ar r angement for the allocation or appor tionment of, or any
contr ibution to, any cost or expense incur r ed or to be incur r ed in connection with a
benefit, ser vice or facility pr ovided or to be pr ovided to any one or mor e of such
enter pr ises, the cost or expense allocated or appor tioned to, or , as the case may be,
contr ibuted by, any such enter pr ise shall be deter mined having r egar d to the ar ms length
pr ice of such benefit, ser vice or facility, as the case may be.
(2) Wher e in an inter national tr ansaction, two or mor e associated enter pr ises
enter into a mutual agr eement or ar r angement for the allocation or appor tion-
ment of, or any contr ibution to, any cost or expense incur r ed or to be incur r ed
in connection with a benefit, ser vice or facility pr ovided or to be pr ovided to any
one or mor e of such enter pr ises, the cost or expense allocated or appor tioned to,
or , as the case may be, contr ibuted by, any such enter pr ise shall be deter mined
having r egar d to the ar ms length pr ice of such benefit, ser vice or facility, as the
case may be.
(3) The pr ovisions of this section shall not apply in a case wher e the computation
of income under sub-section (1) or the deter mination of the allowance for any
expense or inter est under that sub-section, or the deter mination of any cost or
expense allocated or appor tioned, or , as the case may be, contr ibuted under sub-
section (2), has the effect of r educing the income char geable to tax or incr easing
the loss, as the case may be, computed on the basis of entr ies made in the books
of account in r espect of the pr evious year in which the inter national tr ansaction
was enter ed into.]
Meaning of associated enterprise.
92A. (1) For the pur poses of this section and sections 92, 92B, 92C, 92D, 92E and
92F, associated enter pr ise, in r elation to another enter pr ise, means an
enter pr ise
(a) which par ticipates, dir ectly or indir ectly, or thr ough one or mor e
inter mediar ies, in the management or contr ol or capital of the other
enter pr ise; or
(b) in r espect of which one or mor e per sons who par ticipate, dir ectly or
indir ectly, or thr ough one or mor e inter mediar ies, in its management
or contr ol or capital, ar e the same per sons who par ticipate, dir ectly or
indir ectly, or thr ough one or mor e inter mediar ies, in the management
or contr ol or capital of the other enter pr ise.
(2)
14
[For the pur poses of sub-section (1), two enter pr ises shall be deemed to be
associated enter pr ises if, at any time dur ing the pr evious year ,]
(a) one enter pr ise holds, dir ectly or indir ectly, shar es car r ying not less
than twenty-six per cent of the voting power in the other enter pr ise;
or
(b) any per son or enter pr ise holds, dir ectly or indir ectly, shar es car r ying
not less than twenty-six per cent of the voting power in each of such
enter pr ises; or
(c) a loan advanced by one enter pr ise to the other enter pr ise constitutes
not less than fifty-one per cent of the book value of the total assets of
the other enter pr ise; or
(d) one enter pr ise guar antees not less than ten per cent of the total
bor r owings of the other enter pr ise; or
(e) mor e than half of the boar d of dir ector s or member s of the gover ning
boar d, or one or mor e executive dir ector s or executive member s of
S. 92A I.T. ACT, 1961 1.524
14. Substituted for Two enter pr ises shall be deemed to be associated enter pr ises if, at any
time dur ing the pr evious year , by the Finance Act, 2002, w.e.f. 1-4-2002.
the gover ning boar d of one enter pr ise, ar e appointed by the other
enter pr ise; or
(f) mor e than half of the dir ector s or member s of the gover ning boar d,
or one or mor e of the executive dir ector s or member s of the gover n-
ing boar d, of each of the two enter pr ises ar e appointed by the same
per son or per sons; or
(g) the manufactur e or pr ocessing of goods or ar ticles or business
car r ied out by one enter pr ise is wholly dependent on the use of know-
how, patents, copyr ights, tr ade-mar ks, licences, fr anchises or any
other business or commer cial r ights of similar natur e, or any data,
documentation, dr awing or specification r elating to any patent, in-
vention, model, design, secr et for mula or pr ocess, of which the other
enter pr ise is the owner or in r espect of which the other enter pr ise has
exclusive r ights; or
(h) ninety per cent or more of the raw materials and consumables required
for the manufactur e or pr ocessing of goods or ar ticles car r ied out by
one enter pr ise, ar e supplied by the other enter pr ise, or by per sons
specified by the other enter pr ise, and the pr ices and other conditions
r elating to the supply ar e influenced by such other enter pr ise; or
(i) the goods or ar ticles manufactur ed or pr ocessed by one enter pr ise,
ar e sold to the other enter pr ise or to per sons specified by the other
enter pr ise, and the pr ices and other conditions r elating ther eto ar e
influenced by such other enter pr ise; or
(j) wher e one enter pr ise is contr olled by an individual, the other enter -
pr ise is also contr olled by such individual or his r elative or jointly by
such individual and r elative of such individual; or
(k) wher e one enter pr ise is contr olled by a Hindu undivided family, the
other enter pr ise is contr olled by a member of such Hindu undivided
family or by a r elative of a member of such Hindu undivided family
or jointly by such member and his r elative; or
(l) wher e one enter pr ise is a fir m, association of per sons or body of
individuals, the other enter pr ise holds not less than ten per cent
inter est in such fir m, association of per sons or body of individuals; or
(m) ther e exists between the two enter pr ises, any r elationship of mutual
inter est, as may be pr escr ibed.
Meaning of international transaction.
92B. (1) For the pur poses of this section and sections 92, 92C, 92D and 92E,
inter national tr ansaction means a tr ansaction between two or mor e
associated enter pr ises, either or both of whom ar e non-r esidents, in the natur e
of pur chase, sale or lease of tangible or intangible pr oper ty, or pr ovision of
ser vices, or lending or bor r owing money, or any other tr ansaction having a
bear ing on the pr ofits, income, losses or assets of such enter pr ises, and shall
include a mutual agr eement or ar r angement between two or mor e associated
enter pr ises for the allocation or appor tionment of, or any contr ibution to, any
cost or expense incur r ed or to be incur r ed in connection with a benefit, ser vice
or facility pr ovided or to be pr ovided to any one or mor e of such enter pr ises.
1.525 CH. X - SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX S. 92B
(2) A tr ansaction enter ed into by an enter pr ise with a per son other than an
associated enter pr ise shall, for the pur poses of sub-section (1), be deemed to be
a tr ansaction enter ed into between two associated enter pr ises, if ther e exists a
pr ior agr eement in r elation to the r elevant tr ansaction between such other
per son and the associated enter pr ise, or the ter ms of the r elevant tr ansaction ar e
determined in substance between such other person and the associated enterprise.
Computation of arms length price.
92C. (1) The ar ms length pr ice in r elation to an inter national tr ansaction shall
be determined by any of the following methods, being the most appropriate
method, having r egar d to the natur e of tr ansaction or class of tr ansaction or class
of associated per sons or functions per for med by such per sons or such other
r elevant factor s as the Boar d may pr escr ibe
15
, namely :
(a) compar able uncontr olled pr ice method;
(b) r esale pr ice method;
(c) cost plus method;
(d) pr ofit split method;
(e) tr ansactional net mar gin method;
(f) such other method as may be pr escr ibed
15
by the Boar d.
(2) The most appr opr iate method r efer r ed to in sub-section (1) shall be applied,
for deter mination of ar ms length pr ice, in the manner as may be pr escr ibed
16
:
17
[Provided that wher e mor e than one pr ice is deter mined by the most appr opr i-
ate method, the ar ms length pr ice shall be taken to be the ar ithmetical mean of
such pr ices, or , at the option of the assessee, a pr ice which may var y fr om the
ar ithmetical mean by an amount not exceeding five per cent of such ar ithmetical
mean.]
(3) Wher e dur ing the cour se of any pr oceeding for the assessment of income, the
Assessing Officer is, on the basis of mater ial or infor mation or document in his
possession, of the opinion that
(a) the pr ice char ged or paid in an inter national tr ansaction has not been
deter mined in accor dance with sub-sections (1) and (2); or
(b) any infor mation and document r elating to an inter national tr ansac-
tion have not been kept and maintained by the assessee in accor dance
with the pr ovisions contained in sub-section (1) of section 92D and the
r ules made in this behalf; or
(c) the infor mation or data used in computation of the ar ms length pr ice
is not r eliable or cor r ect; or
(d) the assessee has failed to fur nish, within the specified time, any
infor mation or document which he was r equir ed to fur nish by a
notice issued under sub-section (3) of section 92D,
S. 92C I.T. ACT, 1961 1.526
15. See r ule 10B.
16. See r ule 10C.
as under :
Provided that wher e mor e than one pr ice may be deter mined by the most appr opr iate
method, the ar ms length pr ice shall be taken to be the ar ithmetical mean of such pr ices.
the Assessing Officer may pr oceed to deter mine the ar ms length pr ice in r elation
to the said inter national tr ansaction in accor dance with sub-sections (1) and (2),
on the basis of such mater ial or infor mation or document available with him:
Provided that an oppor tunity shall be given by the Assessing Officer by ser ving
a notice calling upon the assessee to show cause, on a date and time to be
specified in the notice, why the ar ms length pr ice should not be so deter mined
on the basis of mater ial or infor mation or document in the possession of the
Assessing Officer .
(4) Wher e an ar ms length pr ice is deter mined by the Assessing Officer under sub-
section (3), the Assessing Officer may compute the total income of the assessee
having r egar d to the ar ms length pr ice so deter mined :
Provided that no deduction under section 10A
18
[or section 10AA] or section 10B
or under Chapter VI-A shall be allowed in r espect of the amount of income by
which the total income of the assessee is enhanced after computation of income
under this sub-section :
Provided further that wher e the total income of an associated enter pr ise is
computed under this sub-section on deter mination of the ar ms length pr ice paid
to another associated enter pr ise fr om which tax has been deducted
19
[or was
deductible] under the pr ovisions of Chapter XVIIB, the income of the other
associated enter pr ise shall not be r ecomputed by r eason of such deter mination
of ar ms length pr ice in the case of the fir st mentioned enter pr ise.
20
[Reference to Transfer Pricing Officer.
92CA. (1) Wher e any per son, being the assessee, has enter ed into an inter na-
tional tr ansaction in any pr evious year , and the Assessing Officer
consider s it necessar y or expedient so to do, he may, with the pr evious appr oval
of the Commissioner , r efer the computation of the ar ms length pr ice in r elation
to the said inter national tr ansaction under section 92C to the Tr ansfer Pr icing
Officer .
(2) Wher e a r efer ence is made under sub-section (1), the Tr ansfer Pr icing Officer
shall ser ve a notice on the assessee r equir ing him to pr oduce or cause to be
pr oduced on a date to be specified ther ein, any evidence on which the assessee
may r ely in suppor t of the computation made by him of the ar ms length pr ice
in r elation to the inter national tr ansaction r efer r ed to in sub-section (1).
(3) On the date specified in the notice under sub-section (2), or as soon ther eafter
as may be, after hear ing such evidence as the assessee may pr oduce, including
any infor mation or documents r efer r ed to in sub-section (3) of section 92D and
after consider ing such evidence as the Tr ansfer Pr icing Officer may r equir e on
any specified points and after taking into account all r elevant mater ials which he
has gather ed, the Tr ansfer Pr icing Officer shall, by or der in wr iting, deter mine
the ar ms length pr ice in r elation to the inter national tr ansaction in accor dance
with sub-section (3) of section 92C and send a copy of his or der to the Assessing
Officer and to the assessee.
1.527 CH. X - SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX S. 92CA
21
[(3A) Wher e a r efer ence was made under sub-section (1) befor e the 1st day of
June, 2007 but the or der under sub-section (3) has not been made by the Tr ansfer
Pr icing Officer befor e the said date, or a r efer ence under sub-section (1) is made
on or after the 1st day of June, 2007, an or der under sub-section (3) may be made
at any time befor e sixty days pr ior to the date on which the per iod of limitation
r efer r ed to in section 153, or as the case may be, in section 153B for making the
or der of assessment or r eassessment or r ecomputation or fr esh assessment, as
the case may be, expir es.]
22
[(4) On r eceipt of the or der under sub-section (3), the Assessing Officer shall
pr oceed to compute the total income of the assessee under sub-section (4) of
section 92C in confor mity with the ar ms length pr ice as so deter mined by the
Tr ansfer Pr icing Officer .]
(5) With a view to r ectifying any mistake appar ent fr om the r ecor d, the Tr ansfer
Pr icing Officer may amend any or der passed by him under sub-section (3), and
the pr ovisions of section 154 shall, so far as may be, apply accor dingly.
(6) Wher e any amendment is made by the Tr ansfer Pr icing Officer under sub-
section (5), he shall send a copy of his or der to the Assessing Officer who shall
ther eafter pr oceed to amend the or der of assessment in confor mity with such
or der of the Tr ansfer Pr icing Officer .
(7) The Tr ansfer Pr icing Officer may, for the pur poses of deter mining the ar ms
length pr ice under this section, exer cise all or any of the power s specified in
clauses (a) to (d) of sub-section (1) of section 131 or sub-section (6) of section 133.
Explan ation .For the pur poses of this section, Tr ansfer Pr icing Officer means
a Joint Commissioner or Deputy Commissioner or Assistant Commissioner
author ised by the Boar d
23
to per for m all or any of the functions of an Assessing
Officer specified in sections 92C and 92D in r espect of any per son or class of
per sons.]
Maintenance and keeping of information and document by persons entering into
an international transaction.
92D. (1) Ever y per son who has enter ed into an inter national tr ansaction shall
keep and maintain such infor mation and document in r espect ther eof, as
may be pr escr ibed
24
.
(2) Without pr ejudice to the pr ovisions contained in sub-section (1), the Boar d
may pr escr ibe the per iod for which the infor mation and document shall be kept
and maintained under that sub-section.
(3) The Assessing Officer or the Commissioner (Appeals) may, in the cour se of
any pr oceeding under this Act, r equir e any per son who has enter ed into an
S. 92D I.T. ACT, 1961 1.528
(4) On r eceipt of the or der under sub-section (3), the Assessing Officer shall pr oceed to
compute the total income of the assessee under sub-section (4) of section 92C having
r egar d to the ar ms length pr ice deter mined under sub-section (3) by the Tr ansfer Pr icing
Officer .
23. For notified subor dinate officer s, see Taxmanns Master Guide to Income-tax Act.
24. See r ule 10D.
inter national tr ansaction to fur nish any infor mation or document in r espect
ther eof, as may be pr escr ibed under sub-section (1), within a per iod of thir ty days
fr om the date of r eceipt of a notice issued in this r egar d :
Provided that the Assessing Officer or the Commissioner (Appeals) may, on an
application made by such per son, extend the per iod of thir ty days by a fur ther
per iod not exceeding thir ty days.
Report from an accountant to be furnished by persons entering into international
transaction.
92E. Ever y per son who has enter ed into an inter national tr ansaction dur ing a
pr evious year shall obtain a r epor t fr om an accountant and fur nish such
r epor t on or befor e the specified date in the pr escr ibed for m duly signed and
ver ified in the pr escr ibed manner by such accountant and setting for th such
par ticular s as may be pr escr ibed
25
.
Definitions of certain terms relevant to computation of arms length price, etc.
92F. In sections 92, 92A, 92B, 92C, 92D and 92E, unless the context other wise
r equir es,
(i) accountant shall have the same meaning as in the Explan ation
(ii) ar ms length pr ice means a pr ice which is applied or pr oposed to be
applied in a tr ansaction between per sons other than associated
enter pr ises, in uncontr olled conditions;
(iii) enter pr ise means a per son (including a per manent establishment of
such per son) who is, or has been, or is pr oposed to be, engaged in any
activity, r elating to the pr oduction, stor age, supply, distr ibution,
acquisition or contr ol of ar ticles or goods, or know-how, patents,
copyr ights, tr ade-mar ks, licences, fr anchises or any other business or
commer cial r ights of similar natur e, or any data, documentation,
dr awing or specification r elating to any patent, invention, model,
design, secr et for mula or pr ocess, of which the other enter pr ise is the
owner or in r espect of which the other enter pr ise has exclusive r ights,
or the pr ovision of ser vices of any kind,
26
[or in car r ying out any wor k
in pur suance of a contr act,] or in investment, or pr oviding loan or in
the business of acquir ing, holding, under wr iting or dealing with
shar es, debentur es or other secur ities of any other body cor por ate,
whether such activity or business is car r ied on, dir ectly or thr ough
one or mor e of its units or divisions or subsidiar ies, or whether such
unit or division or subsidiar y is located at the same place wher e the
enter pr ise is located or at a differ ent place or places;
26
[(iiia) per manent establishment, r efer r ed to in clause (iii), includes a fixed
place of business thr ough which the business of the enter pr ise is
wholly or par tly car r ied on;]
1.529 CH. X - SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX S. 92F
25. See r ule 10E and For m 3CEB.
27
[(iv) specified date shall have the same meaning as assigned to due date
in Explan ation 2 below sub-section (1) of section 139;]
(v) tr ansaction includes an ar r angement, under standing or action in
concer t,
(A) whether or not such ar r angement, under standing or action is
for mal or in wr iting; or
(B) whether or not such ar r angement, under standing or action is
intended to be enfor ceable by legal pr oceeding.]
Avoidance of income-tax by transactions resulting in transfer of income to non-
residents.
28
93. (1) Wher e ther e is a tr ansfer of assets by vir tue or in consequence wher eof,
either alone or in conjunction with associated oper ations, any income
becomes payable to a non-r esident, the following pr ovisions shall apply
(a) wher e any per son has, by means of
29
any such tr ansfer , either alone
or in conjunction with associated oper ations, acquir ed any r ights by
vir tue of which he has, within the meaning of this section, power to
enjoy, whether for thwith or in the futur e, any income of a non-
r esident per son which, if it wer e income of the fir st-mentioned
person, would be chargeable to income-tax, that income shall, whether
it would or would not have been char geable to income-tax apar t fr om
the pr ovisions of this section, be deemed to be income of the fir st-
mentioned per son for all the pur poses of this Act;
(b) wher e, whether befor e or after any such tr ansfer , any such fir st-
mentioned per son r eceives or is entitled to r eceive any capital sum the
payment wher eof is in any way connected with the tr ansfer or any
associated oper ations, then any income which, by vir tue or in conse-
quence of the tr ansfer , either alone or in conjunction with associated
oper ations, has become the income of a non-r esident shall, whether
it would or would not have been char geable to income-tax apar t fr om
the pr ovisions of this section, be deemed to be the income of the fir st-
mentioned per son for all the pur poses of this Act.
Explan ation .The pr ovisions of this sub-section shall apply also in r elation to
tr ansfer s of assets and associated oper ations car r ied out befor e the commence-
ment of this Act.
(2) Wher e any per son has been char ged to income-tax on any income deemed to
be his under the pr ovisions of this section and that income is subsequently
r eceived by him, whether as income or in any other for m, it shall not again be
deemed to for m par t of his income for the pur poses of this Act.
S. 93 I.T. ACT, 1961 1.530
27. Substituted by the Finance Act, 2002, w.e.f. 1-4-2002. Pr ior to its substitution, clause (iv)
r ead as under :
(iv ) specified date means,
(a) wher e the assessee is a company, the 31st day of October of the r elevant
assessment year ;
(b) in any other case, the 31st day of July of the r elevant assessment year ;
29. For the meaning of the ter m/ expr ession by means of and pur pose, see Taxmanns
(3) The pr ovisions of this section shall not apply if the fir st-mentioned per son in
sub-section (1) shows to the satisfaction of the
30
[Assessing] Officer that
(a) neither the tr ansfer nor any associated oper ation had for its pur pose
31
or for one of its pur poses the avoidance of liability to taxation; or
(b) the tr ansfer and all associated oper ations wer e bon a fide commer cial
tr ansactions and wer e not designed for the pur pose of avoiding
liability to taxation.
(a) r efer ences to assets r epr esenting any assets, income or accumula-
tions of income include r efer ences to shar es in or obligation of any
company to which, or obligation of any other per son to whom, those
assets, that income or those accumulations ar e or have been tr ans-
fer r ed;
(b) any body cor por ate incor por ated outside India shall be tr eated as if
it wer e a non-r esident;
(c) a per son shall be deemed to have power to enjoy the income of a non-
r esident if
(i) the income is in fact so dealt with by any per son as to be
calculated at some point of time and, whether in the for m of
income or not, to enur e for the benefit of the fir st-mentioned
per son in sub-section (1), or
(ii) the r eceipt or accr ual of the income oper ates to incr ease the value
to such fir st-mentioned per son of any assets held by him or for his
benefit, or
(iii) such fir st-mentioned per son r eceives or is entitled to r eceive at
any time any benefit pr ovided or to be pr ovided out of that
income or out of moneys which ar e or will be available for the
pur pose by r eason of the effect or successive effects of the
associated oper ations on that income and assets which r epr esent
that income, or
(iv) such fir st-mentioned per son has power by means of the exer cise
of any power of appointment or power of r evocation or other wise
to obtain for himself, whether with or without the consent of any
other per son, the beneficial enjoyment of the income, or
(v) such fir st-mentioned per son is able, in any manner whatsoever
and whether dir ectly or indir ectly, to contr ol the application of
the income;
(d) in deter mining whether a per son has power to enjoy income, r egar d
shall be had to the substantial r esult and effect of the tr ansfer and any
associated oper ations, and all benefits which may at any time accr ue
1-4-1988.
31. For the meaning of the ter m/ expr ession by means of and pur pose, see Taxmanns
to such per son as a r esult of the tr ansfer and any associated oper a-
tions shall be taken into account ir r espective of the natur e or for m of
the benefits.
(4) (a) Assets includes pr oper ty or r ights of any kind and tr ansfer in r elation
to r ights includes the cr eation of those r ights ;
(b) associated oper ation, in r elation to any tr ansfer , means an oper ation of any
kind effected by any per son in r elation to
(i) any of the assets tr ansfer r ed, or
(ii) any assets r epr esenting, whether dir ectly or indir ectly, any of the
assets tr ansfer r ed, or
(iii) the income ar ising fr om any such assets, or
(iv) any assets r epr esenting, whether dir ectly or indir ectly, the accumu-
lations of income ar ising fr om any such assets ;
(c) benefit includes a payment of any kind ;
(d) capital sum means
(i) any sum paid or payable by way of a loan or r epayment of a loan ; and
(ii) any other sum paid or payable other wise than as income, being a sum
which is not paid or payable for full consider ation in money or
moneys wor th.
Avoidance of tax by certain transactions in securities.
32
94. (1) Wher e the owner of any secur ities (in this sub-section and in sub-
section (2) r efer r ed to as the owner ) sells or tr ansfer s those secur ities, and
buys back or r eacquir es the secur ities, then, if the r esult of the tr ansaction is that
any inter est becoming payable in r espect of the secur ities is r eceivable other wise
than by the owner , the inter est payable as afor esaid shall, whether it would or
would not have been char geable to income-tax apar t fr om the pr ovisions of this
sub-section, be deemed, for all the pur poses of this Act, to be the income of the
owner and not to be the income of any other per son.
Explan ation .The r efer ences in this sub-section to buying back or r eacquir ing
the secur ities shall be deemed to include r efer ences to buying or acquir ing
similar secur ities, so, however , that wher e similar secur ities ar e bought or
acquir ed, the owner shall be under no gr eater liability to income-tax than he
would have been under if the or iginal secur ities had been bought back or
r eacquir ed.
(2) Wher e any per son has had at any time dur ing any pr evious year any beneficial
inter est in any secur ities, and the r esult of any tr ansaction r elating to such
secur ities or the income ther eof is that, in r espect of such secur ities within such
year , either no income is r eceived by him or the income r eceived by him is less
than the sum to which the income would have amounted if the income fr om such
secur ities had accr ued fr om day to day and been appor tioned accor dingly, then
the income fr om such secur ities for such year shall be deemed to be the income
of such per son.
S. 94 I.T. ACT, 1961 1.532
(3) The pr ovisions of sub-section (1) or sub-section (2) shall not apply if the owner ,
or the per son who has had a beneficial inter est in the secur ities, as the case may
be, pr oves to the satisfaction of the
33
[Assessing] Officer
(a) that ther e has been no avoidance of income-tax, or
(b) that the avoidance of income-tax was exceptional and not systematic
and that ther e was not in his case in any of the thr ee pr eceding year s
any avoidance of income-tax by a tr ansaction of the natur e r efer r ed
to in sub-section (1) or sub-section (2).
(4) Wher e any per son car r ying on a business which consists wholly or par tly in
dealing in secur ities, buys or acquir es any secur ities and sells back or r etr ansfer s
the secur ities, then, if the r esult of the tr ansaction is that inter est becoming
payable in r espect of the secur ities is r eceivable by him but is not deemed to be
his income by r eason of the pr ovisions contained in sub-section (1), no account
shall be taken of the tr ansaction in computing for any of the pur poses of this Act
the pr ofits ar ising fr om or loss sustained in the business.
(5) Sub-section (4) shall have effect, subject to any necessar y modifications, as
if r efer ences to selling back or r etr ansfer r ing the secur ities included r efer ences
to selling or tr ansfer r ing similar secur ities.
(6) The
33
[Assessing] Officer may, by notice in wr iting, r equir e any per son to
fur nish him within such time as he may dir ect (not being less than twenty-eight
days), in r espect of all secur ities of which such per son was the owner or in which
he had a beneficial inter est at any time dur ing the per iod specified in the notice,
such par ticular s as he consider s necessar y for the pur poses of this section and
for the pur pose of discover ing whether income-tax has been bor ne in r espect of
the inter est on all those secur ities.
34-35
[(7) Wher e
(a) any per son buys or acquir es any secur ities or unit within a per iod of
thr ee months pr ior to the r ecor d date;
36
[(b) such per son sells or tr ansfer s
(i) such secur ities within a per iod of thr ee months after such date;
or
(ii) such unit within a per iod of nine months after such date;]
(c) the dividend or income on such secur ities or unit r eceived or r eceiv-
able by such per son is exempt,
then, the loss, if any, ar ising to him on account of such pur chase and sale of
secur ities or unit, to the extent such loss does not exceed the amount of dividend
1-4-1988.
34-35. Inser ted by the Finance Act, 2001, w.e.f. 1-4-2002.
clause (b) r ead as under :
(b) such per son sells or tr ansfer s such secur ities or unit within a per iod of thr ee months
after such date;
or income r eceived or r eceivable on such secur ities or unit, shall be ignor ed for
the pur poses of computing his income char geable to tax.]
37
[(8) Wher e
(a) any per son buys or acquir es any units within a per iod of thr ee months
pr ior to the r ecor d date;
(b) such per son is allotted additional units without any payment on the
basis of holding of such units on such date;
(c) such per son sells or tr ansfer s all or any of the units r efer r ed to in
clause (a) within a per iod of nine months after such date, while
continuing to hold all or any of the additional units r efer r ed to in
clause (b),
then, the loss, if any, ar ising to him on account of such pur chase and sale of all
or any of such units shall be ignor ed for the pur poses of computing his income
char geable to tax and notwithstanding anything contained in any other pr ovision
of this Act, the amount of loss so ignor ed shall be deemed to be the cost of
pur chase or acquisition of such additional units r efer r ed to in clause (b) as ar e
held by him on the date of such sale or tr ansfer .]
(a) inter est includes a dividend ;
38
[(aa) r ecor d date means such date as may be fixed by
(i) a company for the pur poses of entitlement of the holder of the
secur ities to r eceive dividend; or
(ii) a Mutual Fund or the Administr ator of the specified under taking
or the specified company as r efer r ed to in the Explan ation to
clause (35) of section 10, for the pur poses of entitlement of the
holder of the units to r eceive income, or additional unit without
any consider ation, as the case may be;]
(b) secur ities includes stocks and shar es ;
(c) secur ities shall be deemed to be similar if they entitle their holder s to
the same r ights against the same per sons as to capital and inter est and
the same r emedies for the enfor cement of those r ights, notwithstand-
ing any differ ence in the total nominal amounts of the r espective
secur ities or in the for m in which they ar e held or in the manner in
which they can be tr ansfer r ed;
39
[(d) unit shall have the meaning assigned to it in clause (b) of the
Explan ation to section 115AB.]
38. Substituted, ibid. Pr ior to its substitution, clause (aa), as inser ted by the Finance Act, 2001,
(aa) r ecor d date means such date as may be fixed by a company or a Mutual Fund or
the Unit Tr ust of India for the pur poses of entitlement of the holder of the secur ities
or the unit-holder , to r eceive dividend or income, as the case may be;
S. 94 I.T. ACT, 1961 1.534
1.535 CH. XII - DETERMINATION OF TAX IN CERTAIN SPECIAL CASES S. 110
CHAPTER XI
ADDITIONAL INCOME-TAX ON UNDISTRIBUTED PROFITS
[Ch apter XI om itted by th e Fin an ce Act, 1987, w.e.f. 1-4-1988. Wh ile section s 95 to
103 were omitted by th e Fin an ce Act, 1965, w.e.f. 1-4-1965, section s 104 to 109 were
om itted by th e Fin an ce Act, 1987, w.e.f. 1-4-1988.]
Income-tax on undistributed income of certain companies.
104.
40
Special provisions for certain companies.
105.
41
Period of limitation for making orders under section 104.
106.
42
Approval of Inspecting Assistant Commissioner for orders under section 104.
107.
43
Reduction of minimum distribution in certain cases.
107A.
44
Savings for company in which public are substantially interested.
108. [Om itted by th e Fin an ce Act, 1987, w.e.f. 1-4-1988.]
Distributable income, investment company and statutory percentage
defined.
109.
45
CHAPTER XI I
DETERMINATION OF TAX IN CERTAIN SPECIAL CASES
46
[Determination of tax where total income includes income on which no tax is
payable.
110. Wher e ther e is included in the total income of an assessee any income on
which no income-tax is payable under the pr ovisions of this Act, the
40. Omitted section 104 was ear lier amended by the Finance Act, 1964, w.e.f. 1-4-1964, the
Finance Act, 1965, w.e.f. 1-4-1965, the Finance Act, 1966, w.e.f. 1-4-1966, the Finance
(No. 2) Act, 1967, w.e.f. 1-4-1968, the Finance Act, 1973, w.e.f. 1-4-1974, the Taxation Laws
(Amendment) Act, 1975, w.e.f. 1-4-1976 and the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
41. Omitted section 105 was ear lier amended by the Finance Act, 1973, w.e.f. 1-4-1974.
42. Omitted section 106 was ear lier amended by the Finance Act, 1964, w.e.f. 1-4-1964 and
substituted by the Finance Act, 1975, w.e.f. 1-4-1975.
43. Omitted section 107 was ear lier amended by the Finance Act, 1964, w.e.f. 1-4-1964.
44. Omitted section 107A was ear lier amended by the Finance (No. 2) Act, 1977, w.e.f.
10-7-1978.
45. Omitted section 109 was ear lier amended by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962,
the Finance Act, 1964, w.e.f. 1-4-1964, the Finance Act, 1965, w.e.f. 1-4-1965, the Finance
Act, 1966, w.e.f. 1-4-1966, the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968, the Finance Act,
1968, w.e.f. 1-4-1969, the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976, the
Finance (No. 2) Act, 1977, w.e.f. 1-4-1978 and the Finance Act, 1983, w.e.f. 1-4-1984.
assessee shall be entitled to a deduction, fr om the amount of income-tax with
which he is char geable on his total income, of an amount equal to the income-
tax calculated at the aver age r ate of income-tax on the amount on which no
income-tax is payable.]
Tax on accumulated balance of recognised provident fund.
111. (1) Wher e the accumulated balance due to an employee par ticipating in a
r ecognised pr ovident fund is included in his total income, owing to the
pr ovisions of r ule 8 of Par t A of the Four th Schedule not being applicable, the
47
[Assessing] Officer shall calculate the total of the var ious sums of
48
[tax] in
accor dance with the pr ovisions of sub-r ule (1) of r ule 9 ther eof.
(2) Wher e the accumulated balance due to an employee par ticipating in a
r ecognised pr ovident fund which is not included in his total income under the
pr ovisions of r ule 8 of Par t A of the Four th Schedule becomes payable, super -tax
shall be calculated in the manner pr ovided in sub-r ule (2) of r ule 9 ther eof.
49
[Tax on short term capital gains in certain cases.
111A. (1) Wher e the total income of an assessee includes any income char geable
under the head Capital gains, ar ising fr om the tr ansfer of a shor t-ter m
capital asset, being an equity shar e in a company or a unit of an equity or iented
fund and
(a) the tr ansaction of sale of such equity shar e or unit is enter ed into on
or after the date on which Chapter VII of the Finance (No. 2) Act, 2004
comes into for ce; and
(b) such tr ansaction is char geable to secur ities tr ansaction tax under that
Chapter ,
the tax payable by the assessee on the total income shall be the aggr egate of
(i) the amount of income-tax calculated on such shor t-ter m capital gains
at the r ate of
49a
[ten ] per cent; and
(ii) the amount of income-tax payable on the balance amount of the total
income as if such balance amount were the total income of the assessee:
Provided that in the case of an individual or a Hindu undivided family, being a
r esident, wher e the total income as r educed by such shor t-ter m capital gains is
below the maximum amount which is not char geable to income-tax, then, such
shor t-ter m capital gains shall be r educed by the amount by which the total
income as so r educed falls shor t of the maximum amount which is not char ge-
able to income-tax and the tax on the balance of such shor t-ter m capital gains
shall be computed at the r ate of ten per cent.
(2) Wher e the gr oss total income of an assessee includes any shor t ter m capital
gains r efer r ed to in sub-section (1), the deduction under Chapter VI-A shall be
allowed fr om the gr oss total income as r educed by such capital gains.
S. 111A I.T. ACT, 1961 1.536
1-4-1988.
48. Substituted for income-tax and super tax by the Finance Act, 1965, w.e.f. 1-4-1965.
49a. Wor d fifteen shall be substituted for ten by the Finance Act, 2008, w.e.f. 1-4-2009.
(3) Wher e the total income of an assessee includes any shor t ter m capital gains
r efer r ed to in sub-section (1), the r ebate under section 88 shall be allowed fr om
the income-tax on the total income as r educed by such capital gains.
Explan ation .For the pur poses of this section, the expr ession equity or iented
fund shall have the meaning assigned to it in the Explan ation to clause (38) of
section 10.]
50
[Tax on long-term capital gains.
51
112. (1) Wher e the total income of an assessee includes any income, ar ising
fr om the tr ansfer of a long-ter m capital asset, which is char geable under
the head Capital gains, the tax payable by the assessee on the total income shall
be the aggr egate of,
(a) in the case of an individual or a Hindu undivided family,
52
[being a
r esident,]
(i) the amount of income-tax payable on the total income as r educed
by the amount of such long-ter m capital gains, had the total
income as so r educed been his total income ; and
(ii) the amount of income-tax calculated on such long-ter m capital
gains at the r ate of twenty per cent :
Provided that wher e the total income as r educed by such long-ter m
capital gains is below the maximum amount which is not char geable
to income-tax, then, such long-ter m capital gains shall be r educed by
the amount by which the total income as so r educed falls shor t of the
maximum amount which is not char geable to income-tax and the tax
on the balance of such long-ter m capital gains shall be computed at
the r ate of twenty per cent ;
(b) in the case of a
52
[domestic] company,
income as so r educed been its total income ; and
gains at the r ate of
53
[twenty] per cent :
50. Inser ted by the Finance Act, 1992, w.e.f. 1-4-1993. Ear lier section 112 was omitted by the
Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 and r eplaced by section 80S. Befor e its omission,
the section was fir st amended by the Finance Act, 1965, w.e.f. 1-4-1965 and then by the
Income-tax Act.
53. Substituted for thir ty by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997. Ear lier thir ty was
substituted for for ty by the Finance Act, 1994, w.e.f. 1-4-1995.
S. 112 I.T. ACT, 1961 1.538
54
[***]
55
[(c) in the case of a non-r esident (not being a company) or a for eign
company,
income as so r educed been its total income ; and
gains at the r ate of twenty per cent ;]
56
[(d)] in any other case
57
[of a r esident],
by the amount of long-ter m capital gains, had the total income as
so r educed been its total income ; and
gains at the r ate of
58
[twenty] per cent.
Explan ation .
59
[***]
60
[Provided that wher e the tax payable in r espect of any income ar ising fr om the
tr ansfer of a long-ter m capital asset, being listed secur ities
61
[or unit]
62
[or zer o
coupon bond], exceeds ten per cent of the amount of capital gains befor e giving
54. The pr oviso omitted by the Finance Act, 1995, w.e.f. 1-4-1996. Pr ior to its omission the
pr oviso, as amended by the Finance Act,1994, w.e.f. 1-4-1995, r ead as under :
Provided that in r elation to long-ter m capital gains ar ising to a ventur e capital company
fr om the tr ansfer of equity shar es of ventur e capital under takings, the pr ovisions of sub-
clause (ii) shall have effect as if for the wor ds thir ty per cent, the wor ds twenty per cent
had been substituted ;
56. Reletter ed, ibid.
58. Substituted for thir ty by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
59. Explan ation omitted by the Finance Act, 1995, w.e.f. 1-4-1996. Pr ior to its omission, the
(a) ventur e capital company means such company as is engaged in pr oviding finance
to ventur e capital under takings mainly by way of acquir ing equity shar es of such
under takings or , if the cir cumstances so r equir e, by way of advancing loans to such
under takings, and is appr oved by the Centr al Gover nment in this behalf ;
(b) ventur e capital under taking means such company as the pr escr ibed author ity
may, having r egar d to the following factor s, appr ove for the pur poses of this sub-
section, namely :
(1) the total investment in the company does not exceed ten cr or e r upees or such
other higher amount as may be pr escr ibed ;
(2) t he company does not have adequat e financial r esour ces t o under t ake
pr ojects for which it is other wise pr ofessionally or technically equipped ; and
(3) the company seeks to employ any technology which will r esult in significant
impr ovement over the existing technology in India in any field and the
investment in such technology involves high r isk.
effect to the pr ovisions of the second pr oviso to section 48, then, such excess shall
be ignor ed for the pur pose of computing the tax payable by the assessee.
63
[Explan ation .For the pur poses of this sub-section,
(a) listed secur ities means the secur ities
(i) as defined in clause (h ) of section 2
64
of the Secur ities Contr acts
(Regulation) Act, 1956 (32 of 1956) ; and
(ii) listed in any r ecognised stock exchange in India;
(b) unit shall have the meaning assigned to it in clause (b) of Explan ation
to section 115AB.]]
(2) Wher e the gr oss total income of an assessee includes any income ar ising fr om
the tr ansfer of a long-ter m capital asset, the gr oss total income shall be r educed
by the amount of such income and the deduction under Chapter VI-A shall be
allowed as if the gr oss total income as so r educed wer e the gr oss total income of
the assessee.
(3) Wher e the total income of an assessee includes any income ar ising fr om the
tr ansfer of a long-ter m capital asset, the total income shall be r educed by the
amount of such income and the r ebate under section 88 shall be allowed fr om
the income-tax on the total income as so r educed.
Tax on interest on National Savings Certificates (First Issue).
112A. [Om itted by th e Fin an ce Act, 1988, w.e.f. 1-4-1989. Origin al section 112A
was in serted by th e Fin an ce (No. 2) Act, 1965, w.e.f. 11-9-1965 an d later
on am en ded by th e Fin an ce Act, 1966, w.e.f. 1-4-1966, Fin an ce (No. 2) Act, 1967,
w.e.f. 1-4-1968, Taxation Laws (Amen dmen t) Act, 1970, w.r.e.f. 1-4-1968/ 1969 an d
Fin an ce Act, 1973, w.r.e.f. 1-4-1972.]
65
[Tax in the case of block assessment of search cases.
113. The total undisclosed income of the block per iod, deter mined under
section 158BC, shall be char geable to tax at the r ate of sixty per cent:]
66
[Provided that the tax char geable under this section shall be incr eased by a
sur char ge, if any, levied by any Centr al Act and applicable in the assessment
year r elevant to the pr evious year in which the sear ch is initiated under section
132 or the r equisition is made under section 132A.]
Explan ation .For the pur poses of this sub-section, listed secur ities means the secur ities
(a) as defined in clause (h ) of section 2 of the Secur ities Contr acts (Regulation) Act,
1956 (32 of 1956); and
(b) listed in any r ecognised stock exchange in India.
64. For definition of secur ities, see footnote 7 on p. 1.26 an te.
65. Inser ted by the Finance Act, 1995, w.e.f. 1-7-1995. Ear lier section 113 dealing with Tax in
the case of non-r esident was omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
Tax on capital gains in cases of assessees other than companies.
114. [Om itted by th e Fin an ce (No. 2) Act, 1967, w.e.f. 1-4-1968 an d rein troduced
with material modification s in section 80T. Section 114 was substituted first
by th e Fin an ce (No. 2) Act, 1962, w.e.f. 1-4-1962 an d later on am en ded by th e
Fin an ce Act, 1964, w.e.f. 1-4-1964, th e Fin an ce Act, 1965, w.e.f. 1-4-1965, th e
Fin an ce (No. 2) Act, 1965, w.e.f. 11-9-1965 an d th e Fin an ce Act, 1966, w.e.f.
1-4-1966.]
Tax on capital gains in case of companies.
115.
67
68
[Tax on dividends, royalty and technical service fees in the case of foreign
companies.
69
115A.
70
[(1) Wher e the total income of
(a) a non-r esident (not being a company) or of a for eign company,
includes any income by way of
(i) dividends
71
[other than dividends r efer r ed to in section 115-O]

; or
(ii) inter est r eceived fr om Gover nment or an Indian concer n on
monies bor r owed or debt incur r ed by Gover nment or the Indian
concer n in for eign cur r ency ; or
(iii) income r eceived in r espect of units, pur chased in for eign cur -
r ency, of a Mutual Fund specified under clause (23D) of section
10 or of the Unit Tr ust of India,
the income-tax payable shall be aggr egate of
(A) the amount of income-tax calculated on the amount of income
by way of dividends
71
[other than dividends r efer r ed to in
section 115-O], if any, included in the total income, at the r ate of
twenty per cent ;
(B) the amount of income-tax calculated on the amount of income by
way of inter est r efer r ed to in sub-clause (ii), if any, included in the
total income, at the r ate of twenty per cent ;
S. 115A I.T. ACT, 1961 1.540
67. Omitted section 115 was amended by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962, the
Finance Act, 1964, w.e.f. 1-4-1964, the Finance Act, 1965, w.e.f. 1-4-1965, the Finance Act,
1966, w.e.f. 1-4-1966, the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972, the Finance (No. 2) Act,
1974, w.e.f. 1-4-1975, the Finance Act, 1976, w.e.f. 1-4-1977 and the Finance Act, 1985, w.e.f.
1-4-1986.
was amended by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977/ 1-4-1978, the Finance Act,
1983, w.e.f. 1-6-1983, the Finance Act, 1986, w.e.f. 1-4-1987, the Dir ect Tax Laws (Amend-
ment) Act, 1989, w.e.f. 1-4-1989 and the Finance Act, 1992, w.e.f. 1-6-1992.
71. Inser ted by the Finance Act, 2003, w.e.f. 1-4-2004. Ear lier the wor ds other than dividends
r efer r ed to in section 115-O wer e inser ted by the Finance Act, 1997, w.e.f. 1-4-1998 and
later on omitted by the Finance Act, 2002, w.e.f. 1-4-2003.
(C) the amount of income-tax calculated on the income in r espect of
units r efer r ed to in sub-clause (iii), if any, included in the total
income, at the r ate of twenty per cent ; and
(D) the amount of income-tax with which he or it would have been
char geable had his or its total income been r educed by the
amount of income r efer r ed to in sub-clause (i), sub-clause (ii) and
sub-clause (iii) ;
(b)
72
[a non-r esident (not being a company) or a for eign company,
includes any income by way of r oyalty or fees for technical ser vices
other than income r efer r ed to in sub-section (1) of section 44DA]
r eceived fr om Gover nment or an Indian concer n in pur suance of an
agr eement made by the for eign company with Gover nment or the
Indian concer n after the 31st day of Mar ch, 1976, and wher e such
agr eement is with an Indian concer n, the agr eement is appr oved by
the Centr al Gover nment or wher e it r elates to a matter included in the
industr ial policy, for the time being in for ce, of the Gover nment of
India, the agr eement is in accor dance with that policy, then, subject
to the pr ovisions of sub-sections (1A) and (2), the income-tax payable
shall be the aggr egate of,
73
[(A) the amount of income-tax calculated on the income by way of
r oyalty, if any, included in the total income, at the r ate of thir ty per
cent if such r oyalty is r eceived in pur suance of an agr eement
made on or befor e the 31st day of May, 1997 and twenty per cent
wher e such r oyalty is r eceived in pur suance of an agr eement
made after the 31st day of May, 1997
74
[but befor e the 1st day of
June, 2005];
74
[(AA) the amount of income-tax calculated on the income by way of
r oyalty, if any, included in the total income, at the r ate of ten per
cent if such r oyalty is r eceived in pur suance of an agr eement
made on or after the 1st day of June, 2005;]
(B) the amount of income-tax calculated on the income by way of
fees for technical ser vices, if any, included in the total income, at
the r ate of thir ty per cent if such fees for technical ser vices ar e
r eceived in pur suance of an agr eement made on or befor e the
31st day of May, 1997 and twenty per cent wher e such fees for
technical ser vices ar e r eceived in pur suance of an agr eement
made after the 31st day of May, 1997
74
[but befor e the 1st day of
June, 2005] ; and]
1.541 CH. XII - DETERMINATION OF TAX IN CERTAIN SPECIAL CASES S. 115A
72. Substituted for a for eign company, includes any income by way of r oyalty or fees for
technical ser vices by the Finance Act, 2003, w.e.f. 1-4-2004.
73. Substituted by the Finance Act, 1997, w.e.f. 1-4-1998. Pr ior to their substitution, sub-
clauses (A) and (B) r ead as under :
(A) the amount of income-tax calculated on the income by way of r oyalty, if any,
included in the total income, at the r ate of thir ty per cent ;
(B) the amount of income-tax calculated on the income by way of fees for technical
ser vices, if any, included in the total income, at the r ate of thir ty per cent ; and
75
[(BB) the amount of income-tax calculated on the income by way of
fees for technical ser vices, if any, included in the total income, at
the r ate of ten per cent if such fees for technical ser vices ar e
r eceived in pur suance of an agr eement made on or after the 1st
day of June, 2005; and ]
(C) the amount of income-tax with which it would have been char ge-
able had its total income been r educed by the amount of income
by way of r oyalty and fees for technical ser vices.
Explan ation 2 to clause (vii) of sub-section (1) of section 9 ;
(b) for eign cur r ency shall have the same meaning as in the Explan ation
below item (g) of sub-clause (iv) of clause (15) of section 10 ;
(c) r oyalty shall have the same meaning as in Explan ation 2 to clause
(vi) of sub-section (1) of section 9 ;
(d) Unit Tr ust of India means the Unit Tr ust of India established under
the Unit Tr ust of India Act, 1963 (52 of 1963).]
76
[(1A) Wher e the r oyalty r efer r ed to in clause (b) of sub-section (1) is in
consider ation for the tr ansfer of all or any r ights (including the gr anting of a
licence) in r espect of copyr ight in any book to an Indian concer n
77
[or in r espect
of any computer softwar e to a per son r esident in India], the pr ovisions of sub-
section (1) shall apply in r elation to such r oyalty as if the wor ds
78
[
79
[the
agr eement is appr oved by the Centr al Gover nment or wher e it r elates to a
matter ] included in the industr ial policy, for the time being in for ce, of the
Gover nment of India, the agr eement is in accor dance with that policy] occur r ing
in the said clause had been omitted :
Provided that such book is on a subject, the books on which ar e per mitted,
accor ding to the Impor t Tr ade Contr ol Policy of the Gover nment of India for the
per iod commencing fr om the 1st day of Apr il, 1977, and ending with the 31st day
of Mar ch, 1978, to be impor ted into India under an Open Gener al Licence :
80
[Provided further that such computer softwar e is per mitted accor ding to the
Impor t Tr ade Contr ol Policy of the Gover nment of India for the time being in
for ce to be impor ted into India under an Open Gener al Licence.]
81
[Explan ation 1].In this sub-section, Open Gener al Licence means an Open
Gener al Licence issued by the Centr al Gover nment in pur suance of the Impor ts
(Contr ol) Or der , 1955.]
S. 115A I.T. ACT, 1961 1.542
78. Substituted for and appr oved by the Centr al Gover nment by the Finance Act, 1992, w.e.f.
1-6-1992.
79. Substituted for appr oved by the Centr al Gover nment or wher e the agr eement r elates to
a matter by the Finance Act, 1994, w.e.f. 1-4-1995.
81. Renumber ed, ibid.
82
[Explan ation 2.In this sub-section, the expr ession computer softwar e shall
have the meaning assigned to it in clause (b) of the Explan ation to section 80HHE.]
(2) Nothing contained in sub-section (1) shall apply in r elation to any income by
way of r oyalty r eceived by a for eign company fr om an Indian concer n in
pur suance of an agr eement made by it with the Indian concer n after the 31st day
of Mar ch, 1976, if such agr eement is deemed, for the
83
[pur poses of the fir st
pr oviso] to clause (vi) of sub-section (1) of section 9, to have been made befor e
the 1st day of Apr il, 1976; and the pr ovisions of the annual Finance Act for
calculating, char ging, deducting or computing income-tax shall apply in r elation
to such income as if such income had been r eceived in pur suance of an
agr eement made befor e the 1st day of Apr il, 1976.]
84
[(3) No deduction in r espect of any expenditur e or allowance shall be allowed
to the assessee under sections 28 to 44C and section 57 in computing his or its
income r efer r ed to in sub-section (1).
(4) Wher e in the case of an assessee r efer r ed to in sub-section (1),
(a) the gr oss total income consists only of the income r efer r ed to in clause
(a) of that sub-section, no deduction shall be allowed to him or it
under Chapter VI-A;
(b) the gr oss total income includes any income r efer r ed to in clause (a)
of that sub-section, the gr oss total income shall be r educed by the
amount of such income and the deduction under Chapter VI-A shall
be allowed as if the gr oss total income as so r educed wer e the gr oss
total income of the assessee.
(5) It shall not be necessar y for an assessee r efer r ed to in sub-section (1) to fur nish
under sub-section (1) of section 139 a r etur n of his or its income if
(a) his or its total income in r espect of which he or it is assessable under
this Act dur ing the pr evious year consisted only of income r efer r ed to
in clause (a) of sub-section (1); and
(b) the tax deductible at sour ce under the pr ovisions of Chapter XVII-B
has been deducted fr om such income.]
85
[Tax on income from units purchased in foreign currency or capital gains arising
from their transfer.
115AB. (1) Wher e the total income of an assessee, being an over seas financial
or ganisation (her einafter r efer r ed to as Offshor e Fund) includes
(a) income r eceived in r espect of units pur chased in for eign cur r ency; or
(b) income by way of long-ter m capital gains ar ising fr om the tr ansfer of
units pur chased in for eign cur r ency,
1.543 CH. XII - DETERMINATION OF TAX IN CERTAIN SPECIAL CASES S. 115AB
83. Substituted for pur poses of the pr oviso, ibid.
S. 115AB I.T. ACT, 1961 1.544
the income-tax payable shall be the aggr egate of
(i) the amount of income-tax calculated on the income in r espect of units
r efer r ed to in clause (a), if any, included in the total income, at the r ate
of ten per cent;
(ii) the amount of income-tax calculated on the income by way of long-
ter m capital gains r efer r ed to in clause (b), if any, included in the total
income, at the r ate of ten per cent; and
(iii) the amount of income-tax with which the Offshor e Fund would have
been char geable had its total income been r educed by the amount of
income r efer r ed to in clause (a) and clause (b).
(2) Wher e the gr oss total income of the Offshor e Fund,
(a) consists only of income fr om units or income by way of long-ter m
capital gains ar ising fr om the tr ansfer of units, or both, no deduction
shall be allowed to the assessee under sections 28 to 44C
86
[***]
or clause (i) or clause (iii) of section 57 or under Chapter VI-A
87
[and
nothing contained in the pr ovisions of the second pr oviso to section
48 shall apply to income r efer r ed to in clause (b) of sub-section (1)];
(b) includes any income r efer r ed to in clause (a), the gr oss total income
shall be r educed by the amount of such income and the deduction
under Chapter VI-A shall be allowed as if the gr oss total income as so
r educed wer e the gr oss total income of the assessee.
(a) over seas financial or ganisation means any fund, institution, associa-
tion or body, whether incor por ated or not, established under the laws
of a countr y outside India, which has enter ed into an ar r angement for
investment in India with any public sector bank or public financial
institution or a mutual fund specified under clause (23D) of section 10
and such ar r angement is appr oved by the
88
[Secur ities and Exchange
Boar d of India, established under the Secur ities and Exchange Boar d
of India Act, 1992 (15 of 1992),] for this pur pose;
(b) unit means unit of a mutual fund specified under clause (23D) of
section 10 or of the Unit Tr ust of India;
(c) for eign cur r ency
89
shall have t he meaning as in t he For eign
Exchange Regulation Act, 1973 (46 of 1973);
(d) public sector bank shall have the meaning assigned to it in clause
(23D) of section 10;
(e) public financial institution shall have the meaning assigned to it in
section 4A
90
86. Wor ds or sub-section (2) of section 48 omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
88. Substituted for Centr al Gover nment by the Finance Act, 2001, w.e.f. 1-6-2001.
89. For definition of for eign cur r ency, see footnote 41 on p. 1.65 an te.
Appendix.
(f) Unit Tr ust of India means the Unit Tr ust of India established under
the Unit Tr ust of India Act, 1963 (52 of 1963)].
91
[Tax on income from bonds or Global Depository Receipts purchased in foreign
currency or capital gains arising from their transfer.
115AC. (1) Wher e the total income of an assessee, being a non-r esident,
includes
1.545 CH. XII - DETERMINATION OF TAX IN CERTAIN SPECIAL CASES S. 115AC
115AC, as inser ted by the Finance Act, 1992, w.e.f. 1-4-1993 and amended by the Finance
(No. 2) Act, 1996, w.e.f. 1-10-1996, Finance Act, 1997, w.e.f. 1-4-1998 and Finance Act, 1999,
115AC. Tax on in com e from bon ds or sh ares purch ased in foreign curren cy or capital gain s
arisin g from th eir tran sfer.(1) Wher e the total income of an assessee, being a non-
r esident, includes
(a) income by way of inter est or dividends other than dividends r efer r ed to in section
115-O, on bonds or shar es of an Indian company issued in accor dance with such
scheme as the Centr al Gover nment may, by notification in the Official Gazette,
specify in this behalf

or on bonds or shar es of a public sector company, sold by the
Gover nment and pur chased by him in for eign cur r ency; or
(b) income by way of long-ter m capital gains ar ising fr om the tr ansfer of bonds or , as
the case may be, shar es r efer r ed to in clause (a),
(i) the amount of income-tax calculated on the income by way of inter est or dividends
other than dividends r efer r ed to in section 115-O, as the case may be, in r espect of
bonds or shar es r efer r ed to in clause (a), if any, included in the total income, at the
r ate of ten per cent;
(ii) the amount of income-tax calculated on the income by way of long-ter m capital
gains r efer r ed to in clause (b), if any, at the r ate of ten per cent; and
(iii) the amount of income-tax with which the non-r esident would have been char geable
had his total income been r educed by the amount of income r efer r ed to in clause
(a) and clause (b).
(2) Wher e the gr oss total income of the non-r esident
(a) consists only of income by way of inter est or dividends other than dividends
r efer r ed to in section 115-O in r espect of bonds or , as the case may be, shar es r efer r ed
to in clause (a) of sub-section (1), no deduction shall be allowed to him under
sections 28 to 44C or clause (i) or clause (iii) of section 57 or under Chapter VI-A;
(b) includes any income r efer r ed to in clause (a) or clause (b) of sub-section (1) the gr oss
total income shall be r educed by the amount of such income and the deduction
under Chapter VI-A shall be allowed as if the gr oss total income as so r educed, wer e
the gr oss total income of the assessee.
(3) Nothing contained in the fir st and second pr ovisos to section 48 shall apply for the
computation of long-ter m capital gains ar ising out of the tr ansfer of long-ter m capital
asset, being bonds or shar es r efer r ed to in clause (b) of sub-section (1).
(4) It shall not be necessar y for a non-r esident to fur nish under sub-section (1) of section
139 a r etur n of his income if
(a) his total income in r espect of which he is assessable under this Act dur ing the
pr evious year consisted only of income r efer r ed to in clause (a) of sub-section (1);
and
(b) the tax deductible at sour ce under the pr ovisions of Chapter XVII-B has been
deducted fr om such income.
(5) Wher e the assessee acquir ed shar es or bonds in an amalgamated or r esulting company
by vir tue of his holding shar es or bonds in the amalgamating or demer ged company, as
the case may be, in accor dance with the pr ovisions of sub-section (1), the pr ovisions of the
said sub-section shall apply to such shar es or bonds.
S. 115AC I.T. ACT, 1961 1.546
(a) income by way of inter est on bonds of an Indian company issued in
accor dance with such scheme as the Centr al Gover nment may, by
notification in the Official Gazette
92
, specify in this behalf, or on bonds
of a public sector company sold by the Gover nment, and pur chased
by him in for eign cur r ency; or
(b) income by way of dividends
93
[, other than dividends r efer r ed to in
section 115-O,]

on Global Depositor y Receipts
(i) issu ed in accor dance wit h su ch scheme as t he Cent r al
Government may, by notification in the Official Gazette
94
, specify
in this behalf, against the initial issue of shar es of an Indian
company and pur chased by him in for eign cur r ency thr ough an
appr oved inter mediar y; or
(ii) issued against the shar es of a public sector company sold by the
Gover nment and pur chased by him in for eign cur r ency thr ough
an appr oved inter mediar y; or
(iii)
95
[issued or ] r e-issued in accor dance with such scheme as the
Central Government may, by notification in the Official Gazette
94
,
specify in this behalf, against the existing shar es of an Indian
company pur chased by him in for eign cur r ency thr ough an
appr oved inter mediar y; or
(iv)
96
[***]
(c) income by way of long-ter m capital gains ar ising fr om the tr ansfer of
bonds r efer r ed to in clause (a) or , as the case may be, Global
Depositor y Receipts r efer r ed to in clause (b),
(i) the amount of income-tax calculated on the income by way of inter est
or dividends
97
[, other than dividends r efer r ed to in section 115-O]

, as
the case may be, in r espect of bonds r efer r ed to in clause (a) or Global
92. For notified Scheme, see Taxmanns Master Guide to Income-tax Act. See also Taxmanns
Income-tax Rules for text of Schemes.
93. Inser ted by the Finance Act, 2003, w.e.f. 1-4-2004. Ear lier the wor ds , other than dividends
r efer r ed to in section 115-O, wer e omitted by the Finance Act, 2002, w.e.f. 1-4-2003.
94. Issue of For eign Cur r ency Conver tible Bonds and Or dinar y Shar es (Thr ough Depositor y
Receipt Mechanism) Scheme has been notifiedNotification No. SO 987(E), dated 10-9-
2002. For details, see Taxmanns Master Guide to Income-tax Act.
96. Omitted, ibid. Pr ior t o it s omission, clause (iv) r ead as under :
(iv ) issued in accor dance wit h such scheme as t he Cent r al Gover nment may, by
notification in the Official Gazette, specify in this behalf, and pur chased by him in
for eign cur r ency thr ough an appr oved inter mediar y, against the shar es of an Indian
company ar ising out of disinvestment by such company in its subsidiar y company,
and the shar es of both such Indian companies ar e listed in a r ecognised stock
exchange in India; or
r efer r ed to in section 115-O wer e omitted by the Finance Act, 2002, w.e.f. 1-4-2003.
Depositor y Receipts r efer r ed to in clause (b), if any, included in the
total income, at the r ate of ten per cent;
ter m capital gains r efer r ed to in clause (c), if any, at the r ate of ten per
cent; and
(iii) the amount of income-tax with which the non-r esident would have
been char geable had his total income been r educed by the amount of
income r efer r ed to in clauses (a), (b) and (c).
(2) Wher e the gr oss total income of the non-r esident
(a) consists only of income by way of inter est or dividends
98
[, other than
dividends r efer r ed to in section 115-O] in r espect of bonds r efer r ed
to in clause (a) of sub-section (1) or , as the case may be, Global
Depositor y Receipts r efer r ed to in clause (b) of that sub-section, no
deduction shall be allowed to him under sections 28 to 44C or clause
(i) or clause (iii) of section 57 or under Chapter VI-A;
(b) includes any income r efer r ed to in clause (a) or clause (b) or clause (c)
of sub-section (1), the gr oss total income shall be r educed by the
amount of such income and the deduction under Chapter VI-A shall
be allowed as if the gr oss total income as so r educed, wer e the gr oss
(3) Nothing contained in the fir st and second pr ovisos to section 48 shall apply for
the computation of long-ter m capital gains ar ising out of the tr ansfer of long-
ter m capital asset, being bonds or Global Depositor y Receipts r efer r ed to in
clause (c) of sub-section (1).
(4) It shall not be necessar y for a non-r esident to fur nish under sub-section (1) of
section 139 a r etur n of his income if
(a) his total income in r espect of which he is assessable under this Act
dur ing the pr evious year consisted only of income r efer r ed to in
clauses (a) and (b) of sub-section (1); and
has been deducted fr om such income.
(5) Wher e the assessee acquir ed Global Depositor y Receipts or bonds in an
amalgamated or r esulting company by vir tue of his holding Global Depositor y
Receipts or bonds in the amalgamating or demer ged company, as the case may
be, in accor dance with the pr ovisions of sub-section (1), the pr ovisions of that
sub-section shall apply to such Global Depositor y Receipts or bonds.
(a) appr oved inter mediar y means an inter mediar y who is appr oved in
accor dance with such scheme as may be notified
99
by the Centr al
Gover nment in the Official Gazette;
1.547 CH. XII - DETERMINATION OF TAX IN CERTAIN SPECIAL CASES S. 115AC
r efer r ed to in section 115-O wer e omitted by the Finance Act, 2002, w.e.f. 1-4-2003.
99. See Issue of For eign Cur r ency Conver tible Bonds & Or dinar y Shar es (Thr ough Deposi-
tor y Receipt Mechanism) Scheme, 1993 - Notification No. SO 987(E), dated 10-9-2002.
(b) Global Depositor y Receipts shall have the same meaning as in clause
(a) of the Explan ation to section 115ACA.]
1
[Tax on income from Global Deposit ory Receipts purchased in foreign
currency or capital gains arising from their transfer.
115ACA.
2
[(1) Wher e the total income of an assessee, being an individual, who
is a r esident and an employee of an Indian company engaged in
specified knowledge based industr y or ser vice, or an employee of its subsidiar y
engaged in specified knowledge based industr y or ser vice (her eafter in this
section r efer r ed to as the r esident employee), includes
(a) income by way of dividends
3
[, other than dividends r efer r ed to in
section 115-O,] on Global Depositor y Receipts of an Indian company
engaged in specified knowledge based industr y or ser vice, issued in
accor dance with such Employees Stock Option Scheme as the
Centr al Gover nment may, by notification in the Official Gazette
4
,
specify in this behalf and pur chased by him in for eign cur r ency; or
(b) income by way of long-ter m capital gains ar ising fr om the tr ansfer of
Global Depositor y Receipts r efer r ed to in clause (a),
(i) the amount of income-tax calculated on the income by way of
dividends
3
[, other than dividends r efer r ed to in section 115-O,] in
S. 115ACA I.T. ACT, 1961 1.548
(1) Wher e the total income of an assessee, being an individual, who is a r esident and an
employee of an Indian company engaged in infor mat ion t echnology soft war e and
infor mation technology ser vices (her eafter in this section r efer r ed to as the r esident
employee), includes
(a) income by wa y of dividends, ot her t ha n dividends r efer r ed t o in sect ion
115-O, on Global Depositor y Receipts of an Indian company engaged in infor mation
technology softwar e and infor mation technology ser vices, issued in accor dance
with such employees stock option scheme as the Centr al Gover nment may, by
notification

in the Official Gazette, specify in this behalf and pur chased by him in
for eign cur r ency; or
(b) income by way of long-ter m capital gains ar ising fr om the tr ansfer of Global
Deposit or y Receipt s r efer r ed t o in clause (a),
(i) the amount of income-tax calculated on the income by way of dividends, other than
dividends r efer r ed to in section 115-O, in r espect of Global Depositor y Receipts
r efer r ed t o in clause (a), if any, included in the total income, at the r ate of ten per
cent ;
(ii) the amount of income-tax calculated on the income by way of long-ter m capital
gains r efer r ed to in clause (b), if any, at the r ate of ten per cent; and
(iii) the amount of income-tax with which the r esident employee would have been
char geable had his total income been r educed by the amount of income r efer r ed
t o in clauses (a) and (b).
4. For notified scheme, see Taxmanns Master Guide to Income-tax Act.
1.549 CH. XII - DETERMINATION OF TAX IN CERTAIN SPECIAL CASES S. 115ACA
r espect of Global Depositor y Receipts r efer r ed to in clause (a), if any,
included in the total income, at the r ate of ten per cent;
ter m capital gains r efer r ed to in clause (b), if any, at the r ate of ten per
cent; and
(iii) the amount of income-tax with which the r esident employee would
have been char geable had his total income been r educed by the
amount of income r efer r ed to in clauses (a) and (b).
(a) specified knowledge based industr y or ser vice means
(i) infor mation technology softwar e;
(ii) infor mation technology ser vice;
(iii) enter tainment ser vice;
(iv) phar maceutical industr y;
(v) bio-technology industr y; and
(vi) any other industr y or ser vice, as may be specified by the Centr al
Gover nment, by notification in the Official Gazette;
(b) subsidiar y shall have the meaning assigned to it in section 4
5
of the
Companies Act, 1956 (1 of 1956) and includes subsidiar y incor por ated
outside India.]
(2) Wher e the gr oss total income of the r esident employee
(a) consists only of income by way of dividends
6
[, other than dividends
r efer r ed to in section 115-O,] in r espect of Global Depositor y Receipts
r efer r ed to in clause (a) of sub-section (1), no deduction shall be
allowed to him under any other pr ovision of this Act;
(b) includes any income r efer r ed to in clause (a) or clause (b) of sub-
section (1), the gr oss total income shall be r educed by the amount of
such income and the deduction under any pr ovision of this Act shall
be allowed as if the gr oss total income as so r educed wer e the gr oss
the computation of long-ter m capital gains ar ising out of the tr ansfer of long-
ter m capital asset, being Global Depositor y Receipts r efer r ed to in clause (b) of
sub-section (1).
(a) Global Depositor y Receipts means any instr ument in the for m of a
depositor y r eceipt or cer tificate (by whatever name called) cr eated
by the Over seas Depositor y Bank outside India and issued to non-
r esident investor s against the issue of or dinar y shar es or for eign
cur r ency conver tible bonds of issuing company;
5. For definition of subsidiar y under section 4 of the Companies Act, see Appendix.
(b) infor mation technology ser vice means any ser vice which r esults
fr om the use of any infor mation technology softwar e over a system
of infor mation technology pr oducts for r ealising value addition;
(c) infor mation technology softwar e means any r epr esentation of in-
str uctions, data, sound or image, including sour ce code and object
code, r ecor ded in a machine r eadable for m and capable of being
manipulated or pr oviding inter -activity to a user , by means of an
automatic data pr ocessing machine falling under heading infor ma-
tion technology pr oducts but does not include non-infor mation tech-
nology pr oducts;
(d) Over seas Depositor y Bank means a bank author ised by the issuing
company t o issue Global Deposit or y Receipt s against issue of
For eign Cur r ency Conver tible Bonds or or dinar y shar es of the issuing
company.]
7
[Tax on income of Foreign Institutional Investors from securities or capital gains
arising from their transfer.
115AD. (1) Wher e t he t ot al income of a For eign Inst it ut ional Invest or
includes
8
[(a) income
9
[other than income by way of dividends r efer r ed to in section
115-O] r eceived in r espect of secur ities (other than unit r efer r ed to in
section 115AB); or ]
(b) income by way of shor t-ter m or long-ter m capital gains ar ising fr om
the tr ansfer of such secur ities,
(i) the amount of income-tax calculated on the income in r espect of
secur ities r efer r ed to in clause (a), if any, included in the total income,
at the r ate of twenty per cent;
(ii) the amount of income-tax calculated on the income by way of shor t-
income, at the r ate of thir ty per cent :
10
[Provided that the amount of income-tax calculated on the income
by way of shor t-ter m capital gains r efer r ed to in section 111A shall be
at the r ate of
10a
[ten ] per cent;]
S. 115AD I.T. ACT, 1961 1.550
(a), as amended by the Finance Act, 1997, w.e.f. 1-4-1998, r ead as under :
(a) income other than income by way of dividends r efer r ed to in section 115-O r eceived
in r espect of secur ities (other than units r efer r ed to in section 115AB) listed in a
r ecognised st ock exchange in India in accor dance wit h t he pr ovisions of t he
Secur ities Contr acts (Regulation) Act, 1956 (42 of 1956), and any r ules made
ther eunder ; or
9. Inser ted by the Finance Act, 2003, w.e.f. 1-4-2004. Ear lier the wor ds other than income by
way of dividends r efer r ed to in section 115-O wer e inser ted by the Finance Act, 1999, w.e.f.
1-4-1999 and later on omitted by the Finance Act, 2002, w.e.f. 1-4-2003.
10a. Wor d fifteen shall be substituted for wor d ten by the Finance Act, 2008, w.e.f. 1-4-2009.
(iii) the amount of income-tax calculated on the income by way of long-
(iv) the amount of income-tax with which the For eign Institutional Inves-
tor would have been char geable had its total income been r educed by
the amount of income r efer r ed to in clause (a) and clause (b).
(2) Wher e the gr oss total income of the For eign Institutional Investor
(a) consists only of income in r espect of secur ities r efer r ed to in clause
(a) of sub-section (1), no deduction shall be allowed to it under sections
28 to 44C or clause (i) or clause (iii) of section 57 or under Chapter
VI-A;
(b) includes any income r efer r ed to in clause (a) or clause (b) of sub-
section (1), the gr oss total income shall be r educed by the amount of
such income and the deduction under Chapter VI-A shall be allowed
as if the gr oss total income as so r educed, wer e the gr oss total income
of the For eign Institutional Investor .
the computation of capital gains ar ising out of the tr ansfer of secur ities r efer r ed
to in clause (b) of sub-section (1).
(a) the expr ession For eign Institutional Investor means such investor as
the Centr al Gover nment may, by notification in the Official Gazette
11
,
specify in this behalf;
(b) the expr ession secur ities
12
clause (h ) of section 2 of the Secur ities Contr acts (Regulation) Act,
1956 (42 of 1956).]
13
[Tax on profits and gains of life insurance business.
115B.
14
[(1)] Wher e the total income of an assessee includes any pr ofits and
gains fr om life insur ance business, the income-tax payable shall be the
aggr egate of
(i) the amount of income-tax calculated on the amount of pr ofits and
gains of the life insur ance business included in the total income, at the
r ate of twelve and one-half per cent; and
(ii) the amount of income-tax with which the assessee would have been
char geable had the total income of the assessee been r educed by the
amount of pr ofits and gains of the life insur ance business.]
14
[(2) Notwithstanding anything contained in sub-section (1) or in any other law
for the time being in for ce or any instr ument having the for ce of law, the assessee
shall, in addition to the payment of income-tax computed under sub-section (1),
1.551 CH. XII - DETERMINATION OF TAX IN CERTAIN SPECIAL CASES S. 115B
11. For list of notified For eign Institutional Investor s, see Taxmanns Dir ect Taxes Cir cular s.
12. For definition of secur ities, see footnote 7 on p. 1.26 an te.
deposit, dur ing
15
[the pr evious year s r elevant to the assessment year s commen-
cing on the 1st day of Apr il, 1989 and the 1st day of Apr il, 1990], an amount equal
to thir ty-thr ee and one-thir d per cent of the amount of income-tax computed
under clause (i) of sub-section (1), in such social secur ity fund (her eafter in this
sub-section r efer r ed to as the secur ity fund), as the Centr al Gover nment may, by
notification
16
in the Official Gazette, specify in this behalf :
Provided that wher e the assessee makes dur ing the said pr evious
17
[year s] any
deposit of an amount of not less than two and one-half per cent of the pr ofits and
gains of the life insur ance business in the secur ity fund, the amount of income-
tax payable by the assessee under the said clause (i) shall be r educed by an
amount equal to two and one-half per cent of such pr ofits and gains and,
accor dingly, the deposit of thir ty-thr ee and one-thir d per cent r equir ed to be
made under this sub-section shall be calculated on the income-tax as so r educed.]
18
[Tax on winnings from lotteries, crossword puzzles, races including horse races,
card games and other games of any sort or gambling or betting of any form or
nature whatsoever.
115BB. Wher e the total income of an assessee includes any income by way of
winnings fr om any lotter y or cr osswor d puzzle or r ace including hor se
r ace (not being income fr om the activity of owning and maintaining r ace hor ses)
or car d game and other game of any sor t or fr om gambling or betting of any for m
or natur e whatsoever , the income-tax payable shall be the aggr egate of
(i) the amount of income-tax calculated on income by way of winnings
fr om such lotter y or cr osswor d puzzle or r ace including hor se r ace or
car d game and other game of any sor t or fr om gambling or betting of
any for m or natur e whatsoever , at the r ate of
19
[thir ty] per cent; and
char geable had his total income been r educed by the amount of
income r efer r ed to in clause (i).
Explan ation .For the pur poses of this section, hor se r ace shall have the same
meaning as in section 74A.]
20
[Tax on non-resident sportsmen or sports associations.
115BBA. (1) Wher e the total income of an assessee,
(a) being a spor tsman (including an athlete), who is not a citizen of India
and is a non-r esident, includes any income r eceived or r eceivable by
way of
(i) par ticipation in India in any game (other than a game the win-
nings wher efr om ar e taxable under section 115BB) or spor t; or
S. 115BBA I.T. ACT, 1961 1.552
15. Substituted for the pr evious year r elevant to the assessment year commencing on the 1st
day of Apr il, 1989 by the Finance Act, 1989, w.e.f. 1-4-1990.
16. For notified fund, see Taxmanns Master Guide to Income-tax Act.
17. Substituted for year by the Finance Act, 1989, w.e.f. 1-4-1990.
19. Substituted for for ty by the Finance Act, 2001, w.e.f. 1-4-2002.
(ii) adver tisement; or
(iii) contr ibution of ar ticles r elating to any game or spor t in India in
newspaper s, magazines or jour nals; or
(b) being a non-r esident spor ts association or institution, includes any
amount guar anteed to be paid or payable to such association
or institution in r elation to any game (other than a game the
winnings wher efr om ar e taxable under section 115BB) or spor t
played in India,
the income-tax payable by the assessee shall be the aggr egate of
(i) the amount of income-tax calculated on income r efer r ed to in clause
(a) or clause (b) at the r ate of ten per cent; and
char geable had the total income of the assessee been r educed by the
amount of income r efer r ed to in clause (a) or clause (b) :
Provided that no deduction in r espect of any expenditur e or allowance shall be
allowed under any pr ovision of this Act in computing the income r efer r ed to in
clause (a) or clause (b).
(2) It shall not be necessar y for the assessee to fur nish under sub-section (1) of
section 139 a r etur n of his income if
dur ing the pr evious year consisted only of income r efer r ed to in
clause (a) or clause (b) of sub-section (1); and
has been deducted fr om such income.]
21
[Tax on income from units of an open-ended equity oriented fund of the Unit
Trust of India or of Mutual Funds.
115BBB. (1) Wher e the total income of an assessee includes any income fr om
units of an open-ended equity or iented fund of the Unit Tr ust of India
or of a Mutual Fund, the income-tax payable shall be the aggr egate of
(a) the amount of income-tax calculated on income fr om units of an
open-ended equity or iented fund of the Unit Tr ust of India or of a
Mutual Fund, at the r ate of ten per cent; and
(b) the amount of income-tax with which the assessee would have been
income r efer r ed to in clause (a).
(2) Nothing contained in sub-section (1) shall apply in r elation to any income fr om
units of an open-ended equity or iented fund of the Unit Tr ust of India or of the
Mutual Fund ar ising after the 31st day of Mar ch, 2003.
Explan ation .For the pur poses of this section, the expr essions Mutual Fund,
open-ended equity or iented fund and Unit Tr ust of India shall have the
meanings r espectively assigned to them in the Explan ation to section 115T.]
1.553 CH. XII - DETERMINATION OF TAX IN CERTAIN SPECIAL CASES S. 115BBB
S. 115C I.T. ACT, 1961 1.554
22
[Anonymous donations to be taxed in certain cases.
115BBC. (1) Wher e the total income of an assessee, being a per son in r eceipt of
income on behalf of any univer sity or other educational institution
r efer r ed to in sub-clause (iiiad) or sub-clause (vi) or any hospital or other
institution r efer r ed to in sub-clause (iiiae) or sub-clause (via) or any fund or
institution r efer r ed to in sub-clause (iv) or any tr ust or institution r efer r ed to in
sub-clause (v) of clause (23C) of section 10 or any tr ust or institution r efer r ed to
in section 11, includes any income by way of any anonymous donation, the
income-tax payable shall be the aggr egate of
(i) the amount of income-tax calculated on the income by way of any
anonymous donation, at the r ate of thir ty per cent; and
income r efer r ed to in clause (i).
(2) The pr ovisions of sub-section (1) shall not apply to any anonymous donation
r eceived by
(a) any tr ust or institution cr eated or established wholly for r eligious
pur poses;
(b) any tr ust or institution cr eated or established wholly for r eligious and
char itable pur poses other than any anonymous donation made with
a specific dir ection that such donation is for any univer sity or other
r un by such tr ust or institution.
(3) For the pur poses of this section, anonymous donation means any voluntar y
contr ibution r efer r ed to in sub-clause (iia) of clause (24) of section 2, wher e a
per son r eceiving such contr ibution does not maintain a r ecor d of the identity
indicating the name and addr ess of the per son making such contr ibution and
such other par ticular s as may be pr escr ibed.]
23
[CHAPTER XI I -A
SPECIAL PROVISIONS RELATING TO CERTAIN
INCOMES OF NON-RESIDENTS
Definitions.
115C. In this Chapter , unless the context other wise r equir es,
(b) for eign exchange asset means any specified asset which the assessee
has acquir ed or pur chased with, or subscr ibed to in, conver tible
for eign exchange;
23. Chapter XII-A, consisting of sections 115C, 115D, 115E, 115F, 115G, 115H and 115-I,
(c) investment income means any income der ived
24
[other than divi-
dends r efer r ed to in section 115-O]

fr om a for eign exchange asset;
(d) long-ter m capital gains means income char geable under the head
Capital gains r elating to a capital asset, being a for eign exchange
asset which is not a shor t-ter m capital asset;
(e) non-r esident Indian means an individual, being a citizen of India or
a per son of Indian or igin who is not a r esident.
Explan ation .A per son shall be deemed to be of Indian or igin if he,
or either of his par ents or any of his gr and-par ents, was bor n in
undivided India;
(f) specified asset means any of the following assets, namely :
(i) shar es in an Indian company;
(ii) debentur es issued by an Indian company which is not a pr ivate
company
25
as defined in the Companies Act, 1956 (1 of 1956);
(iii) deposits with an Indian company which is not a pr ivate com-
pany
25
as defined in the Companies Act, 1956 (1 of 1956);
(iv) any secur ity of the Centr al Gover nment as defined in clause (2)
of section 2
26
of the Public Debt Act, 1944 (18 of 1944);
(v) such other assets as the Centr al Gover nment may specify in this
behalf by notification in the Official Gazette.
Special provision for computation of total income of non-residents.
115D. (1) No deduction in r espect of any expenditur e or allowance shall be
allowed under any pr ovision of this Act in computing the investment
income of a non-r esident Indian.
(2) Wher e in the case of an assessee, being a non-r esident Indian,
(a) the gr oss total income consists only of investment income or income
by way of long-ter m capital gains or both, no deduction shall be
allowed to the assessee
27
[under Chapter VI-A and nothing contained
in the pr ovisions of the second pr oviso to section 48 shall apply to
income char geable under the head Capital gains];
(b) the gr oss total income includes any income r efer r ed to in clause (a),
the gr oss total income shall be r educed by the amount of such income
and the deductions under Chapter VI-A shall be allowed as if the gr oss
total income as so r educed wer e the gr oss total income of the assessee.
1.555 CH. XII-A - SPECIAL PROVISIONS RELATING TO INCOMES OF NRs S. 115D
24. Inser ted by the Finance Act, 2003, w.e.f. 1-4-2004. Wor ds other than dividends r efer r ed
to in section 115-O inser ted by the Finance Act, 1997, w.e.f. 1-4-1998 and later on omitted
25. Clause (iii) of section 3(1) of the Companies Act, 1956, defines pr ivate company. For text
26. For definition of Gover nment secur ity see footnote 2 on page 1.482 an te.
27. Substituted for under sub-section (2) of section 48 or under Chapter VI-A by the Finance
Act, 1992, w.e.f. 1-4-1993. Ear lier these wor ds wer e substituted for under Chapter VI-A
by the Dir ect Tax Laws (Second Amendment) Act, 1989, w.r .e.f. 1-4-1988.
28
[Tax on investment income and long-term capital gains.
115E. Wher e the total income of an assessee, being a non-r esident Indian,
includes
(a) any income fr om investment or income fr om long-ter m capital gains
of an asset other than a specified asset;
(b) income by way of long-ter m capital gains,
the tax payable by him shall be the aggr egate of
(i) the amount of income-tax calculated on the income in r espect of
investment income r efer r ed to in clause (a), if any, included in the total
income, at the r ate of twenty per cent;
(iii) the amount of income-tax with which he would have been char geable
had his total income been r educed by the amount of income r efer r ed
to in clauses (a) and (b).]
Capital gains on transfer of foreign exchange assets not to be charged in certain
cases.
115F. (1) Wher e, in the case of an assessee being a non-r esident Indian, any
long-ter m capital gains ar ise fr om the tr ansfer of a for eign exchange
asset (the asset so tr ansfer r ed being her eafter in this section r efer r ed to as the
or iginal asset), and the assessee has, within a per iod of six months after the date
of such tr ansfer , invested
29
[***] the whole or any par t of the net consider ation in
any specified asset
30
[***], or in any savings cer tificates r efer r ed to in clause
(4B) of section 10 (such specified asset
31
[***], or such savings cer tificates being
her eafter in this section r efer r ed to as the new asset), the capital gain shall be
dealt with in accor dance with the following pr ovisions of this section, that is to
say,
(a) if the cost of the new asset is not less than the net consider ation in
be char ged under section 45;
(b) if the cost of the new asset is less than the net consider ation in r espect
of the or iginal asset, so much of the capital gain as bear s to the whole
of the capital gain the same pr opor tion as the cost of acquisition of the
new asset bear s to the net consider ation shall not be char ged under
section 45.
S. 115F I.T. ACT, 1961 1.556
28. Substituted by the Finance Act, 1997, w.e.f. 1-4-1998. Pr ior to its substitution, section 115E
was amended by the Finance Act, 1985, w.e.f. 1-4-1986.
29. or deposited omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
30. or in an account r efer r ed to in clause (4A) omitted, ibid.
31. or such deposit in the account afor esaid omitted, ibid.
(i) cost, in r elation to any new asset, being a deposit
32
[***] r efer r ed to
in sub-clause (iii), or specified under sub-clause (v), of clause (f) of
section 115C, means the amount of such deposit;
(ii) net consider ation, in r elation to the tr ansfer of the or iginal asset,
means the full value of the consider ation r eceived or accr uing as a
r esult of the tr ansfer of such asset as r educed by any expenditur e
(2) Wher e the new asset is tr ansfer r ed or conver ted (other wise than by
tr ansfer ) into money, within a per iod of thr ee year s fr om the date of its
acquisition, the amount of capital gain ar ising fr om the tr ansfer of the or iginal
asset not char ged under section 45 on the basis of the cost of such new asset as
pr ovided in clause (a) or , as the case may be, clause (b), of sub-section (1) shall
be deemed to be income char geable under the head Capital gains r elating to
capital assets other than shor t-ter m capital assets of the pr evious year in which
the new asset is tr ansfer r ed or conver ted (other wise than by tr ansfer ) into money.
Return of income not to be filed in certain cases.
115G. It shall not be necessar y for a non-r esident Indian to fur nish under
sub-section (1) of section 139 a r etur n of his income if
dur ing the pr evious year consisted only of investment income or
income by way of long-ter m capital gains or both; and
has been deducted fr om such income.
Benefit under Chapter to be available in certain cases even after the assessee
becomes resident.
115H. Wher e a per son, who is a non-r esident Indian in any pr evious year ,
becomes assessable as r esident in India in r espect of the total income of
any subsequent year , he may fur nish to the
33
[Assessing] Officer a declar ation in
wr iting along with his r etur n of income under section 139 for the assessment year
for which he is so assessable, to the effect that the pr ovisions of this Chapter shall
continue to apply to him in r elation to the investment income der ived fr om any
for eign exchange asset being an asset of the natur e r efer r ed to in sub-clause (ii)
or sub-clause (iii) or sub-clause (iv) or sub-clause (v) of clause (f) of section 115C;
and if he does so, the pr ovisions of this Chapter shall continue to apply to him in
r elation to such income for that assessment year and for ever y subsequent
assessment year until the tr ansfer or conver sion (other wise than by tr ansfer )
into money of such assets.
1.557 CH. XII-A - SPECIAL PROVISIONS RELATING TO INCOMES OF NRs S. 115H
32. r efer r ed to in clause (4A) of section 10 or omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
1-4-1988.
S. 115J I.T. ACT, 1961 1.558
Chapter not to apply if the assessee so chooses.
115-I. A non-r esident Indian may elect not to be gover ned by the pr ovisions of
this Chapter for any assessment year by fur nishing
34
[his r etur n of income
for that assessment year under section 139 declar ing ther ein] that the pr ovisions
of this Chapter shall not apply to him for that assessment year and if he does so,
the pr ovisions of this Chapter shall not apply to him for that assessment year and
his total income for that assessment year shall be computed and tax on such total
income shall be char ged in accor dance with the other pr ovisions of this Act.]
35
[CHAPTER XI I -B
SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES
Special provisions relating to certain companies.
115J. (1) Notwithstanding anything contained in any other pr ovision of this
Act, wher e in the case of an assessee being a company
36
[(other than a
company engaged in the business of gener ation or distr ibution of electr icity)], the
total income, as computed under this Act in r espect of any pr evious year r elevant
to the assessment year commencing on or after the 1st day of Apr il, 1988
37
[but
befor e the 1st day of Apr il, 1991] (her eafter in this section r efer r ed to as the
r elevant pr evious year ), is less than thir ty per cent of its book pr ofit, the total
income of such assessee char geable to tax for the r elevant pr evious year shall be
deemed to be an amount equal to thir ty per cent of such book pr ofit.
38
[(1A) Ever y assessee, being a company, shall, for the pur poses of this section,
pr epar e its pr ofit and loss account for the r elevant pr evious year in accor dance
with the pr ovisions of Par ts II and III of Schedule VI to the Companies Act, 1956
(1 of 1956).]
Explan ation .For the pur poses of this section, book pr ofit means the net pr ofit
as shown in the pr ofit and loss account for the r elevant pr evious year
39
[pr epar ed
under sub-section (1A)], as incr eased by
(a) the amount of income-tax paid or payable, and the pr ovision ther efor ;
or
(b) the amounts car r ied to any r eser ves
40
[(other than the r eser ves
specified in section 80HHD
41
[or sub-section (1) of section 33AC])], by
whatever name called; or
(c) the amount or amounts set aside to pr ovisions made for meeting
liabilities, other than ascer tained liabilities; or
34. Substituted for to the Assessing Officer his r etur n of income for that assessment year
under section 139 together with a declar ation in wr iting to the effect by the Finance Act,
1990, w.e.f. 1-4-1990.
39. Substituted for pr epar ed in accor dance with the pr ovisions of Par ts II and III of the Sixth
Schedule to the Companies Act, 1956 (1 of 1956), ibid.
(d) the amount by way of pr ovision for losses of subsidiar y companies; or
(e) the amount or amounts of dividends paid or pr oposed; or
(f) the amount or amounts of expenditur e r elatable to any income to
which any of the pr ovisions of Chapter III
42
[applies; or ]
43
[(g) the amount withdr awn fr om the r eser ve account under section
80HHD, wher e it has been utilised for any pur pose other than those
r efer r ed to in sub-section (4) of that section; or
(h) the amount cr edited to the r eser ve account under section 80HHD, to
the extent that amount has not been utilised within the per iod
specified in sub-section (4) of that section;]
44
[(ha) the amount deemed to be the pr ofits under sub-section (3) of section
33AC,]
45
[if any amount r efer r ed to in clauses (a) to (f) is debited or , as the case may be,
the amount r efer r ed to in clauses (g) and (h ) is not cr edited] to the pr ofit and loss
account, and as r educed by,
(i) the amount withdr awn fr om r eser ves
46
[(other than the r eser ves
specified in section 80HHD)] or pr ovisions, if any such amount is
cr edited to the
47
[pr ofit and loss account:
Provided that, wher e this section is applicable to an assessee in any
pr evious year (including the r elevant pr evious year ), the amount
withdr awn fr om r eser ves cr eated or pr ovisions made in a pr evious
year r elevant to the assessment year commencing on or after the 1st
day of Apr il, 1988 shall not be r educed fr om the book pr ofit unless the
book pr ofit of such year has been incr eased by those r eser ves or
pr ovisions (out of which the said amount was withdr awn) under this
Explan ation ; or ]
(ii) the amount of income to which any of the pr ovisions of Chapter III
applies, if any such amount is cr edited to the pr ofit and loss account;
or
48
[(iii) the amounts [as ar r ived at after incr easing the net pr ofit by the
amounts r efer r ed to in clauses (a) to (f) and r educing the net pr ofit by
the amounts r efer r ed to in clauses (i) and (ii)] attr ibutable to the
business, the pr ofits fr om which ar e eligible for deduction under
section 80HHC or section 80HHD; so, however , that such amounts ar e
computed in the manner specified in sub-section (3) or sub-section
(3A) of section 80HHC or sub-section (3) of section 80HHD, as the case
may be; or ]
1.559 CH. XII-B - SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES S. 115J
42. Substituted for applies, by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
45. Substituted for if any such amount is debited by the Dir ect Tax Laws (Amendment) Act,
1989, w.e.f. 1-4-1989.
47. Substituted for pr ofit and loss account; or by the Finance Act, 1989, w.r .e.f. 1-4-1988.
49
[(iv)] the amount of the loss or the amount of depr eciation which would be
r equir ed to be set off against the pr ofit of the r elevant pr evious year
as if the pr ovisions of clause (b) of the fir st pr oviso to sub-section (1)
of section 205 of the Companies Act, 1956 (1 of 1956), ar e applicable.
(2) Nothing contained in sub-section (1) shall affect the deter mination of the
amounts in r elation to the r elevant pr evious year
50
to be car r ied for war d to the
subsequent year or year s under the pr ovisions of sub-section (2) of section 32 or
sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or
section 73 or section 74 or sub-section (3) of section 74A or sub-section (3) of
section 80J.]
51
[Deemed income relating to certain companies.
115JA. (1) Notwithstanding anything contained in any other pr ovisions of this
Act, wher e in the case of an assessee, being a company, the total income,
as computed under this Act in r espect of any pr evious year r elevant to the
assessment year commencing on or after the 1st day of Apr il, 1997
52
[but befor e
the 1st day of Apr il, 2001] (her eafter in this section r efer r ed to as the r elevant
pr evious year ) is less than thir ty per cent of its book pr ofit, the total income of
such assessee char geable to tax for the r elevant pr evious year shall be deemed
to be an amount equal to thir ty per cent of such book pr ofit.
(2) Ever y assessee, being a company, shall, for the pur poses of this section
with the pr ovisions of Par ts II and III of Schedule VI
53
to the Companies Act, 1956
(1 of 1956):
Provided that while pr epar ing pr ofit and loss account, the depr eciation shall be
calculated on the same method and r ates which have been adopted for calculat-
ing the depr eciation for the pur pose of pr epar ing the pr ofit and loss account laid
befor e the company at its annual gener al meeting in accor dance with the
pr ovisions of section 210 of the Companies Act, 1956 (1 of 1956) :
Provided further that wher e a company has adopted or adopts the financial year
under the Companies Act, 1956 (1 of 1956), which is differ ent fr om the pr evious
year under the Act, the method and r ates for calculation of depr eciation shall
cor r espond to the method and r ates which have been adopted for calculating the
depr eciation for such financial year or par t of such financial year falling within
the r elevant pr evious year .
Explan ation .For the pur poses of this section, book pr ofit means the net pr ofit
as shown in the pr ofit and loss account for the r elevant pr evious year pr epar ed
under sub-section (2), as incr eased by
(a) t he amount of income-t ax paid or payable, and t he pr ovision
ther efor ;or
(b) the amounts car r ied to any r eser ves by whatever name called; or
S. 115JA I.T. ACT, 1961 1.560
50. For the meaning of the ter m pr evious year , see Taxmanns Dir ect Taxes Manual, Vol. 3.
(e) the amount or amounts of dividends paid or pr oposed; or
which any of the pr ovisions of Chapter III applies;
if any amount r efer r ed to in clauses (a) t o (f) is debited to the pr ofit and loss
account, and as r educed by,
(i) the amount withdr awn fr om any r eser ves or pr ovisions if any such
amount is cr edited to the pr ofit and loss account:
Provided that, wher e this section is applicable to an assessee in any
pr evious year (including the r elevant pr evious year ), the amount
withdr awn fr om r eser ves cr eated or pr ovisions made in a pr evious
year r elevant to the assessment year commencing on or after the 1st
day of Apr il, 1997
54
[but ending befor e the 1st day of Apr il, 2001] shall
not be r educed fr om the book pr ofit unless the book pr ofit of such
year has been incr eased by those r eser ves or pr ovisions (out of which
the said amount was withdr awn) under this Explan ation ; or
(ii) the amount of income to which any of the pr ovisions of Chapter III
applies, if any such amount is credited to the profit and loss account; or
55
[(iii) the amount of loss br ought for war d or unabsor bed depr eciation,
whichever is less as per books of account.
(a) the loss shall not include depr eciation;
(b) the pr ovisions of this clause shall not apply if the amount of loss
br ought for war d or unabsor bed depr eciation is n il; or ]
(iv) the amount of pr ofits der ived by an industr ial under taking fr om the
business of gener ation or gener ation and distr ibution of power ; or
(v) the amount of pr ofits der ived by an industr ial under taking located in
an industr ially backwar d State or distr ict as r efer r ed to in
56
[sub-
section (4) and sub-section (5) of section 80-IB], for the assessment
year s such industr ial under taking is eligible to claim a deduction of
hundr ed per cent of the
57
[pr ofits and gains under sub-section (4) or
sub-section (5) of section 80-IB]; or
1.561 CH. XII-B - SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES S. 115JA
55. Substituted by the Finance Act, 2002, w.r .e.f. 1-4-1997. Pr ior to its substitution, clause (iii)
and the Explan ation t her et o r ead as under :
(iii) the amount of loss br ought for war d or unabsor bed depr eciation, whichever is less
as per books of account.
Explan ation .For the pur poses of this clause, the loss shall not include depr ecia-
tion; or
56. Substituted for sub-clause (b) or sub-clause (c) of clause (iv) of sub-section (2) of section
80-IA by the Finance Act, 1999, w.e.f. 1-4-2000.
57. Substituted for pr ofits and gains under sub-section (5) of section 80-IA, ibid.
(vi) the amount of pr ofits der ived by an industr ial under taking fr om the
business of developing, maintaining and oper ating any infr astr uctur e
facility
58
[as defined in the Explan ation to sub-section (4) of section
80-IA and subject to fulfilling the conditions laid down in that sub-
section]; or
(vii) the amount of pr ofits of sick industr ial company for the assessment
year commencing fr om the assessment year r elevant to the pr evious
year in which the said company has become a sick industr ial com-
pany under sub-section (1) of section 17 of the Sick Industr ial
Companies (Special Pr ovisions) Act, 1985 (1 of 1986) and ending with
the assessment year dur ing which the entir e net wor th of such
company becomes equal to or exceeds the accumulated losses.
the meaning assigned to it in clause (ga)
59
of sub-section (1) of section
3 of the Sick Industr ial Companies (Special Pr ovisions) Act, 1985 (1 of
1986);
60
[or ]
60
[(viii) the amount of pr ofits eligible for deduction under section 80HHC,
computed under clause (a), (b) or (c) of sub-section (3) or sub-section
(3A), as the case may be, of that section, and subject to the conditions
specified in sub-sections (4) and (4A) of that section;
(ix) the amount of pr ofits eligible for deduction under section 80HHE,
computed under sub-section (3) of that section.]
amounts in r elation to the r elevant pr evious year to be car r ied for war d to the
section 73 or section 74 or sub-section (3) of section 74A.
(4) Save as other wise pr ovided in this section, all other pr ovisions of this Act shall
apply to ever y assessee, being a company, mentioned in this section.]
61
[Tax credit in respect of tax paid on deemed income relating to certain companies.
115JAA. (1) Wher e any amount of tax is paid under sub-section (1) of section
115JA by an assessee being a company for any assessment year , then,
cr edit in r espect of tax so paid shall be allowed to him in accor dance with the
62
[(1A) Wher e any amount of tax is paid under sub-section (1) of section 115JB
by an assessee, being a company for the assessment year commencing on the 1st
day of Apr il, 2006 and any subsequent assessment year , then, cr edit in r espect of
tax so paid shall be allowed to him in accor dance with the pr ovisions of this
section.]
S. 115JAA I.T. ACT, 1961 1.562
58. Substituted for under sub-section (12) of section 80-IA, and subject to fulfilling the
conditions laid down in sub-section (4A) of section 80-IA by the Finance Act, 1999, w.e.f.
1-4-2000.
59. For definition of net wor th, see Appendix.
63
[(2) The tax cr edit to be allowed under sub-section (1) shall be the differ ence
of the tax paid for any assessment year under sub-section (1) of section 115JA
and the amount of tax payable by the assessee on his total income computed in
accor dance with the other pr ovisions of this Act:
Provided that no inter est shall be payable on the tax cr edit allowed under sub-
section (1).
(2A) The tax cr edit to be allowed under sub-section (1A) shall be the differ ence
of the tax paid for any assessment year under sub-section (1) of section 115JB
and the amount of tax payable by the assessee on his total income computed in
accor dance with the other pr ovisions of this Act:
Provided that no inter est shall be payable on the tax cr edit allowed under sub-
section (1A).
(3) The amount of tax cr edit deter mined under sub-section (2) shall be car r ied
for war d and set off in accor dance with the pr ovisions of sub-sections (4) and (5)
but such car r y for war d shall not be allowed beyond the fifth assessment year
immediately succeeding the assessment year in which tax cr edit becomes al-
lowable under sub-section (1).
(3A) The amount of tax cr edit deter mined under sub-section (2A) shall be car r ied
for war d and set off in accor dance with the pr ovisions of sub-sections (4) and (5)
but such car r y for war d shall not be allowed beyond the seventh assessment year
immediately succeeding the assessment year in which tax cr edit becomes
allowable under sub-section (1A).]
(4) The tax cr edit shall be allowed set-off in a year when tax becomes payable on
the total income computed in accor dance with the pr ovisions of this Act other
than section 115JA
64
[or section 115JB, as the case may be].
(5) Set off in r espect of br ought for war d tax cr edit shall be allowed for any
assessment year to the extent of the differ ence between the tax on his total
income and the tax which would have been payable under the pr ovisions of sub-
section (1) of section 115JA
64
[or section 115JB, as the case may be] for that
assessment year .
(6) Wher e as a r esult of an or der under sub-section (1) or sub-section (3) of section
143, section 144, section 147, section 154, section 155, sub-section (4) of section
245D, section 250, section 254, section 260, section 262, section 263 or section 264,
1.563 CH. XII-B - SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES S. 115JAA
63. Sub-sections (2) to (3A) substituted for sub-sections (2) and (3) by the Finance Act, 2006,
w.e.f. 1-4-2007. Pr ior to their substitution, sub-sections (2) and (3), as amended by the
Finance Act, 2005, w.e.f. 1-4-2006, r ead as under :
(2) The tax cr edit to be allowed under sub-section (1) shall be the differ ence of the tax
paid for any assessment year under sub-section (1) of section 115JA or under sub-section
(1) of section 115JB, as the case may be, and the amount of tax payable by the assessee on
his total income computed in accor dance with the other pr ovisions of this Act :
Provided that no inter est shall be payable on the tax cr edit allowed under sub-section (1).
(3) The amount of tax cr edit deter mined under sub-section (2) shall be car r ied for war d
and set off in accor dance with the pr ovisions of sub-section (4) and sub-section (5) but
such car r y for war d shall not be allowed beyond the fifth assessment year immediately
succeeding the assessment year in which tax cr edit becomes allowable under sub-section
(1).
S. 115JB I.T. ACT, 1961 1.564
the amount of tax payable under this Act is r educed or incr eased, as the case may
be, the amount of tax cr edit allowed under this section shall also be incr eased or
r educed accor dingly.]
65
[Special provision for payment of tax by certain companies.
66
115JB. (1) Notwithstanding anything contained in any other pr ovision of this
Act, wher e in the case of an assessee, being a company, the income-tax,
payable on the total income as computed under this Act in r espect of any
pr evious year r elevant to the assessment year commencing on or after the 1st
day of Apr il,
67
[2007], is less than
68
[ten per cent] of its book pr ofit,
69
[such book
pr ofit shall be deemed to be the total income of the assessee and the tax payable
by the assessee on such total income shall be the amount of income-tax at the r ate
of
68
[ten per cent]].
(2) Ever y assessee, being a company, shall, for the pur poses of this section,
with the pr ovisions of Par ts II and III of Schedule VI
70
to the Companies Act, 1956
(1 of 1956) :
Provided that while pr epar ing the annual accounts including pr ofit and loss
account,
(i) the accounting policies;
(ii) the accounting standar ds adopted for pr epar ing such accounts in-
cluding pr ofit and loss account;
(iii) the method and r ates adopted for calculating the depr eciation,
shall be the same as have been adopted for the pur pose of pr epar ing such
accounts including pr ofit and loss account and laid befor e the company at its
annual gener al meeting in accor dance with the pr ovisions of section 210 of the
Companies Act, 1956 (1 of 1956) :
Provided further that wher e the company has adopted or adopts the financial
year under the Companies Act, 1956 (1 of 1956), which is differ ent fr om the
pr evious year under this Act,
(i) the accounting policies;
(ii) the accounting standar ds adopted for pr epar ing such accounts in-
cluding pr ofit and loss account;
(iii) the method and r ates adopted for calculating the depr eciation,
shall cor r espond to the accounting policies, accounting standar ds and the
method and r ates for calculating the depr eciation which have been adopted for
pr epar ing such accounts including pr ofit and loss account for such financial year
or par t of such financial year falling within the r elevant pr evious year .
66. See also Cir cular No. 13/ 2001, dated 9-11-2001. For details, see Taxmanns Master Guide
to Income-tax Act.
68. Substituted for seven and one-half per cent, ibid.
69. Substituted for the tax payable for the r elevant pr evious year shall be deemed to be seven
and one-half per cent of such book pr ofit by the Finance Act, 2002, w.r .e.f. 1-4-2001.
Explan ation
70a
[1].For the pur poses of this section, book pr ofit means the net
pr ofit as shown in the pr ofit and loss account for the r elevant pr evious year
pr epar ed under sub-section (2), as incr eased by
(a) t he amount of income-t ax paid or payable, and t he pr ovision
ther efor ;or
(b) the amounts car r ied to any r eser ves, by whatever name called
71
[, other than a r eser ve specified under section 33AC]; or
(e) the amount or amounts of dividends paid or pr oposed ; or
which
72
[section 10 (other than the pr ovisions contained in clause (38)
ther eof) or
73
[***]

section 11 or section 12 apply; or ]
74
[(g) the amount of depr eciation,]
75
[(h) th e am oun t of deferred tax an d th e provision th erefor,
if an y am oun t ref erred to in clauses (a) to (h) is debited to th e profit an d loss
accoun t, an d as reduced by]
76
[(i) the amount withdr awn fr om any r eser ve or pr ovision (excluding a
r eser ve cr eated befor e the 1st day of Apr il, 1997 other wise than by
way of a debit to the pr ofit and loss account), if any such amount is
cr edited to the pr ofit and loss account:
Provided that wher e this section is applicable to an assessee in any
pr evious year , the amount withdr awn fr om r eser ves cr eated or
pr ovisions made in a pr evious year r elevant to the assessment
year commencing on or after the 1st day of Apr il, 1997 shall not
1.565 CH. XII-B - SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES S. 115JB
70a. Renumber ed as Explan ation 1 by the Finance Act, 2008, w.r .e.f. 1-4-2001.
72. Substituted for section 10 (other than the pr ovisions contained in clause (23G) ther eof)
or section 10A or section 10B or section 11 or section 12 apply, by the Finance Act, 2006,
w.e.f. 1-4-2007. Ear lier quoted por tion was amended by the Finance (No. 2) Act, 2004, w.e.f.
1-4-2005.
73. Wor ds sect ion 10A or sect ion 10B or omit t ed by t he Finance Act , 2007, w.e.f.
1-4-2008.
75. Substituted for the por tion beginning with the wor ds if any amount r efer r ed and ending
with the wor ds as r educed by by the Finance Act, 2008, w.r .e.f. 1-4-2001. Pr ior to its
substitution, this por tion as amended by the Finance Act, 2006, w.e.f. 1-4-2007 r ead as
under :
if any amount r efer r ed to in clauses (a) to (g) is debited to the pr ofit and loss account, and
as r educed by
76. Substituted by the Finance Act, 2002, w.r .e.f. 1-4-2001. Pr ior to their substitution, clause
(i) and the pr oviso r ead as under :
(i) the amount withdr awn fr om any r eser ves or pr ovisions, if any such amount is
cr edited to the pr ofit and loss account :
Provided that, wher e this section is applicable to an assessee in any pr evious year
(including t he r elevant pr evious year ), t he amount wit hdr awn fr om r eser ves
cr eated or pr ovisions made in a pr evious year r elevant to the assessment year
commencing on or after the 1st day of Apr il, 2001 shall not be r educed fr om the
book pr ofit unless the book pr ofit of such year has been incr eased by those r eser ves
or pr ovisions (out of which the said amount was withdr awn) under this Explan a-
tion ; or
S. 115JB I.T. ACT, 1961 1.566
be r educed fr om the book pr ofit unless the book pr ofit of such year
has been incr eased by those r eser ves or pr ovisions (out of which
t he said amou nt was wit hdr awn) u nder t his Explan ation or
Explan ation below the second pr oviso to section 115JA, as the case
may be; or ]
(ii) the amount of income to which any of the pr ovisions of
77
[section 10
(other than the pr ovisions contained in clause (38) ther eof )] or
78
[***]
section 11 or section 12 apply, if any such amount is cr edited to the
pr ofit and loss account; or
79
[(iia) the amount of depr eciation debited to the pr ofit and loss account
(excluding the depr eciation on account of r evaluation of assets); or
(iib) the amount withdr awn fr om r evaluation r eser ve and cr edited to the
pr ofit and loss account, to the extent it does not exceed the amount
of depr eciation on account of r evaluation of assets r efer r ed to in
clause (iia); or ]
80
[(iii) the amount of loss br ought for war d or unabsor bed depr eciation,
whichever is less as per books of account.
(a) the loss shall not include depr eciation;
(b) the pr ovisions of this clause shall not apply if the amount of loss
br ought for war d or unabsor bed depr eciation is n il; or ]
(iv) the amount of pr ofits eligible for deduction under section 80HHC,
computed under clause (a) or clause (b) or clause (c) of sub-section (3)
or sub-section (3A), as the case may be, of that section, and subject to
the conditions specified in that section; or
(v) the amount of pr ofits eligible for deduction under section 80HHE
computed under sub-section (3) or sub-section (3A), as the case may
be, of that section, and subject to the conditions specified in that
section; or
(vi) the amount of pr ofits eligible for deduction under section 80HHF
computed under sub-section (3) of that section, and subject to the
conditions specified in that section; or
(vii) the amount of pr ofits of sick industr ial company for the assessment
year commencing on and fr om the assessment year r elevant to the
pr evious year in which the said company has become a sick industr ial
company under sub-section (1) of section 17
81
of the Sick Industr ial
77. Substituted for section 10 (other than the pr ovisions contained in clause (23G) ther eof)
by the Finance Act, 2006, w.e.f. 1-4-2007. Pr ior to its substitution, the quoted wor ds wer e
78. Wor ds sect ion 10A or sect ion 10B or omit t ed by t he Finance Act , 2007, w.e.f.
1-4-2008.
80. Substituted by the Finance Act, 2002, w.r .e.f. 1-4-2001. Pr ior to their substitution, clause
(iii) and the Explan ation r ead as under :
(iii) the amount of loss br ought for war d or unabsor bed depr eciation, whichever is less
as per books of account.
Explan ation .For the pur poses of this clause, the loss shall not include depr ecia-
tion; or
81. For text of section 17 of the Sick Industr ial Companies (Special Pr ovisions) Act, 1985, see
Appendix.
1.567 CH. XII-C - SPECIAL PROVISIONS RELATING TO RETAIL TRADE, ETC. S. 115JB
Companies (Special Pr ovisions) Act, 1985 (1 of 1986) and ending with
the assessment year dur ing which the entir e net wor th of such
company becomes equal to or exceeds the accumulated losses.
the meaning assigned to it in clause (ga) of sub-section (1) of section
3
82
of the Sick Industr ial Companies (Special Pr ovisions) Act, 1985
(1 of 1986); or
82a
[(viii) th e am oun t of deferred tax, if an y such am oun t is credited to th e profit
an d loss accoun t.]
82a
[Explanation 2. For th e purposes of clause (a) of Explanation 1, th e am oun t
of in com e-tax sh all in clude
(i) an y tax on distributed profits un der section 115-O or on distributed
in com e un der section 115R;
(ii) an y in terest ch arged un der th is Act;
(iii) surch arge, if an y, as levied by th e Cen tral Acts from tim e to tim e;
(iv) Education Cess on in come-tax, if an y, as levied by th e Cen tral Acts from
tim e to tim e; an d
(v) Secon dary an d High er Education Cess on in com e-tax, if an y, as levied
by th e Cen tral Acts from tim e to tim e.]
amounts in r elation to the r elevant pr evious year to be car r ied for war d to the
section 73 or section 74 or sub-section (3) of section 74A.
(4) Ever y company to which this section applies, shall fur nish a r epor t in the
pr escr ibed for m
83
fr om an accountant as defined in the Explan ation below sub-
section (2) of section 288, cer tifying that the book pr ofit has been computed in
accor dance with the pr ovisions of this section along with the r etur n of income
filed under sub-section (1) of section 139 or along with the r etur n of income
fur nished in r esponse to a notice under clause (i) of sub-section (1) of section 142.
(5) Save as other wise pr ovided in this section, all other pr ovisions of this Act shall
apply to ever y assessee, being a company, mentioned in this section.]
84
[(6) The pr ovisions of this section shall not apply to the income accr ued or
ar ising on or after the 1st day of Apr il, 2005 fr om any business car r ied on, or
ser vices r ender ed, by an entr epr eneur or a Developer , in a Unit or Special
Economic Zone, as the case may be.]
CHAPTER XI I -C
SPECIAL PROVISIONS RELATING TO RETAIL TRADE, ETC.
[Ch apter XII-C, con sistin g of section s 115K to 115N, om itted by th e Fin an ce Act,
1997, w.e.f. 1-4-1998. Earlier Ch apter XII-C was in serted by th e Fin an ce Act, 1992,
w.e.f. 1-4-1993.]
82. Clause (ga) of section 3(1) of the Sick Industr ial Companies (Special Pr ovisions) Act, 1985,
defines net wor th. For text of section 3(1)(ga), see Appendix.
83. See r ule 40B and For m No. 29B. Rule 12 pr ovides that the r etur n of income shall not be
accompanied by any document or copy of any account or for m or r epor t of audit r equir ed
to be attached with r etur n of income under any of the pr ovisions of the Act.
S. 115K I.T. ACT, 1961 1.568
85. Pr ior to its omission, section 115K, as inser ted by the Finance Act, 1992, w.e.f. 1-4-1993, and
later on amended by the Finance Act, 1993, w.e.f. 1-4-1993/ 1-4-1994, the Finance Act, 1994,
w.e.f. 1-4-1995, the Finance Act, 1995, w.e.f. 1-4-1996 and the Finance (No. 2) Act, 1996,
115K. Special provision for computation of in come in certain cases.(1) Notwithstanding
anything contained in any other pr ovision of this Act r elating to the computation of
income char geable under the head Pr ofits and gains of business or pr ofession, in the case
of any per son, to whom this section applies and who is
(a) car r ying on the business of r etail tr ade in any goods or mer chandise; or
(b) car r ying on the business of r unning an eating place or of oper ating, hir ing or leasing
a motor cab, a maxicab or a thr ee-wheeled motor vehicle or any other business as
may be pr escr ibed; or
(c) engaged in any vocation,
and submits a statement in accor dance with the pr ovisions of sub-section (4), a sum of
for ty-nine thousand thr ee hundr ed and thir ty r upees shall be deemed to be the pr ofits and
gains of such per son fr om such business or vocation.
(2) The pr ovisions of sub-section (1) shall apply to any per son, being an individual or a
Hindu undivided family, wher e
(a) such per son has not been assessed to income-tax for any assessment year com-
mencing on or befor e the 1st day of Apr il, 1992;
(b) in the case of per son r efer r ed to in
(i) clause (a) of sub-section (1), his tur nover fr om the business of r etail tr ade
dur ing the r elevant pr evious year does not exceed seven lakh r upees and his
income fr om such business dur ing that year does not exceed for ty-nine
thousand thr ee hundr ed and thir ty r upees;
(ii) clause (b) or clause (c) of sub-section (1), his income fr om the said business
or vocation, dur ing the r elevant pr evious year does not exceed for ty-nine
thousand thr ee hundr ed and thir ty r upees; and
(c) such per son does not have any income, in excess of five thousand r upees in the
aggr egate, char geable to tax fr om any sour ce falling under any head of income
other than the income fr om the business or vocation r efer r ed to in clause (a), clause
(b) or , as the case may be, clause (c) of sub-section (1) dur ing the r elevant pr evious
year .
(3) Any per son to whom this section applies shall be liable to pay tax, at the r ate specified
in the Finance Act of the r elevant year for computing advance tax, on the income deemed
under sub-section (1) and the other income r efer r ed to in clause (c) of sub-section (2).
(4) Ever y statement r efer r ed to in sub-section (1) shall
(a) be in the pr escr ibed for m, contain the name of such per son, his addr ess, natur e of
business or vocation and a declar ation by him that,
(i) wher e he is car r ying on the business of r etail tr ade, his tur nover fr om such
tr ade dur ing the r elevant pr evious year does not exceed seven lakh r upees
and his income fr om such tr ade dur ing that year does not exceed for ty-nine
thousand thr ee hundr ed and thir ty r upees;
(ii) wher e he is car r ying on the business or vocation r efer r ed to in clause (b) or ,
as the case may be, clause (c) of that sub-section, his income dur ing the
r elevant pr evious year fr om such business or vocation does not exceed for ty-
nine thousand thr ee hundr ed and thir ty r upees,
and such statement shall also be ver ified in the pr escr ibed manner ;
(Con td. on p. 1.569)
Special provision for computation of income in certain cases.
115K.
85
1.569 CH. XII-C - SPECIAL PROVISIONS RELATING TO RETAIL TRADE, ETC. S. 115N
Return of income not to be filed in certain cases.
115L.
86
Special provision for disallowance of deductions and rebate of income-tax.
115M.
87
Bar of proceedings in certain cases.
115N.
88
(b) be submitted on or befor e the 31st day of Mar ch of the r elevant pr evious year along
with the pr oof of payment of the amount of tax r efer r ed to in sub-section (3).
(a) the expr essions motor cab, maxicab and motor vehicle shall have the meanings
r espectively assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of
1988);
(b) vocation includes tailor ing, hair -cutting, clothes washing, typing, photo-copying,
r epair wor k of any kind and other ser vices of a similar natur e.
Clauses (22), (25) and (28) of section 2 of the Motor Vehicles Act, 1988, define maxicab,
motor cab and motor vehicle, r espectively, as follows :
(22) maxicab means any motor vehicle constr ucted or adapted to car r y mor e than six
passenger s, but not mor e than twelve passenger s, excluding the dr iver , for hir e or
r ewar d;
(25) motor cab means any motor vehicle constr ucted or adapted to car r y not mor e
than six passenger s excluding the dr iver for hir e or r ewar d;
(28) motor vehicle or vehicle means any mechanically pr opelled vehicle adapted for
use upon r oads whether the power of pr opulsion is tr ansmitted ther eto fr om an
exter nal or inter nal sour ce and includes a chassis to which a body has not been
attached and a tr ailer ; but does not include a vehicle r unning upon fixed r ails or a
vehicle of a special type adapted for use only in a factor y or in any other enclosed
pr emises or a vehicle having less than four wheels fitted with engine capacity of not
exceeding twenty-five cubic centimetr es;
86. Pr ior to its omission, section 115L, as inser ted by the Finance Act, 1992, w.e.f. 1-4-1993,
r ead as under :
115L. Return of in come n ot to be filed in certain cases.Subject to the pr ovisions of
section 115N, a per son who has submitted a statement under sub-section (1) of section
115K shall not be r equir ed to fur nish a r etur n of income under sub-section (1) of section
139 and the other pr ovisions of Chapter XIV will not apply in his case.
87. Pr ior to its omission, section 115M, as inser ted by the Finance Act, 1992, w.e.f. 1-4-1993,
r ead as under :
115M. Special provision for disallowan ce of deduction s an d rebate of in come-tax.No
deduction under Chapter VI-A (except section 80L) or r ebate of income-tax under Chapter
VIII shall be allowed in the case of a per son who has submitted a statement under sub-
section (1) of section 115K.
88. Pr ior to its omission, section 115N, as inser ted by the Finance Act, 1992, w.e.f. 1-4-1993 and
later on amended by the Finance Act, 1993, w.e.f. 1-4-1993 and the Finance Act, 1994, w.e.f.
115N. Bar of proceedin gs in certain cases.No pr oceeding under any other Chapter of this
Act shall be initiated against any per son who has submitted a statement under sub-section
(1) of section 115K for the r elevant assessment year unless the Deputy Commissioner , in
consequence of evidence in his possession, has r eason to believe that the statement
fur nished by any per son under section 115K is untr ue.
S. 115-O I.T. ACT, 1961 1.570
89
[CHAPTER XI I -D
SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED
PROFITS OF DOMESTIC COMPANIES
Tax on distributed profits of domestic companies.
115-O.
90
[(1) Notwithstanding anything contained in any other pr ovision of
this Act and subject to the pr ovisions of this section, in addition to the
income-tax char geable in r espect of the total income of a domestic company for
any assessment year , any amount declar ed, distr ibuted or paid by such company
by way of dividends (whether inter im or other wise) on or after the 1st day of
Apr il, 2003, whether out of cur r ent or accumulated pr ofits shall be char ged to
additional income-tax (her eafter r efer r ed to as tax on distr ibuted pr ofits) at the
r ate of
91
[fifteen] per cent.]
91a
[(1A) Th e am oun t referred to in sub-section (1) sh all be reduced by th e am oun t
of dividen d, if an y, received by th e dom estic com pan y durin g th e fin an cial year,
if
(a) such dividen d is received from its subsidiary;
(b) th e subsidiary h as paid tax un der th is section on such dividen d; an d
(c) th e dom estic com pan y is n ot a subsidiary of an y oth er com pan y:
Provided th at th e sam e am oun t of dividen d sh all n ot be tak en in to accoun t for
reduction m ore th an on ce.
Explanation.For th e purposes of th is sub-section , a com pan y sh all be a subsi-
diary of an oth er com pan y, if such oth er com pan y h olds m ore th an h alf in
n om in al value of th e equity sh are capital of th e com pan y.]
(2) Notwithstanding that no income-tax is payable by a domestic company on its
total income computed in accor dance with the pr ovisions of this Act, the tax on
distr ibuted pr ofits under sub-section (1) shall be payable by such company.
(3) The pr incipal officer of the domestic company and the company shall be liable
to pay the tax on distr ibuted pr ofits to the cr edit of the Centr al Gover nment
within four teen days fr om the date of
(a) declar ation of any dividend; or
(b) distr ibution of any dividend; or
(c) payment of any dividend,
whichever is ear liest.
89. Chapter XII-D, consisting of sections 115-O to 115Q, inser ted by the Finance Act, 1997,
w.e.f. 1-6-1997.
(1), as amended by the Finance Act, 2000, w.e.f. 1-6-2000, Finance Act, 2001, w.e.f. 1-6-2001
(1) Notwithstanding anything contained in any other pr ovision of this Act and subject to
the pr ovisions of this section, in addition to the income-tax char geable in r espect of the
total income of a domestic company for any assessment year , any amount declar ed,
distr ibuted or paid by such company by way of dividends (whether inter im or other wise)
on or after the 1st day of June, 1997 but on or befor e the 31st day of Mar ch, 2002, whether
out of cur r ent or accumulated pr ofits shall be char ged to additional income-tax (her eafter
r efer r ed to as tax on distr ibuted pr ofits) at the r ate of ten per cent.
91. Substituted for twelve and one-half by the Finance Act, 2007, w.e.f. 1-4-2007.
(4) The tax on distr ibuted pr ofits so paid by the company shall be tr eated as the
final payment of tax in r espect of the amount declar ed, distr ibuted or paid as
dividends and no fur ther cr edit ther efor shall be claimed by the company or by
any other per son in r espect of the amount of tax so paid.
(5) No deduction under any other pr ovision of this Act shall be allowed to the
company or a shar eholder in r espect of the amount which has been char ged to
tax under sub-section (1) or the tax ther eon.
92
[(6) Notwithstanding anything contained in this section, no tax on distr ibuted
pr ofits shall be char geable in r espect of the total income of an under taking or
enter pr ise engaged in developing or developing and oper ating or developing,
oper ating and maintaining a Special Economic Zone for any assessment year on
any amount declar ed, distr ibuted or paid by such Developer or enter pr ise, by
way of dividends (whether inter im or other wise) on or after the 1st day of Apr il,
2005 out of its cur r ent income either in the hands of the Developer or enter pr ise
or the per son r eceiving such dividend
93
[***]].
Interest payable for non-payment of tax by domestic companies.
115P. Wher e the pr incipal officer of a domestic company and the company fails
to pay the whole or any par t of the tax on distr ibuted pr ofits r efer r ed to
in sub-section (1) of section 115-O, within the time allowed under sub-section (3)
of that section, he or it shall be liable to pay simple inter est at the r ate of
94
[one]
per cent for ever y month or par t ther eof on the amount of such tax for the per iod
beginning on the date immediately after the last date on which such tax was
payable and ending with the date on which the tax is actually paid.
When company is deemed to be in default.
115Q. If any pr incipal officer of a domestic company and the company does not
pay tax on distr ibuted pr ofits in accor dance with the pr ovisions of
section 115-O, then, he or it shall be deemed to be an assessee in default in r espect
of the amount of tax payable by him or it and all the pr ovisions of this Act for the
collection and r ecover y of income-tax shall apply.
Explan ation .For the pur poses of this Chapter , the expr ession dividends shall
have the same meaning as is given to dividend in clause (22) of section 2 but
shall not include sub-clause (e) ther eof.]
95
[CHAPTER XI I -E
SPECIAL PROVISIONS RELATING TO TAX ON
DISTRIBUTED INCOME
Tax on distributed income to unit holders.
115R. (1) Notwithstanding anything contained in any other pr ovisions of
this Act and section 32 of the Unit Tr ust of India Act, 1963 (52 of 1963),
1.571 CH. XII-E - SPECIAL PROVISIONS ON DISTRIBUTED INCOME S. 115R
93. Wor ds not falling under clause (23G) of section 10 omitted by the Finance Act, 2006, w.e.f.
1-4-2007.
94. Substituted for one and one-four th by the Taxation Laws (Amendment) Act, 2003, w.e.f.
8-9-2003. Ear lier the quoted wor ds wer e amended by the Finance Act, 2000, w.e.f. 1-6-2000
95. Chapter XII-E, consisting of sections 115R to 115T, inser ted by the Finance Act, 1999, w.e.f.
1-6-1999.
96
[any amount of income distr ibuted on or befor e the 31st day of Mar ch, 2002 by
the Unit Tr ust of India to its unit holder s] shall be char geable to tax and the Unit
Tr ust of India shall be liable to pay additional income-tax on such distr ibuted
income at the r ate of
97
[ten] per cent :
Provided that nothing contained in this sub-section shall apply in r espect of any
income distr ibuted to a unit holder of open-ended equity or iented funds in
r espect of any distr ibution made fr om such fund for a per iod of thr ee year s
commencing fr om the 1st day of Apr il, 1999.
98
[(2) Notwithstanding anything contained in any other pr ovision of this Act, any
amount of income distr ibuted by the specified company or a Mutual Fund to its
unit holder s shall be char geable to tax and such specified company or Mutual
Fund shall be liable to pay additional income-tax on such distr ibuted income
99
[at the r ate of
1
[(i) twenty-five per cent on income distr ibuted by a money mar ket
mutual fund or a liquid fund;
(ii) twelve and one-half per cent on income distr ibuted to any per son
being an individual or a Hindu undivided family by a fund other than
a money mar ket mutual fund or a liquid fund; and
(iii) twenty per cent on income distr ibuted to any other per son by a fund
other than a money mar ket mutual fund or a liquid fund:]]
Provided that nothing contained in this sub-section shall apply in r espect of any
income distr ibuted,
(a) by the Administr ator of the specified under taking, to the unit holder s;
or
(b) to a unit holder of
2
[***] equity or iented funds in r espect of any
distr ibution made fr om such funds
3
[***].
S. 115R I.T. ACT, 1961 1.572
96. Substituted for any amount of income distr ibuted by the Unit Tr ust of India to its unit-
holder s by the Finance Act, 2002, w.e.f. 1-4-2003.
97. Substituted for twenty by the Finance Act, 2001, w.e.f. 1-6-2001. Ear lier twenty was
substituted for ten by the Finance Act, 2000, w.e.f. 1-6-2000.
(2), as amended by the Finance Act, 2002, w.e.f. 1-4-2003, the Finance Act, 2001, w.e.f.
1-6-2001 and the Finance Act, 2000, w.e.f. 1-6-2000, r ead as under :
(2) Notwithstanding anything contained in any other pr ovisions of this Act, any amount
of income distr ibuted on or befor e the 31st day of Mar ch, 2002 by a Mutual Fund to its
unit-holder s shall be char geable to tax and such Mutual Fund shall be liable to pay
additional income-tax at the r ate of ten per cent :
Provided that nothing contained in this sub-section shall apply in r espect of any income
distr ibuted to a unit holder of open-ended equity or iented funds in r espect of any
distr ibution made fr om such fund for a per iod of thr ee year s commencing fr om the 1st
day of Apr il, 1999.
99. Substituted for at the r ate of twelve and one-half per cent by the Finance (No. 2) Act, 2004,
w.r .e.f. 9-7-2004.
1. Subst it ut ed for clauses (i) and (ii) by the Finance Act, 2007, w.e.f. 1-4-2007. Pr ior to their
subst it ut ion, clauses (i) and (ii) r ead as under :
(i) t welve and one-half per cent on income dist r ibut ed t o any per son being an
individual or a Hindu undivided family; and
(ii) twenty per cent on income distr ibuted to any other per son:
2. Wor d open-ended omitted by the Finance Act, 2006, w.e.f. 1-6-2006.
3. Wor ds for a per iod of one year commencing fr om the 1st day of Apr il, 2003 omitted by
the Finance (No. 2) Act, 2004, w.r .e.f. 1-4-2004.
Explan ation .For the pur poses of this sub-section, Administr ator and speci-
fied company shall have the meanings r espectively assigned to them in the
Explan ation to clause (35) of section 10.]
(3) The per son r esponsible for making payment of the income distr ibuted by the
Unit Tr ust of India or a Mutual Fund and the Unit Tr ust of India or the Mutual
Fund, as the case may be, shall be liable to pay tax to the cr edit of the Centr al
Gover nment within four teen days fr om the date of distr ibution or payment of
such income, whichever is ear lier .
4
[(3A) The per son r esponsible for making payment of the income distr ibuted by
the Unit Tr ust of India or a Mutual Fund and the Unit Tr ust of India or the Mutual
Fund, as the case may be, shall on or befor e the 15th day of September in each
year , fur nish to the pr escr ibed income-tax author ity
5
, a statement in the pr e-
scr ibed for m and ver ified in the pr escr ibed manner , giving the details of the
amount of income distr ibuted to unit holder s dur ing the pr evious year , the tax
paid ther eon and such other r elevant details as may be pr escr ibed
5
.]
(4) No deduction under any other pr ovision of this Act shall be allowed to the Unit
Tr ust of India or to a Mutual Fund in r espect of the income which has been
char ged to tax under sub-section (1) or sub-section (2).
Interest payable for non-payment of tax.
115S. Wher e the per son r esponsible for making payment of the income distr i-
buted by the
6
[specified company as r efer r ed to in clause (h ) of section
2 of the Unit Tr ust of India (Tr ansfer of Under taking and Repeal) Act, 2002
7
(58
of 2002) or a Mutual Fund and the specified company] or the Mutual Fund, as
the case may be, fails to pay the whole or any par t of the tax r efer r ed to in sub-
section (1) or sub-section (2) of section 115R, within the time allowed under sub-
section (3) of that section, he or it shall be liable to pay simple inter est at the r ate
of
8
[one] per cent ever y month or par t ther eof on the amount of such tax for the
per iod beginning on the date immediately after the last date on which such tax
was payable and ending with the date on which the tax is actually paid.
Unit Trust of India or Mutual Fund to be an assessee in default.
115T. If any per son r esponsible for making payment of the income distr ibuted
by the
9
[specified company as r efer r ed to in clause (h ) of section 2 of the
Unit Tr ust of India (Tr ansfer of Under taking and Repeal) Act, 2002
10
(58 of 2002)
or a Mutual Fund and the specified company] or the Mutual Fund, as the case
may be, does not pay tax, as is r efer r ed to in sub-section (1) or sub-section (2) of
1.573 CH. XII-E - SPECIAL PROVISIONS ON DISTRIBUTED INCOME S. 115T
5. See r ule 12B and For m Nos. 63 & 63A.
6. Substituted for Unit Tr ust of India or a Mutual Fund and the Unit Tr ust of India by the
Finance Act, 2003, w.e.f. 1-4-2003.
7. For text of section 2(h ) of the Unit Tr ust of India (Tr ansfer of Under taking & Repeal) Act,
2003, see Taxmanns Dir ect Taxes Manual, Vol. 3.
9. Substituted for Unit Tr ust of India or a Mutual Fund and the Unit Tr ust of India by the
Finance Act, 2003, w.e.f. 1-4-2003.
10. For text of section 2(h ) of the Unit Tr ust of India (Tr ansfer of Under taking & Repeal) Act,
2003, see Taxmanns Dir ect Taxes Manual, Vol. 3.
section 115R, then, he or it shall be deemed to be an assessee in default in r espect
of the amount of tax payable by him or it and all the pr ovisions of this Act for the
collection and r ecover y of income-tax shall apply.
Explan ation . For the pur poses of this Chapter ,
(a) Mutual Fund means a Mutual Fund specified under clause (23D) of
section 10;
(b)
11
[***] equity or iented fund means
(i) the Unit Scheme, 1964 made by the Unit Tr ust of India; and
(ii) such fund wher e the investible funds ar e invested by way of
equity shar es in domestic companies to the extent of mor e than
12
[sixty-five] per cent of the total pr oceeds of such fund:
Provided that the per centage of equity shar e holding of the fund shall
be computed with r efer ence to the annual aver age of the monthly
aver ages of the opening and closing figur es;
(c) Unit Tr ust of India means the Unit Tr ust of India established under
the Unit Tr ust of India Act, 1963 (52 of 1963);]
13
[(d) money mar ket mutual fund means a money mar ket mutual fund as
defined in sub-clause (p) of clause (2) of the Secur ities and Exchange
Boar d of India (Mutual Funds) Regulations
14
, 1996;
(e) liquid fund means a scheme or plan of a mutual fund which is
classified by the Secur ities and Exchange Boar d of India as a liquid
fund in accor dance with the guidelines issued by it in this behalf
under the Secur ities and Exchange Boar d of India Act, 1992 (15 of
1992) or r egulations made ther eunder .]
15
[CHAPTER XI I -F
SPECIAL PROVISIONS RELATING TO TAX ON INCOME RECEIVED
FROM VENTURE CAPITAL COMPANIES AND
VENTURE CAPITAL FUNDS
Tax on income in certain cases.
115U. (1) Notwithstanding anything contained in any other pr ovisions of this Act,
any income r eceived by a per son out of investments made in a ventur e
capital company or ventur e capital fund shall be char geable to income-tax in the
same manner as if it wer e the income r eceived by such per son had he made
investments dir ectly in the ventur e capital under taking.
(2) The per son r esponsible for making payment of the income on behalf of a
ventur e capital company or a ventur e capital fund and the ventur e capital
company or ventur e capital fund shall fur nish, within such time as may be
pr escr ibed, to the per son r eceiving such income and to the pr escr ibed income-
tax author ity
16
, a statement in the pr escr ibed for m
16
and ver ified in the pr escr ibed
S. 115U I.T. ACT, 1961 1.574
11. Wor d open-ended omitted by the Finance Act, 2006, w.e.f. 1-6-2006.
12. Substituted for fifty, ibid.
14. For meaning of the ter m money mar ket mutual fund, see Appendix.
manner , giving details of the natur e of the income paid dur ing the pr evious year
and such other r elevant details as may be pr escr ibed.
(3) The income paid by the ventur e capital company and the ventur e capital fund
shall be deemed to be of the same natur e and in the same pr opor tion in the hands
of the per son r eceiving such income as it had been r eceived by, or had accr ued
to, the ventur e capital company or the ventur e capital fund, as the case may be,
dur ing the pr evious year .
(4) The pr ovisions of Chapter XII-D or Chapter XII-E or Chapter XVII-B shall not
apply to the income paid by a ventur e capital company or ventur e capital fund
under this Chapter .
Explan ation .For the pur poses of this Chapter , ventur e capital company,
ventur e capital fund and ventur e capital under taking shall have the meanings
r espectively assigned to them in clause (23FB) of section 10.]
17
[CHAPTER XI I -G
SPECIAL PROVISIONS RELATING TO INCOME
OF SHIPPING COMPANIES
A.Mean in g of certain expression s
Definitions.
115V. In this Chapter , unless the context other wise r equir es,
(a) bar eboat char ter means hir ing of a ship for a stipulated per iod on
ter ms which give the char ter er possession and contr ol of the ship,
including the r ight to appoint the master and cr ew;
(b) bar eboat char ter -cum -demise means a bar eboat char ter wher e the
owner ship of the ship is intended to be tr ansfer r ed after a specified
per iod to the company to whom it has been char ter ed;
(c) Dir ector -Gener al of Shipping means the Dir ector -Gener al of Ship-
ping appointed by the Centr al Gover nment under sub-section (1) of
section 7 of the Mer chant Shipping Act, 1958 (44 of 1958);
(d) factor y ship includes a vessel pr oviding pr ocessing ser vices in
r espect of pr ocessing of the fishing pr oduce;
(e) fishing vessel shall have the meaning assigned to it in clause (12) of
section 3
18
of the Mer chant Shipping Act, 1958 (44 of 1958);
(f) pleasur e cr aft means a ship of a kind whose pr imar y use is for the
pur poses of spor t or r ecr eation;
(g) qualifying company means a company r efer r ed to in section 115VC;
(h) qualifying ship means a ship r efer r ed to in section 115VD;
(i) seagoing ship means a ship if it is cer tified as such by the competent
author ity of any countr y;
(j) tonnage income means the income of a tonnage tax company
computed in accor dance with the pr ovisions of this Chapter ;
(k) tonnage tax activities means the activities r efer r ed to in sub-
sections (2) and (5) of section 115V-I;
1.575 CH. XII-G - PROVISIONS RELATING TO SHIPPING COMPANIES S. 115V
17. Chapter XII-G, consisting of sections 115V to 115VZC, inser ted by the Finance (No. 2) Act,
2004, w.e.f. 1-4-2005.
18. For text of section 3(12) of the Mer chant Shipping Act, 1958, see Appendix.
(l) tonnage tax company means a qualifying company in r elation to
which tonnage tax option is in for ce;
(m) tonnage tax scheme means a scheme for computation of pr ofits and
gains of business of oper ating qualifying ships under the pr ovisions of
this Chapter .
B.Com putation of ton n age in com e from busin ess of
operatin g qualifyin g sh ips
Computation of profits and gains from the business of operating qualifying ships.
115VA. Notwithstanding anything to the contr ar y contained in sections 28 to
43C, in the case of a company, the income fr om the business of
oper ating qualifying ships, may, at its option, be computed in accor dance with
the pr ovisions of this Chapter and such income shall be deemed to be the pr ofits
and gains of such business char geable to tax under the head Pr ofits and gains
of business or pr ofession.
Operating ships.
115VB. For the pur poses of this Chapter , a company shall be r egar ded as
oper ating a ship if it oper ates any ship whether owned or char ter ed by
it and includes a case wher e even a par t of the ship has been char ter ed in by it
in an ar r angement such as slot char ter , space char ter or joint char ter :
Provided that a company shall not be r egar ded as the oper ator of a ship which
has been char ter ed out by it on bar eboat char ter -cum -demise ter ms or on
bar eboat char ter ter ms for a per iod exceeding thr ee year s.
Qualifying company.
115VC. For the pur poses of this Chapter , a company is a qualifying company
if
(a) it is an Indian company;
(b) the place of effective management of the company is in India;
(c) it owns at least one qualifying ship; and
(d) the main object of the company is to car r y on the business of
oper ating ships.
Explan ation .For the pur poses of this section, place of effective management
of the company means
(A) the place wher e the boar d of dir ector s of the company or its executive
dir ector s, as the case may be, make their decisions; or
(B) in a case wher e the boar d of dir ector s r outinely appr ove the commer -
cial and str ategic decisions made by the executive dir ector s or
officer s of the company, the place wher e such executive dir ector s or
officer s of the company per for m their functions.
Qualifying ship.
115VD. For the pur poses of this Chapter , a ship is a qualifying ship if
(a) it is a sea going ship or vessel of fifteen net tonnage or mor e;
S. 115VD I.T. ACT, 1961 1.576
1.577 CH. XII-G - PROVISIONS RELATING TO SHIPPING COMPANIES S. 115VF
(b) it is a ship r egister ed under the Mer chant Shipping Act, 1958 (44 of
1958), or a ship r egister ed outside India in r espect of which a licence
has been issued by the Dir ector -Gener al of Shipping under section
406 or section 407 of the Mer chant Shipping Act, 1958 (44 of 1958);
and
(c) a valid cer tificate in r espect of such ship indicating its net tonnage is
in for ce,
but does not include
(i) a sea going ship or vessel if the main pur pose for which it is used is the
pr ovision of goods or ser vices of a kind nor mally pr ovided on land;
(ii) fishing vessels;
(iii) factor y ships;
(iv) pleasur e cr afts;
(v) har bour and r iver fer r ies;
(vi) offshor e installations;
(vii)
19
[***]
(viii) a qualifying ship which is used as a fishing vessel for a per iod of mor e
than thir ty days dur ing a pr evious year .
Manner of computation of income under tonnage tax scheme.
115VE. (1) A tonnage tax company engaged in the business of oper ating
qualifying ships shall compute the pr ofits fr om such business under the
tonnage tax scheme.
(2) The business of oper ating qualifying ships giving r ise to income r efer r ed to in
sub-section (1) of section 115V-I shall be consider ed as a separ ate business
(her eafter in this Chapter r efer r ed to as the tonnage tax business) distinct fr om
all other activities or business car r ied on by the company.
(3) The pr ofits r efer r ed to in sub-section (1) shall be computed separ ately fr om
the pr ofits and gains fr om any other business.
(4) The tonnage tax scheme shall apply only if an option to that effect is made in
accor dance with the pr ovisions of section 115VP.
(5) Wher e a company engaged in the business of oper ating qualifying ships is not
cover ed under the tonnage tax scheme or , has not made an option to that effect,
as the case may be, the pr ofits and gains of such company fr om such business
shall be computed in accor dance with the other pr ovisions of this Act.
Tonnage income.
115VF. Subject to the other pr ovisions of this Chapter , the tonnage income
shall be computed in accor dance with section 115VG and the income
so computed shall be deemed to be the pr ofits char geable under the head Pr ofits
and gains of business or pr ofession and the r elevant shipping income r efer r ed
to in sub-section (1) of section 115V-I shall not be char geable to tax.
19. Omitted by the Finance Act, 2005, w.e.f. 1-4-2006. Pr ior to its omission, clause (vii) r ead as
under :
(vii) dr edger s;
Computation of tonnage income.
115VG. (1) The tonnage income of a tonnage tax company for a pr evious year
shall be the aggr egate of the tonnage income of each qualifying ship
computed in accor dance with the pr ovisions of sub-sections (2) and (3).
(2) For the pur poses of sub-section (1), the tonnage income of each qualifying
ship shall be the daily tonnage income of each such ship multiplied by
(a) the number of days in the pr evious year ; or
(b) the number of days in par t of the pr evious year in case the ship is
oper ated by the company as a qualifying ship for only par t of the
pr evious year , as the case may be.
(3) For the pur poses of sub-section (2), the daily tonnage income of a qualifying
ship having tonnage r efer r ed to in column (1) of the Table below shall be the
amount specified in the cor r esponding entr y in column (2) of the Table:
TABLE
Qualifyin g sh ip h avin g Am oun t of daily ton n age
n et ton n age in come
(1) (2)
up to 1,000 Rs. 46 for each 100 tons
exceeding 1,000 but not mor e Rs. 460 plus Rs. 35 for each
than 10,000 100 tons exceeding 1,000 tons
exceeding 10,000 but not mor e Rs. 3,610 plus Rs. 28 for each
than 25,000 100 tons exceeding 10,000 tons
exceeding 25,000 Rs. 7,810 plus Rs. 19 for each 100
tons exceeding 25,000 tons.
(4) For the pur poses of this Chapter , the tonnage shall mean the tonnage of a ship
indicated in the cer tificate r efer r ed to in section 115VX and includes the deemed
tonnage computed in the pr escr ibed manner
20
.
Explan ation .For the pur poses of this sub-section, deemed tonnage shall be
the tonnage in r espect of an ar r angement of pur chase of slots, slot char ter and
an ar r angement of shar ing of br eak-bulk vessel.
(5) The tonnage shall be r ounded off to the near est multiple of hundr ed tons and
for this pur pose any tonnage consisting of kilogr ams shall be ignor ed and
ther eafter if such tonnage is not a multiple of hundr ed, then, if the last figur e in
that amount is fifty tons or mor e, the tonnage shall be incr eased to the next higher
tonnage which is a multiple of hundr ed and if the last figur e is less than fifty tons,
the tonnage shall be r educed to the next lower tonnage which is a multiple of
hundr ed; and the tonnage so r ounded off shall be the tonnage of the ship for the
pur poses of this section.
(6) Notwithstanding anything contained in any other pr ovision of this Act, no
deduction or set off shall be allowed in computing the tonnage income under this
Chapter .
S. 115VG I.T. ACT, 1961 1.578
20. See r ule 11Q.
Calculation in case of joint operation, etc.
115VH. (1) Wher e a qualifying ship is oper ated by two or mor e companies by
way of joint inter est in the ship or by way of an agr eement for the use
of the ship and their r espective shar es ar e definite and ascer tainable, the tonnage
income of each such company shall be an amount equal to a shar e of income
pr opor tionate to its shar e of that inter est.
(2) Subject to the pr ovisions of sub-section (1), wher e two or mor e companies ar e
oper ator s of a qualifying ship, the tonnage income of each company shall be
computed as if each had been the only oper ator .
Relevant shipping income.
115V-I. (1) For the pur poses of this Chapter , the r elevant shipping income of a
tonnage tax company means
(i) its pr ofits fr om cor e activities r efer r ed to in sub-section (2);
(ii) its pr ofits fr om incidental activities r efer r ed to in sub-section (5):
Provided that wher e the aggr egate of all such incomes specified in clause (ii)
exceeds one-four th per cent of the tur nover fr om cor e activities r efer r ed to in
sub-section (2), such excess shall not for m par t of the r elevant shipping income
for the pur poses of this Chapter and shall be taxable under the other pr ovisions
of this Act.
(2) The cor e activities of a tonnage tax company shall be
(i) its activities fr om oper ating qualifying ships; and
(ii) other ship-r elated activities mentioned as under :
(A) shipping contr acts in r espect of
(i) ear ning fr om pooling ar r angements;
(ii) contr acts of affr eightment.
(a) pooling ar r angement means an agr eement between two or
mor e per sons for pr oviding ser vices thr ough a pool or oper -
ating one or mor e ships and shar ing ear nings or oper ating
pr ofits on the basis of mutually agr eed ter ms;
(b) contr act of affr eightment means a ser vice contr act under
which a tonnage tax company agr ees to tr anspor t a specified
quantity of specified pr oducts at a specified r ate, between
designated loading and dischar ging por ts over a specified
per iod;
(B) specific shipping tr ades, being
(i) on-boar d or on-shor e activities of passenger ships compr ising
of far es and food and bever ages consumed on boar d;
(ii) slot char ter s, space char ter s, joint char ter s, feeder ser vices,
container box leasing of container shipping.
by notification in the Official Gazette, exclude any activity r efer r ed to in clause
1.579 CH. XII-G - PROVISIONS RELATING TO SHIPPING COMPANIES S. 115V-I
(ii) of sub-section (2) or pr escr ibe the limit up to which such activities shall be
included in the cor e activities for the pur poses of this section.
(4) Ever y notification issued under this Chapter shall be laid, as soon as may be
after it is issued, befor e each House of Par liament, while it is in session for a total
per iod of thir ty days which may be compr ised in one session or in two or mor e
successive sessions, and if, befor e the expir y of the session immediately following
the session or the successive sessions afor esaid, both Houses agr ee in making any
modification in the notification, or both Houses agr ee that the notification should
not be issued, the notification shall ther eafter have effect only in such modified
for m or be of no effect, as the case may be; so, however , that any such
modification or annulment shall be without pr ejudice to the validity of anything
pr eviously done under that notification.
(5) The incidental activities shall be the activities which ar e incidental to the cor e
activities and which may be pr escr ibed
21
for the pur pose.
(6) Wher e a tonnage tax company oper ates any ship, which is not a qualifying
ship, the income attr ibutable to oper ating such non-qualifying ship shall be
computed in accor dance with the other pr ovisions of this Act.
(7) Wher e any goods or ser vices held for the pur poses of tonnage tax business ar e
tr ansfer r ed to any other business car r ied on by a tonnage tax company, or wher e
any goods or ser vices held for the pur poses of any other business car r ied on by
such tonnage tax company ar e tr ansfer r ed to the tonnage tax business and, in
either case, the consider ation, if any, for such tr ansfer as r ecor ded in the
accounts of the tonnage tax business does not cor r espond to the mar ket value
of such goods or ser vices as on the date of the tr ansfer , then, the r elevant shipping
income under this section shall be computed as if the tr ansfer , in either case, had
been made at the mar ket value of such goods or ser vices as on that date:
Provided that wher e, in the opinion of the Assessing Officer , the computation of
the r elevant shipping income in the manner her einbefor e specified pr esents
exceptional difficulties, the Assessing Officer may compute such income on such
Explan ation .For the pur poses of this sub-section, mar ket value, in r elation to
any goods or ser vices, means the pr ice that such goods or ser vices would
or dinar ily fetch on sale in the open mar ket.
(8) Wher e it appear s to the Assessing Officer that, owing to the close connection
between the tonnage tax company and any other per son, or for any other r eason,
the cour se of business between them is so ar r anged that the business tr ansacted
between them pr oduces to the tonnage tax company mor e than the or dinar y
pr ofits which might be expected to ar ise in the tonnage tax business, the
Assessing Officer shall, in computing the r elevant shipping income of the tonnage
tax company for the pur poses of this Chapter , take the amount of income as may
r easonably be deemed to have been der ived ther efr om.
Explan ation .For the pur poses of this Chapter , in case the r elevant shipping
income of a tonnage tax company is a loss, then, such loss shall be ignor ed for the
pur poses of computing tonnage income.
S. 115V-I I.T. ACT, 1961 1.580
21. See r ule 11R.
Treatment of common costs.
115VJ. (1) Wher e a tonnage tax company also car r ies on any business or
activity other than the tonnage tax business, common costs attr ibutable
to the tonnage tax business shall be deter mined on a r easonable basis.
(2) Wher e any asset, other than a qualifying ship, is not exclusively used for the
tonnage tax business by the tonnage tax company, depr eciation on such asset
shall be allocated between its tonnage tax business and other business on a fair
pr opor tion to be deter mined by the Assessing Officer , having r egar d to the use
of such asset for the pur pose of the tonnage tax business and for the other
business.
Depreciation.
115VK. (1) For the pur poses of computing depr eciation under clause (iv) of
section 115VL, the depr eciation for the fir st pr evious year of the
tonnage tax scheme (her eafter in this section r efer r ed to as the fir st pr evious
year ) shall be computed on the wr itten down value of the qualifying ships as
specified under sub-section (2).
(2) The wr itten down value of the block of assets, being ships, as on the fir st day
of the fir st pr evious year , shall be divided in the r atio of the book wr itten down
value of the qualifying ships (her eafter in this section r efer r ed to as the qualifying
assets) and the book wr itten down value of the non-qualifying ships (her eafter
in this section r efer r ed to as the other assets).
(3) The block of qualifying assets as deter mined under sub-section (2) shall
constitute a separ ate block of assets for the pur poses of this Chapter .
(4) For the pur poses of sub-section (2), the book wr itten down value of the block
of qualifying assets and the block of other assets shall be computed in the
following manner , namely:
(a) the book wr itten down value of each qualifying asset and each other
asset as on the fir st day of the pr evious year and which for m par t of
the block of assets to be divided shall be deter mined by taking the
book wr itten down value of each asset appear ing in the books of
account as on the last day of the pr eceding pr evious year :
Provided that any change in the value of the assets consequent to their
r evaluation after the date on which the Finance (No. 2) Act, 2004
r eceives the assent of the Pr esident shall be ignor ed;
(b) the book wr itten down value of all the qualifying assets and other
assets shall be aggr egated; and
(c) the r atio of the aggr egate book wr itten down value of the qualifying
assets to the aggr egate book wr itten down value of the other assets
shall be deter mined.
(5) Wher e an asset for ming par t of a block of qualifying assets begins to be used
for pur poses other than the tonnage tax business, an appr opr iate por tion of the
wr itten down value allocable to such asset shall be r educed fr om the wr itten
down value of that block and shall be added to the block of other assets.
Explan ation .For the pur poses of this sub-section, appr opr iate por tion of the
wr itten down value allocable to the asset, which begins to be used for pur poses
1.581 CH. XII-G - PROVISIONS RELATING TO SHIPPING COMPANIES S. 115VK
other than the tonnage tax business, shall be an amount which bear s the same
pr opor tion to the wr itten down value of the block of qualifying assets as on the
fir st day of the pr evious year as the book wr itten down value of the asset
beginning to be used for pur poses other than tonnage tax business bear s to the
book wr itten down value of all the assets for ming the block of qualifying asset.
(6) Wher e an asset for ming par t of a block of other assets begins to be used for
tonnage tax business, an appr opr iate por tion of the wr itten down value allocable
to such asset shall be r educed fr om the wr itten down value of the block of other
assets and shall be added to the block of qualifying asset.
Explan ation .For the pur poses of this sub-section, appr opr iate por tion of
wr itten down value allocable to the asset which begins to be used for the tonnage
tax business shall be an amount which bear s the same pr opor tion to the wr itten
down value of the block of other assets as on the fir st day of the pr evious year
as the book wr itten down value of the asset beginning to be used for tonnage tax
business bear s to the total book wr itten down value of all the assets for ming the
block of other assets.
(7) For the pur poses of computing depr eciation under clause (iv) of section
115VL in r espect of an asset mentioned in sub-sections (5) and (6), depr eciation
computed for the pr evious year shall be allocated in the r atio of the number of
days for which the asset was used for the tonnage tax business and for pur poses
other than tonnage tax business.
Explan ation 1.For the r emoval of doubts, it is her eby declar ed that for the
pur poses of this Act, depr eciation on the block of qualifying assets and block of
other assets so cr eated shall be allowed as if such wr itten down value r efer r ed
to in sub-section (2) had been br ought for war d fr om the pr eceding pr evious year .
Explan ation 2.For the pur poses of this section, book wr itten down value
means the wr itten down value as appear ing in the books of account.
General exclusion of deduction and set off, etc.
115VL. Notwithstanding anything contained in any other pr ovision of this
Act, in computing the tonnage income of a tonnage tax company for
any pr evious year (her eafter in this section r efer r ed to as the r elevant pr evious
year ) in which it is char geable to tax in accor dance with this Chapter
(i) sections 30 to 43B shall apply as if ever y loss, allowance or deduction
previous years, had been given full effect to for that previous year itself;
(ii) no loss r efer r ed to in sub-sections (1) and (3) of section 70 or sub-
sections (1) and (2) of section 71 or sub-section (1) of section 72 or sub-
section (1) of section 72A, in so far as such loss r elates to the business
of oper ating qualifying ships of the company, shall be car r ied for war d
or set off wher e such loss r elates to any of the pr evious year s when
the company is under the tonnage tax scheme;
(iii) no deduction shall be allowed under Chapter VI-A in r elation to the
pr ofits and gains fr om the business of oper ating qualifying ships; and
ten down value of any asset used for the pur poses of the tonnage tax
S. 115VL I.T. ACT, 1961 1.582
business shall be computed as if the company has claimed and has
been actually allowed the deduction in r espect of depr eciation for the
r elevant pr evious year s.
Exclusion of loss.
115VM. (1) Section 72 shall apply in r espect of any losses that have accr ued to
a company befor e its option for tonnage tax scheme and which ar e
attr ibutable to its tonnage tax business, as if such losses had been set off against
the r elevant shipping income in any of the pr evious year s when the company is
under the tonnage tax scheme.
(2) The losses r efer r ed to in sub-section (1) shall not be available for set off against
any income other than r elevant shipping income in any pr evious year beginning
on or after the company exer cises its option under section 115VP.
(3) Any appor tionment necessar y to deter mine the losses r efer r ed to in sub-
section (1) shall be made on a r easonable basis.
Chargeable gains from transfer of tonnage tax assets.
115VN. Any pr ofits or gains ar ising fr om the tr ansfer of a capital asset being an
asset for ming par t of the block of qualifying assets shall be char geable
to income-tax in accor dance with the pr ovisions of section 45, r ead with section
50, and the capital gains so ar ising shall be computed in accor dance with the
pr ovisions of sections 45 to 51:
Provided that for the pur pose of computing such pr ofits or gains, the pr ovisions
of section 50 shall have effect as if for the wor ds wr itten down value of the block
of assets, the wor ds wr itten down value of the block of qualifying assets had
been substituted.
Explan ation .For the pur poses of this Chapter , wr itten down value of the block
of qualifying assets means the wr itten down value computed in accor dance with
the pr ovisions of sub-section (2) of section 115VK.
Exclusion from provisions of section 115JB.
115V-O. The book pr ofit or loss der ived fr om the activities of a tonnage tax
company, r efer r ed to in sub-section (1) of section 115V-I, shall be
excluded fr om the book pr ofit of the company for the pur poses of section 115JB.
C.Procedure for option of ton n age tax sch em e
Method and time of opting for tonnage tax scheme.
115VP. (1) A qualifying company may opt for the tonnage tax scheme by
making an application to the Joint Commissioner having jur isdiction
over the company in the for m and manner as may be pr escr ibed
22
, for such
scheme.
(2) The application under sub-section (1) may be made by any existing qualifying
company at any time after the 30th day of September , 2004 but befor e the 1st day
of Januar y, 2005 (her eafter r efer r ed to as the initial per iod):
1.583 CH. XII-G - PROVISIONS RELATING TO SHIPPING COMPANIES S. 115VP
22. See r ule 11P and For m No. 65.
Provided that
(i) a company incor por ated after the initial per iod; or
(ii) a qualifying company incor por ated befor e the initial per iod but
which becomes a qualifying company for the fir st time after the initial
per iod,
may make an application within thr ee months of the date of its incor por ation or
the date on which it became a qualifying company, as the case may be.
(3) On r eceipt of an application for option for tonnage tax scheme under sub-
section (1), the Joint Commissioner may call for such infor mation or documents
fr om the company as he thinks necessar y in or der to satisfy himself about the
eligibility of the company and after satisfying himself about such eligibility of the
company to make such option for tonnage tax scheme, he
(i) shall pass an or der in wr iting appr oving the option for tonnage tax
scheme; or
(ii) shall, if he is not so satisfied, pass an or der in wr iting r efusing to
appr ove the option for tonnage tax scheme,
and a copy of such or der shall be sent to the applicant:
Provided that no or der under clause (ii) shall be passed unless the applicant has
been given a r easonable oppor tunity of being hear d.
(4) Ever y or der gr anting or r efusing the appr oval of the option for tonnage tax
scheme under clause (i) or clause (ii), as the case may be, of sub-section (3) shall
be passed befor e the expir y of one month fr om the end of the month in which the
application was r eceived under sub-section (1).
(5) Wher e an or der gr anting appr oval is passed under sub-section (3), the
pr ovisions of this Chapter shall apply fr om the assessment year r elevant to the
pr evious year in which the option for tonnage tax scheme is exer cised.
Period for which tonnage tax option to remain in force.
115VQ. (1) An option for tonnage tax scheme, after it has been appr oved under
sub-section (3) of section 115VP, shall r emain in for ce for a per iod of
ten year s fr om the date on which such option has been exer cised and shall be
taken into account fr om the assessment year r elevant to the pr evious year in
which such option is exer cised.
(2) An option for tonnage tax scheme shall cease to have effect fr om the
assessment year r elevant to the pr evious year in which
(a) the qualifying company ceases to be a qualifying company;
(b) a default is made in complying with the pr ovisions contained in
section 115VT or section 115VU or section 115VV;
(c) the tonnage tax company is excluded fr om the tonnage tax scheme
under section 115VZC;
(d) the qualifying company fur nishes to the Assessing Officer , a declar a-
tion in wr iting to the effect that the pr ovisions of this Chapter may not
be made applicable to it,
S. 115VQ I.T. ACT, 1961 1.584
and the pr ofits and gains of the company fr om the business of oper ating
qualifying ships shall be computed in accor dance with the other pr ovisions of this
Act.
Renewal of tonnage tax scheme.
115VR. (1) An option for tonnage tax scheme appr oved under sub-section (3)
of section 115VP may be r enewed within one year fr om the end of the
pr evious year in which the option ceases to have effect.
(2) The pr ovisions of sections 115VP and 115VQ shall apply in r elation to a
r enewal of the option for tonnage tax scheme in the same manner as they apply
in r elation to the appr oval of option for tonnage tax scheme.
Prohibition to opt for tonnage tax scheme in certain cases.
115VS. A qualifying company, which, on its own, opts out of the tonnage tax
scheme or makes a default in complying with the pr ovisions of section
115VT or section 115VU or section 115VV or whose option has been excluded
fr om tonnage tax scheme in pur suance of an or der made under sub-section (1)
of section 115VZC, shall not be eligible to opt for tonnage tax scheme for a per iod
of ten year s fr om the date of opting out or default or or der , as the case may be.
D.Con dition s for applicability of ton n age tax sch em e
Transfer of profits to Tonnage Tax Reserve Account.
115VT. (1) A tonnage tax company shall, subject to and in accor dance with the
pr ovisions of this section, be r equir ed to cr edit to a r eser ve account
(her eafter in this section r efer r ed to as the Tonnage Tax Reser ve Account) an
amount not less than twenty per cent of the book pr ofit der ived fr om the
activities r efer r ed to in clauses (i) and (ii) of sub-section (1) of section 115V-I in
each pr evious year to be utilised in the manner laid down in sub-section (3):
Provided that a tonnage tax company may tr ansfer a sum in excess of twenty per
cent of the book pr ofit and such excess sum tr ansfer r ed shall also be utilised in
the manner laid down in sub-section (3).
Explan ation .For the pur poses of this section, book pr ofit shall have the same
meaning as in the Explan ation to sub-section (2) of section 115JB so far as it
r elates to the income der ived fr om the activities r efer r ed to in clauses (i) and (ii)
of sub-section (1) of section 115V-I.
(2) Wher e the company has book pr ofit fr om the business of oper ating qualifying
ships and book loss fr om any other sour ces, and consequently, the company is
not in a position to cr eate the full or any par t of the r eser ves under sub-section
(1), the company shall cr eate the r eser ves to the extent possible in that pr evious
year and the shor tfall, if any, shall be added to the amount of the r eser ves
r equir ed to be cr eated for the following pr evious year and such shor tfall shall be
deemed to be par t of the r eser ve r equir ement of that following pr evious year :
Provided that to the extent the shor tfall in cr eation of r eser ves dur ing a
par ticular pr evious year is car r ied for war d to the following pr evious year under
this sub-section, the company shall be consider ed as having cr eated sufficient
r eser ves for the fir st mentioned pr evious year :
1.585 CH. XII-G - PROVISIONS RELATING TO SHIPPING COMPANIES S. 115VT
Provided further that nothing contained in the fir st pr oviso shall apply in r espect
of the second year in case the shor tfall in cr eation of r eser ves continues for two
consecutive pr evious year s.
(3) The amount cr edited to the Tonnage Tax Reser ve Account under sub-section
(1) shall be utilised by the company befor e the expir y of a per iod of eight year s
next following the pr evious year in which the amount was cr edited
(a) for acquir ing a new ship for the pur poses of the business of the
company; and
(b) until the acquisition of a new ship, for the pur poses of the business of
oper ating qualifying ships other than for distr ibution by way of
dividends or pr ofits or for r emittance outside India as pr ofits or for
the cr eation of any asset outside India.
(4) Wher e any amount cr edited to the Tonnage Tax Reser ve Account under sub-
section (1),
(a) has been utilised for any pur pose other than that r efer r ed to in clause
(a) or clause (b) of sub-section (3); or
(b) has not been utilised for the pur pose specified in clause (a) of sub-
section (3); or
(c) has been utilised for the pur pose of acquir ing a new ship as specified
in clause (a) of sub-section (3), but such ship is sold or other wise
tr ansfer r ed, other than in any scheme of demer ger by the company
to any per son at any time befor e the expir y of thr ee year s fr om the end
of the pr evious year in which it was acquir ed,
an amount which bear s the same pr opor tion to the total r elevant shipping
income of the year in which such r eser ve was cr eated, as the amount out of such
r eser ve so utilised or not utilised bear s to the total r eser ve cr eated dur ing that
year under sub-section (1) shall be taxable under the other pr ovisions of this
Act
so utilised; or
the per iod of eight year s specified in sub-section (3); or
(iii) in a case r efer r ed to in clause (c), in the year in which the sale or
tr ansfer took place:
Provided that the income so taxable under the other pr ovisions of this Act shall
be r educed by the pr opor tionate tonnage income char ged to tax in the year of
cr eation of such r eser ves.
(5) Notwithstanding anything contained in any other pr ovision of this Chapter ,
wher e the amount cr edited to the Tonnage Tax Reser ve Account in accor dance
with sub-section (1) is less than the minimum amount r equir ed to be cr edited
under sub-section (1), an amount which bear s the same pr opor tion to the total
r elevant shipping income, as the shor tfall in cr edit to the r eser ves bear s to the
minimum r eser ve r equir ed to be cr edited under sub-section (1) shall not be
taxable under the tonnage tax scheme and shall be taxable under the other
pr ovisions of this Act.
S. 115VT I.T. ACT, 1961 1.586
(6) If the r eser ve r equir ed to be cr eated under sub-section (1) is not cr eated for
any two consecutive pr evious year s, the option of the company for tonnage tax
scheme shall cease to have effect fr om the beginning of the pr evious year
following the second consecutive pr evious year in which the failur e to cr eate the
r eser ve under sub-section (1) had occur r ed.
Explan ation .For the pur poses of this section, new ship includes a qualifying
ship which, befor e the date of acquisition by the qualifying company was used
by any other per son, if it was not at any time pr evious to the date of such
acquisition owned by any per son r esident in India.
Minimum training requirement for tonnage tax company.
115VU. (1) A tonnage tax company, after its option has been appr oved under
sub-section (3) of section 115VP, shall comply with the minimum
tr aining r equir ement in r espect of tr ainee officer s in accor dance with the
guidelines
23
fr amed by the Dir ector -Gener al of Shipping and notified in the
Official Gazette by the Centr al Gover nment.
(2) The tonnage tax company shall be r equir ed to fur nish a copy of the cer tificate
issued by the Dir ector -Gener al of Shipping along with the r etur n of income
under section 139 to the effect that such company has complied with the
minimum tr aining r equir ement in accor dance with the guidelines r efer r ed to in
sub-section (1) for the pr evious year .
(3) If the minimum tr aining r equir ement is not complied with for any five
consecutive pr evious year s, the option of the company for tonnage tax scheme
shall cease to have effect fr om the beginning of the pr evious year following the
fifth consecutive pr evious year in which the failur e to comply with the minimum
tr aining r equir ement under sub-section (1) had occur r ed.
Limit for charter in of tonnage.
24
115VV. (1) In the case of ever y company which has opted for tonnage tax
scheme, not mor e than for ty-nine per cent of the net tonnage of the
qualifying ships oper ated by it dur ing any pr evious year shall be char ter ed in.
(2) The pr opor tion of net tonnage r efer r ed to in sub-section (1) in r espect of a
pr evious year shall be calculated based on the aver age of net tonnage dur ing that
pr evious year .
(3) For the pur poses of sub-section (2), the aver age of net tonnage shall be
computed in such manner as may be pr escr ibed in consultation with the
Dir ector -Gener al of Shipping.
(4) Wher e the net tonnage of ships char ter ed in exceeds the limit under sub-
section (1) dur ing any pr evious year , the total income of such company in r elation
to that pr evious year shall be computed as if the option for tonnage tax scheme
does not have effect for that pr evious year .
(5) Wher e the limit under sub-section (1) had exceeded in any two consecutive
pr evious year s, the option for tonnage tax scheme shall cease to have effect fr om
the beginning of the pr evious year following the second consecutive pr evious
year in which the limit had exceeded.
1.587 CH. XII-G - PROVISIONS RELATING TO SHIPPING COMPANIES S. 115VV
23. See Notification No. SO 1436(E), dated 31-12-2004. For text of Guidelines, see Taxmanns
Income-tax Rules.
24. See r ule 11S.
Explan ation .For the pur poses of this section, the ter m char ter ed in shall
exclude a ship char t er ed in by t he company on bar eboat char t er -cum -
demise ter ms.
Maintenance and audit of accounts.
115VW. An option for tonnage tax scheme by a tonnage tax company shall not
have effect in r elation to a pr evious year unless such company
(i) maintains separ ate books of account in r espect of the business of
oper ating qualifying ships; and
(ii) fur nishes, along with the r etur n of income for that pr evious year , the
r epor t of an accountant, in the pr escr ibed for m
25
duly signed and
ver ified by such accountant.
Explan ation .For the pur poses of this section, accountant shall have the same
meaning as in the Explan ation below sub-section (2) of section 288.
Determination of tonnage.
115VX. (1) For the pur poses of this Chapter ,
(a) the tonnage of a ship shall be deter mined in accor dance with the valid
cer tificate indicating its tonnage;
(b) valid cer tificate means,
(i) in case of ships r egister ed in India
(a) having a length of less than twenty-four metr es, a cer tificate
issued under the Mer chant Shipping (Tonnage Measur ement
of Ship) Rules, 1987 made under the Mer chant Shipping Act,
1958 (44 of 1958);
(b) having a length of twenty-four metr es or mor e, an inter na-
tional tonnage cer tificate issued under the pr ovisions of the
Convention on Tonnage Measur ement of Ships, 1969, as
specified in the Mer chant Shipping (Tonnage Measur ement
of Ship) Rules, 1987 made under the Mer chant Shipping Act,
1958 (44 of 1958);
(ii) in case of ships r egister ed outside India, a licence issued by the
Dir ector -Gener al of Shipping under section 406 or section 407 of
the Mer chant Shipping Act, 1958 (44 of 1958) specifying the net
tonnage on the basis of Tonnage Cer tificate issued by the Flag
State Administr ation wher e the ship is r egister ed or any other
evidence acceptable to the Dir ector -Gener al of Shipping pr o-
duced by the ship owner while seeking per mission for char ter ing
in the ship.
E.Am algam ation an d dem erger of sh ippin g com pan ies
Amalgamation.
115VY. Wher e ther e has been an amalgamation of a company with another
company or companies, then, subject to the other pr ovisions of this
S. 115VY I.T. ACT, 1961 1.588
25. See r ule 11T and For m No. 66.
section, the pr ovisions r elating to the tonnage tax scheme shall, as far as may be,
apply to the amalgamated company if it is a qualifying company:
Provided that wher e the amalgamated company is not a tonnage tax company,
it shall exer cise an option for tonnage tax scheme under sub-section (1) of section
115VP within thr ee months fr om the date of the appr oval of the scheme of
amalgamation:
Provided further that wher e the amalgamating companies ar e tonnage tax
companies, the pr ovisions of this Chapter shall, as far as may be, apply to the
amalgamated company for such per iod as the option for tonnage tax scheme
which has the longest unexpir ed per iod continues to be in for ce:
Provided also that wher e one of the amalgamating companies is a qualifying
company as on the 1st day of October , 2004 and which has not exer cised the
option for tonnage tax scheme within the initial per iod, the pr ovisions of this
Chapter shall not apply to the amalgamated company and the income of the
amalgamated company fr om the business of oper ating qualifying ships shall be
computed in accor dance with the other pr ovisions of this Act.
Demerger.
115VZ. Wher e in a scheme of demer ger , the demer ged company tr ansfer s its
business to the r esulting company befor e the expir y of the option for
tonnage tax scheme, then, subject to the other pr ovisions of this Chapter , the
tonnage tax scheme shall, as far as may be, apply to the r esulting company for
the unexpir ed per iod if it is a qualifying company:
Provided that the option for tonnage tax scheme in r espect of the demer ged
company shall r emain in for ce for the unexpir ed per iod of the tonnage tax
scheme if it continues to be a qualifying company.
F.Miscellan eous
Effect of temporarily ceasing to operate qualifying ships.
115VZA. (1) A tempor ar y cessation (as against per manent cessation) of oper at-
ing any qualifying ship by a company shall not be consider ed as a
cessation of oper ating of such qualifying ship and the company shall be deemed
to be oper ating such qualifying ship for the pur poses of this Chapter .
(2) Wher e a qualifying company continues to oper ate a ship, which tempor ar ily
ceases to be a qualifying ship, such ship shall not be consider ed as a qualifying
ship for the pur poses of this Chapter .
G.Provision s of th is Ch apter n ot to apply in certain cases
Avoidance of tax.
115VZB. (1) Subject to the pr ovisions of this Chapter , the tonnage tax scheme
shall not apply wher e a tonnage tax company is a par ty to any
tr ansaction or ar r angement which amounts to an abuse of the tonnage tax
scheme.
(2) For the pur poses of sub-section (1), a tr ansaction or ar r angement shall be
consider ed an abuse if the enter ing into or the application of such tr ansaction or
1.589 CH. XII-G - PROVISIONS RELATING TO SHIPPING COMPANIES S. 115VZB
ar r angement r esults, or would but for this section have r esulted, in a tax
advantage being obtained for
(i) a per son other than a tonnage tax company; or
(ii) a tonnage tax company in r espect of its non-tonnage tax activities.
Explan ation .For the pur poses of this section, tax advantage include,
(i) the deter mination of the allowance for any expense or inter est, or the
deter mination of any cost or expense allocated or appor tioned, or , as
the case may be, which has the effect of r educing the income or
incr easing the loss, as the case may be, fr om activities other than
tonnage tax activities char geable to tax, computed on the basis of
entr ies made in the books of account in r espect of the pr evious year
in which the tr ansaction was enter ed into; or
(ii) a tr ansaction or ar r angement which pr oduces to the tonnage tax
company mor e than or dinar y pr ofits which might be expected to
ar ise fr om tonnage tax activities.
Exclusion from tonnage tax scheme.
115VZC. (1) Wher e a tonnage tax company is a par ty to any tr ansaction or
ar r angement r efer r ed to in sub-section (1) of section 115VZB, the
Assessing Officer shall, by an or der in wr iting, exclude such company fr om the
tonnage tax scheme:
Provided that an oppor tunity shall be given by the Assessing Officer by ser ving
a notice calling upon such company to show cause, on a date and time to be
specified in the notice, why it should not be excluded fr om the tonnage tax
scheme:
Provided further that no or der under this sub-section shall be passed without the
pr evious appr oval of the Chief Commissioner .
(2) The pr ovisions of this section shall not apply wher e the company shows to the
satisfaction of the Assessing Officer that the tr ansaction or ar r angement was a
bon a fide commer cial tr ansaction and had not been enter ed into for the pur pose
of obtaining tax advantage under this Chapter .
(3) Wher e an or der has been passed under sub-section (1) by the Assessing
Officer excluding the tonnage tax company fr om the tonnage tax scheme, the
option for tonnage tax scheme shall cease to be in for ce fr om the fir st day of the
pr evious year in which the tr ansaction or ar r angement was enter ed into.]
26
[CHAPTER XI I -H
27
INCOME-TAX ON FRINGE BENEFITS
A.Mean in g of certain expression s
Definitions.
115W. In this Chapter , unless the context other wise r equir es,
S. 115W I.T. ACT, 1961 1.590
26. Chapter XII-H, consisting of sections 115W to 115WL, inser ted by the Finance Act, 2005,
w.e.f. 1-4-2006.
27. See also Cir cular No. 8/ 2005, dated 29-8-2005, No. 3/ 2007, dated 25-5-2007 and No. 9/ 2007,
(a) employer means,
(i) a company;
(ii) a fir m;
28
[(iii) an association of per sons or a body of individuals, whether
incor por ated or not;]
(iv) a local author ity; and
(v) ever y ar tificial jur idical per son, not falling within any of the
pr eceding sub-clauses:
29
[Provided that any per son eligible for exemption under clause (23C)
of section 10 or r egister ed under section 12AA or a political par ty
r egister ed under section 29A of the Repr esentation of the People Act,
1951 (43 of 1951) shall not be deemed to be an employer for the
pur poses of this Chapter ;]
(b) fr inge benefit tax or tax means the tax char geable under section
115WA.
B.Basis of ch arge
Charge of fringe benefit tax.
115WA. (1) In addition to the income-tax char ged under this Act, ther e shall be
char ged for ever y assessment year commencing on or after the 1st day
of Apr il, 2006, additional income-tax (in this Act r efer r ed to as fr inge benefit tax)
in r espect of the fr inge benefits pr ovided or deemed to have been pr ovided by
an employer to his employees dur ing the pr evious year at the r ate of thir ty per
cent on the value of such fr inge benefits.
(2) Notwithstanding that no income-tax is payable by an employer on his total
income computed in accor dance with the pr ovisions of this Act, the tax on fr inge
benefits shall be payable by such employer .
Fringe benefits.
115WB. (1) For the pur poses of this Chapter , fr inge benefits means any con-
sider ation for employment pr ovided by way of
(a) any pr ivilege, ser vice, facility or amenity, dir ectly or indir ectly, pr o-
vided by an employer , whether by way of r eimbur sement or other -
wise, to his employees (including for mer employee or employees);
(b) any fr ee or concessional ticket pr ovided by the employer for pr ivate
jour neys of his employees or their family member s;
30
[***]
(c) any contr ibution by the employer to an appr oved super annuation
fund for employees
31
[; an d]
1.591 CH. XII-H - INCOME-TAX ON FRINGE BENEFITS S. 115WB
28. Substituted by the Taxation Laws (Amendment) Act, 2005, w.e.f. 1-4-2006. Pr ior to its
subst it ut ion, sub-clause (iii), as inser ted by the Finance Act, 2005, w.e.f. 1-4-2006, r ead as
under :
(iii) an association of per sons or a body of individuals, whether incor por ated or not, but
excluding any fund or tr ust or institution eligible for exemption under clause (23C)
of section 10 or r egister ed under section 12AA;
32
[(d) an y specified security or sweat equity sh ares allotted or tran sferred,
directly or in directly, by th e em ployer free of cost or at con cession al
rate to h is em ployees (in cludin g form er em ployee or em ployees).
Explanation.For th e purposes of th is clause,
(i) specified securitym ean s th e securities as defin ed in clause (h) of
section 2 of th e Securities Con tracts (Regulation ) Act, 1956 (42 of
1956)
33

33a
[an d, wh ere em ployees stock option h as been gran ted
un der an y plan or sch em e th erefor, in cludes th e securities offered
un der such plan or sch em e];
(ii) sweat equity sh aresm ean s equity sh ares issued by a com pan y to
its em ployees or directors at a discoun t or for con sideration oth er
th an cash for providin g k n ow-h ow or m ak in g available righ ts in
th e n ature of in tellectual property righ ts or value addition s, by
wh atever n am e called.]
(2) The fr inge benefits shall be deemed to have been pr ovided by the employer
to his employees, if the employer has, in the cour se of his business or pr ofession
(including any activity whether or not such activity is car r ied on with the object
of der iving income, pr ofits or gains) incur r ed any expense on, or made any
payment for , the following pur poses, namely:
(A) enter tainment;
(B) pr ovision of hospitality of ever y kind by the employer to any per son,
whether by way of pr ovision of food or bever ages or in any other
manner whatsoever and whether or not such pr ovision is made by
r eason of any expr ess or implied contr act or custom or usage of
tr ade but does not include
(i) any expenditur e on, or payment for , food or bever ages pr ovided
by the employer to his employees in office or factor y;
(ii) any expenditur e on or payment thr ough paid voucher s which
ar e not tr ansfer able and usable only at eating joints or outlets;
The following sub-clause (iii) shall be inserted after sub-clause
(ii) of clause (B) of sub-section (2) of section 115WB by the
Finance Act, 2008, w.e.f. 1-4-2009 :
(iii) an y expen diture on or paym en t th rough n on -tran sferable pre-
paid electron ic meal card usable on ly at eatin g join ts or outlets an d
wh ich fulfils such oth er con dition s as m ay be prescribed;
(C) confer ence (other than fee for par ticipation by the employees in any
confer ence).
Explan ation .For the pur poses of this clause, any expenditur e on
conveyance, tour and tr avel (including for eign tr avel), on hotel, or
boar ding and lodging in connection with any confer ence shall be
deemed to be expenditur e incur r ed for the pur poses of confer ence;
S. 115WB I.T. ACT, 1961 1.592
32. Inser ted by the Finance Act, 2007, w.e.f. 1-4-2008. See also Cir cular No. 9/ 2007, dated
33. For clause (h ) of section 2 of the Secur ities Contr acts (Regulation) Act, 1956, see footnote
No. 7 on page 1.26.
33a. Substituted for and includes employees stock option by the Finance Act, 2008, w.e.f.
1-4-2008.
(D) sales pr omotion including publicity:
Provided that any expenditur e on adver tisement,
(i) being the expenditur e (including r ental) on adver tisement of any
for m in any pr int (including jour nals, catalogues or pr ice lists) or
electr onic media or tr anspor t system;
(ii) being the expenditur e on the holding of, or the par ticipation in,
any pr ess confer ence or business convention, fair or exhibition;
(iii) being the expenditur e on sponsor ship of any spor ts event or any
other event or ganised by any Gover nment agency or tr ade asso-
ciation or body;
(iv) being the expenditur e on the publication in any pr int or elec-
tr onic media of any notice r equir ed to be published by or under
any law or by an or der of a cour t or tr ibunal;
(v) being the expenditure on advertisement by way of signs, art work,
paint ing, banner s, awnings, dir ect mail, elect r ic spect acular s,
kiosks, hoar dings, bill boar ds
34
[, display of products] or by way
of such other medium of adver tisement;
35
[***]
(vi) being the expenditur e by way of payment to any adver tising
agency for the pur poses of clauses (i) to (v) above;
36
[
37
[(vii)bein g th e expen diture on distribution of sam ples eith er free of cost
or at con cession al rate; an d ]
(viii) being the expenditur e by way of payment to any per son of r epute
for pr omoting the sale of goods or ser vices of the business of the
employer ,]
shall not be consider ed as expenditur e on sales pr omotion including
publicity;
(E) employees welfar e.
Explan ation .For the pur poses of this clause, any expenditur e in-
cur r ed or payment made to fulfil any statutor y obligation or miti-
gate occupational hazar ds or pr ovide fir st aid facilities in the hospi-
tal or dispensar y r un by the employer shall not be consider ed as
expenditur e for employees welfar e;
The following Explan at ion shall be substituted for the existing
Explan at ion to clause (E) of sub-section (2) of section 115WB by the
Finance Act, 2008, w.e.f. 1-4-2009 :
Explanation.For th e purposes of th is clause, an y expen diture in -
curred or paym en t m ade to
1.593 CH. XII-H - INCOME-TAX ON FRINGE BENEFITS S. 115WB
37. Substituted by the Finance Act, 2007, w.e.f. 1-4-2008. Pr ior to its substitution, clause (vii)
r ead as under :
(vii) being the expenditur e on distr ibution of fr ee samples of medicines or of medical
equipment, to doctor s; and
(i) fulfil an y statutory obligation ; or
(ii) m itigate occupation al h azards; or
(iii) provide first aid facilities in th e h ospital or dispen sary run by th e
em ployer; or
(iv) provide crech e facility for th e ch ildren of th e em ployee; or
(v) spon sor a sportsm an , bein g an em ployee; or
(vi) organ ise sports even ts for em ployees,
sh all n ot be con sidered as expen diture for em ployees welfare;
(F) conveyance
38
[***];
(G) use of hotel, boar ding and lodging facilities;
(H) r epair , r unning (including fuel), maintenance of motor car s and the
amount of depr eciation ther eon;
(I) r epair , r unning (including fuel) and maintenance of air cr afts and
the amount of depr eciation ther eon;
(J) use of telephone (including mobile phone) other than expenditur e
on leased telephone lines;
38a
[(K) m ain ten an ce of an y accom m odation in th e n ature of guest h ouse
oth er th an accom m odation used for train in g purposes;]
(L) festival celebr ations;
(M) use of health club and similar facilities;
(N) use of any other club facilities;
(O) gifts; and*
(P) scholar ships;
39
[(Q) tour and tr avel (including for eign tr avel).]
(3) For the pur poses of sub-section (1), the pr ivilege, ser vice, facility or amenity
does not include per quisites in r espect of which tax is paid or payable by the
employee
39
[or any benefit or amenity in the natur e of fr ee or subsidised tr ans-
por t or any such allowance pr ovided by the employer to his employees for jour -
neys by the employees fr om their r esidence to the place of wor k or such place
of wor k to the place of r esidence].
Value of fringe benefits.
115WC. (1) For the pur poses of this Chapter , the value of fr inge benefits shall
be the aggr egate of the following, namely:
(a) cost at which the benefits r efer r ed to in clause (b) of sub-section (1)
of section 115WB, is pr ovided by the employer to the gener al public
as r educed by the amount, if any, paid by, or r ecover ed fr om, his
employee or employees:
Provided that in a case wher e the expenses of the natur e r efer r ed to
in clause (b) of sub-section (1) of section 115WB ar e included in any
other clause of sub-section (2) of the said section, the total expenses
S. 115WC I.T. ACT, 1961 1.594
38. Wor ds , tour and tr avel (including for eign tr avel) omitted by the Finance Act, 2006, w.e.f.
1-4-2007.
38a. Clause (K) shall be omitted by the Finance Act, 2008, w.e.f. 1-4-2009.
*With effect fr om 1-4-2007 the wor d and should appear after end of clause (P).
included under such other clause shall be r educed by the amount of
expenditure referred to in the said clause (b) for computing the value
of fr inge benefits;
40
[(b) the amount of contr ibution, r efer r ed to in clause (c) of sub-section (1)
of section 115WB, which exceeds one lakh r upees in r espect of each
employee;]
41
[(ba) th e fair m ark et value of th e specified security or sweat equity sh ares
referred to in clause (d) of sub-section (1) of section 115WB, on th e date
on wh ich th e option vests with th e employee as reduced by th e amoun t
actually paid by, or recovered from , th e em ployee in respect of such
security or sh ares.
Explanation.For th e purposes of th is clause,
(i) fair m ark et valuem ean s th e value determ in ed in accordan ce
with th e m eth od as m ay be prescribed
41a
by th e Board;
(ii) option m ean s a righ t but n ot an obligation gran ted to an
em ployee to apply for th e specified security or sweat equity sh ares
at a predeterm in ed price;]
(c) twenty per cent of the expenses r efer r ed to in clauses
41b
[(A) to (K)]
of sub-section (2) of section 115WB;
(d) fifty per cent of the expenses r efer r ed to in clauses
41c
[(L) to (P)] of
sub-section (2) of section 115WB;
42
[(e) five per cent of the expenses r efer r ed to in clause (Q) of sub-section
(2) of section 115WB.]
(2) Notwithstanding anything contained in sub-section (1),
(a) in the case of an employer engaged in the business of hotel, the value
of fr inge benefits for the pur poses r efer r ed to in clause (B) of sub-
section (2) of section 115WB shall be five per cent instead of twenty
per cent r efer r ed to in clause (c) of sub-section (1);
42
[(aa) in the case of an employer engaged in the business of car r iage of
passenger s or goods by air cr aft, the value of fr inge benefits for the
pur poses r efer r ed to in clause (B) of sub-section (2) of section 115WB
shall be five per cent instead of twenty per cent r efer r ed to in
clause (c) of sub-section (1);
(ab) in the case of an employer engaged in the business of car r iage of
passenger s or goods by ship, the value of fr inge benefits for the
pur poses r efer r ed to in clause (B) of sub-section (2) of section 115WB
clause (c) of sub-section (1);]
1.595 CH. XII-H - INCOME-TAX ON FRINGE BENEFITS S. 115WC
40. Substituted by the Finance Act, 2006, w.e.f. 1-4-2007. Pr ior to its substitution, clause (b)
r ead as under :
(b) actual amount of the contr ibution r efer r ed to in clause (c) of sub-section (1) of
section 115WB;
41a. See r ules 40C and 40D.
41b. Wor ds (A) to (L) shall be substituted for (A) to (K) by the Finance Act, 2008, w.e.f.
1-4-2009.
41c. Wor ds (M) t o (P) shall be substituted for (L) t o (P), ibid.
(b) in the case of an employer engaged in the business of constr uction,
the value of fr inge benefits for the pur poses r efer r ed to in clause (F)
of sub-section (2) of section 115WB shall be five per cent instead of
twenty per cent r efer r ed to in clause (c) of sub-section (1);
(c) in the case of an employer engaged in the business of manufactur e
or pr oduction of phar maceuticals, the value of fr inge benefits for
the pur poses r efer r ed to in clauses (F) and (G) of sub-section (2) of
section 115WB shall be five per cent instead of twenty per cent
r efer r ed to in clause (c) of sub-section (1);
(d) in the case of an employer engaged in the business of manufactur e
or pr oduction of computer softwar e, the value of fr inge benefits for
the pur poses r efer r ed to in clauses (F) and (G) of sub-section (2) of
section 115WB shall be five per cent instead of twenty-per cent
r efer r ed to in clause (c) of sub-section (1);
42a
[(da) in the case of an employer engaged in the business of car r iage of
pur poses r efer r ed to in clause (G) of sub-section (2) of section 115WB
clause (c) of sub-section (1);
(db) in the case of an employer engaged in the business of car r iage of
passenger s or goods by ship, the value of fr inge benefits for the
pur poses r efer r ed to in clause (G) of sub-section (2) of section 115WB
clause (c) of sub-section (1);]
(e) in the case of an employer engaged in the business of car r iage of
passenger s or goods by motor car , the value of fr inge benefits for
the pur poses r efer r ed to in clause (H) of sub-section (2) of section
115WB shall be five per cent instead of twenty per cent r efer r ed
to in clause (c) of sub-section (1);
(f) in the case of an employer engaged in the business of car r iage of
pur poses r efer r ed to in clause (I) of sub-section (2) of section 115WB
shall be taken as Nil.
C.Procedure for filin g of return in respect of frin ge ben efits,
assessm en t an d paym en t of tax in respect th ereof
Return of fringe benefits
42b
.
115WD. (1) Without pr ejudice to the pr ovisions contained in section 139, ever y
employer who dur ing a pr evious year has paid or made pr ovision for
payment of fr inge benefits to his employees, shall, on or befor e the due date,
fur nish or cause to be fur nished a r etur n of fr inge benefits to the Assessing
Officer in the pr escr ibed for m
43
and ver ified in the pr escr ibed manner and setting
for th such other par ticular s as may be pr escr ibed, in r espect of the pr evious year .
S. 115WD I.T. ACT, 1961 1.596
42b. See Cir cular No. 3/ 2007, dated 25-5-2007. For details, see Taxmanns Master Guide to
Income-tax Act.
43. See r ule 12 and footnote No. 57 on page 1.635 an te for pr escr ibed r et ur ns.
Explan ation .In this sub-section, due date means,
(a) wher e the employer is
(i) a company; or
(ii) a per son (other than a company) whose accounts ar e r equir ed to
be audited under this Act or under any other law for the time
being in for ce,
the
43a
[30th day of Septem ber] of the assessment year ;
(b) in the case of any other employer , the 31st day of July of the
assessment year .
(2) In the case of any employer who, in the opinion of the Assessing Officer , is
r esponsible for paying fr inge benefit tax under this Act and who has not
fur nished a r etur n under sub-section (1), the Assessing Officer may, after the due
date, issue a notice to him and ser ve the same upon him, r equir ing him to fur nish
within thir ty days fr om the date of ser vice of the notice, the r etur n in the
pr escr ibed for m and ver ified in the pr escr ibed manner and setting for th such
other par ticular s as may be pr escr ibed.
(3) Any employer r esponsible for paying fr inge benefit tax who has not fur nished
a r etur n within the time allowed under sub-section (1) or within the time allowed
under a notice issued under sub-section (2), may fur nish the r etur n for any
pr evious year , at any time befor e the expir y of one year fr om the end of the
r elevant assessment year or befor e the completion of the assessment, whichever
is ear lier .
(4) If any employer , having fur nished a r etur n under sub-section (1), or in
pur suance of a notice issued under sub-section (2), discover s any omission or any
wr ong statement ther ein, he may fur nish a r evised r etur n at any time befor e the
expir y of one year fr om the end of the r elevant assessment year or befor e the
completion of the assessment, whichever is ear lier .
Assessment.
115WE.
43b
[(1) Wh ere a return h as been made un der section 115WD, such return
sh all be processed in th e f ollowin g m an n er, n am ely:
1.597 CH. XII-H - INCOME-TAX ON FRINGE BENEFITS S. 115WE
43b. Substituted by the Finance Act, 2008, w.e.f. 1-4-2008. Pr ior to its substitution, sub-section
(1) Wher e a r etur n has been made under section 115WD,
(i) if any tax or inter est is found due on the basis of such r etur n, after adjustment of
any advance tax paid, any tax paid on self-assessment and any amount paid
other wise by way of tax or inter est, then, without pr ejudice to the pr ovisions of sub-
section (2), an intimation shall be sent to the assessee specifying the sum so payable,
and such intimation shall be deemed to be a notice of demand issued under section
156 and all the pr ovisions of this Act shall apply accor dingly; and
(ii) if any r efund is due on the basis of such r etur n, it shall be gr anted to the assessee
and an intimation to this effect shall be sent to the assessee:
Provided that except as other wise pr ovided in this sub-section, the acknowledgement of
the r etur n shall be deemed to be an intimation under this sub-section wher e either no sum
is payable by the assessee or no r efund is due to him:
Provided further that no intimation under this sub-section shall be sent after the expir y
of one year fr om the end of the financial year in which the r etur n is made.
S. 115WE I.T. ACT, 1961 1.598
(a) th e value of frin ge ben efits sh all be com puted after m ak in g th e
followin g adjustm en ts, n am ely:
(i) an y arith m etical error in th e return ; or
(ii) an in correct claim , if such in correct claim is apparen t from an y
in form ation in th e return ;
(b) th e tax an d in terest, if an y, sh all be com puted on th e basis of th e value
of frin ge ben efits computed un der clause (a);
(c) th e sum payable by, or th e am oun t of refun d due to, th e assessee sh all
be determ in ed after adjustm en t of th e tax an d in terest, if an y, com -
puted un der clause (b) by an y advan ce tax paid, an y tax paid on self-
assessm en t an d an y am oun t paid oth erwise by way of tax or in terest;
(d) an in tim ation sh all be prepared or gen erated an d sen t to th e assessee
specifyin g th e sum determ in ed to be payable by, or th e am oun t of
refun d due to, th e assessee un der clause (c); an d
(e) th e am oun t of refun d due to th e assessee in pursuan ce of th e determ i-
n ation un der clause (c) sh all be gran ted to th e assessee:
Provided th at n o in tim ation un der th is sub-section sh all be sen t after th e expiry
of on e year from th e en d of th e fin an cial year in wh ich th e return is m ade.
(a) an in correct claim apparen t from an y in formation in th e return sh all
m ean a claim , on th e basis of an en try, in th e return ,
(i) of an item , wh ich is in con sisten t with an oth er en try of th e sam e
or som e oth er item in such return ;
(ii) in respect of wh ich th e in form ation required to be furn ish ed to
substan tiate such en try h as n ot been so furn ish ed un der th is Act;
or
(iii) in respect of a deduction or value of frin ge ben efits, wh ere such
deduction or value exceeds specified statutory lim it wh ich m ay
h ave been expressed as m on etary am oun t or percen tage or ratio
or fraction ;
(b) th e ack n owledgem en t of th e return sh all be deem ed to be th e in tim a-
tion in a case wh ere n o sum is payable by, or refun dable to, th e assessee
un der clause (c), an d wh ere n o adjustm en t h as been m ade un der
clause (a).
(1A) For th e purposes of processin g of return s un der sub-section (1), th e Board
m ay m ak e a sch em e for cen tralised processin g of return s with a view to
expeditiously determ in in g th e tax payable by, or th e refun d due to, th e assessee as
required un der th at sub-section .
(1B) Save as oth erwise expressly provided, for th e purpose of givin g effect to th e
sch em e m ade un der sub-section (1A), th e Cen tral Govern m en t m ay, by n otifica-
tion in th e Official Gazette, direct th at an y of th e provision s of th is Act relatin g to
processin g of return s sh all n ot apply or sh all apply with such exception s,
m odification s an d adaptation s as m ay be specified in th at n otification ; so,
h owever, th at n o direction sh all be issued after th e 31st day of March , 2009.
(1C) Every n otification issued un der sub-section (1B), alon g with th e sch em e
m ade un der sub-section (1A), sh all, as soon as m ay be after th e n otification is
issued, be laid before each House of Parliam en t.]
(2) Wher e a r etur n has been fur nished under section 115WD, the Assessing
Officer shall, if he consider s it necessar y or expedient to ensur e that the assessee
has not under stated the value of fr inge benefits or has not under paid the tax in
any manner , ser ve on the assessee a notice r equir ing him on a date to be specified
ther ein, either to attend his office or to pr oduce, or cause to be pr oduced, any
evidence on which the assessee may r ely in suppor t of the r etur n:
Provided that no notice under this sub-section shall be ser ved on the assessee
after the expir y of
43c
[six m on th s from th e en d of th e fin an cial year] in which the
r etur n is fur nished.
(3) On the day specified in the notice issued under sub-section (2), or as soon
after war ds as may be, after hear ing such evidence as the assessee may pr oduce
and such other evidence as the Assessing Officer may r equir e on specified points,
and after taking into account all r elevant mater ial which he has gather ed, the
Assessing Officer shall, by an or der in wr iting, make an assessment of the value
of the fr inge benefits paid or payable by the assessee, and deter mine the sum
payable by him or r efund of any amount due to him on the basis of such
assessment.
(4) Wher e a r egular assessment under sub-section (3) or section 115WF is
made,
(a) any tax or inter est paid by the assessee under sub-section (1) shall be
deemed to have been paid towar ds such r egular assessment;
(b) if no r efund is due on r egular assessment or the amount r efunded
under sub-section (1) exceeds the amount r efundable on r egular
assessment, the whole or the excess amount so r efunded shall be
deemed to be tax payable by the assessee and the pr ovisions of this Act
shall apply accor dingly.
Best judgment assessment.
115WF. If any per son, being an employer
(a) fails to make the r etur n r equir ed under sub-section (1) of section
115WD and has not made a r etur n under sub-section (3) or a r evised
r etur n under sub-section (4) of that section, or
(b) fails to comply with all the ter ms of a notice issued under sub-section
(2) of section 115WD or fails to comply with a dir ection issued under
sub-section (2A) of section 142, or
(c) having made a r etur n, fails to comply with all the ter ms of a notice
issued under sub-section (2) of section 115WE,
the Assessing Officer , after taking into account all r elevant mater ial which the
Assessing Officer has gather ed, shall, after giving the assessee an oppor tunity of
being hear d, make the assessment of the fr inge benefits to the best of his
judgment and deter mine the sum payable by the assessee on the basis of such
assessment:
Provided that such oppor tunity shall be given by the Assessing Officer by ser ving
a notice calling upon the assessee to show cause, on a date and time to be
1.599 CH. XII-H - INCOME-TAX ON FRINGE BENEFITS S. 115WF
43c. Substituted for twelve months fr om the end of the month by the Finance Act, 2008, w.e.f.
1-4-2008.
specified in the notice as to why the assessment should not be completed to the
best of his judgment:
Provided further that it shall not be necessar y to give such oppor tunity in a case
wher e a notice under sub-section (2) of section 115WD has been issued pr ior to
the making of an assessment under this section.
Fringe benefits escaping assessment.
115WG. If the Assessing Officer has r eason to believe that any fr inge benefits
char geable to tax have escaped assessment for any assessment year , he
may, subject to the pr ovisions of sections 115WH, 150 and 153, assess or r eassess
such fr inge benefits and also any other fr inge benefits char geable to tax which
have escaped assessment and which come to his notice subsequently in the
cour se of the pr oceedings under this section, for the assessment year concer ned
(her eafter r efer r ed to as the r elevant assessment year ).
Explan ation .For the pur poses of this section, the following shall also be
deemed to be cases wher e fr inge benefits char geable to tax have escaped
assessment, namely:
(a) wher e no r etur n of fr inge benefits has been fur nished by the assessee;
(b) wher e a r etur n of fr inge benefits has been fur nished by the assessee
but no assessment has been made and it is noticed by the Assessing
Officer that the assessee has under stated the value of fr inge benefits
in the r etur n;
(c) wher e an assessment has been made, but the fr inge benefits char ge-
able to tax have been under -assessed.
Issue of notice where fringe benefits have escaped assessment.
115WH. (1) Befor e making the assessment or r eassessment under section
115WG, the Assessing Officer shall ser ve on the assessee a notice
r equir ing him to fur nish within such per iod as may be specified in the notice, a
r etur n of the fr inge benefits in r espect of which he is assessable under this
Chapter dur ing the pr evious year cor r esponding to the r elevant assessment year ,
in the pr escr ibed for m and ver ified in the pr escr ibed manner and setting for th
such other par ticular s as may be pr escr ibed, and the pr ovisions of this Chapter
shall, so far as may be, apply accor dingly as if such r etur n wer e a r etur n r equir ed
to be fur nished under section 115WD.
(2) The Assessing Officer shall, befor e issuing any notice under this section,
r ecor d his r easons for doing so.
(3) No notice under sub-section (1) shall be issued for the r elevant assessment
year after the expir y of six year s fr om the end of the r elevant assessment year .
Explan ation .In deter mining fr inge benefits char geable to tax which have
escaped assessment for the pur poses of this sub-section, the pr ovisions of the
Explan ation to section 115WG shall apply as they apply for the pur poses of that
section.
(4) In a case wher e an assessment under sub-section (3) of section 115WE or
section 115WG has been made for the r elevant assessment year , no notice shall
be issued under sub-section (1) by an Assessing Officer , after the expir y of four
year s fr om the end of the r elevant assessment year , unless the Chief Commis-
S. 115WH I.T. ACT, 1961 1.600
sioner or Commissioner is satisfied, on the r easons r ecor ded by the Assessing
Officer , that it is a fit case for the issue of such notice.
Payment of fringe benefit tax.
115WI. Notwithstanding that the r egular assessment in r espect of any fr inge
benefits is to be made in a later assessment year , the tax on such fr inge
benefits shall be payable in advance dur ing any financial year , in accor dance
with the pr ovisions of section 115WJ, in r espect of the fr inge benefits which
would be char geable to tax for the assessment year immediately following that
financial year , such fr inge benefits being her eafter in this Chapter r efer r ed to as
the cur r ent fr inge benefits.
Advance tax in respect of fringe benefits.
115WJ. (1) Ever y assessee who is liable to pay advance tax under section
115WI, shall on his own accor d, pay advance tax on his cur r ent fr inge
benefits calculated in the manner laid down in sub-section (2).
44
[(2) Advance tax on the cur r ent fr inge benefits shall be payable by
(a) all the companies, who ar e liable to pay the same in four instalments
dur ing each financial year and the due date of each instalment and
the amount of such instalment shall be as specified in Table I below :
TABLE I
Due date of in stalm en t Amoun t payable
On or befor e the 15th June Not less than fifteen per cent of such ad-
vance tax.
On or befor e the 15th September Not less than for ty-five per cent of such
advance tax as r educed by the amount, if
any, paid in the ear lier instalment.
On or befor e the 15th December Not less than seventy-five per cent of such
advance tax as r educed by the amount or
amounts, if any, paid in the ear lier instal-
ment or instalments.
On or befor e the 15th Mar ch The whole amount of such advance tax as
r educed by the amount or amounts, if any,
paid in the ear lier instalment or instalments;
1.601 CH. XII-H - INCOME-TAX ON FRINGE BENEFITS S. 115WJ
44. Substituted for sub-sections (2) and (3) by the Finance Act, 2007, w.e.f. 1-6-2007. Pr ior t o
their substitution, sub-sections (2) and (3) r ead as under :
(2) The amount of advance tax payable by an assessee in the financial year shall be thir ty
per cent of the value of the fr inge benefits r efer r ed to in section 115WC, paid or payable
in each quar ter and shall be payable on or befor e the 15th day of the month following such
qu ar t er :
Provided that the advance tax payable for the quar ter ending on the 31st day of Mar ch of
the financial year shall be payable on or befor e the 15th day of Mar ch of the said financial
year .
(3) Wher e an assessee, has failed to pay the advance tax for any quar ter or wher e the
advance tax paid by him is less than thir ty per cent of the value of fr inge benefits paid or
payable in that quar ter , he shall be liable to pay simple inter est at the r ate of one per cent
on the amount by which the advance tax paid falls shor t of, thir ty per cent of the value of
fr inge benefits for any quar ter , for ever y month or par t of the month for which the
shor tfall continues.
(b) all the assessees (other than companies), who ar e liable to pay the
same in thr ee instalments dur ing each financial year and the due date
of each instalment and the amount of such instalment shall be as
specified in Table II below :
TABLE II
Due date of in stalm en t Amoun t payable
On or befor e the 15th September Not less than thir ty per cent of such ad-
vance tax.
On or befor e the 15th December Not less than sixty per cent of such ad-
vance tax as r educed by the amount, if
any, paid in the ear lier instalment.
On or befor e the 15th Mar ch The whole amount of such advance tax as
r educed by the amount or amounts, if any,
paid in the ear lier instalment or instalments.
(3) Wher e an assessee, being a company, has failed to pay the advance tax
payable by him on or befor e the due date for any instalment or wher e the
advance tax paid by him is less than the amount payable by the due date, he shall
be liable to pay simple inter est calculated at the r ate of
(i) one per cent per month, for thr ee months on an amount by which the
advance tax paid on or befor e the 15th June of the financial year falls
shor t of fifteen per cent of the advance tax payable;
(ii) one per cent per month, for thr ee months on an amount by which the
advance tax paid on or befor e the 15th September of the financial
year falls shor t of for ty-five per cent of the advance tax payable;
(iii) one per cent per month, for thr ee months on an amount by which the
advance tax paid on or befor e the 15th December of the financial year
falls shor t of seventy-five per cent of the advance tax payable; and
(iv) one per cent on an amount by which the advance tax paid on or befor e
the 15th Mar ch of the financial year falls shor t of the hundr ed per cent
of the advance tax payable.
(4) Wher e an assessee, being a per son other than a company, has failed to pay the
advance tax payable by him on or befor e the due date for any instalment or
wher e the advance tax paid by him is less than the amount payable by the due
date, he shall be liable to pay simple inter est calculated at the r ate of
(i) one per cent per month, for thr ee months on an amount by which the
advance tax paid on or befor e the 15th September of the financial
year falls shor t of thir ty per cent of the advance tax payable;
(ii) one per cent per month, for thr ee months on an amount by which the
advance tax paid on or befor e the 15th December of the financial year
falls shor t of sixty per cent of the advance tax payable; and
(iii) one per cent on an amount by which the advance tax paid on or befor e
the 15th Mar ch of the financial year falls shor t of hundr ed per cent of
the advance tax payable.
(5) Wher e an assessee has failed to pay the advance tax payable by him dur ing
a financial year or wher e the advance tax paid by him is less than ninety per cent
S. 115WJ I.T. ACT, 1961 1.602
of the tax assessed under section 115WE or section 115WF or section 115WG, the
assessee shall be liable to pay simple inter est at the r ate of one per cent per month,
for ever y month or par t of a month compr ised in the per iod fr om the 1st day of
Apr il next following such financial year to the date of assessment of tax under
section 115WE or section 115WF or section 115WG.]
Interest for default in furnishing return of fringe benefits.
115WK. (1) Wher e the r etur n of fr inge benefits for any assessment year under
sub-section (1) or sub-section (3) of section 115WD or in r esponse to a
notice under sub-section (2) of that section, is fur nished after the due date, or is
not fur nished, the employer shall be liable to pay simple inter est at the r ate of one
per cent for ever y month or par t of a month compr ised in the per iod commencing
on the date immediately following the due date, and,
(a) wher e the r etur n is fur nished after the due date, ending on the date
of fur nishing of the r etur n; or
(b) wher e no r etur n has been fur nished, ending on the date of completion
of the assessment under section 115WF,
on the amount of the tax on the value of fr inge benefits as deter mined under sub-
section (1) of section 115WE or r egular assessment as r educed by the advance
tax paid under section 115WJ.
Explan ation 1.In this section, due date means the date specified in the
Explan ation to sub-section (1) of section 115WD as applicable in the case of the
employer .
Explan ation 2.Wher e, in r elation to an assessment year , an assessment is made
for the fir st time under section 115WG, the assessment so made shall be r egar ded
as a r egular assessment for the pur poses of this section.
(2) The pr ovisions contained in sub-sections (2) to (4) of section 234A shall, so far
as may be, apply to this section.
45
[Recovery of fringe benefit tax by the employer from the employee.
115WKA. Notwithstanding anything contained in any agr eement or scheme
under which any specified secur ity or sweat equity shar es r efer r ed to
in clause (d) of sub-section (1) of section 115WB has been allotted or tr ansfer r ed,
dir ectly or indir ectly, by the employer on or after the 1st day of Apr il, 2007, it shall
be lawful for the employer to var y the agr eement or scheme under which such
specified secur ity or sweat equity shar es has been allotted or tr ansfer r ed so as
to r ecover fr om the employee the fr inge benefit tax to the extent to which such
employer is liable to pay the fr inge benefit tax in r elation to the value of fr inge
benefits pr ovided to the employee and deter mined under clause (ba) of sub-
section (1) of section 115WC.]
45a
[Deemed payment of tax by employee.
115WKB. (1) Wh ere an em ployer h as paid an y frin ge ben efit tax with respect
to allotm en t or tran sfer of specified security or sweat equity sh ares,
referred to in clause (d) of sub-section (1) of section 115WB, an d h as recovered
1.603 CH. XII-H - INCOME-TAX ON FRINGE BENEFITS S. 115WKB
such tax subsequen tly from an employee, it sh all be deemed th at th e frin ge ben efit
tax so recovered is th e tax paid by such em ployee in relation to th e value of th e
frin ge ben efit provided to h im on ly to th e exten t to wh ich th e am oun t th ereof
relates to th e value of th e frin ge ben efit provided to such em ployee, as determ in ed
un der clause (ba) of sub-section (1) of section 115WC.
(2) Notwith stan din g an yth in g con tain ed in an y oth er provision s of th is Act, wh ere
th e frin ge ben efit tax recovered from th e em ployee is deem ed to be th e tax paid by
such em ployee un der sub-section (1), such em ployee sh all, un der th is Act, n ot be
en titled to claim
(i) an y refun d out of such paym en t of tax; or
(ii) an y credit of such paym en t of tax again st tax liability on oth er in com e
or again st an y oth er tax liability.]
Application of other provisions of this Act.
115WL. Save as other wise pr ovided in this Chapter , all other pr ovisions of this
Act shall, as far as may be, apply in r elation to fr inge benefits also.]
CHAPTER XI I I
INCOME-TAX AUTHORITIES
A.Appoin tm en t an d con trol
46
[Income-tax authorities.
116. Ther e shall be the following classes of income-tax author ities for the
pur poses of this Act, namely :
(a) the Centr al Boar d of Dir ect Taxes constituted under the Centr al
Boar ds of Revenue Act, 1963 (54 of 1963),
(b) Dir ect or s-Gener a l of Income-t a x or Chief Commissioner s of
Income-tax,
(c) Dir ector s of Income-tax or Commissioner s of Income-tax or Commis-
sioner s of Income-tax (Appeals),
47
[(cc) Additional Dir ector s of Income-tax or Additional Commissioner s
of In come-t a x or Ad d it ion a l Commission er s of In come-t a x
(Appeals),]
48
[(cca) Joint Dir ector s of Income-tax or Joint Commissioner s of Income-tax,]
(d) Deput y Dir ect or s of Income-t ax or Deput y Commissioner s of
Income-tax or Deputy Commissioner s of Income-tax (Appeals),
(e) Assistant Dir ector s of Income-tax or Assistant Commissioner s of
Income-tax,
S. 116 I.T. ACT, 1961 1.604
46. Substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Ear lier , it was
amended by the Centr al Boar ds of Revenue Act, 1963, w.e.f. 1-1-1964, the Finance Act,
1970, w.e.f. 1-4-1970 and the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978.
1.605 CH. XIII - INCOME-TAX AUTHORITIES - APPOINTMENT S. 119
(f) Income-tax Officer s,
(g) Tax Recover y Officer s,
(h) Inspector s of Income-tax.]
49
[Appointment of income-tax authorities.
50
117. (1) The Centr al Gover nment may appoint such per sons as it thinks fit to
be income-tax author ities.
(2) Without pr ejudice to the pr ovisions of sub-section (1), and subject to the r ules
and or der s of the Centr al Gover nment r egulating the conditions of ser vice of
per sons in public ser vices and posts, the Centr al Gover nment may author ise
the Boar d, or a Dir ector -Gener al, a Chief Commissioner or a Dir ector or a
Commissioner to appoint income-tax author ities below the r ank of an Assistant
Commissioner
51
[or Deputy Commissioner ].
(3) Subject to the r ules and or der s of the Centr al Gover nment r egulating the
conditions of ser vice of per sons in public ser vices and posts, an income-
tax author ity author ised in this behalf by the Boar d may appoint such executive
or minister ial staff as may be necessar y to assist it in the execution of its
functions.]
52
[Control of income-tax authorities.
118. The Boar d may, by notification
53
in the Official Gazette, dir ect that any
income-tax author ity or author ities specified in the notification shall be
subor dinate to such other income-tax author ity or author ities as may be
specified in such notification.]
54
[Instructions to subordinate authorities.
55
119. (1) The Boar d may, fr om time to time, issue such or der s, instr uctions
and dir ections to other income-tax author ities as it may deem fit for the
pr oper administr ation of this Act, and such author ities and all other per sons
employed in the execution of this Act shall obser ve and follow such or der s,
instr uctions and dir ections of the Boar d:
Provided that no such or der s, instr uctions or dir ections shall be issued
(a) so as to r equir e any income-tax author ity to make a par ticular assess-
ment or to dispose of a par ticular case in a par ticular manner ; or
amended by the Finance Act, 1970, w.e.f. 1-4-1970 and the Finance (No. 2) Act, 1977, w.e.f.
10-7-1978.
50. For notified author ities/ officer s, see Taxmanns Dir ect Taxes Cir cular s.
53. For notified subor dinate officer s, see Taxmanns Dir ect Taxes Cir cular s.
55. See also Instr uction No. 796, dated 22-11-1974. For details, see Taxmanns Master Guide
to Income-tax Act.
(b) so as to inter fer e with the discr etion of the
56
[* * *]
57
[Commissioner
(Appeals)] in the exer cise of his appellate functions.
(2) Without pr ejudice to the gener ality of the for egoing power ,
58
(a) the Boar d may, if it consider s it necessar y or expedient so to do, for
the pur pose of pr oper and efficient management of the wor k of
assessment and collection of r evenue, issue, fr om time to time
(whether by way of r elaxation of any of the pr ovisions of sections
59
[115P, 115S, 115WD, 115WE, 115WF, 115WG, 115WH, 115WJ,
115WK,]
60
[139,] 143, 144, 147, 148, 154, 155
61
[, 158BFA],
62
[sub-section
(1A) of section 201, sections 210, 211, 234A, 234B, 234C], 271 and 273
or other wise), gener al or special or der s in r espect of any class of
incomes
63
[or fr inge benefits] or class of cases, setting for th dir ections
or instr uctions (not being pr ejudicial to assessees) as to the guidelines,
pr inciples or pr ocedur es to be followed by other income-tax author i-
ties in the wor k r elating to assessment or collection of r evenue or the
initiation of pr oceedings for the imposition of penalties and any such
or der
64
may, if the Boar d is of opinion that it is necessar y in the public
inter est so to do, be published and cir culated in the pr escr ibed
manner for gener al infor mation;
(b) the Boar d may, if it consider s it desir able or expedient so to do for
avoiding genuine har dship in any case or class of cases, by gener al or
special or der , author ise
65
[any income-tax author ity, not being a
66
[***]
Commissioner (Appeals)] to admit an application or claim for any
exemption, deduction, r efund or any other r elief under this Act after
the expir y of the per iod specified by or under this Act for making such
application or claim and deal with the same on mer its in accor dance
with law;
67
[(c) the Boar d may, if it consider s it desir able or expedient so to do for
avoiding genuine har dship in any case or class of cases, by gener al or
S. 119 I.T. ACT, 1961 1.606
56. Wor ds Deputy Commissioner (Appeals) or the omitted by the Finance (No. 2) Act, 1998,
w.e.f. 1-10-1998. Ear lier Deputy Commissioner (Appeals) was substituted for Appellate
Assistant Commissioner by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
58. See r ule 111B.
59. Substituted for 115P, 115S, by the Finance Act, 2005, w.e.f. 1-4-2006. Ear lier the quoted
wor ds wer e inser ted by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004.
62. Substituted for 210, 234A, 234B by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. Ear lier
234A, 234B wer e inser ted by the Finance Act, 1990, w.e.f. 1-4-1990.
64. For Boar ds instr uctions to subor dinate author ities, fr om time to time, see Taxmanns
Dir ect Taxes Cir cular s.
65. Substituted for the Commissioner or the Income-tax Officer by the Dir ect Tax Laws
w.e.f. 1-10-1998.
special or der for r easons to be specified ther ein, r elax any r equir e-
ment contained in any of the pr ovisions of Chapter IV or Chapter
VI-A, wher e the assessee has failed to comply with any r equir ement
specified in such pr ovision for claiming deduction ther eunder , sub-
ject to the following conditions, namely:
(i) the default in complying with such r equir ement was due to
cir cumstances beyond the contr ol of the assessee; and
(ii) the assessee has complied with such r equir ement befor e the
completion of assessment in r elation to the pr evious year in which
such deduction is claimed:
Provided that the Centr al Gover nment shall cause ever y or der issued
under this clause to be laid befor e each House of Par liament.]
(3)
68
[***]
B.Jurisdiction
69
[Jurisdiction of income-tax authorities.
70
120. (1) Income-tax author ities shall exer cise all or any of the power s and
per for m all or any of the functions confer r ed on, or , as the case may be,
assigned to such author ities by or under this Act in accor dance with such
dir ections as the Boar d may issue for the exer cise of the power s and per for -
mance of the functions by all or any of those author ities.
71
[Explan ation .For the r emoval of doubts, it is her eby declar ed that any
income-tax author ity, being an author ity higher in r ank, may, if so dir ected by the
Boar d, exer cise the power s and per for m the functions of the income-tax
author ity lower in r ank and any such dir ection issued by the Boar d shall be
deemed to be a dir ection issued under sub-section (1).]
(2) The dir ections of the Boar d under sub-section (1) may author ise any other
income-tax author ity to issue or der s in wr iting for the exer cise of the power s and
per for mance of the functions by all or any of the other income-tax author ities
who ar e subor dinate to it.
(3) In issuing the dir ections or or der s r efer r ed to in sub-sections (1) and (2), the
Boar d or other income-tax author ity author ised by it may have r egar d to any one
or mor e of the following cr iter ia, namely :
(a) ter r itor ial ar ea;
(b) per sons or classes of per sons;
(c) incomes or classes of income; and
(d) cases or classes of cases.
(4) Without pr ejudice to the pr ovisions of sub-sections (1) and (2), the Boar d may,
by gener al or special or der , and subject to such conditions, r estr ictions or
limitations as may be specified ther ein,
1.607 CH. XIII - INCOME-TAX AUTHORITIES - JURISDICTION S. 120
70. For Boar ds dir ections issued for exer cise of power s and jur isdiction of income-tax
author ities fr om time to time, see Taxmanns Dir ect Taxes Cir cular s.
(a) au t hor ise any Dir ect or Gener al or Dir ect or t o per for m su ch
functions of any other income-tax author ity as may be assigned to
him by the Boar d;
(b) empower the Dir ector Gener al or Chief Commissioner or Commis-
sioner to issue or der s in wr iting that the power s and functions
confer r ed on, or as the case may be, assigned to, the Assessing Officer
by or under this Act in r espect of any specified ar ea or per sons or
classes of per sons or incomes or classes of income or cases or classes
of cases, shall be exer cised or per for med by
72
[an Additional Commis-
sioner or ]
73
[an Additional Dir ector or ] a
74
[Joint] Commissioner
75
[or
a
74
[Joint] Dir ector ], and, wher e any or der is made under this clause,
r efer ences in any other pr ovision of this Act, or in any r ule made
ther eunder to the Assessing Officer shall be deemed to be r efer ences
to such
72
[Additional Commissioner or ]
73
[Additional Dir ector or ]
74
[Joint] Commissioner
75
[or
74
[Joint] Dir ector ] by whom the power s
and functions ar e to be exer cised or per for med under such or der , and
any pr ovision of this Act r equir ing appr oval or sanction of the
76
[Joint]
Commissioner shall not apply.
(5) The dir ections and or der s r efer r ed to in sub-sections (1) and (2) may,
wher ever consider ed necessar y or appr opr iate for the pr oper management of
the wor k, r equir e two or mor e Assessing Officer s (whether or not of the same
class) to exer cise and per for m, concur r ently, the power s and functions in r espect
of any ar ea or per sons or classes of per sons or incomes or classes of income or
cases or classes of cases; and, wher e such power s and functions ar e exer cised
and per for med concur r ently by the Assessing Officer s of differ ent classes, any
author ity lower in r ank amongst them shall exer cise the power s and per for m the
functions as any higher author ity amongst them may dir ect, and, fur ther ,
r efer ences in any other pr ovision of this Act or in any r ule made ther eunder to
the Assessing Officer shall be deemed to be r efer ences to such higher author ity
and any pr ovision of this Act r equir ing appr oval or sanction of any such author ity
shall not apply.
(6) Notwithstanding anything contained in any dir ection or or der issued under
this section, or in section 124, the Boar d may, by notification in the Official
Gazette, dir ect that for the pur pose of fur nishing of the r etur n of income or the
doing of any other act or thing under this Act or any r ule made ther eunder by
any per son or class of per sons, the income-tax author ity exer cising and per for m-
ing the power s and functions in r elation to the said per son or class of per sons shall
be such author ity as may be specified in the notification.]
Jurisdiction of Commissioners.
77
S. 121 I.T. ACT, 1961 1.608
77. Pr ior to its omission, section 121 was amended by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
Jurisdiction of Commissioners (Appeals).
121A. [Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f. 1-4-1988.
Origin al section was in serted by th e Fin an ce (No. 2) Act, 1977, w.e.f.
10-7-1978.]
Jurisdiction of Appellate Assistant Commissioners.
Jurisdiction of Inspecting Assistant Commissioners.
123.
78
[Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f. 1-4-1988.]
79
[Jurisdiction of Assessing Officers.
80
124. (1) Wher e by vir tue of any dir ection or or der issued under sub-section (1)
or sub-section (2) of section 120, the Assessing Officer has been vested
with jur isdiction over any ar ea, within the limits of such ar ea, he shall have
jur isdiction
(a) in r espect of any per son car r ying on a business or pr ofession, if the
place at which he car r ies on his business or pr ofession is situate within
the ar ea, or wher e his business or pr ofession is car r ied on in mor e
places than one, if the pr incipal place of his business or pr ofession is
situate within the ar ea, and
(b) in r espect of any other per son r esiding within the ar ea.
(2) Wher e a question ar ises under this section as to whether an Assessing Officer
has jur isdiction to assess any per son, the question shall be deter mined by the
Dir ector Gener al or the Chief Commissioner or the Commissioner ; or wher e the
question is one r elating to ar eas within the jur isdiction of differ ent Dir ector s
Gener al or Chief Commissioner s or Commissioner s, by the Dir ector s Gener al or
Chief Commissioner s or Commissioner s concer ned or , if they ar e not in agr ee-
ment, by the Boar d or by such Dir ector Gener al or Chief Commissioner or
Commissioner as the Boar d may, by notification in the Official Gazette, specify.
(3) No per son shall be entitled to call in question the jur isdiction of an Assessing
Officer
(a) wher e he has made a r etur n
81
[under sub-section (1) of section 115WD
or ] under sub-section (1) of section 139, after the expir y of one month
fr om the date on which he was ser ved with a notice under sub-section
(1) of section 142 or
81
[sub-section (2) of section 115WE or ] sub-
section (2) of section 143 or after the completion of the assessment,
whichever is ear lier ;
(b) wher e he has made no such r etur n, after the expir y of the time
allowed by the notice under
82
[sub-section (2) of section 115WD or
78. Pr ior to its omission, section 123 was substituted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
substitution, section 124 was amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967 and
the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975.
82. Substituted for sub-section (1) of section 142 or under section 148 for the making of the
r etur n or by the notice under the fir st pr oviso to section 144, ibid.
sub-section (1) of section 142 or under sub-section (1) of section
115WH or under section 148 for the making of the r etur n or by the
notice under the fir st pr oviso to section 115WF or under the fir st
pr oviso to section 144] to show cause why the assessment should not
be completed to the best of the judgment of the Assessing Officer ,
whichever is ear lier .
(4) Subject to the pr ovisions of sub-section (3), wher e an assessee calls in question
the jur isdiction of an Assessing Officer , then the Assessing Officer shall, if not
satisfied with the cor r ectness of the claim, r efer the matter for deter mination
under sub-section (2) befor e the assessment is made.
(5) Notwithstanding anything contained in this section or in any dir ection or
or der issued under section 120, ever y Assessing Officer shall have all the power s
confer r ed by or under this Act on an Assessing Officer in r espect of the income
accr uing or ar ising or r eceived within the ar ea, if any, over which he has been
vested with jur isdiction by vir tue of the dir ections or or der s issued under sub-
section (1) or sub-section (2) of section 120.]
Powers of Commissioner respecting specified areas, cases, persons, etc.
125.
83
Concurrent jurisdiction of Inspecting Assistant Commissioner and Income-tax
Officer.
125A.
84
Origin al section was in serted by th e Taxation Laws (Am en dm en t) Act,
1975, w.e.f. 1-10-1975.]
Powers of Board respecting specified area, classes of persons or incomes.
126.
85
86
[Power to transfer cases
87
.
88
127. (1) The Dir ector Gener al or Chief Commissioner or Commissioner may,
after giving the assessee a r easonable oppor tunity of being hear d in the
matter , wher ever it is possible to do so, and after r ecor ding his r easons for doing
so, tr ansfer any case
89
fr om one or mor e Assessing Officer s subor dinate to him
(whether with or without concur r ent jur isdiction) to any other Assessing Officer
or Assessing Officer s (whether with or without concur r ent jur isdiction) also
subor dinate to him.
S. 127 I.T. ACT, 1961 1.610
1-4-1967 and later on amended by the Finance Act, 1972, w.e.f. 1-4-1972, the Taxation Laws
(Amendment) Act, 1975, w.e.f. 1-10-1975 and the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978.
84. Pr ior to its omission, section 125A was amended by the Finance (No. 2) Act, 1977, w.e.f.
10-7-1978.
85. Pr ior to its omission, section 126 was amended by the Finance (No. 2) Act, 1977, w.e.f.
10-7-1978.
substitution, section 127 was substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967
and amended by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975.
Income-tax Act.
89. For the meaning of the ter m case, see Taxmanns Dir ect Taxes Manual, Vol. 3.
(2) Wher e the Assessing Officer or Assessing Officer s fr om whom the case is to
be tr ansfer r ed and the Assessing Officer or Assessing Officer s to whom the case
is to be tr ansfer r ed ar e not subor dinate to the same Dir ector Gener al or Chief
Commissioner or Commissioner ,
(a) wher e the Dir ector s Gener al or Chief Commissioner s or Commis-
sioner s to whom such Assessing Officer s ar e subor dinate ar e in
agr eement, then the Dir ector Gener al or Chief Commissioner or
Commissioner fr om whose jur isdiction the case is to be tr ansfer r ed
may, after giving the assessee a r easonable oppor tunity of being
hear d in the matter , wher ever it is possible to do so, and after
r ecor ding his r easons for doing so, pass the or der ;
(b) wher e the Dir ector s Gener al or Chief Commissioner s or Commis-
sioner s afor esaid ar e not in agr eement, the or der tr ansfer r ing the case
may, similar ly, be passed by the Boar d or any such Dir ector Gener al
or Chief Commissioner or Commissioner as the Boar d may, by
notification in the Official Gazette, author ise in this behalf.
(3) Nothing in sub-section (1) or sub-section (2) shall be deemed to r equir e any
such oppor tunity to be given wher e the tr ansfer is fr om any Assessing Officer or
Assessing Officer s (whether with or without concur r ent jur isdiction) to any other
Assessing Officer or Assessing Officer s (whether with or without concur r ent
jur isdiction) and the offices of all such officer s ar e situated in the same city,
locality or place.
(4) The tr ansfer of a case under sub-section (1) or sub-section (2) may be made
at any stage
90-91
of the pr oceedings, and shall not r ender necessar y the r e-issue of
any notice alr eady issued by the Assessing Officer or Assessing Officer s fr om
whom the case is tr ansfer r ed.
Explan ation .In section 120 and this section, the wor d case, in r elation to any
per son whose name is specified in any or der or dir ection issued ther eunder ,
means all pr oceedings under this Act
90-91
in r espect of any year which may be
pending on the date of such or der or dir ection or which may have been
completed on or befor e such date, and includes also all pr oceedings under this
Act which may be commenced after the date of such or der or dir ection in
r espect of any year .]
Functions of Inspectors of Income-tax.
128.
92
Change of incumbent of an office.
93
129. Whenever in r espect of any pr oceeding under this Act an income-tax
author ity ceases to exer cise jur isdiction and is succeeded by another
90-91. For the meaning of ter ms/ expr essions stage and all pr oceedings under this Act, see
1-4-1967.
who has and exer cises jur isdiction, the income-tax author ity so succeeding may
continue the pr oceeding fr om the stage at which the pr oceeding was left by his
pr edecessor :
Provided that the assessee concer ned may demand that befor e the pr oceeding
is so continued the pr evious pr oceeding or any par t ther eof be r eopened or that
befor e any or der of assessment is passed against him, he be r ehear d.
Commissioner competent to perform any function or functions.
130.
94
Income-tax Officer competent to perform any function or functions.
130A.
95
Origin al section was in serted by th e Fin an ce (No. 2) Act, 1967, w.e.f.
1-4-1967.]
C.Powers
Power regarding discovery, production of evidence, etc.
96
131. (1) The
97
98
[Depu t y Commissioner (Appeals)],
99
[Joint Commissioner ]
1
[, Commissioner (Appeals)] and
2
[Chief Com-
missioner or Commissioner ] shall, for the pur poses of this Act, have the
same power s as ar e vested in a cour t under the Code of Civil Pr ocedur e,
1908 (5 of 1908), when tr ying a suit in r espect of the following matter s,
namely :
(a) discover y and inspection;
(b) enfor cing the attendance of any per son, including any officer of a
banking company and examining him on oath;
(c) compelling the pr oduction of books of account and other documents;
and
(d) issuing commissions.
S. 131 I.T. ACT, 1961 1.612
94. Pr ior to its omission, section 130 was substituted by the Finance Act, 1970, w.e.f. 1-4-1970
95. Pr ior to its omission, section 130A was amended by the Taxation Laws (Amendment) Act,
1975, w.e.f. 1-10-1975.
96. See also Cir cular No. 8-D (LXXVI-22), dated 13-5-1958. For details, see Taxmanns Master
1-4-1988.
98. Substituted for Appellate Assistant Commissioner , ibid.
1-4-1988.
3
[(1A)
4
[If the Dir ector Gener al or Dir ector or
5
[Joint] Dir ector or Assistant
Dir ector
6
[or Deputy Dir ector ], or the author ised officer r efer r ed to in sub-
section (1) of section 132 befor e he takes action under clauses (i) to (v) of that
sub-section
7
,] has r eason to suspect that any income has been concealed,
or is likely to be concealed, by any per son or class of per sons, within his
jur isdict ion, t hen, for t he pur poses of making any enquir y or invest iga-
tion r elating ther eto, it shall be competent for him to exer cise the power s
confer r ed under sub-section (1) on the income-tax author ities r efer r ed to in
that sub-section, notwithstanding that no pr oceedings with r espect to such
per son or class of per sons ar e pending
7
befor e him or any other income-tax
author ity.]
(2) [Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f. 1-4-1989.]
(3) Subject to any r ules made in this behalf, any author ity r efer r ed to in sub-
section (1)
8
[or sub-section (1A)] may impound and r etain in its custody for such
per iod as it thinks fit any books of account or other documents pr oduced befor e
it in any pr oceeding under this Act :
Provided that an
9
[Assessing] Officer
8
[or an
10
[Assistant Dir ector
11
[or Deputy
Dir ector ]]] shall not
(a) impound any books of account or other documents without r ecor d-
ing his r easons for so doing, or
(b) r etain in his custody any such books or documents for a per iod
exceeding fifteen days (exclusive of holidays) without obtaining the
appr oval of the
12
[
13
[Chief Commissioner or Dir ector Gener al or
Commissioner or Dir ector ther efor , as the case may be.]]
1.613 CH. XIII - INCOME-TAX AUTHORITIES - POWERS S. 131
4. Substituted for If the Assistant Dir ector of Inspection by the Finance Act, 1988, w.e.f.
1-6-1988.
6. Inser ted, ibid.
7. For the meaning of the expr essions r efer r ed to. . . sub-section and notwithstanding
that . . . ar e pending, see Taxmanns Dir ect Taxes Manual, Vol. 3.
1-4-1988.
10. Substituted for Assistant Dir ector of Inspection by the Dir ect Tax Laws (Amendment)
Act, 1987, w.e.f. 1-4-1988.
1-4-1988.
13. Substituted for Chief Commissioner or Commissioner ther efor by the Finance Act, 1988,
w.e.f. 1-6-1988.
14
[Search and seizure.
15
132.
16
(1) Wher e the
17
[Dir ector Gener al or Dir ector ] or the
18
[Chief Com-
missioner or Commissioner ]
19
[or any su ch
20
[Joint Dir ect or ] or
21
[Joint Commissioner ] as may be empower ed in this behalf by the Boar d], in
consequence of infor mation
22
in his possession, has r eason to believe
22
that
(a) any per son to whom a summons under sub-section (1) of section 37
of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section
(1) of section 131 of this Act, or a notice under sub-section (4) of
section 22 of the Indian Income-tax Act, 1922, or under sub-section (1)
of section 142 of this Act was issued to pr oduce, or cause to be
pr oduced, any books of account or other documents has omitted or
failed to pr oduce, or cause to be pr oduced, such books of account or
other documents as r equir ed by such summons or notice, or
(b) any per son to whom a summons or notice as afor esaid has been or
might be issued will not, or would not, pr oduce or cause to be
pr oduced, any books of account or other documents which will be
useful for , or r elevant to, any pr oceeding under the Indian Income-tax
Act, 1922 (11 of 1922), or under this Act, or
S. 132 I.T. ACT, 1961 1.614
14. Substituted by the Income-tax (Amendment) Act, 1965, w.e.f. 12-3-1965. Ear lier , section
132 was substituted by the Finance Act, 1964, w.e.f. 1-4-1964. Section 6 of the Amendment
Act, 1965 has made the following independent pr ovision :
Validation of certain search es made.Any sear ch of a building or place by an Inspecting
Assistant Commissioner or Income-tax Officer pur por ted to have been made in pur suance
of sub-section (1) of section 132 of the pr incipal Act befor e the commencement of this Act
shall be deemed to have been made in accor dance with the pr ovisions of that sub-section
as amended by this Act as if those pr ovisions wer e in for ce on the day the sear ch was made
and shall not be called in question befor e any cour t of law or any other author ity mer ely
on the gr ound
(i) that the Inspecting Assistant Commissioner or the Income-tax Officer made such
sear ch with the assistance of any other per son; or
(ii) that no pr oceeding under the Indian Income-tax Act, 1922 (11 of 1922), or the
pr incipal Act was pending against the per son concer ned when the sear ch was
author ised under the said sub-section.
15. See r ule 112. For r elevant case laws, see Taxmanns Master Guide to Income-tax Act. For
char ter of r ights and duties of per sons sear ched as well as Depar tmental Instr uctions, see
16. See r ule 112(2)(a) and For m No. 45 for for m of author isation for sear ch and seizur e.
17. Substituted for Dir ector of Inspection by the Dir ect Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1988.
20. Substituted for Deputy Dir ector by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998. Ear lier
Deputy Dir ector was substituted for Deputy Dir ector of Inspection by the Dir ect Tax
22. For the meaning of the ter ms/ expr essions infor mation and r eason to believe, see
(c) any per son is in possession of any money, bullion, jeweller y or other
valuable ar ticle or thing
23
and such money, bullion, jeweller y or other
valuable ar ticle or thing r epr esents either wholly or par tly income or
pr oper ty
24
[which has not been, or would not be, disclosed
23
] for the
pur poses of the Indian Income-tax Act, 1922 (11 of 1922), or this Act
(her einafter in this section r efer r ed to as the undisclosed income or
pr oper ty),
25
[then,
(A) the
26
27
Commissioner ], as the case may be, may author ise any
28
[Joint
Dir ector ],
29
[Joint Commissioner ],
30
31
[or Deputy
Dir ector ]],
32
[Assistant Commissioner
31
[or Deputy Commissioner ] or
Income-tax Officer ], or
(B) such
28
[Joint Dir ector ], or
29
[Joint Commissioner ], as the case may be,
may author ise any
30
31
[or Deputy Dir ector ]],
32
31
[or Deputy Commissioner ] or Income-
tax Officer ],
(the officer so author ised in all cases being her einafter r efer r ed to as the
author ised officer ) to]
(i) enter and sear ch
33
any
34
[building, place, vessel, vehicle or air cr aft]
wher e he has r eason to suspect that such books of account, other
documents, money, bullion, jeweller y or other valuable ar ticle or
thing ar e kept;
23. For the meaning of the ter ms/ expr essions other valuable ar ticle or thing and income
which has not been, or would not be, disclosed, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
24. Substituted for which has not been disclosed by the Taxation Laws (Amendment) Act,
1975, w.e.f. 1-10-1975.
25. Substituted for he may author ise any Deputy Dir ector of Inspection, Inspecting Assistant
Commissioner , Assist ant Dir ect or of Inspect ion or Income-t ax Officer (her einaft er
r efer r ed to as the author ised officer ) to, ibid.
w.e.f. 1-4-1988.
Act, 1987, w.e.f. 1-4-1988.
32. Substituted for or Income-tax Officer by the Dir ect Tax Laws (Amendment) Act, 1987 (as
amended by the Finance Act, 1988), w.e.f. 1-4-1988.
33. For the meaning of the ter m sear ch, see Taxmanns Dir ect Taxes Manual, Vol. 3.
34. Substituted for building or place by the Taxation Laws (Amendment) Act, 1975, w.e.f.
1-10-1975.
(ii) br eak open the lock of any door , box, locker , safe, almir ah or other
r eceptacle for exer cising the power s confer r ed by clause (i) wher e the
keys ther eof ar e not available;
35
[(iia) sear ch any per son who has got out of, or is about to get into, or is in,
the building, place, vessel, vehicle or air cr aft, if the author ised officer
has r eason to suspect that such per son has secr eted about his per son
any such books of account, other documents, money, bullion, jewellery
or other valuable ar ticle or thing;]
36
[(iib) r equir e any per son who is found to be in possession or contr ol of any
books of account or other documents maintained in the for m of
electr onic r ecor d as defined in clause (t) of sub-section (1) of section
2 of the Infor mation Technology Act, 2000 (21 of 2000)
37
, to affor d the
author ised officer the necessar y facility to inspect such books of
account or other documents;]
(iii) seize
38
any such
38
books of account, other documents, money, bullion,
jeweller y or other valuable ar ticle or thing found as a r esult of such
sear ch:
39
[Provided that bullion, jeweller y or other valuable ar ticle or thing,
being stock-in-tr ade of the business, found as a r esult of such sear ch
shall not be seized but the author ised officer shall make a note or
inventor y of such stock-in-tr ade of the business;]
(iv) place mar ks of identification on any books of account or other
documents or make or cause to be made extr acts or copies ther efr om;
(v) make a note or an inventor y of any such money, bullion, jeweller y or
other valuable ar ticle or thing :
40
[Provided that wher e any building, place, vessel, vehicle or air cr aft r efer r ed to
in clause (i) is within the ar ea of jur isdiction of any
41
Commissioner ], but such
41
[Chief Commissioner or Commissioner ] has no
jur isdiction over the per son r efer r ed to in clause (a) or clause (b) or clause (c),
then, notwithstanding anything contained in section
42
[120], it shall be competent
for him to exer cise the power s under this sub-section in all cases wher e he has
r eason to believe that any delay in getting the author isation fr om the
43
[Chief
S. 132 I.T. ACT, 1961 1.616
37. For definition of electr onic r ecor d as defined in section 2(1)(t) of the Infor mation
Technology Act, 2000, see Appendix.
38. For the meaning of the ter ms seize and such, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
40. Inser ted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975. See r ule 112(2)(b)
and For m No. 45A for for m of author isation for sear ch and seizur e.
1-4-1988.
42. Substituted for 121 by the Dir ect Tax Laws (Amendment) Act, 1987 (as amended by the
Finance Act, 1988), w.e.f. 1-4-1988.
43. Substituted for Commissioner by the Dir ect Tax Laws (Amendment) Act, 1987 (as
Commissioner or Commissioner ] having jur isdiction over such per son may be
pr ejudicial to the inter ests of the r evenue :]
44
[Provided further that wher e it is not possible or pr acticable to take physical
possession of any valuable ar ticle or thing and r emove it to a safe place due to
its volume, weight or other physical char acter istics or due to its being of a
danger ous natur e, the author ised officer may ser ve an or der on the owner or the
per son who is in immediate possession or contr ol ther eof that he shall not
r emove, par t with or other wise deal with it, except with the pr evious per mission
of such author ised officer and such action of the author ised officer shall be
deemed to be seizur e of such valuable ar ticle or thing under clause (iii) :]
45
[Provided also that nothing contained in the second pr oviso shall apply in case
of any valuable ar ticle or thing, being stock-in-tr ade of the business.]
46
[(1A) Wher e any
47
[Chief Commissioner or Commissioner ], in consequence of
infor mation in his possession, has r eason to suspect that any books of account,
other documents, money, bullion, jeweller y or other valuable ar ticle or thing in
r espect of which an officer has been author ised by the
48
[Dir ector Gener al or
Dir ector ] or any other
49
[Chief Commissioner or Commissioner ] or any such
50
[Joint Dir ector ] or
51
[Joint Commissioner ] as may be empower ed in this behalf
by the Boar d to take action under clauses (i) to (v) of sub-section (1) ar e or is kept
in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation
under sub-section (1), such
52
[Chief Commissioner or Commissioner ] may,
notwithstanding anything contained in section
53
[120], author ise the said officer
to take action under any of the clauses afor esaid in r espect of such building,
place, vessel, vehicle or air cr aft.]
(2) The author ised officer may r equisition the ser vices of any police officer or of
any officer of the Centr al Gover nment, or of both, to assist him for all or any of
the pur poses specified in sub-section (1)
54
[or sub-section (1A)] and it shall be the
duty of ever y such officer to comply with such r equisition.
46. Inser ted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975. See r ule 112(2)(c)
and For m No. 45B.
1-4-1988.
48. Substituted for Dir ector of Inspection, ibid.
1-4-1988.
53. Substituted for 121 by the Dir ect Tax Laws (Amendment) Act, 1987 (as amended by the
Finance Act, 1988), w.e.f. 1-4-1988.
(3) The author ised officer may, wher e it is not pr acticable
55
to seize any such
books of account, other documents, money, bullion, jeweller y or other valuable
ar ticle or thing,
56
[for r easons other than those mentioned in the second pr oviso
to sub-section (1),] ser ve an or der on the owner or the per son who is in immediate
possession
55
or contr ol ther eof that he shall not r emove, par t with or other wise
deal with it except with the pr evious per mission of such officer and such officer
may take such steps as may be necessar y for ensur ing compliance with this sub-
section.
57
[Explan ation .For the r emoval of doubts, it is her eby declar ed that ser ving of
an or der as afor esaid under this sub-section shall not be deemed to be seizur e of
such books of account, other documents, money, bullion, jeweller y or other
valuable ar ticle or thing under clause (iii) of sub-section (1).]
(4) The author ised officer may, dur ing the cour se of the sear ch or seizur e,
examine on oath any per son who is found to be in possession or contr ol of any
books of account, documents, money, bullion, jeweller y or other valuable ar ticle
or thing and any statement made by such per son dur ing such examination may
ther eafter be used in evidence in any pr oceeding under the Indian Income-tax
Act, 1922 (11 of 1922), or under this Act.
57
[Explan ation .For the r emoval of doubts, it is her eby declar ed that the exami-
nation of any per son under this sub-section may be not mer ely in r espect of any
books of account, other documents or assets found as a r esult of the sear ch, but
also in r espect of all matter s r elevant for the pur poses of any investigation
connected with any pr oceeding under the Indian Income-tax Act, 1922 (11 of
1922), or under this Act.]
58
[(4A) Wher e any books of account, other documents, money, bullion, jeweller y
or other valuable ar ticle or thing ar e or is found in the possession or contr ol of
any per son in the cour se of a sear ch, it may be pr esumed
(i) that such books of account, other documents, money, bullion, jewellery
or other valuable ar ticle or thing belong or belongs to such per son ;
(ii) that the contents of such books of account and other documents ar e
tr ue ; and
(iii) that the signatur e and ever y other par t of such books of account and
other documents which pur por t to be in the handwr iting of any
par ticular per son or which may r easonably be assumed to have been
signed by, or to be in the handwr iting of, any par ticular per son, ar e in
that per sons handwr iting, and in the case of a document stamped,
executed or attested, that it was duly stamped and executed or
attested by the per son by whom it pur por ts to have been so executed
or attested.]
55. For the meaning of the ter ms pr acticable and possession, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
S. 132 I.T. ACT, 1961 1.618
(5)
59
[***]
(6)
60
[***]
(7)
61
[***]
amended by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975, Taxation Laws
(Amendment) Act, 1984, w.e.f. 1-10-1984, Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1988, Finance Act, 1995, w.e.f. 1-7-1995 and Finance (No. 2) Act, 1998, w.e.f. 1-10-1998,
r ead as under :
(5) Wher e any money, bullion, jeweller y or other valuable ar ticle or thing (her eafter in this
sect ion and in sect ions 132A and 132B r efer r ed t o as t he asset s) is seized under
sub-section (1) or sub-section (1A), as a r esult of a sear ch initiated or r equisition made
befor e the 1st day of July, 1995, the Income-tax Officer , after affor ding a r easonable
oppor tunity to the per son concer ned of being hear d and making such enquir y as may be
pr escr ibed, shall, within one hundr ed and twenty days of the seizur e, make an or der , with
the pr evious appr oval of the Joint Commissioner ,
(i) estimating the undisclosed income (including the income fr om the undisclosed
pr oper ty) in a summar y manner to the best of his judgment on the basis of such
mater ials as ar e available with him ;
(ii) calculating the amount of tax on the income so estimated in accor dance with the
pr ovisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act ;
(iia) deter mining the amount of inter est payable and the amount of penalty imposable
in accor dance with the pr ovisions of the Indian Income-tax Act, 1922 (11 of 1922),
or this Act, as if the or der had been the or der of r egular assessment ;
(iii) specifying the amount that will be r equir ed to satisfy any existing liability under this
Act and any one or mor e of the Acts specified in clause (a) of sub-section (1) of
section 230A in r espect of which such per son is in default or is deemed to be in
default ,
and r etain in his custody such assets/ or par t ther eof as ar e in his opinion sufficient to
satisfy the aggr egate of the amounts r efer r ed to in clauses (ii), (iia) and (iii) and for thwith
r elease the r emaining por tion, if any, of the assets to the per son fr om whose custody they
wer e seized :
Provided that if, after taking into account the mater ials available with him, the Income-
tax Officer is of the view that it is not possible to ascer tain to which par ticular pr evious
year or year s such income or any par t ther eof r elates, he may calculate the tax on such
income or par t, as the case may be, as if such income or par t wer e the total income
char geable to tax at the r ates in for ce in the financial year in which the assets wer e seized
and may also deter mine the inter est or penalty, if any, payable or imposable accor dingly :
Provided further that wher e a per son has paid or made satisfactor y ar r angements for
payment of all the amounts r efer r ed to in clauses (ii), (iia) and (iii) or any par t ther eof, the
Income-t ax Officer may, wit h t he pr evious appr oval of t he Chief Commissioner or
Commissioner , r elease t he asset s or such par t t her eof as he may deem fit in t he
cir cumstances of the case.
See r ules 112A and 112B.
amended by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975, r ead as under :
(6) The assets r etained under sub-section (5) may be dealt with in accor dance with the
pr ovisions of section 132B.
61. Omitted by the Finance Act, 2002, w.e.f. 1-6-2002. Pr ior to its omission, sub-section (7) r ead
as under :
(7) If the Income-tax Officer is satisfied that the seized assets or any par t ther eof wer e held
by such per son, for or on behalf of any other per son, the Income-tax Officer may pr oceed
under sub-section (5) against such other per son and all the pr ovisions of this section shall
apply accor dingly.
(8) The books of account or other documents seized under sub-section (1)
62
[or
sub-section (1A)] shall not be r etained by the author ised officer for a per iod
exceeding
63
[thir ty days fr om the date of the or der of assessment under
64
[section
153A or ] clause (c) of section 158BC] unless the r easons for r etaining the same
ar e r ecor ded by him in wr iting and the appr oval of the
65
[Chief Commissioner ,
Commissioner , Dir ector Gener al or Dir ector ] for such r etention is obtained :
Provided that the
65
[Chief Commissioner , Commissioner , Dir ector Gener al or
Dir ector ] shall not author ise the r etention of the books of account and other
documents for a per iod exceeding thir ty days after all the pr oceedings under the
Indian Income-tax Act, 1922 (11 of 1922), or this Act in r espect of the year s for
which the books of account or other documents ar e r elevant ar e completed.
66
[(8A) An or der under sub-section (3) shall not be in for ce for a per iod exceeding
sixty days fr om the date of the or der .]
(9) The per son fr om whose custody any books of account or other documents ar e
seized under sub-section (1)
67
[or sub-section (1A)] may make copies ther eof, or
take extr acts ther efr om, in the pr esence of the author ised officer or any other
per son empower ed by him in this behalf, at such place and time as the author ised
officer may appoint in this behalf.
68
[(9A) Wher e the author ised officer has no jur isdiction over the per son r efer r ed
to in clause (a) or clause (b) or clause (c) of sub-section (1), the books of account
S. 132 I.T. ACT, 1961 1.620
63. Substituted for one hundr ed and eighty days fr om the date of the seizur e by the Finance
Act, 2002, w.e.f. 1-6-2002.
65. Substituted for Chief Commissioner or Commissioner by the Finance Act, 1997, w.r .e.f.
1-10-1996. Ear lier Chief Commissioner or Commissioner was substituted for Commis-
sioner by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
(8A), as inser ted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and
(8A) An or der under sub-section (3) shall not be in for ce for a per iod exceeding sixty days
fr om the date of the or der , except wher e the author ised officer , for r easons to be r ecor ded
by him in wr iting, extends the per iod of oper ation of the or der beyond sixty days, after
obtaining the appr oval of the Dir ector or , as the case may be, Commissioner for such
extension :
Provided that the Dir ector or , as the case may be, Commissioner shall not appr ove the
extension of the per iod for any per iod beyond the expir y of thir ty days after the completion
of all the pr oceedings under this Act in r espect of the year s for which the books of account,
other documents, money, bullion, jeweller y or other valuable ar ticles or things ar e r elevant.
(9A), as inser ted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975, r ead as
under :
(9A) Wher e the author ised officer has no jur isdiction over the per son r efer r ed to in clause
(a) or clause (b) or clause (c) of sub-section (1), the books of account or other documents
or assets seized under that sub-section shall be handed over by the author ised officer to
the Income-tax Officer * having jur isdiction over such per son within a per iod of fifteen
days of such seizur e and ther eupon the power s exer cisable by the author ised officer
under sub-section (8) or sub-section (9) shall be exer cisable by such Income-tax Officer *.
*Should be Assessing Officer .
or other documents, or any money, bullion, jeweller y or other valuable ar ticle or
thing (her eafter in this section and in sections 132A and 132B r efer r ed to as the
assets) seized under that sub-section shall be handed over by the author ised
officer to the Assessing Officer having jur isdiction over such per son within a
per iod of sixty days fr om the date on which the last of the author isations for
sear ch was executed and ther eupon the power s exer cisable by the author ised
officer under sub-section (8) or sub-section (9) shall be exer cisable by such
Assessing Officer .]
(10) If a per son legally entitled to the books of account or other documents seized
under sub-section (1)
69
[or sub-section (1A)] objects for any r eason to the
appr oval given by the
70
[Chief Commissioner , Commissioner , Dir ector Gener al
or Dir ect or ] under sub-sect ion (8), he may make an applicat ion t o t he
Boar d stating ther ein the r easons for such objection and r equesting for the
r etur n of the books of account or other documents
71
[and the Boar d may, after
giving the applicant an oppor tunity of being hear d, pass such or der s as it thinks
fit].
(11)
72
[***]
(11A)
73
[***]
(12)
74
[***]
70. Subst it ut ed for Chief Commissioner or Commissioner by t he Finance Act , 1997,
w.r .e.f. 1-10-1996. Ear lier Chief Commissioner or Commissioner was su bst it u t ed
for Commissioner by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
72. Omitted, ibid. Pr ior to its omission, sub-section (11), as amended by the Taxation Laws
(Amendment) Act, 1984, w.e.f. 1-10-1984 and Dir ect Tax Laws (Amendment) Act, 1987,
(11) If any per son objects for any r eason to an or der made under sub-section (5), he may,
within thir ty days of the date of such or der , make an application to the Chief Commis-
sioner or Commissioner , stating ther ein the r easons for such objection and r equesting for
appr opr iate r elief in the matter .
73. Omitted by the Finance Act, 2002, w.e.f. 1-6-2002. Pr ior to its omission, sub-section (11A),
as inser ted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984 and amended
by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988, r ead as under :
(11A) Ever y application r efer r ed to in sub-section (11) which is pending immediately
befor e the 1st day of October , 1984, befor e an author ity notified under that sub-section
as it stood immediately befor e that day shall stand tr ansfer r ed on that day to the Chief
Commissioner or Commissioner , and the Chief Commissioner or Commissioner may
pr oceed with such application fr om the stage at which it was on that day :
Provided t hat t he applicant may demand t hat befor e pr oceeding fur t her wit h t he
application, he be r ehear d.
amended by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984 and Dir ect Tax
(12) On r eceipt of the application under sub-section (10) the Boar d, or on r eceipt of the
application under sub-section (11) the Chief Commissioner or Commissioner , may, after
giving the applicant an oppor tunity of being hear d, pass such or der s as it or he thinks fit.
75
[(13) The pr ovisions of the Code of Cr iminal Pr ocedur e, 1973 (2 of 1974), r elating
to sear ches and seizur e shall apply, so far as may be, to sear ches and seizur e
under sub-section (1) or sub-section (1A).]
76
(14) The Boar d may make r ules in r elation to any sear ch or seizur e under this
section ; in par ticular , and without pr ejudice to the gener ality of the for egoing
power , such r ules may pr ovide for the pr ocedur e to be followed by the author ised
officer
(i) for obtaining ingr ess into
77
[any building, place, vessel, vehicle or
air cr aft] to be sear ched wher e fr ee ingr ess ther eto is not available ;
(ii) for ensur ing safe custody of any books of account or other docu-
ments or assets seized.
78
[Explan ation 1.For the pur poses of sub-section (9A), execution of an
author isation for sear ch shall have the same meaning as assigned to it in
Explan ation 2 to section 158BE.]
Explan ation 2.In this section, the wor d pr oceeding means any pr oceeding in
r espect of any year , whether under the Indian Income-tax Act, 1922 (11 of 1922),
or this Act, which may be pending on the date on which a sear ch is author ised
under this section or which may have been completed on or befor e such date and
includes also all pr oceedings under this Act which may be commenced after such
date in r espect of any year .]
79
[Powers to requisition books of account, etc.
80
132A.
81
(1) Wher e the
82
83
[Chief Com-
missioner or Commissioner ], in consequence of infor mation in his
possession, has r eason to believe that
(a) any per son to whom a summons under sub-section (1) of section 37of
the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1)
of section 131 of this Act, or a notice under sub-section (4) of section
22 of the Indian Income-tax Act, 1922, or under sub-section (1) of
section 142 of this Act was issued to pr oduce, or cause to be pr oduced,
any books of account or other documents has omitted or failed to
S. 132A I.T. ACT, 1961 1.622
76. See r ule 112.
77. Substituted for such building or place by the Taxation Laws (Amendment) Act, 1975,
w.e.f. 1-10-1975.
78. Substituted by the Finance Act, 2002, w.e.f. 1-6-2002. Pr ior to its substitution Explan a-
tion 1, as amended by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984 and
Explan ation 1.In computing the per iod r efer r ed to in sub-section (5) for the pur poses
of that sub-section, any per iod dur ing which any pr oceeding under this section is stayed
by an or der or injunction of any cour t shall be excluded.
81. See r ule 112D and For m No. 45C for for m of author isation under section 132A(1).
w.e.f. 1-4-1988.
1.623 CH. XIII - INCOME-TAX AUTHORITIES - POWERS S. 132A
pr oduce, or cause to be pr oduced, such books of account or other
documents, as r equir ed by such summons or notice and the said
books of account or other documents have been taken into custody
by any officer or author ity
84
under any other law for the time being
in for ce, or
(b) any books of account or other documents will be useful for , or
r elevant to, any pr oceeding under the Indian Income-tax Act, 1922 (11
of 1922), or under this Act and any per son to whom a summons or
notice as afor esaid has been or might be issued will not, or would not,
pr oduce or cause to be pr oduced, such books of account or other
documents on the r etur n of such books of account or other docu-
ments by any officer or author ity by whom or which such books of
account or other documents have been taken into custody under any
other law for the time being in for ce, or
(c) any assets r epr esent either wholly or par tly income or pr oper ty which
has not been, or would not have been, disclosed for the pur poses of
the Indian Income-tax Act, 1922 (11 of 1922), or this Act by any per son
fr om whose possession or contr ol such assets have been taken into
custody by any officer or author ity under any other law for the time
being in for ce,
then, the
85
86
Commissioner ] may author ise any
87
[Joint Dir ector ],
88
89
90
[or Deputy Dir ector ]],
91
90
[or
Deputy Commissioner ] or Income-tax Officer ] (her eafter in this section and in
sub-section (2) of section 278D r efer r ed to as the r equisitioning officer ) to r equir e
the officer or author ity r efer r ed to in clause (a) or clause (b) or clause (c), as the
case may be, to deliver such books of account, other documents or assets to the
r equisitioning officer .
(2) On a r equisition being made under sub-section (1), the officer or author ity
r efer r ed to in clause (a) or clause (b) or clause (c), as the case may be, of that sub-
section shall deliver the books of account, other documents or assets to the
r equisitioning officer either for thwith or when such officer or author ity is of the
opinion that it is no longer necessar y to r etain the same in his or its custody.
84. For the meaning of the ter m author ity, see Taxmanns Dir ect Taxes Manual, Vol. 3.
w.e.f. 1-4-1988.
Act, 1987, w.e.f. 1-4-1988.
91. Substituted for or Income-tax Officer by the Dir ect Tax Laws (Amendment) Act, 1987 (as
(3) Wher e any books of account, other documents or assets have been deliver ed
to the r equisitioning officer , the pr ovisions of sub-sections (4A) to (14) (both
inclusive) of section 132 and section 132B shall, so far as may be, apply as if such
books of account, other documents or assets had been seized under sub-section
(1) of section 132 by the r equisitioning officer fr om the custody of the per son
r efer r ed to in clause (a) or clause (b) or clause (c), as the case may be, of sub-
section (1) of this section and as if for the wor ds the author ised officer occur r ing
in any of the afor esaid sub-sections (4A) to (14), the wor ds the r equisitioning
officer wer e substituted.]
92
[Application of seized or requisitioned assets
93
.
132B. (1) The assets seized under section 132 or r equisitioned under section
132A may be dealt with in the following manner , namely:
S. 132B I.T. ACT, 1961 1.624
92. Substituted by the Finance Act, 2002, w.e.f. 1-6-2002. See r ule 112C. Pr ior to its substitu-
tion, section 132B, inser ted as section 132A by the Income-tax (Amendment) Act, 1965,
w.e.f. 12-3-1965 and r enumber ed as 132B by the Taxation Laws (Amendment) Act, 1975,
w.e.f. 1-10-1975, and later on amended by the Taxation Laws (Amendment) Act, 1967, w.e.f.
1-10-1967, Finance Act, 1972, w.e.f. 1-4-1972, Taxation Laws (Amendment) Act, 1984, w.e.f.
1-10-1984 and Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988/ 1-4-1989, r ead as
under :
132B. Application of retain ed assets.(1) The assets r etained under sub-section (5) of
section 132 may be dealt with in the following manner , namely :
(i) The amount of the existing liability r efer r ed to in clause (iii) of the said sub-section
and the amount of the liability deter mined on completion of the r egular assessment
or r eassessment for all the assessment year s r elevant to the pr evious year s to which
the income r efer r ed to in clause (i) of that sub-section r elates (including any penalty
levied or inter est payable in connection with such assessment or r eassessment) and
in r espect of which he is in default or is deemed to be in default may be r ecover ed
out of such asset s.
(ii) If the assets consist solely of money, or par tly of money and par tly of other assets,
the Assessing Officer may apply such money in the dischar ge of the liabilities
r efer r ed to in clause (i) and the assessee shall be dischar ged of such liability to the
extent of the money so applied.
(iii) The assets other than money may also be applied for the dischar ge of any such
liability r efer r ed to in clause (i) as r emains undischar ged and for this pur pose such
assets shall be deemed to be under distr aint as if such distr aint was effected by the
Assessing Officer or , as the case may be, Tax Recover y Officer under author isation
fr om the Chief Commissioner or Commissioner under sub-section (5) of section 226
and the Assessing Officer or , as the case may be, Tax Recover y Officer may r ecover
the amount of such liabilities by the sale of such assets and such sale shall be
effected in the manner laid down in the Thir d Schedule.
(2) Nothing contained in sub-section (1) shall pr eclude the r ecover y of the amount of
liabilities afor esaid by any other mode laid down in this Act.
(3) Any assets or pr oceeds ther eof which r emain after the liabilities r efer r ed to in clause
(i) of sub-section (1) ar e dischar ged shall be for thwith made over or paid to the per sons
fr om whose custody the assets wer e seized.
(4) (a) The Centr al Gover nment shall pay simple inter est at the r ate of fifteen per cent per
annum on the amount by which the aggr egate of money r etained under section 132 and
of the pr oceeds, if any, of the assets sold towar ds the dischar ge of the existing liability
r efer r ed t o in clause (iii) of sub-section (5) of that section exceeds the aggr egate of the
amounts r equir ed to meet the liabilities r efer r ed to in clause (i) of sub-section (1) of this
sect ion.
(Con td. on p. 1.625)
1.625 CH. XIII - INCOME-TAX AUTHORITIES - POWERS S. 132B
(i) the amount of any existing liability under this Act, the Wealth-tax Act,
1957 (27 of 1957), the Expenditur e-tax Act, 1987 (35 of 1987), the Gift-
tax Act, 1958 (18 of 1958) and the Inter est-tax Act, 1974 (45 of 1974),
and the amount of the liability deter mined on completion of the
assessment
94
[under section 153A and the assessment of the year
r elevant to the pr evious year in which sear ch is initiated or r equisition
is made, or the amount of liability deter mined on completion of the
assessment under Chapter XIV-B for the block per iod, as the case
may be] (including any penalty levied or inter est payable in connec-
tion with such assessment) and in r espect of which such per son is in
default or is deemed to be in default, may be r ecover ed out of such
assets:
95
[Provided that wher e the per son concer ned makes an application to
the Assessing Officer within thir ty days fr om the end of the month in
which the asset was seized, for r elease of asset and the natur e and
sour ce of acquisition of any such asset is explained ] to the satisfaction
of the Assessing Officer , the amount of any existing liability r efer r ed
to in this clause may be r ecover ed out of such asset and the r emaining
por tion, if any, of the asset may be r eleased, with the pr ior appr oval
of the Chief Commissioner or Commissioner , to the per son fr om
whose custody the assets wer e seized:
Provided further that such asset or any por tion ther eof as is r efer r ed
to in the fir st pr oviso shall be r eleased within a per iod of one hundr ed
and twenty days fr om the date on which the last of the author isations
for sear ch under section 132 or for r equisition under section 132A, as
the case may be, was executed;
(ii) if the assets consist solely of money, or par tly of money and par tly of
other assets, the Assessing Officer may apply such money in the
dischar ge of the liabilities r efer r ed to in clause (i) and the assessee
shall be dischar ged of such liability to the extent of the money so
applied;
(iii) the assets other than money may also be applied for the dischar ge of
any such liability r efer r ed to in clause (i) as r emains undischar ged and
for this pur pose such assets shall be deemed to be under distr aint as
if such distr aint was effected by the Assessing Officer or , as the case
may be, the Tax Recover y Officer under author isation fr om the Chief
(b) Such inter est shall r un fr om the date immediately following the expir y of the per iod
of six months fr om the date of the or der under sub-section (5) of section 132 to the date
of the r egular assessment or r eassessment r efer r ed to in clause (i) of sub-section (1) or , as
the case may be, to the date of last of such assessments or r eassessments.
93. See also Instr uction No. 11/ 2006, dated 1-12-2006. For details, see Taxmanns Master
94. Substituted for under Chapter XIV-B for the block per iod by the Finance Act, 2003, w.e.f.
1-6-2003.
95. Substituted for Pr ovided that wher e the natur e and sour ce of acquisition of any such
asset is explained, ibid.
Commissioner or Commissioner under sub-section (5) of section 226
and the Assessing Officer or , as the case may be, the Tax Recover y
Officer may r ecover the amount of such liabilities by the sale of such
assets and such sale shall be effected in the manner laid down in the
Thir d Schedule.
(2) Nothing contained in sub-section (1) shall pr eclude the r ecover y of the
amount of liabilities afor esaid by any other mode laid down in this Act.
(3) Any assets or pr oceeds ther eof which r emain after the liabilities r efer r ed to
in clause (i) of sub-section (1) ar e dischar ged shall be for thwith made over or
paid to the per sons fr om whose custody the assets wer e seized.
(4) (a) The Centr al Gover nment shall pay simple inter est at the r ate of
96
[on e-h alf
per cen t for every m on th or part of a m on th ] on the amount by which the
aggr egate amount of money seized under section 132 or r equisitioned under
section 132A, as r educed by the amount of money, if any, r eleased under the fir st
pr oviso to clause (i) of sub-section (1), and of the pr oceeds, if any, of the assets
sold towar ds the dischar ge of the existing liability r efer r ed to in clause (i) of sub-
section (1), exceeds the aggr egate of the amount r equir ed to meet the liabilities
r efer r ed to in clause (i) of sub-section (1) of this section.
(b) Such inter est shall r un fr om the date immediately following the expir y of the
per iod of one hundr ed and twenty days fr om the date on which the last of the
author isations for sear ch under section 132 or r equisition under section 132A
was executed to the date of completion of the assessment
97
[under section 153A
or ] under Chapter XIV-B.
(i) block per iod shall have the meaning assigned to it in clause (a) of
section 158B;
(ii) execution of an author isation for sear ch or r equisition shall have the
same meaning as assigned to it in Explan ation 2 to section 158BE.]
Power to call for information.
98
133. The
99
[Assessing] Officer , the
1
[Deputy Commissioner (Appeals),]
2
[the
3
[Joint Commissioner ] or the Commissioner (Appeals)] may, for the
pur poses of this Act,
(1) r equir e any fir m to fur nish him with a r etur n of the names and
addr esses of the par tner s of the fir m and their r espective shar es ;
96. Substituted for six per cent per annum by the Finance Act, 2007, w.e.f. 1-4-2008. Ear lier
wor d six was substituted for eight by the Taxation Laws (Amendment) Act, 2003, w.e.f.
8-9-2003.
1-4-1988.
2. Substituted for or the Inspecting Assistant Commissioner by the Finance (No. 2) Act,
1977, w.e.f. 10-7-1978.
S. 133 I.T. ACT, 1961 1.626
(2) r equir e any Hindu undivided family to fur nish him with a r etur n of
the names and addr esses of the manager and the member s of the
family ;
(3) r equir e any per son whom he has r eason to believe to be a tr ustee,
guar dian or agent, to fur nish him with a r etur n of the names of the
per sons for or of whom he is tr ustee, guar dian or agent, and of their
addr esses ;
(4) r equir e any assessee to fur nish a statement of the names and
addr esses of all per sons to whom he has paid in any pr evious year
r ent, inter est, commission, r oyalty or br oker age, or any annuity,
not being any annuity taxable under the head Salar ies amounting
to mor e than
4
[one thousand r upees, or such higher amount as may
be pr escr ibed], t oget her wit h par t icular s of all such payment s
made ;
(5) r equir e any dealer , br oker or agent or any per son concer ned in the
management of a stock or commodity exchange to fur nish a state-
ment of the names and addr esses of all per sons to whom he or the
exchange has paid any sum in connection with the tr ansfer , whether
by way of sale, exchange or other wise, of assets, or on whose behalf
or fr om whom he or the exchange has r eceived any such sum,
together with par ticular s of all such payments and r eceipts ;
(6) r equir e any per son, including a banking company or any officer
ther eof, to fur nish infor mation in r elation to such points or matter s,
or to fur nish statements of accounts and affair s ver ified in the
manner specified by the
5
6
[Deputy Commis-
sioner (Appeals)]
7
[, the
8
[Joint Commissioner ] or the Commissioner
(Appeals)], giving infor mation in r elation to such points or matter s as,
in the opinion of the
9
10
[Deputy Commissioner
(Appeals)]
7
[, the
8
[Joint Commissioner ] or the Commissioner (Ap-
peals)], will be useful for , or r elevant to, any
11
[enquir y
12
or ] pr oceed-
ing
12
under this Act :
4. Substituted for four hundr ed r upees by the Dir ect Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989.
1-4-1988.
1977, w.e.f. 10-7-1978.
1-4-1988.
12. For the meaning of the ter m pr oceeding/ enquir y, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
13
[Provided that the power s r efer r ed to in clause (6), may also be
exer cised by the Dir ector -Gener al, the Chief Commissioner , the
Dir ector and the Commissioner :]
14
[Provided further that the power in r espect of an inquir y, in a case
wher e no pr oceeding is pending, shall not be exer cised by any income-
tax author ity below the r ank of Dir ector or Commissioner without
the pr ior appr oval of the Dir ector or , as the case may be, the
Commissioner .]
15
[Power of survey.
16
133A. (1) Notwithstanding anything contained in any other pr ovision of this
Act, an income-tax author ity may enter
(a) any place within the limits of the ar ea assigned to him, or
(b) any place occupied by any per son in r espect of whom he exer cises
jur isdiction,
17
[or ]
17
[(c) any place in r espect of which he is author ised for the pur poses of this
section by such income-tax author ity, who is assigned the ar ea within
which such place is situated or who exer cises jur isdiction in r espect
of any per son occupying such place,]
at which a business or pr ofession is car r ied on, whether such place be the
pr incipal place or not of such business or pr ofession, and r equir e any pr opr ietor ,
employee or any other per son who may at that time and place be attending in any
manner to, or helping in, the car r ying on of such business or pr ofession
(i) to affor d him the necessar y facility to inspect such books of account
or other documents as he may r equir e and which may be available at
such place,
(ii) to affor d him the necessar y facility to check or ver ify the cash, stock
or other valuable ar ticle or thing which may be found ther ein, and
(iii) to fur nish such infor mation as he may r equir e as to any matter which
may be useful for , or r elevant to, any pr oceeding under this Act.
Explan ation .For the pur poses of this sub-section, a place wher e a business or
pr ofession is car r ied on shall also include any other place, whether any business
or pr ofession is car r ied on ther ein or not, in which the per son car r ying on the
business or pr ofession states that any of his books of account or other documents
or any par t of his cash or stock or other valuable ar ticle or thing r elating to his
business or pr ofession ar e or is kept.
(2) An income-tax author ity may enter any place of business or pr ofession
r efer r ed to in sub-section (1) only dur ing the hour s at which such place is open
S. 133A I.T. ACT, 1961 1.628
15. Substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975. Or iginal
section was inser ted by the Finance Act, 1964, w.e.f. 1-4-1964.
16 . See also Cir cular No. 7-D(LXIII-7), dated 3-5-1967. For details, see Taxmanns Master
for the conduct of business or pr ofession and, in the case of any other place, only
after sunr ise and befor e sunset.
(3) An income-tax author ity acting under this section may,
(i) if he so deems necessar y, place mar ks of identification on the books
of account or other documents inspected by him and make or cause
to be made extr acts or copies ther efr om,
18
[(ia) impound and r etain in his custody for such per iod as he thinks fit any
books of account or other documents inspected by him:
Provided that such income-tax author ity shall not
(a) impound any books of account or other documents except
after r ecor ding his r easons for so doing; or
19
[(b) r etain in his custody any such books of account or other
documents for a per iod exceeding ten days (exclusive of
holidays) wit hout obt aining t he appr oval of t he Chief
Commissioner or Dir ector Gener al ther efor , as the case may
be,]]
(ii) make an inventor y of any cash, stock or other valuable ar ticle or thing
checked or ver ified by him,
(iii) r ecor d the statement of any per son which may be useful for , or
r elevant to, any pr oceeding under this Act.
(4) An income-tax author ity acting under this section shall, on no account,
r emove or cause to be r emoved fr om the place wher ein he has enter ed,
20
[***] any
cash, stock or other valuable ar ticle or thing.
(5) Wher e, having r egar d to the natur e and scale of expenditur e incur r ed by an
assessee, in connection with any function, cer emony or event, the income-tax
author ity is of the opinion that it is necessar y or expedient so to do, he may, at any
time after such function, cer emony or event, r equir e the assessee by whom such
expenditur e has been incur r ed or any per son who, in the opinion of the income-
tax author ity, is likely to possess infor mation as r espects the expenditur e
incur r ed, to fur nish such infor mation as he may r equir e as to any matter which
may be useful for , or r elevant to, any pr oceeding under this Act and may have
the statements of the assessee or any other per son r ecor ded and any statement
so r ecor ded may ther eafter be used in evidence in any pr oceeding under this Act.
(6) If a per son under this section is r equir ed to affor d facility to the income-tax
author ity to inspect books of account or other documents or to check or ver ify
any cash, stock or other valuable ar ticle or thing or to fur nish any infor mation
or to have his statement r ecor ded either r efuses or evades to do so, the income-
1.629 CH. XIII - INCOME-TAX AUTHORITIES - POWERS S. 133A
r ead as under :
(b) r etain in his custody any such books of account or other documents for a per iod
exceeding fifteen days (exclusive of holidays) without obtaining the appr oval of the
Chief Commissioner or Dir ector Gener al or Commissioner or Dir ector ther efor , as
the case may be,
20. Wor ds any books of account or other documents or omitted by the Finance Act, 2002,
w.e.f. 1-6-2002.
tax author ity shall have all the power s under
21
[sub-section (1) of section 131]
for enfor cing compliance with the r equir ement made :
22
[Provided that no action under sub-section (1) shall be taken by an Assistant
Dir ector or a Deputy Dir ector or an Assessing Officer or a Tax Recover y Officer
or an Inspector of Income-tax without obtaining the appr oval of the Joint
Dir ector or the Joint Commissioner , as the case may be.]
23
[(a) income-tax author ity means a Commissioner , a Joint Commis-
sioner , a Dir ector , a Joint Dir ector , an Assistant Dir ector or a Deputy
Dir ector or an Assessing Officer , or a Tax Recover y Officer , and for
the pur poses of clause (i) of sub-section (1), clause (i) of sub-section
(3) and sub-section (5), includes an Inspector of Income-tax;]
(b) pr oceeding means any pr oceeding under this Act in r espect of any
year which may be pending on the date on which the power s under
this section ar e exer cised or which may have been completed on
or befor e such date and includes also all pr oceedings under this
Act which may be commenced after such date in r espect of any
year .]
24
[Power to collect certain information.
133B. (1) Notwithstanding anything contained in any other pr ovision of this
Act, an income-tax author ity may, for the pur pose of collecting any
infor mation which may be useful for , or r elevant to, the pur poses of this Act,
enter
(a) any building or place within the limits of the ar ea assigned to such
author ity ; or
(b) any building or place occupied by any per son in r espect of whom he
exer cises jur isdiction,
at which a business or pr ofession is car r ied on, whether such place be the
pr incipal place or not of such business or pr ofession, and r equir e any pr opr ietor ,
employee or any other per son who may at that time and place be attending in any
manner to, or helping in, the car r ying on of such business or pr ofession to fur nish
such infor mation as may be pr escr ibed
25
.
S. 133B I.T. ACT, 1961 1.630
21. Substituted for sub-sections (1) and (2) of section 131 by the Dir ect Tax Laws (Amend-
ment) Act, 1987, w.e.f. 1-4-1989.
as amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988/ 1-4-1989,
Finance Act, 1995, w.e.f. 1-7-1995 and Finance (No. 2) Act, 1998, w.e.f. 1-10-1998, r ead as
under :
(a) income-tax author ity means a Commissioner , a Joint Commissioner , a Dir ector ,
a Joint Dir ector , an Assistant Dir ector or Deputy Dir ector or an Assessing Officer ,
and for the pur poses of clause (i) of sub-section (1), clause (i) of sub-section (3) and
sub-section (5), includes an Inspector of Income-tax, if so author ised by any such
aut hor it y;
25. See r ule 112E and For m No. 45D for for m of infor mation r equir ed to be fur nished under
section 133B(1).
(2) An income-tax author ity may enter any place of business or pr ofession
r efer r ed to in sub-section (1) only dur ing the hour s at which such place is open
for the conduct of business or pr ofession.
(3) For the r emoval of doubts, it is her eby declar ed that an income-tax author ity
acting under this section shall, on no account, r emove or cause to be r emoved
fr om the building or place wher ein he has enter ed, any books of account or other
documents or any cash, stock or other valuable ar ticle or thing.
Explan ation .In this section, income-tax author ity means a
26
[Joint Commis-
sioner ], an
27
[Assistant Dir ector ]
28
[or Deputy Dir ector ] or an
29
[Assessing]
Officer , and includes an Inspector of Income-tax who has been author ised by the
29
[Assessing] Officer to exer cise the power s confer r ed under this section in
r elation to the ar ea in r espect of which the
29
[Assessing] Officer exer cises
jur isdiction or par t ther eof.]
Power to inspect registers of companies.
134. The
29
30
[Deputy Commissioner (Appeals)],
31
[the
32
[Joint Commissioner ] or the Commissioner (Appeals)], or any per son
subor dinate to him author ised in wr iting in this behalf by the
29
[Assessing]
Officer , the
30
31
[the
32
[Joint Commissioner ] or
the Commissioner (Appeals)], may inspect, and if necessar y, take copies, or cause
copies to be taken, of any r egister of the member s, debentur e holder s or
mor tgagees of any company or of any entr y in such r egister .
Power of
33
[Director General or Director ],
34
sioner] and
35
[Joint Commissioner].
135. The
33
[Dir ector Gener al or Dir ector ], the
34
[Chief Commissioner or Com-
missioner ] and the
35
[Joint Commissioner ] shall be competent to make any
enquir y under this Act, and for this pur pose shall have all the power s that an
36
[Assessing] Officer has under this Act in r elation to the making of enquir ies.
Act, 1987, w.e.f. 1-4-1988.
1-4-1988.
1977, w.e.f. 10-7-1978.
w.e.f. 1-4-1988.
1-4-1988.
Proceedings before income-tax authorities to be judicial proceedings.
37
136. Any pr oceeding under this Act befor e an income-tax author ity shall be
deemed to be a judicial pr oceeding within the meaning of sections 193
and 228 and for the pur poses of section 196 of the Indian Penal Code (45 of 1860)
38
[and ever y income-tax author ity shall be deemed to be a Civil Cour t for the
pur poses of section 195, but not for the pur poses of Chapter XXVI of the Code
of Cr iminal Pr ocedur e, 1973 (2 of 1974)].
D.Disclosure of in form ation
Disclosure of information prohibited.
39
[Disclosure of information respecting assessees.
40
138.
41
[(1)(a) The Boar d or any other income-tax author ity specified by it by
a gener al or special or der in this behalf may fur nish or cause to be
fur nished to
(i) any officer , author ity or body per for ming any functions under any
law r elating to the imposition of any tax, duty or cess, or to deal-
ings i n
42
for eign exchange as defined in section 2(d) of the For eign
Exchange Regulation Act, 1947 (7 of 1947)
43
; or
(ii) such officer , author ity or body per for ming functions under any other
law as the Centr al Gover nment may, if in its opinion it is necessar y so
to do in the public inter est, specify by notification
44
in the Official
Gazette in this behalf,
any such infor mation
45
[r eceived or obtained by any income-tax author ity in the
per for mance of his functions under this Act], as may, in the opinion of the Boar d
or other income-tax author ity, be necessar y for the pur pose of enabling the
officer , author ity or body to per for m his or its functions under that law.
(b) Wher e a per son makes an application to the
46
Commissioner ] in the pr escr ibed for m
47
for any infor mation r elating to any
S. 138 I.T. ACT, 1961 1.632
42. For definition of for eign exchange, see footnote 41 on p. 1.431 an te.
43. Since r epealed and now the For eign Exchange Regulation Act, 1973 (46 of 1973)/ For eign
Exchange Management Act, 1999 (42 of 1999).
44. For specified income-tax/ other author ities, see Taxmanns Master Guide to Income-tax
Act .
45. Substituted for r elating to any assessee in r espect of any assessment made under this Act
or the Indian Income-tax Act, 1922 (11 of 1922) by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989.
46. Substituted for Commissioner , ibid., w.e.f. 1-4-1988.
47. See r ule 113 and For m Nos. 46 to 49 for for m of application to Commissioner for
disclosur e of infor mation, for m of infor mation fur nished by Commissioner and for m of
r efusal to fur nish infor mation, r espectively.
1.633 CH. XIV - PROCEDURE FOR ASSESSMENT S. 139
assessee
48
[r eceived or obtained by any income-tax author ity in the per for mance
of his functions under this Act], the
49
[Chief Commissioner or Commissioner ]
may, if he is satisfied that it is in the public inter est so to do, fur nish or cause to
be fur nished the infor mation asked for
50
[***] and his decision in this behalf shall
be final and shall not be called in question in any cour t of law.]
(2) Notwithstanding anything contained in sub-section (1) or any other law for
the time being in for ce, the Centr al Gover nment may, having r egar d to the
pr actices and usages customar y or any other r elevant factor s, by or der notified
51
in the Official Gazette, dir ect that no infor mation or document shall be fur nished
or pr oduced by a public ser vant in r espect of such matter s r elating to such class
of assessees or except to such author ities as may be specified in the or der .]
CHAPTER XI V
PROCEDURE FOR ASSESSMENT
52
Return of income.
53
139.
54
[(1) Ever y per son
55
,
48. Substituted for in r espect of any assessment made under this Act or the Indian Income-
tax Act, 1922 (11 of 1922), on or after the 1st day of Apr il, 1960 by the Dir ect Tax Laws
1-4-1988.
50. in r espect of that assessment only omitted by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989.
51. For or der notified under sub-section (2), see Taxmanns Master Guide to Income-tax Act.
52. For the meaning of the ter m assessment, see Taxmanns Dir ect Taxes Manual, Vol. 3.
53. See also Cir cular No. 307, dated 23-6-1981, Cir cular No. 412, dated 2-3-1985, Cir cular No.
639, dated 13-11-1992, Cir cular No. 792, dated 21-6-2000, Cir cular No. 795, dated 1-9-2000,
Cir cular No. 10/ 2001, dated 19-7-2001, Cir cular No. 10/ 2003, dated 24-12-2003, Cir cular
No. 9/ 2006, dat ed 10-10-2006, Cir cular No. 10/ 2006, dat ed 16-10-2006, Cir cular No.
12/ 2006, dated 27-11-2006 and Cir cular No. 5/ 2007, dated 26-7-2007. For details, see
(1), as amended by the Finance Act, 1963, w.r .e.f. 1-4-1962, Taxation Laws (Amendment)
Act, 1967, w.e.f. 1-10-1967, Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, Finance
Act, 1972, w.e.f. 1-4-1972, Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, Dir ect
Tax Laws (Second Amendment ) Act , 1989, w.e.f. 1-4-1989, Finance Act , 1990, w.e.f.
1-4-1991, Finance Act, 1992, w.e.f. 1-4-1993, Finance Act, 1994, w.e.f. 1-4-1994, Finance (No.
2) Act, 1996, w.e.f. 1-4-1997, Finance Act, 1997, w.e.f. 1-4-1997, Finance (No. 2) Act, 1998,
(1) Ever y per son, if his total income or the total income of any other per son in r espect of
which he is assessable under this Act dur ing the pr evious year exceeded the maximum
amount which is not char geable to income-tax, shall, on or befor e the due date, fur nish
a r etur n of his income or the income of such other per son dur ing the pr evious year in the
pr escr ibed for m and ver ified in the pr escr ibed manner and setting for th such other
par ticular s as may be pr escr ibed:
Provided that a per son, not fur nishing r etur n under this sub-section and r esiding in such
ar ea as may be specified by the Boar d in this behalf by a notification in the Official Gazette,
and who at any time dur ing the pr evious year fulfils any one of the following conditions,
namely :
(Con td. on p. 1.634)
S. 139 I.T. ACT, 1961 1.634
(a) being a company
56
[or a fir m]; or
(b) being a per son other than a company
56
[or a fir m], if his total income
or the total income of any other per son in r espect of which he is
assessable under this Act dur ing the pr evious year exceeded the
maximum amount which is not char geable to income-tax,
(i) is in occupation of an immovable pr oper ty exceeding a specified floor ar ea, whether
by way of owner ship, tenancy or other wise, as may be specified by the Boar d in this
behalf; or
(ii) is the owner or the lessee of a motor vehicle other than a two-wheeled motor vehicle,
whether having any detachable side car having extr a wheel attached to such two-
wheeled motor vehicle or not; or
(iii) is a subscr iber to a telephone; or
(iv ) has incur r ed expenditur e for himself or any other per son on tr avel to any for eign
countr y; or
(v) is the holder of the cr edit car d, not being an add-on car d, issued by any bank or
institution; or
(vi) is a member of a club wher e entr ance fee char ged is twenty-five thousand r upees
or mor e,
shall fur nish a r etur n, of his income dur ing the pr evious year , on or befor e the due date
in the pr escr ibed for m and ver ified in the pr escr ibed manner and setting for th such other
par ticular s as may be pr escr ibed:
Provided further that the Centr al Gover nment may, by notification in the Official Gazette,
specify the class or classes of per sons to whom the pr ovisions of the fir st pr oviso shall not
apply.
Explan ation 1.In this sub-section, due date means
(a) wher e the assessee is a company, the 30th day of November of the assessment year ;
(b) wher e the assessee is a per son, other than a company,
(i) in a case wher e the accounts of the assessee ar e r equir ed under this Act or any
other law to be audited or wher e the r epor t of an accountant is r equir ed to be
fur nished under section 80HHC or section 80HHD or wher e the pr escr ibed
cer tificate is r equir ed to be fur nished under section 80R or section 80RR or sub-
section (1) of section 80RRA, or in the case of a co-oper ative society or in the case
of a wor king par tner of a fir m whose accounts ar e r equir ed under this Act or any
other law to be audited, the 31st day of October of the assessment year ;
(ii) in a case wher e the total income r efer r ed to in this sub-section includes any
income fr om business or pr ofession, not being a case falling under sub-
clause (i), the 31st day of August of the assessment year ;
(iii) in any other case, the 30th day of June of the assessment year .
Explan ation 2.For the pur poses of sub-clause (i) of clause (b) of Explan ation 1, the
expr ession wor king par tner shall have the meaning assigned to it in Explan ation 4 of
clause (b) of section 40.
Explan ation 3.For the pur poses of this sub-section, the expr ession motor vehicle shall
have the meaning assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988
(59 of 1988).
Explan ation 4.For the pur poses of this sub-section, the expr ession tr avel to any for eign
countr y does not include tr avel to the neighbour ing countr ies or to such places of
pilgr image as the Boar d may specify in this behalf by notification in the Official Gazette.
55. For the meaning of the expr ession ever y per son, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
shall, on or befor e the due date, fur nish a r etur n of his income or the income of
such other per son dur ing the pr evious year , in the pr escr ibed for m
57
and ver ified
57. See r ule 12. Pr escr ibed r etur ns for assessment year 2007-08 ar e as under :
ITR1 (a) in the case of a per son being an individual wher e the total income includes
income char geable to income-tax under the head salar ies or income in
the natur e of family pension as defined in the Explan ation to clause (iia)
of section 57 but does not include any other income except income by way
of inter est char geable to income-tax under the head Income fr om other
sour ces,
ITR2 (b) in the case of a per son being an individual [not being an individual to
whom (a) applies] or a Hindu undivided family wher e the total income
does not include any income char geable to income-tax under the head
Pr ofits or gains of business or pr ofession,
ITR3 (c) in the case of a per son being an individual or a Hindu undivided family
who is a par tner in a fir m and wher e income char geable to income-tax
under the head Pr ofits or gains of business or pr ofession does not
include any income except the income by way of any inter est, salar y,
bonus, commission or r emuner ation, by whatever name called, due to, or
r eceived by him fr om such fir m,
ITR4 (d) in the case of a per son being an individual or a Hindu undivided family
other than the individual or Hindu undivided family r efer r ed to in (a) or
(b) or (c) and der iving income fr om a pr opr ietar y business or pr ofession,
ITR5 (e) in the case of a per son not being an individual or a Hindu undivided family
or a company or a per son to which (g) applies,
ITR6 (f ) in the case of a company not being a company to which (g) applies,
ITR7 (g) in the case of a per son including a company whether or not r egister ed
under section 25 of the Companies Act, 1956, r equir ed to file a r etur n
under sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-
section (4D) of section 139,
ITR8 (h ) in the case of a per son who is not r equir ed to fur nish the r etur n of income
but is r equir ed to fur nish the r etur n of fr inge benefits.
Note 1. The r etur n of income and r etur n of fr inge benefits r equir ed to be fur nished in
For m No. ITR-1 or For m No. ITR-2 or For m No. ITR-3 or For m No. ITR-4 or For m No. ITR-
5 or For m No. ITR-6 or For m No. ITR-8 shall not be accompanied by a statement showing
the computation of the tax payable on the basis of the r etur n, or pr oof of the tax, if any,
claimed to have been deducted or collected at sour ce or the advance tax or tax on self-
assessment, if any, claimed to have been paid or any document or copy of any account or
For m or r epor t of audit r equir ed to be attached with the r etur n of income or the r etur n
of fr inge benefits under any of the pr ovisions of the Act.
2. The r etur n of income or r etur n of fr inge benefits may be fur nished in any of the
following manner s, namely:
(i) fur nishing the r etur n in a paper for m;
(ii) fur nishing the r etur n electr onically under digital signatur e;
(iii) tr ansmitting the data in the r etur n electr onically and ther eafter submitting the
ver ification of the r etur n in For m ITR-V;
(iv ) fur nishing a bar -coded r etur n in a paper for m:
However ,
(a) a fir m r equir ed to fur nish the r etur n in For m ITR-5 and to whom pr ovisions of
section 44AB ar e applicable or a company r equir ed to fur nish the r etur n in For m
ITR-6 shall fur nish the r etur n in the manner specified in (ii) or (iii) above
(b) a per son r equir ed to fur nish the r etur n in For m ITR-7 shall fur nish the r etur n in the
manner specified in (i) above.
in the pr escr ibed manner and setting for th such other par ticular s as may be
pr escr ibed :
Provided that a per son r efer r ed to in clause (b), who is not r equir ed to fur nish a
r etur n under this sub-section and r esiding in such ar ea as may be specified by
the Boar d in this behalf by notification
58
in the Official Gazette, and who
59
[dur ing
the pr evious year incur s an expenditur e of fifty thousand r upees or mor e
towar ds consumption of electr icity or ] at any time dur ing the pr evious year
fulfils any one of the following conditions, namely :
(i) is in occupation of an immovable pr oper ty exceeding a specified floor
ar ea, whether by way of owner ship, tenancy or other wise, as may be
specified
60
by the Boar d in this behalf; or
(ii) is the owner or the lessee of a motor vehicle other than a two-
wheeled motor vehicle, whether having any detachable side car
having extr a wheel attached to such two-wheeled motor vehicle or
not; or
(iii)
61
[***]
(iv) has incur r ed expenditur e for himself or any other per son on tr avel to
any for eign countr y; or
(v) is the holder of a cr edit car d
62
, not being an add-on car d, issued by
any bank or institution; or
(vi) is a member of a club wher e entr ance fee char ged is twenty-five
thousand r upees or mor e,
shall fur nish a r etur n, of his income
63
[dur ing any pr evious year ending befor e
the 1st day of Apr il, 2005], on or befor e the due date in the pr escr ibed for m
64
and
ver ified in the pr escr ibed manner and setting for th such other par ticular s as may
be pr escr ibed :
Provided further that the Centr al Gover nment may, by notification
65
in the
Official Gazette, specify the class or classes of per sons to whom the pr ovisions
of the fir st pr oviso shall not apply:
Provided also that ever y company
66
[or a fir m] shall fur nish on or befor e the
due date the r etur n in r espect of its income or loss in ever y pr evious year :
66
[Provided also that ever y per son, being an individual or a Hindu undivided
family or an association of per sons or a body of individuals, whether incor por ated
or not, or an ar tificial jur idical per son, if his total income or the total income of
any other per son in r espect of which he is assessable under this Act dur ing the
S. 139 I.T. ACT, 1961 1.636
58. For notified ar eas, see Taxmanns Dir ect Taxes Cir cular s. See also Cir cular No. 10/ 2001,
dated 19-7-2001.
60. For specified floor ar eas, see Taxmann's Dir ect Taxes Cir cular s.
61. Omitted by the Finance Act, 2005, w.e.f. 1-4-2006. Pr ior to its omission, clause (iii) was
62. See also Cir cular No. 795, dat ed 1-9-2000. For det ails, see Taxmanns Dir ect Taxes
Cir cular s.
63. Substituted for dur ing the pr evious year by the Finance Act, 2006, w.e.f. 1-4-2006.
64. See old r ule 12 and For m No. 2C.
65. For notified per sons, see Taxmanns Dir ect Taxes Cir cular s.
pr evious year , without giving effect to the pr ovisions of section 10A or section
10B or section 10BA or Chapter VI-A exceeded the maximum amount which is
not char geable to income-tax, shall, on or befor e the due date, fur nish a r etur n
of his income or the income of such other per son dur ing the pr evious year , in the
pr escr ibed for m and ver ified in the pr escr ibed manner and setting for th such
other par ticular s as may be pr escr ibed.]
Explan ation 1.For the pur poses of this sub-section, the expr ession motor
vehicle shall have the meaning assigned to it in clause (28) of section 2
67
of the
Motor Vehicles Act, 1988 (59 of 1988).
Explan ation 2.In this sub-section, due date means,
(a) wher e the assessee is
(i) a company; or
(ii) a per son (other than a company) whose accounts ar e r equir ed to
be audited under this Act or under any other law for the time
being in for ce; or
(iii) a wor king par tner of a fir m whose accounts ar e r equir ed to be
audited under this Act or under any other law for the time being
in for ce,
the
67a
[30th day of Septem ber] of the assessment year ;
(b) in the case of a per son other than a company, r efer r ed to in the fir st
pr oviso to this sub-section, the 31st day of October of the assessment
year ;
(c) in the case of any other assessee, the 31st day of July of the assessment
year .
Explan ation 3.For the pur poses of this sub-section, the expr ession tr avel to
any for eign countr y does not include tr avel to the neighbour ing countr ies or to
such places of pilgr image as the Boar d may specify in this behalf by notification
68
in the Official Gazette.]
69
[(1A) Without pr ejudice to the pr ovisions of sub-section (1), any per son, being
an individual who is in r eceipt of income char geable under the head Salar ies
67. For definition of motor vehicle, see footnote 85 on p. 1.568 an te.
68. For notified places of pilgr image and neighbour ing countr ies, see Taxmanns Dir ect Taxes
Cir cular s.
69. Inser ted by the Finance Act, 2002, w.e.f. 1-4-2002. Ear lier sub-section (1A) was amended
by the Finance Act, 1963, w.r .e.f. 1-4-1962, the Taxation Laws (Amendment) Act, 1970, w.e.f.
Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985 and the Finance Act, 1985, w.e.f.
1-4-1986 and later on omitted by the Finance Act, 1992, w.e.f. 1-4-1993. Pr ior to omission
sub-section (1A) r ead as under :
(1A) Notwithstanding anything contained in sub-section (1), no per son need fur nish under
that sub-section a r etur n of his income or the income of any other per son in r espect of
whose total income he is assessable under this Act, if his income or , as the case may be,
the income of such other per son dur ing the pr evious year consisted only of income
char geable under the head Salar ies or of income char geable under that head and also
income of the natur e r efer r ed to in any one or mor e of clauses (i) to (ix) of sub-section (1)
of section 80L and the following conditions ar e fulfilled, namely :
(Con td. on p. 1.638)
may, at his option, fur nish a r etur n of his income for any pr evious year to his
employer , in accor dance with such scheme as may be specified by the Boar d in
this behalf, by notification in the Official Gazette
70
, and subject to such conditions
as may be specified ther ein, and such employer shall fur nish all r etur ns of
income r eceived by him on or befor e the due date, in such for m (including on a
floppy, diskette, magnetic car tr idge tape, CD-ROM or any other computer
r eadable media) and manner as may be specified in that scheme, and in such
case, any employee who has filed a r etur n of his income to his employer shall be
deemed to have fur nished a r etur n of income under sub-section (1), and the
pr ovisions of this Act shall apply accor dingly.]
71
[***]]
72
[(1B) Without pr ejudice to the pr ovisions of sub-section (1), any per son, being
a company or being a per son other than a company, r equir ed to fur nish a r etur n
of income under sub-section (1), may, at his option, on or befor e the due date,
fur nish a r etur n of his income for any pr evious year in accor dance with such
scheme as may be specified by the Boar d in this behalf by notification in the
Official Gazette
73
and subject to such conditions as may be specified ther ein, in
such for m (including on a floppy, diskette, magnetic car tr idge tape, CD-ROM or
any other computer r eadable media) and in the manner as may be specified in
that scheme, and in such case, the r etur n of income fur nished under such
scheme shall be deemed to be a r etur n fur nished under sub-section (1), and the
pr ovisions of this Act shall apply accor dingly.]
S. 139 I.T. ACT, 1961 1.638
(a) wher e he or such other per son was employed dur ing the pr evious year by a company,
he or such other per son was at no time dur ing the pr evious year a dir ector of the
company or a beneficial owner of shar es in the company (not being shar es entitled
to a fixed r ate of dividend whether with or without a r ight to par ticipate in pr ofits)
car r ying not less than twenty per cent of the voting power ;
(b) his income or the income of such other per son under the head Salar ies, exclusive
of the value of all benefits or amenities not pr ovided for by way of monetar y payment,
does not exceed twenty-four thousand r upees;
(c) the amount of income of the natur e r efer r ed to in clauses (i) to (ix) of sub-section (1)
of section 80L, if any, does not, in the aggr egate, exceed the maximum amount
allowable as deduction in his case under that section; and
(d) the tax deductible at sour ce under section 192 fr om the income char geable under the
head Salar ies has been deducted fr om that income.
70. See Scheme for Bulk Filing of Retur ns by Salar ied Employees, 2002/ Scheme for Filing of
Retur ns by Salar ied Employees Thr ough Employer , 2004. For details, see Taxmanns
Income-tax Rules.
71. Explan ation omit t ed by t he Taxat ion Laws (Amendment ) Act , 1984, w.e.f. 1-4-1985.
Omitted Explan ation r ead as under :
Explan ation . For the pur poses of this sub-section, salar y shall have the meaning
assigned to it in clause (1) of section 17.
73. See Electr onic Fur nishing of Retur n of Income Scheme, 2007/ Fur nishing of Retur n of
Income on Inter net Scheme, 2004. For details, see Taxmanns Income-tax Rules.
74
[***]
(3) If any per son who
75
[***] has sustained a loss in any pr evious year under the
head Pr ofits and gains of business or pr ofession or under the head Capital
gains and claims that the loss or any par t ther eof should be car r ied for war d
under sub-section (1) of section 72, or sub-section (2) of section 73, or sub-
section (1)
76
[or sub-section (3)] of section 74,
77
[or sub-section (3) of section 74A],
he may fur nish, within the time allowed under sub-section (1)
78
[***], a r etur n of
loss in the pr escr ibed for m
79
and ver ified in the pr escr ibed manner and con-
taining such other par ticular s as may be pr escr ibed, and all the pr ovisions of this
Act shall apply as if it wer e a r etur n under sub-section (1).
80
[(4) Any per son who has not fur nished a r etur n within the time allowed
81
to him
under sub-section (1), or within the time allowed under a notice issued under sub-
section (1) of section 142, may fur nish the r etur n for any pr evious year at any
time
81
befor e the expir y of one year fr om the end of the r elevant assessment year
or befor e the completion of the assessment, whichever is ear lier :
Provided that wher e the r etur n r elates to a pr evious year r elevant to the
assessment year commencing on the 1st day of Apr il, 1988, or any ear lier
assessment year , the r efer ence to one year afor esaid shall be constr ued as a
r efer ence to two year s fr om the end of the r elevant assessment year .]
82
[
83
[(4A)
84
Ever y per son in r eceipt of income der ived fr om pr oper ty held under
tr ust or other legal obligation wholly for char itable or r eligious pur poses or in
omission, sub-section (2) was amended by the Taxation Laws (Amendment) Act, 1970,
w.e.f. 1-4-1971, Finance Act, 1972, w.e.f. 1-4-1972 and Taxation Laws (Amendment) Act,
1975, w.e.f. 1-4-1976.
75. has not been ser ved with a notice under sub-section (2), omitted by the Dir ect Tax Laws
78. or by the thir ty-fir st day of July of the assessment year r elevant to the pr evious year
dur ing which the loss was sustained omitted by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989. Pr ior to its omission, the said expr ession was substituted for within
such fur ther time which, on an application made in the pr escr ibed manner , the Income-
tax Officer may, in his discr etion allow by the Taxation Laws (Amendment & Mis-
cellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1987. Or iginal expr ession was inser ted by the
79. See r ules 12 and 12A.
substitution, sub-section (4) was substituted by the Finance Act, 1968, w.e.f. 1-4-1968 and
amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
81. For the meaning of the expr essions time allowed and at any time, see Taxmanns Dir ect
1-4-1989. Ear lier it was substituted by the Dir ect Tax Laws (Amendment) Act, 1987, with
83. Substituted by the Finance Act, 1972, w.e.f. 1-4-1973. Or iginal sub-section was inser ted by
par t only for such pur poses, or of income being voluntar y contr ibutions
r efer r ed to in sub-clause (iia) of clause (24) of section 2, shall, if the total income
in r espect of which he is assessable as a r epr esentative assessee (the total income
for this pur pose being computed under this Act without giving effect to the
pr ovisions of sections 11 and 12) exceeds the maximum amount which is not
char geable to income-tax, fur nish a r etur n of such income of the pr evious year
such other par ticular s as may be pr escr ibed and all the pr ovisions of this Act
shall, so far as may be, apply as if it wer e a r etur n r equir ed to be fur nished under
sub-section (1).]]
85
[(4B)
86
The chief executive officer (whether such chief executive officer is
known as Secr etar y or by any other designation) of ever y political par ty shall, if
the total income in r espect of which the political par ty is assessable (the total
income for this pur pose being computed under this Act without giving effect to
the pr ovisions of section 13A) exceeds the maximum amount which is not
char geable to income-tax, fur nish a r etur n of such income of the pr evious year
such other par ticular s as may be pr escr ibed and all the pr ovisions of this Act,
shall, so far as may be, apply as if it wer e a r etur n r equir ed to be fur nished under
sub-section (1).]
87
[(4C) Ever y
(a) scientific r esear ch association r efer r ed to in clause (21) of section 10;
(b) news agency r efer r ed to in clause (22B) of section 10;
(c) association or institution r efer r ed to in clause (23A) of section 10;
(d) institution r efer r ed to in clause (23B) of section 10;
(e) fund or institution r efer r ed to in sub-clause (iv) or tr ust or institution
r efer r ed to in sub-clause (v) or any univer sity or other educational
institution r efer r ed to in
88
[sub-clause (iiiad) or ] sub-clause (vi) or any
hospital or other medical institution r efer r ed to in
88
[sub-clause (iiiae)
or ] sub-clause (via) of clause (23C) of section 10;
(f) tr ade union r efer r ed to in sub-clause (a) or association r efer r ed to in
sub-clause (b) of clause (24) of section 10,
shall, if the total income in r espect of which such scientific r esear ch association,
news agency, association or institution, fund or tr ust or univer sity or other
educational institution or any hospital or other medical institution or tr ade union
is assessable, without giving effect to the pr ovisions of section 10, exceeds the
maximum amount which is not char geable to income-tax, fur nish a r etur n of
such income of the pr evious year in the pr escr ibed for m
89
and ver ified in the
pr escr ibed manner and setting for th such other par ticular s as may be pr escr ibed
S. 139 I.T. ACT, 1961 1.640
89. See r ule 12(1)(e) and For m No. ITR-7.
and all the pr ovisions of this Act shall, so far as may be, apply as if it wer e a r etur n
r equir ed to be fur nished under sub-section (1).]
90
[(4D) Ever y univer sity, college or other institution r efer r ed to in clause (ii) and
clause (iii) of sub-section (1) of section 35, which is not r equir ed to fur nish r etur n
of income or loss under any other pr ovision of this section, shall fur nish the
r etur n in r espect of its income or loss in ever y pr evious year and all the pr ovisions
of this Act shall, so far as may be, apply as if it wer e a r etur n r equir ed to be
fur nished under sub-section (1).]
91
[(5) If any per son, having fur nished a r etur n under sub-section (1), or in
pur suance of a notice issued under sub-section (1) of section 142, discover s any
omission or any wr ong statement ther ein, he may fur nish a r evised r etur n at any
time befor e the expir y of one year fr om the end of the r elevant assessment year
or befor e the completion of the assessment, whichever is ear lier :
Provided that wher e the r etur n r elates to the pr evious year r elevant to the
assessment year commencing on the 1st day of Apr il, 1988, or any ear lier
assessment year , the r efer ence to one year afor esaid shall be constr ued as a
r efer ence to two year s fr om the end of the r elevant assessment year .]
92
[(6) The pr escr ibed for m of the r etur ns r efer r ed to
93
[in sub-sections (1) and (3)
of this section, and in clause (i) of sub-section (1) of section 142] shall, in such
cases as may be pr escr ibed, r equir e the assessee to fur nish the par ticular s of
income exempt fr om tax, assets of the pr escr ibed natur e
94
[, value and belonging
to him, his bank account and cr edit car d held by him], expenditur e exceeding the
pr escr ibed limits incur r ed by him under pr escr ibed heads and such other
outgoings as may be pr escr ibed.
(6A) Without pr ejudice to the pr ovisions of sub-section (6), the pr escr ibed for m
of the r etur ns r efer r ed to
95
[in
96
[***] this section, and in clause (i) of sub-section
(1) of section 142] shall, in the case of an assessee engaged in any business or
pr ofession, also r equir e him to fur nish
97
[the r epor t of any audit
98
[r efer r ed to in
section 44AB, or , wher e the r epor t has been fur nished pr ior to the fur nishing of
the r etur n, a copy of such r epor t together with pr oof of fur nishing the r epor t],
the] par ticular s of the location and style of the pr incipal place wher e he car r ies
on the business or pr ofession and all the br anches ther eof, the names and
addr esses of his par tner s, if any, in such business or pr ofession and, if he is a
member of an association or body of individuals, the names of the other
member s of the association or the body of individuals and the extent of the shar e
92. Substituted for sub-section (6) by the Taxation Laws (Amendment) Act, 1975, w.e.f.
1-4-1976.
93. Substituted for in sub-sections (1), (2) and (3) by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989.
94. Substituted for and value and belonging to him by the Finance Act, 1999, w.e.f. 1-6-1999.
95. Substituted for in sub-sections (1), (2) and (3) by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989.
96. Wor ds sub-sections (1) and (3) of omitted by the Finance Act, 1995, w.e.f. 1-7-1995.
98. Substituted for obtained under section 44AB by the Finance Act, 1995, w.e.f. 1-7-1995.
of the assessee and the shar es of all such par tner s or the member s, as the case
may be, in the pr ofits of the business or pr ofession and any br anches ther eof.]
(7)
99
[***]
1
[
2
(8)(a)
3
[Wher e the r etur n under sub-section (1) or sub-section (2) or sub-section
(4) for an assessment year is fur nished after the specified date, or is not fur nished,
then [whether or not the
4
[Assessing] Officer has extended the date for fur nishing
the r etur n under sub-section (1) or sub-section (2)], the assessee shall be liable to
pay simple inter est at
5
[fifteen] per cent per annum, r eckoned fr om the day
immediately following the specified date to the date of the fur nishing of the
r etur n or , wher e no r etur n has been fur nished, the date of completion of the
assessment under section 144, on the amount of the tax payable on the total
income as deter mined on r egular assessment, as r educed by the advance tax, if
any, paid, and any tax deducted at sour ce :
Provided that the
6
[Assessing] Officer may, in such cases and under such
cir cumstances as may be pr escr ibed
7
, r educe or waive the inter est payable by
any assessee under this sub-section.
Explan ation 1.For the pur poses of this sub-section, specified date, in r elation
to a r etur n for an assessment year , means,
(a) in the case of ever y assessee whose total income, or the total income
of any per son in r espect of which he is assessable under this Act,
includes any income fr om business or pr ofession, the date of the
expir y of four months fr om the end of the pr evious year or wher e
ther e is mor e than one pr evious year , fr om the end of the pr evious
year which expir ed last befor e the commencement of the assessment
year or the 30th day of June of the assessment year , whichever is later ;
(b) in the case of ever y other assessee, the 30th day of June of the
assessment year .]
8
[Explan ation 2.Wher e, in r elation to an assessment year , an assessment is
made for the fir st time under section 147, the assessment so made shall be
r egar ded as a r egular assessment for the pur poses of this sub-section.]
S. 139 I.T. ACT, 1961 1.642
1. Substituted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971. Or iginal sub-
section was inser ted by the Finance Act, 1963, w.e.f. 28-4-1963.
2. See r ule 119A.
3. Substituted for por tion beginning with Wher e the r etur n and ending with under this
sub-section by the Finance Act, 1972, w.e.f. 1-4-1972.
1-4-1988.
5. Substituted for twelve by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984.
Section 84 of the Amendment Act has clar ified that the incr ease in the r ate of inter est will
apply in r espect of any per iod falling after 30-9-1984, also in those cases wher e the inter est
became char geable or payable fr om an ear lier date.
1-4-1988.
7. See r ule 117A.
8. Substituted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985. Ear lier it was
9
[(b) Wher e as a r esult of an or der under section 147 or section 154 or section 155
or section 250 or section 254 or section 260 or section 262 or section 263 or section
264
10
[or an or der of the Settlement Commission under sub-section (4) of section
245D], the amount of tax on which inter est was payable under this sub-section
has been incr eased or r educed, as the case may be, the inter est shall be incr eased
or r educed accor dingly, and
(i) in a case wher e the inter est is incr eased, the
11
[Assessing] Officer shall
ser ve on the assessee, a notice of demand in the pr escr ibed for m
specifying the sum payable, and such notice of demand shall be
deemed to be a notice under section 156 and the pr ovisions of this Act
shall apply accor dingly;
(ii) in a case wher e the inter est is r educed, the excess inter est paid, if any,
shall be r efunded.]]
12
[(c) The pr ovisions of this sub-section shall apply in r espect of the assessment
for the assessment year commencing on the 1st day of Apr il, 1988, or any ear lier
assessment year , and r efer ences ther ein to the other pr ovisions of this Act shall
be constr ued as r efer ences to the said pr ovisions as they wer e applicable to the
r elevant assessment year .]
13
[(9) Wher e the
14
[Assessing] Officer consider s that the r etur n of income
fur nished by the assessee is defective, he may intimate the defect to the assessee
and give him an oppor tunity to r ectify the defect within a per iod of fifteen days
fr om the date of such intimation or within such fur ther per iod which, on an
application made in this behalf, the
14
[Assessing] Officer may, in his discr etion,
allow; and if the defect is not r ectified within the said per iod of fifteen days or ,
as the case may be, the fur ther per iod so allowed, then, notwithstanding anything
contained in any other pr ovision of this Act, the r etur n shall be tr eated as an
invalid r etur n and the pr ovisions of this Act shall apply as if the assessee had
failed to fur nish the r etur n :
Provided that wher e the assessee r ectifies the defect after the expir y of the said
per iod of fifteen days or the fur ther per iod allowed, but befor e the assessment
is made, the
14
[Assessing] Officer may condone the delay and tr eat the r etur n as
a valid r etur n.
Explan ation .For the pur poses of this sub-section, a r etur n of income shall be
r egar ded as defective unless all the following conditions ar e fulfilled, namely :
(a) the annexur es, statements and columns in the r etur n of income
r elating to computation of income char geable under each head of
income, computation of gr oss total income and total income have
been duly filled in;
1-4-1988.
(b) the r etur n is accompanied by a statement showing the computation
of the tax payable on the basis of the r etur n;
15
[(bb) the r etur n is accompanied by the r epor t of the audit r efer r ed to in
section 44AB, or , wher e the r epor t has been fur nished pr ior to the
fur nishing of the r etur n, by a copy of such r epor t together with pr oof
of fur nishing the r epor t;]
(c) the r etur n is accompanied by pr oof of
(i) the tax, if any, claimed to have been deducted
16
[or collected] at
sour ce
17-18
[***] and the advance tax and tax on self-assessment, if
any, claimed to have been paid :
19
[Provided that wher e the r etur n is not accompanied by pr oof of
the tax, if any, claimed to have been deducted
20
[or collected] at
sour ce, the r etur n of income shall not be r egar ded as defective
if
21
[(a) a cer tificate for tax deducted or collected was not fur nished
under section 203 or section 206C to the per son fur nishing his
r etur n of income;]
(b) such cer tificate is pr oduced within a per iod of two year s
specified under sub-section (14) of section 155;]
(ii) the amount of compulsor y deposit, if any, claimed to have been
made under the Compulsor y Deposit Scheme (Income-tax
Payer s) Act, 1974 (38 of 1974);
(d) wher e r egular books of account ar e maintained by the assessee, the
r etur n is accompanied by copies of
(i) manufactur ing account, tr ading account, pr ofit and loss account
or , as the case may be, income and expenditur e account or any
other similar account and balance sheet;
(ii) in the case of a pr opr ietar y business or pr ofession, the per sonal
account of the pr opr ietor ; in the case of a fir m, association of
per sons or body of individuals, per sonal accounts of the par tner s
or member s; and in the case of a par tner or member of a fir m,
association of per sons or body of individuals, also his per sonal
account in the fir m, association of per sons or body of individuals;
(e) wher e the accounts of the assessee have been audited, the r etur n is
accompanied by copies of the audited pr ofit and loss account and
S. 139 I.T. ACT, 1961 1.644
15. Substituted by the Finance Act, 1995, w.e.f. 1-7-1995. Pr ior to its substitution, clause (bb),
(bb) the r etur n is accompanied by the r epor t of the audit obtained under section 44AB;
17-18. Wor ds befor e the 1st day of Apr il, 2008 omitted by the Finance Act, 2008, w.e.f. 1-4-
2008. Ear lier quoted wor ds wer e inser ted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005,
and amended by the Finance Act, 2006, w.e.f. 1-4-2006 and the Finance Act, 2005, w.e.f.
1-4-2005.
21. Substituted, ibid. Pr ior t o it s subst it ut ion, clause (a) r ead as under :
(a) a cer tificate for tax deducted was not fur nished under section 203 to the per son
fur nishing his r etur n of income;
balance sheet and the auditor s r epor t
22
[and, wher e an audit of cost
accounts of the assessee has been conducted, under section 233B
23
of
the Companies Act, 1956 (1 of 1956), also the r epor t under that
section];
(f) wher e r egular books of account ar e not maintained by the assessee,
the r etur n is accompanied by a statement indicating the amounts of
tur nover or , as the case may be, gr oss r eceipts, gr oss pr ofit, expenses
and net pr ofit of the business or pr ofession and the basis on which
such amounts have been computed, and also disclosing the amounts
of total sundr y debtor s, sundr y cr editor s, stock-in-tr ade and cash
balance as at the end of the pr evious year .]
24
[***]
(10)
25
[Om itted by th e Fin an ce (No. 2) Act, 1991, w.e.f. 1-4-1991.]
26
[Permanent account number
27
.
139A. (1) Ever y per son,
(i) if his total income or the total income of any other per son in r espect
of which he is assessable under this Act dur ing any pr evious year
exceeded the maximum amount which is not char geable to income-
tax; or
1.645 CH. XIV - PROCEDURE FOR ASSESSMENT S. 139A
23. For text of section 233B of the Companies Act, 1956, see Appendix.
24. Omitted by the Finance Act, 2007, w.r .e.f. 1-6-2006. Pr ior to its omission, the pr oviso, as
Provided that the Boar d may, by r ules made by it,
(a) dispense, for a class or classes of per sons, with any of the conditions specified in
clauses (a) t o (f ); or
(b) include any of the conditions specified in clauses (a) to (f ) of t his Explan ation in the
for m of r etur n pr escr ibed under sub-section (1) or sub-section (6) of this section.
25. Pr ior to omission sub-section (10) was amended by the Taxation Laws (Amendment &
Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1986, Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989, Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989 and Finance
Act, 1990, w.e.f. 1-4-1990.
as inser ted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 and later
amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988/ 1-4-1989 and the
139A. Perman en t accoun t n umbers.(1) Ever y per son, if his total income or the total
income of any other per son in r espect of which he is assessable under this Act dur ing any
pr evious year exceeded the maximum amount which is not char geable to income-tax and
he has not been allotted any per manent account number , shall, within such time as may
be pr escr ibed, apply to the Assessing Officer for the allotment of a per manent account
nu mber .
(2) Notwithstanding anything contained in sub-section (1), ever y per son not falling under
that sub-section, but
(i) car r ying on any business whose total sales, tur nover or gr oss r eceipts ar e or is likely
to exceed fifty thousand r upees in any pr evious year ; or
(ii) who is r equir ed to fur nish a r etur n of income under sub-section (4A) of section 139,
and who has not been allotted any per manent account number , shall, within such
time as may be pr escr ibed apply to the Assessing Officer for the allotment of a
per manent account number .
(Con td. on p. 1.646)
S. 139A I.T. ACT, 1961 1.646
(ii) car r ying on any business or pr ofession whose total sales, tur nover or
gr oss r eceipts ar e or is likely to exceed
28
[five lakh] r upees in any
pr evious year ; or
(iii) who is r equir ed to fur nish a r etur n of income under
29
[sub-section
(4A) of section 139; or
(iv) being an employer , who is r equir ed to fur nish a r etur n of fr inge
benefits under section 115WD,]
and who has not been allotted a per manent account number shall, within such
time, as may be pr escr ibed
30
, apply to the Assessing Officer for the allotment of
a per manent account number .
31
[(1A) Notwithstanding anything contained in sub-section (1), the Centr al Gov-
er nment may, by notification
32
in the Official Gazette, specify, any class or classes
of per sons by whom tax is payable under this Act or any tax or duty is payable
(3) The Assessing Officer may also allot to any other per son by whom tax is payable, a
(4) All per manent account number s allotted to assessees befor e the commencement of the
Taxation Laws (Amendment) Act, 1975 (41 of 1975), shall, with effect fr om such date as
the Boar d may, by notification in the Official Gazette, specify, be deemed to have been
allotted to them under the pr ovisions of this section.
(5) Wher e a per manent account number has been allotted or is deemed to have been
allotted to any per son under this section, he shall
(a) quote such number in all his r etur ns to, or cor r espondence with, any income-tax
aut hor it y;
(b) quote such number in all challans for the payment of any sum due under this Act;
(c) quote such number in all documents per taining to such tr ansactions as may be
pr escr ibed by the Boar d in the inter ests of the r evenue, and enter ed into by him;
(d) intimate the Assessing Officer any change in his addr ess or in the name and natur e
of his business.
(6) The Boar d may make r ules pr oviding for
(a) the for m and the manner in which an application may be made for the allotment
of a per manent account number and the par ticular s which such application shall
cont ain ;
(b) the categor ies of tr ansactions in r elation to which per manent account number s
shall be quoted by the per sons to whom such number s have been allotted, in the
documents per taining to such tr ansactions ;
(c) the categor ies of documents per taining to business or pr ofession of the per sons to
whom per manent account number s have been allotted, in which such number s
shall be quoted by them.
Explan ation . In this section,
(a) [***]
(b) per manent account number means a number which the Assessing Officer may
allot to any per son for the pur pose of identification.
27. See Pr ess r elease dat ed 19-5-1998, Cir cular No. 792, dat ed 21-6-2000, Not ificat ion
No. SO 123(E), dated 11-2-1998 and PAN Cir cular No. 4, dated 11-10-2006. For details, see
28. Substituted for fifty thousand by the Finance (No. 2) Act, 1998, w.e.f. 1-8-1998.
29. Substituted for sub-section (4A) of section 139 by the Finance Act, 2005, w.e.f. 1-4-2006.
30. See r ule 114 and For m No. 49A for application for allotment of PAN.
32. For specified class or classes of per sons, see Taxmanns Master Guide to Income-tax Act.
under any other law for the time being in for ce including impor ter s and expor ter s
whether any tax is payable by them or not and such per sons shall, within such
time as mentioned in that notification, apply to the Assessing Officer for the
allotment of a per manent account number .]
33
[(1B) Notwithstanding anything contained in sub-section (1), the Centr al Gov-
er nment may, for the pur pose of collecting any infor mation which may be useful
for or r elevant to the pur poses of this Act, by notification in the Official Gazette,
specify, any class or classes of per sons who shall apply to the Assessing Officer
for the allotment of the per manent account number and such per sons shall,
within such time as mentioned in that notification, apply to the Assessing Officer
for the allotment of a per manent account number .]
34
[(2) The Assessing Officer , having r egar d to the natur e of the tr ansactions as
may be pr escr ibed, may also allot a per manent account number , to any other
per son (whether any tax is payable by him or not), in the manner and in
accor dance with the pr ocedur e as may be pr escr ibed.]
(3) Any per son, not falling under sub-section (1) or sub-section (2), may apply to
the Assessing Officer for the allotment of a per manent account number and,
ther eupon, the Assessing Officer shall allot a per manent account number to such
per son for thwith.
(4) For the pur pose of allotment of per manent account number s under the new
ser ies, the Boar d may, by notification
35
in the Official Gazette, specify the date
fr om which the per sons r efer r ed to in sub-sections (1) and (2) and other per sons
who have been allotted per manent account number s and r esiding in a place to
be specified in such notification, shall, within such time as may be specified, apply
to the Assessing Officer for the allotment of a per manent account number under
the new ser ies and upon allotment of such per manent account number to a
per son, the per manent account number , if any, allotted to him ear lier shall cease
to have effect :
Provided that the per sons to whom per manent account number under the new
ser ies has alr eady been allotted shall not apply for such number again.
(5) Ever y per son shall
(a) quote such number in all his r etur ns to, or cor r espondence with, any
income-tax author ity;
(b) quote such number in all challans for the payment of any sum due
under this Act;
(c) quote such number in all documents per taining to such tr ansactions
as may be pr escr ibed
36
by the Boar d in the inter ests of the r evenue,
and enter ed into by him:
Provided that the Boar d may pr escr ibe differ ent dates for differ ent
tr ansactions or class of tr ansactions or for differ ent class of per sons :
34. Substituted, ibid. Pr ior t o it s subst it ut ion, sub-sect ion (2) r ead as under :
(2) The Assessing Officer may also allot to any other per son by whom tax is payable, a
35. For notified time limit, see Taxmanns Master Guide to Income-tax Act.
36. See r ules 114B to 114D and For m Nos. 60 & 61.
S. 139A I.T. ACT, 1961 1.648
37
[Provided further that a per son shall quote Gener al Index Register
Number till such time Per manent Account Number is allotted to such
per son;]
(d) intimate the Assessing Officer any change in his addr ess or in the
name and natur e of his business on the basis of which the per manent
account number was allotted to him.
38
[(5A) Ever y per son r eceiving any sum or income or amount fr om which tax has
been deducted under the pr ovisions of Chapter XVIIB, shall intimate his
per manent account number to the per son r esponsible for deducting such tax
under that Chapter :
39
[***]
Provided further that a per son r efer r ed to in this sub-section shall intimate the
Gener al Index Register Number till such time per manent account number is
allotted to such per son.
(5B) Wher e any sum or income or amount has been paid after deducting tax
under Chapter XVIIB, ever y per son deducting tax under that Chapter shall quote
the per manent account number of the per son to whom such sum or income or
amount has been paid by him
(i) in the statement fur nished in accor dance with the pr ovisions of sub-
section (2C) of section 192;
(ii) in all cer tificates fur nished in accor dance with the pr ovisions of
section 203;
(iii) in all r etur ns pr epar ed and deliver ed or caused to be deliver ed in
accor dance with the pr ovisions of section 206 to any income-tax
author ity;
40
[(iv) in all quar ter ly statements pr epar ed and deliver ed or caused to be
deliver ed in accor dance with the pr ovisions of sub-section (3) of
section 200:]
Provided that the Centr al Gover nment may, by notification
41
in the Official
Gazette, specify differ ent dates fr om which the pr ovisions of this sub-section
shall apply in r espect of any class or classes of per sons:
Provided further that nothing contained in sub-sections (5A) and (5B) shall apply
in case of a per son whose total income is not char geable to income-tax or who
is not r equir ed to obtain per manent account number under any pr ovision of this
Act if such per son fur nishes to the per son r esponsible for deducting tax, a
declar ation r efer r ed to in section 197A in the for m and manner pr escr ibed
ther eunder to the effect that the tax on his estimated total income of the pr evious
38. Sub-sections (5A) to (5D) inser ted by the Finance Act, 2001, w.e.f. 1-6-2001.
39. Fir st pr oviso omitted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. Pr ior to its omission,
t he fir st pr oviso r ead as under :
Provided that nothing contained in this sub-section shall apply to a non-r esident r efer r ed
to in sub-section (4) of section 115AC, or sub-section (2) of section 115BBA, or to a non-
r esident Indian r efer r ed to in section 115G :
41. For notified dates, see Taxmanns Master Guide to Income-tax Act.
year in which such income is to be included in computing his total income will
be n il.
(5C) Ever y buyer
42
[or licensee or lessee] r efer r ed to in section 206C shall intimate
his per manent account number to the
43
[per son r esponsible for collecting tax]
r efer r ed to in that section.
(5D) Ever y
44
[per son] collecting tax in accor dance with the pr ovisions of section
206C shall quote the per manent account number of ever y buyer
42
[or licensee or
lessee] r efer r ed to in that section
(i) in all cer tificates fur nished in accor dance with the pr ovisions of sub-
section (5) of section 206C;
(ii) in all r etur ns pr epar ed and deliver ed or caused to be deliver ed in
accor dance with the pr ovisions of sub-section (5A) or sub-section (5B)
of section 206C to an income-tax author ity;]
45
[(iii) in all quar ter ly statements pr epar ed and deliver ed or caused to be
section 206C.]
(6) Ever y per son r eceiving any document r elating to a tr ansaction pr escr ibed
under clause (c) of sub-section (5) shall ensur e that the Per manent Account
Number
46
[or the Gener al Index Register Number ] has been duly quoted in the
document.
(7) No per son who has alr eady been allotted a per manent account number under
the new ser ies shall apply, obtain or possess another per manent account number .
47
[Explan ation .For the r emoval of doubts, it is her eby declar ed that any per son,
who has been allotted a per manent account number under any clause other than
clause (iv) of sub-section (1), shall not be r equir ed to obtain another per manent
account number and the per manent account number alr eady allotted to him
shall be deemed to be the per manent account number in r elation to fr inge benefit
tax.]
48
(8) The Boar d may make r ules pr oviding for
(a) the for m and the manner in which an application may be made for the
allotment of a per manent account number and the par ticular s which
such application shall contain;
(b) the categor ies of tr ansactions in r elation to which Per manent Ac-
count Number s
49
[or the Gener al Index Register Number ] shall be
quoted by ever y per son in the documents per taining to such tr ansac-
tions;
(c) the categor ies of documents per taining to business or pr ofession in
which such number s shall be quoted by ever y per son;
43. Substituted for seller by the Finance Act, 2006, w.e.f. 1-4-2007.
44. Substituted for seller , ibid.
48. See r ules 114 & 114B to 114D and For m Nos. 49A, 60 & 61.
50
[(d) class or classes of per sons to whom the pr ovisions of this section shall
not apply;
(e) the for m and the manner in which the per son who has not been
allotted a Per manent Account Number or who does not have Gener al
Index Register Number shall make his declar ation;
(f) the manner in which the Per manent Account Number or the Gener al
Index Register Number shall be quoted in r espect of the categor ies of
tr ansactions r efer r ed to in clause (c)*;
(g) the time and the manner in which the tr ansactions r efer r ed to in
clause (c)* shall be intimated to the pr escr ibed author ity.]
(a) Assessing Officer includes an income-tax author ity who is assigned
the duty of allotting per manent account number s;
(b) per manent account number means a number which the Assessing
Officer may allot to any per son for the pur pose of identification and
includes a per manent account number allotted under the new ser ies;
(c) per manent account number under the new ser ies means a per ma-
nent account number having ten alphanumer ic char acter s and
issued in the for m of a laminated car d;]
51
[(d) Gener al Index Register Number means a number given by an
Assessing Officer to an assessee in the Gener al Index Register main-
tained by him and containing the designation and par ticular s of the
war d or cir cle or r ange of the Assessing Officer .]
52
[Scheme for submission of returns through Tax Return Preparers.
139B. (1) For the pur pose of enabling any specified class or classes of per sons in
pr epar ing and fur nishing r etur ns of income, the Boar d may, without
pr ejudice to the pr ovisions of section 139, fr ame a Scheme, by notification in the
Official Gazette, pr oviding that such per sons may fur nish their r etur ns of income
thr ough a Tax Retur n Pr epar er author ised to act as such under the Scheme
53
.
(2) Ever y Tax Retur n Pr epar er shall assist the per sons fur nishing the r etur n of
income in such manner as may be specified in the Scheme fr amed under this
section and affix his signatur e on such r etur n.
(a) Tax Retur n Pr epar er means any individual, [not being a per son
r efer r ed to in clause (ii) or clause (iii) or clause (iv) of sub-section (2)
of section 288 or an employee of the specified class or classes of
per sons], who has been author ised to act as a Tax Retur n Pr epar er
under the Scheme fr amed under this section;
(b) specified class or classes of per sons means any per son, other than a
company or a per son, whose accounts ar e r equir ed to be audited
S. 139B I.T. ACT, 1961 1.650
50. Clauses (d) t o (g) inser ted by the Finance (No. 2) Act, 1998, w.e.f. 1-8-1998.
53. See Tax Retur n Pr epar er Scheme, 2006. For details, see Taxmanns Income-tax Rules.
*Should be r ead as clause (b).
under section 44AB or under any other law for the time being in for ce,
who is r equir ed to fur nish a r etur n of income under this Act.
(4) The Scheme fr amed by the Boar d under this section may pr ovide for the
following, namely:
(a) the manner in which and the per iod for which the Tax Retur n
Pr epar er s shall be author ised under sub-section (3);
(b) the educational and other qualifications to be possessed, and the
tr aining and other conditions r equir ed to be fulfilled, by a per son to
act as a Tax Retur n Pr epar er ;
(c) the code of conduct for the Tax Retur n Pr epar er s;
(d) the duties and obligations of the Tax Retur n Pr epar er s;
(e) the cir cumstances under which the author isation given to a Tax
Retur n Pr epar er may be withdr awn;
(f) any other matter which is r equir ed to be, or may be, specified by the
Scheme for the pur poses of this section.
(5) The Scheme fr amed by the Boar d under this section shall be laid, as soon as
may be after it is fr amed, befor e each House of Par liament, while it is in session,
for a total per iod of thir ty days which may be compr ised in one session or in two
or mor e successive sessions, and if, befor e the expir y of the session immediately
following the session or the successive sessions afor esaid, both Houses agr ee in
making any modification in the Scheme or both Houses agr ee that the Scheme
should not be fr amed, the Scheme shall ther eafter have effect only in such
modified for m or be of no effect, as the case may be; so, however , that any such
modification or annulment shall be without pr ejudice to the validity of anything
pr eviously done under that Scheme.]
54
[Power of Board to dispense with furnishing documents, etc., with the return.
139C. (1) The Boar d may make r ules pr oviding for a class or classes of per sons
who may not be r equir ed to fur nish documents, statements, r eceipts,
cer tificates, r epor ts of audit or any other documents, which ar e other wise under
any other pr ovisions of this Act, except section 139D, r equir ed to be fur nished,
along with the r etur n but on demand to be pr oduced befor e the Assessing
Officer .
(2) Any r ule made under the pr oviso to sub-section (9) of section 139 as it stood
immediately befor e its omission by the Finance Act, 2007 shall be deemed to have
been made under the pr ovisions of this section.
Filing of return in electronic form.
139D. The Boar d may make r ules pr oviding for
(a) the class or classes of per sons who shall be r equir ed to fur nish the
r etur n in electr onic for m;
(b) the for m and the manner in which the r etur n in electr onic for m may
be fur nished;
(c) the documents, statements, r eceipts, cer tificates or audited r epor ts*
which may not be fur nished along with the r etur n in electr onic for m
but shall be pr oduced befor e the Assessing Officer on demand;
1.651 CH. XIV - PROCEDURE FOR ASSESSMENT S. 139D
*Wor ds r epor ts of audit be r ead for wor ds audited r epor ts.
(d) the computer r esour ce or the electr onic r ecor d to which the r etur n in
electr onic for m may be tr ansmitted.]
Return by whom to be signed.
55
140. The r etur n under
56
[section 115WD or ] section 139 shall be signed and
ver ified
57
[(a) in the case of an individual,
(i) by the individual himself;
(ii) wher e he is absent fr om India, by the individual himself or by
some per son duly author ised by him in this behalf;
(iii) wher e he is mentally incapacitated fr om attending to his affair s,
by his guar dian or any other per son competent to act on his
behalf; and
(iv) wher e, for any other r eason, it is not possible for the individual to
sign the r etur n, by any per son duly author ised by him in this
behalf :
Provided that in a case r efer r ed to in sub-clause (ii) or sub-clause (iv),
the per son signing the r etur n holds a valid power of attor ney fr om the
individual to do so, which shall be attached to the r etur n;]
(b) in the case of a Hindu undivided family, by the kar ta, and, wher e the
kar ta is absent fr om India or is mentally incapacitated fr om attending
to his affair s, by any other adult member of such family;
58
[(c) in the case of a company, by the managing dir ector ther eof, or wher e
for any unavoidable r eason such managing dir ector is not able to sign
and ver ify the r etur n, or wher e ther e is no managing dir ector , by any
dir ector ther eof :
59
[Provided that wher e the company is not r esident in India, the r etur n
may be signed and ver ified by a per son who holds a valid power of
attor ney fr om such company to do so, which shall be attached to the
r etur n :
Provided further that,
(a) wher e the company is being wound up, whether under the or der s
of a cour t or other wise, or wher e any per son has been appointed
as the r eceiver of any assets of the company, the r etur n shall be
signed and ver ified by the liquidator r efer r ed to in sub-section (1)
of section 178;
(b) wher e the management of the company has been taken over by
the Centr al Gover nment or any State Gover nment under any law,
the r etur n of the company shall be signed and ver ified by the
pr incipal officer ther eof;]
S. 140 I.T. ACT, 1961 1.652
58. Substituted for clauses (c) and (d) by the Taxation Laws (Amendment) Act, 1975, w.e.f.
1-4-1976.
(cc) in the case of a fir m, by the managing par tner ther eof, or wher e for
any unavoidable r eason such managing par tner is not able to sign and
ver ify the r etur n, or wher e ther e is no managing par tner as such, by
any par tner ther eof, not being a minor ;
(d) in the case of a local author ity, by the pr incipal officer ther eof;]
60
[(dd) in the case of a political par ty r efer r ed to in sub-section (4B) of section
139, by the chief executive officer of such par ty (whether such chief
executive officer is known as secr etar y or by any other designation);]
(e) in the case of any other association, by any member of the association
or the pr incipal officer ther eof; and
(f) in the case of any other per son, by that per son or by some per son
competent to act on his behalf.
61
[Self-assessment.
62
140A.
63
[(1) Wher e any tax is payable on the basis of any r etur n r equir ed to be
fur nished under
64
[
65
[section 115WD or section 115WH or ] section 139
or section 142
66
[or section 148 or
67
[section 153A or ], as the case may be, section
158BC]],
68
[after taking into account,
(i) the amount of tax, if any, alr eady paid under any pr ovision of this Act;
(ii) any tax deducted or collected at sour ce;
(iii) any r elief of tax or deduction of tax claimed under section 90 or
section 91 on account of tax paid in a countr y outside India;
(iv) any r elief of tax claimed under section 90A on account of tax paid in
any specified ter r itor y outside India r efer r ed to in that section; and
(v) any tax cr edit claimed to be set off in accor dance with the pr ovisions
of section 115JAA,]
69
[the assessee shall be liable to pay such tax together with inter est payable under
any pr ovision of this Act for any delay in fur nishing the r etur n or any default or
delay in payment of advance tax, befor e fur nishing the r etur n and the r etur n
shall be accompanied by pr oof of payment of such tax and inter est.]
61. Substituted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971. Or iginal section
62. See also Cir cular No. 20(LXXXVI)-D of 1964 (extr acts), dated 7-7-1964. For details, see
64. Substituted for section 139 or section 148 by the Finance (No. 2) Act, 1991, w.e.f.
27-9-1991.
66. Substituted for or , as the case may be, section 148 by the Finance Act, 1999, w.e.f.
1-6-1999.
68. Substituted for the wor ds after taking into account the amount of tax, if any, alr eady paid
under any pr ovision of this Act, by the Finance Act, 2006, w.e.f. 1-4-2007.
69. Substituted for the assessee shall be liable to pay such tax befor e fur nishing the r etur n
and the r etur n shall be accompanied by pr oof of payment of such tax by the Dir ect Tax
S. 140A I.T. ACT, 1961 1.654
70
[Explan ation .Wher e the amount paid by the assessee under this sub-section
falls shor t of the aggr egate of the tax and inter est as afor esaid, the amount so paid
shall fir st be adjusted towar ds the inter est payable as afor esaid and the balance,
if any, shall be adjusted towar ds the tax payable.]
71
[(1A) For the pur poses of sub-section (1), inter est payable,
72
[(i) under section 234A shall be computed on the amount of the tax on the
total income as declar ed in the r etur n as r educed by the amount of,
(a) advance tax, if any, paid;
(b) any tax deducted or collected at sour ce;
(c) any r elief of tax or deduction of tax claimed under section 90 or
(d) any r elief of tax claimed under section 90A on account of tax paid
in any specified ter r itor y outside India r efer r ed to in that section;
and
(e) any tax cr edit claimed to be set off in accor dance with the
pr ovisions of section 115JAA;]
(ii) under section 115WK shall be computed on the amount of tax on the
value of the fr inge benefits as declar ed in the r etur n as r educed by the
advance tax, paid, if any.]
73
[(1B) For the pur poses of sub-section (1), inter est payable under section 234B
shall be computed on an amount equal to the assessed tax or , as the case may be,
on the amount by which the advance tax paid falls shor t of the assessed tax.
74
[Explan ation .For the pur poses of this sub-section, assessed tax means the
tax on the total income as declar ed in the r etur n as r educed by the amount of,
(i) tax deducted or collected at sour ce, in accor dance with the pr ovisions
of Chapter XVII, on any income which is subject to such deduction or
collection and which is taken into account in computing such total
income;
(1A), as inser ted by the Finance Act, 2001, w.r .e.f. 1-4-1989, r ead as under :
(1A) For the pur poses of sub-section (1), inter est payable under section 234A shall be
computed on the amount of the tax on the total income as declar ed in the r etur n as
r educed by the advance tax, if any, paid and any tax deducted or collected at sour ce.
72. Substituted by the Finance Act, 2006, w.e.f. 1-4-2007. Pr ior to its substitution, clause (i)
r ead as under :
(i) under section 234A shall be computed on the amount of the tax on the total income
as declar ed in the r etur n as r educed by the advance tax, if any, paid and any tax
deducted or collected at sour ce;
r ead as under :
Explan ation .For the pur poses of this sub-section, assessed tax means the tax on the
total income as declar ed in the r etur n as r educed by the amount of tax deducted or
collected at sour ce, in accor dance with the pr ovisions of Chapter XVII, on any income
which is subject to such deduction or collection and which is taken into account in
computing such total income.
(ii) any r elief of tax or deduction of tax claimed under section 90 or
(iii) any r elief of tax claimed under section 90A on account of tax paid in
any specified ter r itor y outside India r efer r ed to in that section; and
(iv) any tax cr edit claimed to be set off in accor dance with the pr ovisions
of section 115JAA.]]
(2) After a r egular assessment under
75
[section 115WE or section 115WF or ]
section 143 or section 144
76
[or an assessment under
77
[section 153A or ] section
158BC] has been made, any amount paid under sub-section (1) shall be deemed
to have been paid towar ds such r egular assessment
76
[or assessment, as the case
may be].
78
[(3) If any assessee fails to pay the whole or any par t of such tax or inter est or
both in accor dance with the pr ovisions of sub-section (1), he shall, without
pr ejudice to any other consequences which he may incur , be deemed to be an
assessee in default in r espect of the tax or inter est or both r emaining unpaid, and
all the pr ovisions of this Act shall apply accor dingly.]
79
[(4) The pr ovisions of this section as they stood immediately befor e their amend-
ment by the Dir ect Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to
and in r elation to any assessment for the assessment year commencing on the 1st
day of Apr il, 1988, or any ear lier assessment year and r efer ences in this section to
the other provisions of this Act shall be construed as references to those provisions
as for the time being in for ce and applicable to the r elevant assessment year .]
Provisional assessment.
141. [Om itted by th e Taxation Laws (Am en dm en t) Act, 1970, w.e.f. 1-4-1971.]
Provisional assessment for refund.
141A.
80
1-4-1989. Section 141A was in serted by th e Fin an ce Act, 1968, w.e.f.
1-4-1968. Origin al section was in serted by th e Fin an ce Act, 1963, w.e.f. 1-4-1963
an d om itted by th e Fin an ce Act, 1964, w.e.f. 1-4-1964.]
Inquiry before assessment.
81
142. (1) For t he pur pose of making an assessment under t his Act , t he
82
[Assessing] Officer may ser ve on any per son who has made a r etur n
substitution, sub-section (3) was substituted by the Taxation Laws (Amendment) Act,
1975, w.e.f. 1-4-1976.
1970, w.e.f. 1-4-1971, Finance Act, 1974, w.e.f. 1-4-1975, Taxation Laws (Amendment) Act,
1975, w.e.f. 1-4-1976, Finance Act, 1976, w.e.f. 1-4-1976 and the Finance Act, 1988, w.e.f.
1-4-1988.
1-4-1988.
S. 142 I.T. ACT, 1961 1.656
83
[under section 115WD or section 139
84
[or in whose case the time allowed under
sub-section (1) of section 139] for fur nishing the r etur n has expir ed] a notice
r equir ing him, on a date to be ther ein specified,
85
[(i) wher e such per son has not made a r etur n
86
[within the time allowed
under sub-section (1) of section 139]
87
[or befor e the end of the
r elevant assessment year ], to fur nish a r etur n of his income or the
income of any other per son in r espect of which he is assessable under
this Act, in the pr escr ibed for m and ver ified in the pr escr ibed man-
ner
88
and setting for th such other par ticular s as may be pr escr ibed,
or :]
89
[Provided that wher e any notice has been ser ved under this sub-
section for the pur poses of this clause after the end of the r elevant
assessment year commencing on or after the 1st day of Apr il, 1990 to
a per son who has not made a r etur n within the time allowed under
sub-section (1) of section 139 or befor e the end of the r elevant
assessment year , any such notice issued to him shall be deemed to
have been ser ved in accor dance with the pr ovisions of this sub-
section,]
90
[(ii)] to pr oduce, or cause to be pr oduced, such accounts or documents as
the
91
[Assessing] Officer may r equir e, or
92
[(iii)]
93
to fur nish in wr iting and ver ified in the pr escr ibed manner infor ma-
tion in such for m and on such points or matter s (including a statement
of all assets and liabilities of the assessee, whether included in the
accounts or not) as the
94
[Assessing] Officer may r equir e :
Provided that
(a) the pr evious appr oval of the
95
[Joint Commissioner ] shall be obtained
83. Substituted for under section 139 or in whose case the time allowed under sub-section
(1) of that section by the Finance Act, 2005, w.e.f. 1-4-2006.
84. Substituted for or to wh om a n otice h as been issued under sub-section (2) of section 139
(whether a r etur n has been made or not) by the Dir ect Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989. Ear lier , t he it alicised wor ds wer e subst it ut ed by t he Taxat ion Laws
86. Substituted for befor e the end of the r elevant assessment year by the Finance Act, 1990,
w.e.f. 1-4-1990.
88. See r ule 14 for for m of ver ification which shall be in the following for m : I declar e that
to the best of my knowledge and belief, the infor mation fur nished in the statement/
statements is cor r ect and complete and the other par ticular s shown ther ein ar e tr uly
st at ed.
90. Renumber ed by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
92. Renumber ed, ibid., w.e.f. 1-4-1989.
93. See r ule 14.
1-4-1988.
befor e r equir ing the assessee to fur nish a statement of all assets and
liabilities not included in the accounts ;
(b) the
96
[Assessing] Officer shall not r equir e the pr oduction of any
accounts r elating to a per iod mor e than thr ee year s pr ior to the
pr evious year .
(2) For the pur pose of obtaining full infor mation in r espect of the income or loss
of any per son, the
96
[Assessing] Officer may make such inquir y as he consider s
necessar y.
97
[(2A)
98
If, at any stage of the pr oceedings befor e him, the
99
having r egar d to the natur e and complexity
1
of the
1
accounts of the assessee and
the inter ests of the r evenue, is of the opinion that it is necessar y so to do, he may,
with the pr evious appr oval of the
2
[Chief Commissioner or Commissioner ], dir ect
the assessee to get the accounts audited by an accountant, as defined in the
Explan ation below sub-section (2) of section 288, nominated by the
2
[Chief
Commissioner or Commissioner ] in this behalf and to fur nish a r epor t of such
3
duly signed and ver ified by such accountant and
setting for th such par ticular s as may be pr escr ibed and such other par ticular s as
the
4
[Assessing] Officer may r equir e :
5
[Provided that the Assessing Officer shall not dir ect the assessee to get the
accounts so audited unless the assessee has been given a r easonable oppor tunity
of being hear d.]
(2B) The pr ovisions of sub-section (2A) shall have effect notwithstanding that the
accounts of the assessee have been audited under any other law for the time
being in for ce or other wise.
(2C) Ever y r epor t under sub-section (2A) shall be fur nished by the assessee to the
4
[Assessing] Officer within such per iod as may be specified by the
4
[Assessing]
Officer :
Provided that the
4
[Assessing] Officer may,
5a
[suo motu, or] on an application
made in this behalf by the assessee and for any good and sufficient r eason, extend
the said per iod by such fur ther per iod or per iods as he thinks fit ; so, however , that
the aggr egate of the per iod or iginally fixed and the per iod or per iods so extended
shall not, in any case, exceed one hundr ed and eighty days fr om the date on which
the dir ection under sub-section (2A) is r eceived by the assessee.
1-4-1988.
98. See r ule 14A and For m No. 6B for audit r epor t under section 142(2A).
1-4-1988.
1. For the meaning of the ter ms complexity and accounts of assessee, see Taxmanns
1-4-1988.
3. See r ule 14A and For m No. 6B for audit r epor t under section 142(2A).
1-4-1988.
S. 142A I.T. ACT, 1961 1.658
(2D) The expenses of, and incidental to, any audit under sub-section (2A)
(including the r emuner ation of the accountant) shall be deter mined by the
6
[Chief Commissioner or Commissioner ] (which deter mination shall be final) and
paid by the assessee and in default of such payment, shall be r ecover able fr om
the assessee in the manner pr ovided in Chapter XVII-D for the r ecover y of
ar r ear s of tax :]
7
[Provided that wher e any dir ection for audit under sub-section (2A) is issued by
the Assessing Officer on or after the 1st day of June, 2007, the expenses of, and
incidental to, such audit (including the r emuner ation of the Accountant) shall be
deter mined by the Chief Commissioner or Commissioner in accor dance with
such guidelines as may be pr escr ibed
6a
and the expenses so deter mined shall be
paid by the Centr al Gover nment.]
(3) The assessee shall, except wher e the assessment is made under section 144,
be given an oppor tunity of being hear d in r espect of any mater ial gather ed on the
basis of any inquir y under sub-section (2)
8
[or any audit under sub-section (2A)]
and pr oposed to be utilised for the pur poses of the assessment.
9
[(4) The pr ovisions of this section as they stood immediately befor e their
amendment by the Dir ect Tax Laws (Amendment) Act, 1987 (4 of 1988), shall
apply to and in r elation to any assessment for the assessment year commencing
on the 1st day of Apr il, 1988, or any ear lier assessment year and r efer ences in this
section to the other pr ovisions of this Act shall be constr ued as r efer ences to those
pr ovisions as for the time being in for ce and applicable to the r elevant assessment
year .]
10
[Estimate by Valuation Officer in certain cases.
142A. (1) For the pur poses of making an assessment or r eassessment under this
Act, wher e an estimate of the value of any investment r efer r ed to in
section 69 or section 69B or the value of any bullion, jeweller y or other valuable
ar ticle r efer r ed to in section 69A or section 69B is r equir ed to be made, the
Assessing Officer may r equir e the Valuation Officer to make an estimate of such
value and r epor t the same to him.
(2) The Valuation Officer to whom a r efer ence is made under sub-section (1)
shall, for the pur poses of dealing with such r efer ence, have all the power s that
he has under section 38A of the Wealth-tax Act, 1957 (27 of 1957).
(3) On r eceipt of the r epor t fr om the Valuation Officer , the Assessing Officer may,
after giving the assessee an oppor tunity of being hear d, take into account such
r epor t in making such assessment or r eassessment:
Provided that nothing contained in this section shall apply in r espect of an
assessment made on or befor e the 30th day of September , 2004, and wher e such
assessment has become final and conclusive on or befor e that date, except in
cases wher e a r eassessment is r equir ed to be made in accor dance with the
pr ovisions of section 153A.
1-4-1988.
6a. See r ule 14B.
Explan ation .In this section, Valuation Officer has the same meaning as in
clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).]
11
[Assessment
12
.
13
143.
14-19
[(1) Wh ere a return h as been m ade un der section 139, or in respon se
to a n otice un der sub-section (1) of section 142, such return sh all be
processed in th e f ollowin g m an n er, n am ely:
(a) th e total in com e or loss sh all be com puted after m ak in g th e followin g
adjustm en ts, n am ely:
(i) an y arith m etical error in th e return ; or
(ii) an in correct claim , if such in correct claim is apparen t from an y
in form ation in th e return ;
(b) th e tax an d in terest, if an y, sh all be com puted on th e basis of th e total
in com e com puted un der clause (a);
(c) th e sum payable by, or th e am oun t of refun d due to, th e assessee sh all
be determ in ed after adjustm en t of th e tax an d in terest, if an y, com -
puted un der clause (b) by an y tax deducted at source, an y tax collected
at source, an y advan ce tax paid, an y relief allowable un der an agree-
m en t un der section 90 or section 90A, or an y relief allowable un der
section 91, an y rebate allowable un der Part A of Ch apter VIII, an y tax
paid on self-assessm en t an d an y am oun t paid oth erwise by way of tax
or in terest;
(d) an in tim ation sh all be prepared or gen erated an d sen t to th e assessee
specifyin g th e sum determ in ed to be payable by, or th e am oun t of
refun d due to, th e assessee un der clause (c); an d
11. Substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Section 143
was ear lier amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971,
Finance Act, 1974, w.e.f. 1-4-1975, Finance Act, 1976, w.e.f. 1-4-1976, Finance (No. 2) Act,
1980, w.e.f. 1-4-1980 and Finance Act, 1987, w.e.f. 1-4-1988.
12. The pr ovisions of section 143 as they stood befor e the commencement of the Dir ect Tax
Laws (Amendment) Act, 1987, shall apply in r espect of assessments for the assessment
year commencing on the 1st day of Apr il, 1988 and any ear lier assessment year vide
Income-tax (Removal of Difficulties) Or der , 1989.
13. See also Cir cular No. 201, dated 5-7-1976, Instr uction No. 1395, dated 15-5-1981 [Sour ce:
114th Repor t [1982-83] of the Public Accounts Committee, pp. 16-17], Cir cular No. 230,
dated 27-10-1977. Relevant extr acts fr om minutes of 12th meeting of CDTAC held on
17-8-1967, Cir cular No. 18 (XL-37), dated 28-4-1955, Cir cular No. 125, dated 26-11-1973,
Cir cular No. 36(XL-52), dated 19-11-1958, Cir cular No. 50(XL-43), dated 28-12-1956,
Letter [F.No. 91/ 41/ 67/ ITJ(25)], dated 3-7-1967, Letter [F.No. 81/ 27/ 65-IT(B)], dated
18-5-1965, Cir cular No. 14 (XL-35), dated 11-4-1955, Cir cular No. 3 of 1942, dated
16-1-1942, Cir cular No. 601, dat ed 4-6-1991, Inst r uct ion No. 574, dat ed 27-7-1993,
Cir cular No. 4/ 2003, dated 14-5-2003 and Instr uction No. 2/ 2008, dated 22-2-2008. For
14-19. Substituted for sub-section (1) by the Finance Act, 2008, w.e.f. 1-4-2008. Pr ior to its
substitution, sub-section (1), as amended by the Finance Act, 2001, w.e.f. 1-6-2001,
Finance Act, 1999, w.e.f. 1-6-1999, Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-
1989, Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989, Finance Act, 1992,
(Con td. on p. 1.660)
S. 143 I.T. ACT, 1961 1.660
(e) th e am oun t of refun d due to th e assessee in pursuan ce of th e determ i-
n ation un der clause (c) sh all be gran ted to th e assessee:
Provided th at an in tim ation sh all also be sen t to th e assessee in a case
wh ere th e loss declared in th e return by th e assessee is adjusted but
n o tax or in terest is payable by, or n o refun d is due to, h im :
Provided further th at n o in tim ation un der th is sub-section sh all be
sen t after th e expiry of on e year from th e en d of th e fin an cial year in
wh ich th e return is m ade.
(a) an in correct claim apparen t from an y in formation in th e return sh all
m ean a claim , on th e basis of an en try, in th e return ,
(i) of an item , wh ich is in con sisten t with an oth er en try of th e sam e
or som e oth er item in such return ;
(ii) in respect of wh ich th e in form ation required to be furn ish ed
un der th is Act to substan tiate such en try h as n ot been so fur-
n ish ed; or
(iii) in respect of a deduction , wh ere such deduction exceeds specified
statutory lim it wh ich m ay h ave been expressed as m on etary
am oun t or percen tage or ratio or fraction ;
(1) Wher e a r etur n has been made under section 139, or in r esponse to a notice under
sub-section (1) of section 142,
(i) if any tax or inter est is found due on the basis of such r etur n, after adjustment of
any tax deducted at sour ce, any advance tax paid, any tax paid on self-assessment
and any amount paid other wise by way of tax or inter est, then, without pr ejudice
to the pr ovisions of sub-section (2), an intimation shall be sent to the assessee
specifying the sum so payable, and such intimation shall be deemed to be a notice
of demand issued under section 156 and all the pr ovisions of this Act shall apply
accor dingly; and
(ii) if any r efund is due on the basis of such r etur n, it shall be gr anted to the assessee
and an intimation to this effect shall be sent to the assessee :
Provided that except as other wise pr ovided in this sub-section, the acknowledgement of
the r etur n shall be deemed to be an intimation under this sub-section wher e either no sum
is payable by the assessee or no r efund is due to him :
Provided further that no intimation under this sub-section shall be sent after the expir y
of one year fr om the end of the financial year in which the r etur n is made :
Provided also that wher e the r etur n made is in r espect of the income fir st assessable in the
assessment year commencing on the 1st day of Apr il, 1999, such intimation may be sent
at any time up to the 31st day of Mar ch, 2002.
Ear lier sub-section (1A) was omitted by the Finance Act, 1999, w.e.f. 1-6-1999. Ear lier , sub-
section (1A) was inser ted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989,
and later on amended by the Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f.
1-4-1989, the Finance Act, 1992, w.r .e.f. 1-4-1989 and the Finance Act, 1993, w.r .e.f.
1-4-1989.
Ear lier , sub-section (1B) was inser ted by the Finance Act, 1990, w.r .e.f. 1-4-1989 and later
on omitted by the Finance Act, 1999, w.e.f. 1-6-1999.
(b) th e ack n owledgem en t of th e return sh all be deem ed to be th e in tim a-
tion in a case wh ere n o sum is payable by, or refun dable to, th e assessee
un der clause (c), an d wh ere n o adjustm en t h as been m ade un der
clause (a).
(1A) For th e purposes of processin g of return s un der sub-section (1), th e Board
m ay m ak e a sch em e for cen tralised processin g of return s with a view to
expeditiously determ in in g th e tax payable by, or th e refun d due to, th e assessee as
required un der th e said sub-section .
(1B) Save as oth erwise expressly provided, for th e purpose of givin g effect to th e
sch em e m ade un der sub-section (1A), th e Cen tral Govern m en t m ay, by n otifica-
tion in th e Official Gazette, direct th at an y of th e provision s of th is Act relatin g to
processin g of return s sh all n ot apply or sh all apply with such exception s,
m odification s an d adaptation s as m ay be specified in th at n otification ; so,
h owever, th at n o direction sh all be issued after th e 31st day of March , 2009.
(1C) Every n otification issued un der sub-section (1B), alon g with th e sch em e
m ade un der sub-section (1A), sh all, as soon as m ay be after th e n otification is
issued, be laid before each House of Parliam en t.]
20
[(2) Wher e a r etur n has been fur nished under section 139, or in r esponse to a
notice under sub-section (1) of section 142, the Assessing Officer shall,
(i) wher e he has r eason to believe that any claim of loss, exemption,
deduction, allowance or r elief made in the r etur n is inadmissible,
ser ve on the assessee a notice specifying par ticular s of such claim of
loss, exemption, deduction, allowance or r elief and r equir e him, on a
date to be specified ther ein to pr oduce, or cause to be pr oduced, any
evidence or par ticular s specified ther ein or on which the assessee
may r ely, in suppor t of such claim :
21
[Provided that no notice under this clause shall be ser ved on the
assessee on or after the 1st day of June, 2003;]
(ii) notwithstanding anything contained in clause (i), if he consider s it
necessar y or expedient to ensur e that the assessee has not under -
stated the income or has not computed excessive loss or has not
(2), a s a mended by t he Dir ect Ta x La ws (Second Amendment ) Act , 1989, w.e.f.
1-4-1989 and the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991, r ead as under :
(2) Wher e a r etur n has been made under section 139, or in r esponse to a notice under sub-
section (1) of section 142, the Assessing Officer shall, if he consider s it necessar y or
expedient to ensur e that the assessee has not under stated the income or has not computed
excessive loss or has not under -paid the tax in any manner , ser ve on the assessee a notice
r equir ing him, on a date to be specified ther ein, either to attend his office or to pr oduce,
or cause to be pr oduced ther e, any evidence on which the assessee may r ely in suppor t of
t he r et ur n :
Provided that no notice under this sub-section shall be ser ved on the assessee after the
expir y of twelve months fr om the end of the month in which the r etur n is fur nished.
S. 143 I.T. ACT, 1961 1.662
under -paid the tax in any manner , ser ve on the assessee a notice
r equir ing him, on a date to be specified ther ein, either to attend his
office or to pr oduce, or cause to be pr oduced, any evidence on which
the assessee may r ely in suppor t of the r etur n:
22
[Provided th at n o n otice un der clause (ii) sh all be served on th e
assessee after th e expiry of six m on th s from th e en d of th e fin an cial
year in wh ich th e return is f urn ish ed.]]
23
[(3) On the day specified in the notice,
(i) issued under clause (i) of sub-section (2), or as soon after war ds as may
be, after hear ing such evidence and after taking into account such
par ticular s as the assessee may pr oduce, the Assessing Officer shall,
by an or der in wr iting, allow or r eject the claim or claims specified in
such notice and make an assessment deter mining the total income or
loss accor dingly, and deter mine the sum payable by the assessee on
the basis of such assessment;
(ii) issued under clause (ii) of sub-section (2), or as soon after war ds as
may be, after hear ing such evidence as the assessee may pr oduce and
such other evidence as the Assessing Officer may r equir e on specified
points, and after taking into account all r elevant mater ial which he
has gather ed, the Assessing Officer shall, by an or der in wr iting, make
an assessment of the total income or loss of the assessee, and
deter mine the sum payable by him or r efund of any amount due to
him on the basis of such assessment:]
24
[Provided that in the case of a
(a) scientific r esear ch association r efer r ed to in clause (21) of section 10;
(b) news agency r efer r ed to in clause (22B) of section 10;
(c) association or institution r efer r ed to in clause (23A) of section 10;
(d) institution r efer r ed to in clause (23B) of section 10;
22. Substituted by the Finance Act, 2008, w.e.f. 1-4-2008. Pr ior to its substitution, pr oviso as
amended by Finance Act, 2003, w.e.f. 1-6-2003, r ead as under :
Provided that no notice under clause (ii) shall be ser ved on the assessee after the expir y
of twelve months fr om the end of the month in which the r etur n is fur nished.
(3), as inser ted by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998, r ead as under :
(3) On the day specified in the notice issued under sub-section (2), or as soon after war ds
as may be, after hear ing such evidence as the assessee may pr oduce and such other
evidence as the Assessing Officer may r equir e on specified points, and after taking into
account all r elevant mater ial which he has gather ed, the Assessing Officer shall, by an
or der in wr iting, make an assessment of the total income or loss of the assessee, and
deter mine the sum payable by him or r efund of any amount due to him on the basis of such
assessment .
(e) fund or institution r efer r ed to in sub-clause (iv) or tr ust or institution
r efer r ed to in sub-clause (v) or any univer sity or other educational
institution r efer r ed to in sub-clause (vi) or any hospital or other
medical institution r efer r ed to in sub-clause (via) of clause (23C) of
section 10,
which is r equir ed to fur nish the r etur n of income under sub-section (4C) of
section 139, no or der making an assessment of the total income or loss of such
scientific r esear ch association, news agency, association or institution or fund or
tr ust or univer sity or other educational institution or any hospital or other
medical institution, shall be made by the Assessing Officer , without giving effect
to the pr ovisions of section 10, unless
(i) the Assessing Officer has intimated the Centr al Gover nment or the
pr escr ibed author ity the contr avention of the pr ovisions of clause
(21) or clause (22B) or clause (23A) or clause (23B) or sub-clause (iv)
or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C)
of section 10, as the case may be, by such scientific r esear ch associa-
tion, news agency, association or institution or fund or tr ust or
medical institution, wher e in his view such contr avention has taken
place; and
(ii) the appr oval gr anted to such scientific r esear ch association or other
association
25
[or fund or tr ust] or institution or univer sity or other
educational institution or hospital or other medical institution has
been withdr awn or notification issued in r espect of such news agency
or fund or tr ust or institution has been r escinded :]
26
[Provided further that wher e the Assessing Officer is satisfied that the activities
of the univer sity, college or other institution r efer r ed to in clause (ii) and clause
(iii) of sub-section (1) of section 35 ar e not being car r ied out in accor dance with
all or any of the conditions subject to which such univer sity, college or other
institution was appr oved, he may, after giving a r easonable oppor tunity of
showing cause against the pr oposed withdr awal to the concer ned univer sity,
college or other institution, r ecommend to the Centr al Gover nment to withdr aw
the appr oval and that Gover nment may by or der , withdr aw the appr oval and
for war d a copy of the or der to the concer ned univer sity, college or other
institution and the Assessing Officer .]
27
[(4) Wher e a r egular assessment under sub-section (3) of this section or section
144 is made,
(a) any tax or inter est paid by the assessee under sub-section (1) shall be
deemed to have been paid towar ds such r egular assessment ;
S. 144 I.T. ACT, 1961 1.664
(b) if no r efund is due on r egular assessment or the amount r efunded
under sub-section (1) exceeds the amount r efundable on r egular
assessment, the whole or the excess amount so r efunded shall be
deemed to be tax payable by the assessee and the pr ovisions of this Act
shall apply accor dingly.
(5)
28
29
[* * *]
Best judgment assessment.
30
144.
31
[(1)] If any per son
(a) fails to make the r etur n r equir ed
32
[under sub-section (1) of section
139] and has not made a r etur n or a r evised r etur n under sub-section
(4) or sub-section (5) of that section, or
(b) fails to comply with all the ter ms of a notice issued under sub-section
(1) of section 142
33
[or fails to comply with a dir ection issued under
sub-section (2A) of that section], or
(c) having made a r etur n, fails to comply with all the ter ms of a notice
issued under sub-section (2) of section 143,
the
34
[Assessing] Officer , after taking into account all r elevant mater ial which the
34
[Assessing] Officer has gather ed,
35
[shall, after giving the assessee an oppor -
tunity of being hear d, make the assessment
36
] of the total income or loss to the
best of his judgment and deter mine the sum payable by the assessee
37
[* * *] on
the basis of such assessment :
28. Pr ior t o it s omission, sub-sect ion (5), as inser t ed by t he Dir ect Tax Laws (Second
Amendment) Act, 1989, w.e.f. 1-4-1989, r ead as under :
(5) The pr ovisions of this section as they stood immediately befor e their amendment by
the Dir ect Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in r elation to
any assessment for the assessment year commencing on the 1st day of Apr il, 1988, or any
ear lier assessment year and r efer ences in this section to the other pr ovisions of this Act
shall be constr ued as r efer ences to those pr ovisions as for the time being in for ce and
applicable to the r elevant assessment year .
29. Omitted by the Finance Act, 1999, w.e.f. 1-6-1999. Pr ior to its omission, Explan ation , as
inser ted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991 and later on amended by the
Explan ation .An intimation sent to the assessee under sub-section (1) or sub-section (1B)
shall be deemed to be an or der for the pur poses of sections 246 and 264.
30. For depar tmental instr uctions and r elevant case laws, see Taxmanns Master Guide to
Income-tax Act.
31. Renumber ed by the Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989.
32. Substituted for by any notice given under sub-section (2) of section 139 by the Dir ect Tax
1-4-1988.
35. Substituted for shall make the assessment, ibid., w.e.f. 1-4-1989.
36. For the meaning of the expr ession make the assessment, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
37. Wor ds or r efundable to the assessee omitted by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1988.
38
[Provided that such oppor tunity shall be given by the Assessing Officer by
ser ving 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 :
Provided further that it shall not be necessar y to give such oppor tunity in a case
wher e a notice under sub-section (1) of section 142 has been issued pr ior to the
making of an assessment under this section.]
39
apply to and in r elation to any assessment for the assessment year commencing
on the 1st day of Apr il, 1988, or any ear lier assessment year and r efer ences in this
section to the other pr ovisions of this Act shall be constr ued as r efer ences to those
year .]
40
[Power of
41
[Joint Commissioner] to issue directions in certain cases.
42
144A.
43
[* * *] A
41
[Joint Commissioner ] may, on his own motion or on a
r efer ence being made to him by the
44
[Assessing] Officer or on the
application of an assessee, call for and examine the r ecor d of any pr oceeding in
which an assessment is pending and, if he consider s that, having r egar d to the
natur e of the case or the amount involved or for any other r eason, it is necessar y
or expedient so to do, he may issue such dir ections as he thinks fit for the
guidance of the
44
[Assessing] Officer to enable him to complete the assessment
and such dir ections shall be binding on the
44
[Assessing] Officer :
Provided that no dir ections which ar e pr ejudicial to the assessee shall be issued
befor e an oppor tunity is given to the assessee to be hear d.
Explan ation .For the pur poses of this
45
[section] no dir ection as to the lines on
which an investigation connected with the assessment should be made
46
, shall be
deemed to be a dir ection pr ejudicial to the assessee.
47
[* * *]]
43. (1) omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
45. Substituted for sub-section by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
46. For the meaning of the expr ession dir ection as to . . . should be made, see Taxmanns
47. Sub-section (2) omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
Reference to Deputy Commissioner in certain cases.
144B.
48
[Omitted by th e Direct Tax Laws (Amen dmen t) Act, 1987, w.e.f. 1-4-1989.
Origin al section 144B was in serted by th e Taxation Laws (Am en dm en t)
Act, 1975, w.e.f. 1-4-1976.]
49
[Method of accounting.
50
145. (1) Income char geable under the head Pr ofits and gains of business or
pr ofession or Income fr om other sour ces shall, subject to the pr ovisions
of sub-section (2), be computed in accor dance with either cash or mer cantile
system of accounting r egular ly
50
employed by the assessee.
(2) The Centr al Gover nment may notify in the Official Gazette
51
fr om time to time
accounting standar ds to be followed by any class of assessees or in r espect of any
class of income.
(3) Wher e the Assessing Officer is not satisfied about the cor r ectness or com-
pleteness of the accounts of the assessee, or wher e the method of accounting
pr ovided in sub-section (1) or accounting standar ds as notified under sub-section
(2), have not been r egular ly followed by the assessee, the Assessing Officer may
make an assessment in the manner pr ovided in section 144.]
S. 145 I.T. ACT, 1961 1.666
48. Pr ior to its omission, section 144B was amended by the Taxation Laws (Amendment) Act,
1984, w.e.f. 1-10-1984.
as amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988/ 1-4-1989 and
the Finance Act, 1990, w.r .e.f. 1-4-1989, r ead as under :
145. Meth od of accoun tin g.(1) Income char geable under the head Pr ofits and gains of
business or pr ofession or Income fr om other sour ces shall be computed in accor dance
with the method of accounting r egular ly employed by the assessee :
Provided that in any case wher e the accounts ar e cor r ect 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 pr oper ly be deduced ther efr om, then the computa-
tion shall be made upon such basis and in such manner as the Assessing Officer may
deter mine :
Provided further that wher e no method of accounting is r egular ly employed by the
assessee, any income by way of inter est on secur ities shall be char geable to tax as the
income of the pr evious year in which such inter est is due to the assessee :
Provided also that nothing contained in this sub-section shall pr eclude an assessee fr om
being char ged to income-tax in r espect of any inter est on secur ities r eceived by him in a
pr evious year if such inter est had not been char ged to income-tax for any ear lier pr evious
year .
(2)Wher e the Assessing Officer is not satisfied about the cor r ectness or the completeness
of the accounts of the assessee, or wher e no method of accounting has been r egular ly
employed by the assessee, the Assessing Officer may make an assessment in the manner
pr ovided in section 144.
50. For Instr uction No. 1310, dated 26-2-1980 and Cir cular No. 491, dated 30-6-1986, see
Taxmanns Master Guide to Income-tax Act. For r elevant case laws, see Taxmanns Master
Guide to Income-tax Act. For the meaning of the ter m r egular ly, see Taxmanns Dir ect
51. See Notification No. SO 69(E), dated 25-1-1996 for Notified Accounting Standar ds. For
details, see Taxmanns Income-tax Rules.
52
[Method of accounting in certain cases.
145A. Notwithstanding anything to the contr ar y contained in section 145, the
valuation of pur chase and sale of goods and inventor y for the pur poses of
deter mining the income char geable under the head Pr ofits and gains of business
or pr ofession shall be
(a) in accor dance with the method of accounting r egular ly employed by
the assessee; and
(b) fur ther adjusted to include the amount of any tax, duty, cess or fee (by
whatever name called) actually paid or incur r ed by the assessee to
br ing the goods to the place of its location and condition as on the date
of valuation.
Explan ation . For the pur poses of this section, any tax, duty, cess or fee (by
whatever name called) under any law for the time being in for ce, shall include
all such payment notwithstanding any r ight ar ising as a consequence to such
payment.]
Reopening of assessment at the instance of the assessee.
146.
53
54
[Income escaping assessment.
55
147. If the
56
[Assessing] Officer
57
[has r eason to believe
58
] that any income
char geable to tax has escaped assessment
58
for any assessment year , he
may, subject to the pr ovisions of sections 148 to 153, assess or r eassess
58
such
income and also any other income char geable to tax which has escaped
assessment and which comes to his notice subsequently in the cour se of the
pr oceedings under this section, or r ecompute the loss or the depr eciation
allowance or any other allowance, as the case may be, for the assessment year
concer ned (her eafter in this section and in sections 148 to 153 r efer r ed to as the
r elevant assessment year ) :
Provided that wher e an assessment under sub-section (3) of section 143 or this
section has been made for the r elevant assessment year , no action shall be taken
under this section after the expir y of four year s fr om the end of the r elevant
assessment year , unless any income char geable to tax has escaped assessment
53. Pr ior to its omission, section 146 was amended by the Finance Act, 1963, w.e.f. 28-4-1963,
Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 and Taxation Laws (Amendment)
Act, 1984, w.e.f. 1-10-1984.
55. See also Cir cular [F. No. 45A/ 180/ 52-IT], dated 6-12-1955. For details, see Taxmanns
1-4-1988.
57. Substituted for , for r easons to be r ecor ded by him in wr iting, is of the opinion by the
58. For the meaning of the ter ms/ expr essions r eason to believe, assessment, r eassess and
failur e, see Taxmanns Dir ect Taxes Manual, Vol. 3.
for such assessment year by r eason of the failur e
59
on the par t of the assessee to
make a r etur n under section 139 or in r esponse to a notice issued under sub-
section (1) of section 142 or section 148 or to disclose fully and tr uly all mater ial
facts
59
necessar y for his assessment, for that assessment year :
59a
[Provided further th at th e Assessin g Of f icer m ay assess or reassess such
in com e, oth er th an th e in com e in volvin g m atters wh ich are th e subject-m atter of
an y appeal, referen ce or revision , wh ich is ch argeable to tax an d h as escaped
assessmen t.]
Explan ation 1.Pr oduction befor e the Assessing Officer of account books or
other evidence fr om which mater ial evidence could with due diligence have
been discover ed by the Assessing Officer will not necessar ily
59
amount to
disclosur e within the meaning of the for egoing pr oviso.
Explanation 2.For the purposes of this section, the following shall also be deemed
to be cases wher e income char geable to tax has escaped assessment, namely :
(a) wher e no r etur n of income has been fur nished by the assessee
although his total income or the total income of any other per son in
r espect of which he is assessable under this Act dur ing the pr evious
year exceeded the maximum amount which is not char geable to
income-tax ;
(b) wher e a r etur n of income has been fur nished by the assessee but no
assessment has been made and it is noticed by the Assessing Officer
that the assessee has under stated the income or has claimed exces-
sive loss, deduction, allowance or r elief in the r etur n ;
(c) wher e an assessment has been made, but
(i) income char geable to tax has been under assessed ; or
(ii) such income has been assessed at too low a r ate ; or
(iii) such income has been made the subject of excessive r elief under
this Act ; or
(iv) excessive loss or depr eciation allowance or any other allowance
under this Act has been computed.]
60
[Issue of notice where income has escaped assessment.
61
148.
62
[(1)] Befor e making the assessment, r eassessment or r ecomputation
under section 147, the Assessing Officer shall ser ve
63
on t he assessee a
notice r equir ing him to fur nish within such per iod,
64
[* * *] as may be specified in
S. 148 I.T. ACT, 1961 1.668
59. For the meaning of the expr essions failur e, mater ial facts and not necessar ily, see
61. For Notification No. SO 1178, dated 11-2-1982, r efer Taxmanns Dir ect Taxes Cir cular s.
63. For the meaning of the ter m ser ve, see Taxmanns Dir ect Taxes Manual, Vol. 3.
64. Wor ds not being less than thir ty days, omitted by the Finance (No. 2) Act, 1996, w.r .e.f.
1-4-1989.
the notice, a r etur n of his income or the income of any other per son in r espect
of which he is assessable under this Act dur ing the pr evious year cor r esponding
to the r elevant assessment year , in the pr escr ibed for m and ver ified in the
pr escr ibed manner and setting for th such other par ticular s as may be pr es-
cr ibed; and the pr ovisions of this Act shall, so far as may be
65
, apply accor dingly
as if such r etur n wer e a r etur n r equir ed to be fur nished under section 139 :]
66
[Provided that in a case
(a) wher e a r etur n has been fur nished dur ing the per iod commencing on
the 1st day of October , 1991 and ending on the 30th day of September ,
2005 in r esponse to a notice ser ved under this section, and
(b) subsequently a notice has been ser ved under sub-section (2) of
section 143 after the expir y of twelve months specified in the pr oviso
to sub-section (2) of section 143, as it stood immediately befor e the
amendment of said sub-section by the Finance Act, 2002 (20 of 2002)
but befor e the expir y of the time limit for making the assessment, r e-
assessment or r ecomputation as specified in sub-section (2) of section
153, ever y such notice r efer r ed to in this clause shall be deemed to be
a valid notice:
Provided further that in a case
(a) wher e a r etur n has been fur nished dur ing the per iod commencing on
the 1st day of October , 1991 and ending on the 30th day of September ,
2005, in r esponse to a notice ser ved under this section, and
(b) subsequently a notice has been ser ved under clause (ii) of sub-section
(2) of section 143 after the expir y of twelve months specified in the
pr oviso to clause (ii) of sub-section (2) of section 143, but befor e the
expir y of the time limit for making the assessment, r eassessment or
r ecomputation as specified in sub-section (2) of section 153, ever y
such notice r efer r ed to in this clause shall be deemed to be a valid
notice.]
67
contained in the fir st pr oviso or the second pr oviso shall apply to any r etur n
which has been fur nished on or after the 1st day of October , 2005 in r esponse to
a notice ser ved under this section.]
68
[(2) The Assessing Officer shall, befor e issuing any notice under this section,
r ecor d his r easons for doing so.]
65. For the meaning of the expr ession so far as may be, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
S. 149 I.T. ACT, 1961 1.670
70. For the meaning of the ter m issued, see Taxmanns Dir ect Taxes Manual, Vol. 3.
71. Clauses (a) and (b) substituted by the Finance Act, 2001, w.e.f. 1-6-2001. Pr ior to their
substitution, clauses (a) and (b), as amended by the Dir ect Tax Laws (Second Amendment)
(a) in a case wher e an assessment under sub-section (3) of section 143 or section 147
has been made for such assessment year ,
(i) if four year s have elapsed fr om the end of the r elevant assessment year ,
unless the case falls under sub-clause (ii) or sub-clause (iii) ;
(ii) if four year s, but not mor e than seven year s, have elapsed fr om the end of the
r elevant assessment year unless the income char geable to tax which has
escaped assessment amount s t o or is likely t o amount t o r upees fift y
thousand or mor e for that year ;
(iii) if seven year s, but not mor e than ten year s, have elapsed fr om the end of the
r elevant assessment year , unless the income char geable to tax which has
escaped assessment amounts to or is likely to amount to r upees one lakh or
mor e for t hat year ;
(b) in any other case,
(i) if four year s have elapsed fr om the end of the r elevant assessment year ,
unless the case falls under sub-clause (ii) or sub-clause (iii) ;
(ii) if four year s, but not mor e than seven year s, have elapsed fr om the end of the
escaped assessment amounts to or is likely to amount to r upees twenty-five
t housand or mor e for t hat year ;
(iii) if seven year s, but not mor e than ten year s, have elapsed fr om the end of the
escaped assessment amount s t o or is likely t o amount t o r upees fift y
thousand or mor e for that year .
72. For the meaning of the expr ession likely to amount to one lakh r upees or mor e, see
Time limit for notice.
149.
69
[(1) No notice under section 148 shall be issued
70
for the r elevant
assessment year ,
71
[(a) if four year s have elapsed fr om the end of the r elevant assessment
year , unless the case falls under clause (b);
(b) if four year s, but not mor e than six year s, have elapsed fr om the end
of the r elevant assessment year unless the income char geable to tax
which has escaped assessment amounts to or is likely to amount to
one lakh r upees or mor e
72
for that year .]
Explan ation .In deter mining income char geable to tax which has escaped
assessment for the pur poses of this sub-section, the pr ovisions of Explan ation 2
of section 147 shall apply as they apply for the pur poses of that section.]
(2) The pr ovisions of sub-section (1) as to the issue of notice shall be subject to
the pr ovisions of section 151.
(3) If the per son on whom a notice under section 148 is to be ser ved is a per son
tr eated as the agent of a non-r esident under section 163 and the assessment,
r eassessment or r ecomputation to be made in pur suance of the notice is to be
made on him as the agent of such non-r esident, the notice shall not be issued after
the expir y of a per iod of two year s fr om the end of the r elevant assessment year .
Provision for cases where assessment is in pursuance of an order on appeal, etc.
150. (1) Notwithstanding anything contained in section 149, the notice under
section 148 may be issued at any time for the pur pose of making an
assessment or r eassessment or r ecomputation in consequence of or to give
effect to any finding or dir ection contained in an or der passed by any author ity
in any pr oceeding under this Act by way of appeal, r efer ence or r evision
73
[or by
a Cour t in any pr oceeding under any other law].
(2) The pr ovisions of sub-section (1) shall not apply in any case wher e any such
assessment, r eassessment or r ecomputation as is r efer r ed to in that sub-section
r elates to an assessment year in r espect of which an assessment, r eassessment
or r ecomputation could not have been made at the time the or der which was the
subject-matter of the appeal, r efer ence or r evision, as the case may be, was made
by r eason of any other pr ovision limiting the time within which any action for
assessment, r eassessment or r ecomputation may be taken.
74
[Sanction for issue of notice.
151. (1) In a case wher e an assessment under sub-section (3) of section 143 or
section 147 has been made for the r elevant assessment year , no notice shall
be issued under section 148
75
[by an Assessing Officer , who is below the r ank of
Assistant Commissioner
76
[or Deputy Commissioner ], unless the
77
[Joint] Com-
missioner is satisfied on the r easons r ecor ded by such Assessing Officer that it
is a fit case for the issue of such notice] :
Provided that, after the expir y of four year s fr om the end of the r elevant
assessment year , no such notice shall be issued unless the Chief Commissioner
or Commissioner is satisfied, on the r easons r ecor ded by the Assessing Officer
afor esaid, that it is a fit case for the issue of such notice.
(2) In a case other than a case falling under sub-section (1), no notice shall be
issued under section 148 by an Assessing Officer , who is below the r ank of
77
[Joint] Commissioner , after the expir y of four year s fr om the end of the r elevant
assessment year , unless the
77
[Joint] Commissioner is satisfied, on the r easons
r ecor ded by such Assessing Officer , that it is a fit case for the issue of such notice.]
77a
[Explanation.For th e rem oval of doubts, it is h ereby declared th at th e Join t
Com m ission er, th e Com m ission er or th e Ch ief Com m ission er, as th e case m ay be,
bein g satisfied on th e reason s recorded by th e Assessin g Officer about fitn ess of
75. Substituted for except by an Assessing Officer of the r ank of Assistant Commissioner or
Deputy Commissioner by the Finance Act, 1990, w.e.f. 1-4-1990.
77. Substituted for Deputy, ibid.
a case for th e issue of n otice un der section 148, n eed n ot issue such n otice
h imself.]
Other provisions.
152. (1) In an assessment, r eassessment or r ecomputation made under section
147, the tax shall be char geable at the r ate or r ates at which it would have
been char ged had the income not escaped assessment.
(2) Wher e an assessment is r eopened
78
[under section 147], the assessee may, if
he has not impugned any par t of the or iginal assessment or der for that year either
under sections 246 to 248 or under section 264, claim that the pr oceedings under
section 147 shall be dr opped on his showing that he had been assessed on an
amount or to a sum not lower than what he would be r ightly liable for even if the
income alleged to have escaped assessment had been taken into account, or the
assessment or computation had been pr oper ly made :
Provided that in so doing he shall not be entitled to r eopen matter s concluded by
an or der under section 154, 155, 260, 262, or 263.
Time limit for completion of assessments and reassessments.
153.
79
[(1) No or der of assessment
80
shall be made under section 143 or section
144 at any time after the expir y of
(a) two year s fr om the end of the assessment year in which the income
was fir st assessable ; or
(b) one year fr om the end of the financial year in which a r etur n or a
r evised r etur n r elating to the assessment year commencing on the 1st
day of Apr il, 1988, or any ear lier assessment year , is filed under sub-
section (4) or sub-section (5) of section 139,
whichever is later :]
81
[Provided that in case the assessment year in which the income was fir st
assessable is the assessment year commencing on the 1st day of Apr il, 2004 or
any subsequent assessment year , the pr ovisions of clause (a) shall have effect as
if for the wor ds two year s, the wor ds twenty-one months had been substi-
tuted :]
82
[Provided further that in case the assessment year in which the income was
fir st assessable is the assessment year commencing on the 1st day of Apr il, 2005
S. 153 I.T. ACT, 1961 1.672
78. Substituted for in cir cumstances falling under clause (b) of section 147 by the Dir ect Tax
79. Substituted by the Finance Act, 1989, w.e.f. 1-4-1989. Ear lier sub-section (1) was substi-
tuted by the Dir ect Tax Laws (Amendment) Act, 1987, with effect fr om the same date.
Pr ior to its substitution, sub-section (1) [as it stood befor e its substitution by the Dir ect
Tax Laws (Amendment) Act, 1987] was substituted by the Finance Act, 1968, w.e.f.
1-4-1968 and later on amended by the Taxation Laws (Amendment) Act, 1984, w.e.f.
1-10-1984.
80. For the meaning of the expr ession or der of assessment, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
or any subsequent assessment year and dur ing the cour se of the pr oceeding for
the assessment of total income, a r efer ence under sub-section (1) of section
92CA
(i) was made befor e the 1st day of June, 2007 but an or der under sub-
section (3) of that section has not been made befor e such date; or
(ii) is made on or after the 1st day of June, 2007,
the pr ovisions of clause (a) shall, notwithstanding anything contained in the fir st
pr oviso, have effect as if for the wor ds two year s, the wor ds thir ty-thr ee
months had been substituted.]
83
[(1A) No or der of assessment shall be made under section 115WE or section
115WF at any time after the expir y of
84
[twenty-one months] fr om the end of the
assessment year in which the fr inge benefits wer e fir st assessable.
(1B) No or der of assessment or r eassessment shall be made under section
115WG after the expir y of
85
[nine months] fr om the end of the financial year in
which the notice under section 115WH was ser ved.]
86
[(2) No or der of assessment, r eassessment or r ecomputation shall be made
under section 147 after the expir y of
87
[one year ] fr om the end of the financial
year in which the notice under section 148 was ser ved :
88
[Provided that wher e the notice under section 148 was ser ved on or after the
1st day of Apr il, 1999 but befor e the 1st day of Apr il, 2000, such assessment,
r eassessment or r ecomputation may be made at any time up to the 31st day of
Mar ch, 2002 :]
89
[Provided further that wher e the notice under section 148 was ser ved on or
after the 1st day of Apr il, 2005, the pr ovisions of this sub-section shall have effect
as if for the wor ds one year , the wor ds nine months had been substituted :]
90
[Provided also that wher e the notice under section 148 was ser ved on or after
the 1st day of Apr il, 2006 and dur ing the cour se of the pr oceedings for the
assessment or r eassessment or r ecomputation of total income, a r efer ence under
sub-section (1) of section 92CA
section (3) of that section has not been made befor e such date; or
84. Substituted for two year s by the Finance Act, 2006, w.e.f. 1-6-2006.
85. Substituted for one year , ibid.
87. Substituted for two year s by the Finance Act, 2001, w.e.f. 1-6-2001.
88. Pr oviso substituted, ibid. Pr ior t o it s subst it ut ion, pr oviso r ead as under :
Provided that wher e the notice under section 148 was ser ved on or befor e the 31st day
of Mar ch, 1987, such assessment, r eassessment or r ecomputation may be made at any
time up to the 31st day of Mar ch, 1990.
the pr ovisions of this sub-section shall, notwithstanding anything contained in
the second pr oviso, have effect as if for the wor ds one year , the wor ds twenty-
one months had been substituted.]
91
[(2A) Notwithstanding anything contained in sub-sections (1)
92
[, (1A), (1B)] and
(2), in r elation to the assessment year commencing on the 1st day of Apr il, 1971,
and any subsequent assessment year , an or der of fr esh assessment in pur suance
of an or der under section 250 or section 254 or section 263 or section 264, setting
aside or cancelling an assessment, may be made at any time befor e the expir y of
one year fr om the end of the financial year in which the or der under section 250
or section 254 is r eceived by the Chief Commissioner or Commissioner or , as the
case may be, the or der under section 263 or section 264 is passed by the Chief
Commissioner or Commissioner :
Provided that wher e the or der under section 250 or section 254 is r eceived by the
Chief Commissioner or Commissioner or , as the case may be, the or der under
section 263 or section 264 is passed by the Chief Commissioner or Commissioner ,
on or after the 1st day of Apr il, 1999 but befor e the 1st day of Apr il, 2000, such
an or der of fr esh assessment may be made at any time up to the 31st day of
Mar ch, 2002 :]
93
[Provided further that wher e the or der under section 254 is r eceived by the
Chief Commissioner or Commissioner or , as the case may be, the or der under
section 263 or section 264 is passed by the Commissioner on or after the 1st day
of Apr il, 2005, the pr ovisions of this sub-section shall have effect as if for the
wor ds one year , the wor ds nine months had been substituted:]
94
[Provided also that wher e the or der under section 254 is r eceived by the Chief
Commissioner or Commissioner or , as the case may be, the or der under section
263 or section 264 is passed by the Commissioner on or after the 1st day of Apr il,
2006, and dur ing the cour se of the pr oceedings for the fr esh assessment of total
income, a r efer ence under sub-section (1) of section 92CA
section (3) of section 92CA has not been made befor e such date; or
S. 153 I.T. ACT, 1961 1.674
(2A), as inser ted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971 and later
on amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988, r ead as
under :
(2A) Notwithstanding anything contained in sub-sections (1) and (2), in r elation to the
assessment year commencing on the 1st day of Apr il, 1971, and any subsequent assess-
ment year , an or der of fr esh assessment under section 146 or in pur suance of an or der ,
under section 250, section 254, section 263 or section 264, setting aside or cancelling an
assessment, may be made at any time befor e the expir y of two year s fr om the end of the
financial year in which the or der under section 146 cancelling the assessment is passed by
the Assessing Officer or the or der under section 250 or section 254 is r eceived by the Chief
Commissioner or Commissioner or , as the case may be, the or der under section 263 or
section 264 is passed by the Chief Commissioner or Commissioner .
the pr ovisions of this sub-section shall, notwithstanding anything contained in
the second pr oviso, have effect as if for the wor ds one year , the wor ds twenty-
one months had been substituted.]
(3) The pr ovisions of sub-sections (1)
95
[, (1A), (1B)] and (2) shall not apply to the
following classes of assessments, r eassessments and r ecomputations which may,
96
[subject to the pr ovisions of sub-section (2A),] be completed at any time
(i)
97
[***]
(ii) wher e the assessment, r eassessment or r ecomputation is made on the
assessee or any per son
98
in consequence of or to give effect to
98
any
finding or dir ection
99
contained in an or der under section 250, 254,
260, 262, 263, or 264
1
[or in an or der of any cour t in a pr oceeding
other wise than by way of appeal or r efer ence under this Act] ;
(iii) wher e, in the case of a fir m, an assessment is made on a par tner of the
fir m in consequence of an assessment made on the fir m under section
147.
1a
[(4) Notwith stan din g an yth in g con tain ed in th e foregoin g provision s of th is
section , sub-section (2) of section 153A an d sub-section (1) of section 153B, th e
order of assessm en t or reassessm en t, relatin g to an y assessm en t year, wh ich
stan ds revived un der sub-section (2) of section 153A, sh all be m ade with in on e
year from th e en d of th e m on th of such revival or with in th e period specified in
th is section or sub-section (1) of section 153B, wh ich ever is later.]
2
[Explan ation 1.In computing the per iod of limitation for the pur poses of this
section
(i) the time taken in r eopening the whole or any par t of the pr oceeding
or in giving an oppor tunity to the assessee to be r e-hear d under the
pr oviso to section 129, or
(ii) the per iod dur ing which the assessment pr oceeding
3
is stayed by an
or der or injunction of any cour t, or
4
[(iia) the per iod commencing fr om the date on which the Assessing Officer
intimates the Centr al Gover nment or the pr escr ibed author ity, the
97. Omitted by the Finance Act, 2001, w.e.f. 1-6-2001. Pr ior to its omission, clause (i) r ead as
under :
(i) wher e a fr esh assessment is made under section 146;
98. For the meaning of expr essions any per son and in consequence of or to give effect to,
99. For the meaning of the ter m finding or dir ection, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
2. Substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-1-1976 as r egar ds
clauses (i), (ii) and (iv) and w.e.f. 1-4-1976 as r egar ds clauses (iii) and (v).
3. For the meaning of the expr ession assessment pr oceeding, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
S. 153 I.T. ACT, 1961 1.676
1-4-1988.
6. Substituted for the date on which the assessee fur nishes by the Finance (No. 2) Act, 1996,
w.e.f. 1-4-1997.
1-4-1988.
contr avention of the pr ovisions of clause (21) or clause (22B) or clause
(23A) or clause (23B) or sub-clause (iv) or sub-clause (v) or sub-clause
(vi) or sub-clause (via) of clause (23C) of section 10, under clause (i)
of the pr oviso to sub-section (3) of section 143 and ending with the
date on which the copy of the or der withdr awing the appr oval or
r escinding the notification, as the case may be, under those clauses is
r eceived by the Assessing Officer ;]
(iii) the per iod commencing fr om the date on which the
5
[Assessing]
Officer dir ects the assessee to get his accounts audited under sub-
section (2A) of section 142 and ending with
6
[the last date on which the
assessee is r equir ed to fur nish] a r epor t of such audit under that sub-
section, or
(iv)
7
[* * *]
8
[(iva) the per iod (not exceeding sixty days) commencing fr om the date on
which the
9
[Assessing] Officer r eceived the declar ation under sub-
section (1) of section 158A and ending with the date on which the
or der under sub-section (3) of that section is made by him, or ]
(v) in a case wher e an application made befor e the Income-tax Settle-
ment Commission under section 245C is r ejected by it or is not
allowed to be pr oceeded with by it, the per iod commencing fr om the
date on which such application is made and ending with the date on
which the or der under sub-section (1) of section 245D is r eceived by
the Commissioner under sub-section (2) of that section,
10
[or ]
10
[(vi) the per iod commencing fr om the date on which an application is
made befor e the Author ity for Advance Rulings under sub-section (1)
of section 245Q and ending with the date on which the or der r ejecting
the application is r eceived by the Commissioner under sub-section (3)
of section 245R, or
(vii) the per iod commencing fr om the date on which an application is
of section 245Q and ending with the date on which the advance r uling
pr onounced by it is r eceived by the Commissioner under sub-section
(7) of section 245R,]
shall be excluded :
11
[Provided that wher e immediately after the exclusion of the afor esaid time or
per iod, the per iod of limitation r efer r ed to in sub-sections (1),
12
[(1A), (1B),]
12a
[(2),
(2A) an d (4)] available to the Assessing Officer for making an or der of assessment,
r eassessment or r ecomputation, as the case may be, is less than sixty days, such
r emaining per iod shall be extended to sixty days and the afor esaid per iod of
limitation shall be deemed to be extended accor dingly:]
12b
[Provided further th at wh ere a proceedin g before th e Settlem en t Com m ission
abates un der section 245HA, th e period of lim itation available un der th is section
to th e Assessin g Of f icer f or m ak in g an order of assessm en t, reassessm en t or re-
computation , as th e case may be, sh all, after th e exclusion of th e period un der sub-
section (4) of section 245HA, be n ot less th an on e year; an d wh ere such period of
lim itation is less th an on e year, it sh all be deem ed to h ave been exten ded to on e
year; an d for th e purposes of determ in in g th e period of lim itation un der section s
149, 153B, 154, 155, 158BE an d 231 an d for th e purposes of paym en t of in terest
un der section 243 or section 244 or, as th e case m ay be, section 244A, th is proviso
sh all also apply accordin gly.]
Explan ation 2.Wher e, by an or der
13
[r efer r ed to in clause (ii) of sub-section (3)],
any income is excluded fr om the total income of the assessee for an assessment
year , then, an assessment of such income for another assessment year shall, for
the pur poses of section 150 and this section, be deemed to be one made in
consequence of or to give effect to any finding or dir ection contained in the said
or der .
Explan ation 3.Wher e, by an or der
13
[r efer r ed to in clause (ii) of sub-section (3)],
any income is excluded fr om the total income of one per son and held to be the
income of another per son
14
, then, an assessment of such income on such other
per son shall, for the pur poses of section 150 and this section, be deemed to be one
made in consequence of or to give effect to any finding or dir ection contained
in the said or der , pr ovided such other per son was given an oppor tunity of being
hear d befor e the said or der was passed.
15
[Assessment in case of search or requisition.
153A.
15a
[(1)] Notwithstanding anything contained in section 139, section 147,
section 148, section 149, section 151 and section 153, in the case of a per son
wher e a sear ch is initiated under section 132 or books of account, other
documents or any assets ar e r equisitioned under section 132A after the 31st day
of May, 2003, the Assessing Officer shall
(a) issue notice to such per son r equir ing him to fur nish within such
per iod, as may be specified in the notice, the r etur n of income in
r espect of each assessment year falling within six assessment year s
12a. Substituted for (2) and (2A) by the Finance Act, 2008, w.r .e.f. 1-6-2003.
12b. Inser ted by the Finance Act, 2008, w.r .e.f. 1-6-2007.
13. Substituted for under section 250, 254, 260, 262, 263 or 264 by the Dir ect Taxes
14. For the meaning of the expr ession another per son, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
15. Sections 153A, 153B and 153C inser ted by the Finance Act, 2003, w.e.f. 1-6-2003.
15a. Renumber ed as sub-section (1) by the Finance Act, 2008, w.r .e.f. 1-6-2003.
r efer r ed to in clause (b), in the pr escr ibed for m and ver ified in the
pr escr ibed manner and setting for th such other par ticular s as may be
pr escr ibed and the pr ovisions of this Act shall, so far as may be, apply
accor dingly as if such r etur n wer e a r etur n r equir ed to be fur nished
under section 139;
(b) assess or r eassess the total income of six assessment year s immedi-
ately pr eceding the assessment year r elevant to the pr evious year in
which such sear ch is conducted or r equisition is made :
Provided that the Assessing Officer shall assess or r eassess the total income in
r espect of each assessment year falling within such six assessment year s:
Provided further that assessment or r eassessment, if any, r elating to any
assessment year falling within the per iod of six assessment year s r efer r ed to in
this
15b
[sub-section ] pending on the date of initiation of the sear ch under section
132 or making of r equisition under section 132A, as the case may be, shall abate.
15c
[(2) If an y proceedin g in itiated or an y order of assessmen t or reassessmen t made
un der sub-section (1) h as been an n ulled in appeal or an y oth er legal proceedin g,
th en , n otwith stan din g an yth in g con tain ed in sub-section (1) or section 153, th e
assessm en t or reassessm en t relatin g to an y assessm en t year wh ich h as abated
un der th e secon d proviso to sub-section (1), sh all stan d revived with effect from
th e date of receipt of th e order of such an n ulm en t by th e Com m ission er:
Provided th at such revival sh all cease to h ave effect, if such order of an n ulm en t
is set aside.]
Explan ation .For the r emoval of doubts, it is her eby declar ed that,
(i) save as other wise pr ovided in this section, section 153B and section
153C, all other pr ovisions of this Act shall apply to the assessment
made under this section;
(ii) in an assessment or r eassessment made in r espect of an assessment
year under this section, the tax shall be char geable at the r ate or r ates
as applicable to such assessment year .
Time-limit for completion of assessment under section 153A.
153B. (1) Notwithstanding anything contained in section 153, the Assessing
Officer shall make an or der of assessment or r eassessment,
(a) in r espect of each assessment year falling within six assessment year s
r efer r ed to in clause (b) of
15c
[sub-section (1) of] section 153A, within
a per iod of two year s fr om the end of the financial year in which the
last of the author isations for sear ch under section 132 or for r equisi-
tion under section 132A was executed;
(b) in r espect of the assessment year r elevant to the pr evious year in
which sear ch is conducted under section 132 or r equisition is made
under section 132A, within a per iod of two year s fr om the end of the
financial year in which the last of the author isations for sear ch under
section 132 or for r equisition under section 132A was executed :
S. 153B I.T. ACT, 1961 1.678
15b. Substituted for section by the Finance Act, 2008, w.r .e.f. 1-6-2003.
15c. Inser ted, ibid.
16
[Provided that in case of other per son r efer r ed to in section 153C, the per iod of
limitation for making the assessment or r eassessment shall be the per iod as
r efer r ed to in clause (a) or clause (b) of this sub-section or one year fr om the end
of the financial year in which books of account or documents or assets seized or
r equisitioned ar e handed over under section 153C to the Assessing Officer
having jur isdiction over such other per son, whichever is later :]
17
[Provided further that in the case wher e the last of the author isations for sear ch
under section 132 or for r equisition under section 132A was executed dur ing the
financial year commencing on the 1st day of Apr il, 2004 or any subsequent
financial year ,
(i) the pr ovisions of clause (a) or clause (b) of this sub-section shall have
effect as if for the wor ds two year s the wor ds twenty-one months
had been substituted;
(ii) the per iod of limitation for making the assessment or r eassessment in
case of other per son r efer r ed to in section 153C, shall be the per iod of
twenty-one months fr om the end of the financial year in which the last
of the author isations for sear ch under section 132 or for r equisition
under section 132A was executed or nine months fr om the end of the
financial year in which books of account or documents or assets
seized or r equisitioned ar e handed over under section 153C to the
Assessing Officer having jur isdiction over such other per son, which-
ever is later :]
18
[Provided also that in case wher e the last of the author isations for sear ch
under section 132 or for r equisition under section 132A was executed dur ing the
financial year and dur ing the cour se of the pr oceedings for the assessment or
r eassessment of total income, a r efer ence under sub-section (1) of section
92CA
the pr ovisions of clause (a) or clause (b) of this sub-section shall, notwithstanding
anything contained in clause (i) of the second pr oviso, have effect as if for the
wor ds two year s, the wor ds thir ty-thr ee months had been substituted:
Provided also that in case wher e the last of the author isations for sear ch under
section 132 or for r equisition under section 132A was executed dur ing the
financial year and dur ing the cour se of the pr oceedings for the assessment or
r eassessment of total income in case of other per son r efer r ed to in section 153C,
a r efer ence under sub-section (1) of section 92CA
1.679 CH. XIV - PROCEDURE FOR ASSESSMENT S. 153B
the per iod of limitation for making the assessment or r eassessment in case of
such other per son shall, notwithstanding anything contained in clause (ii) of the
second pr oviso, be the per iod of thir ty-thr ee months fr om the end of the financial
year in which the last of the author isations for sear ch under section 132 or for
r equisition under section 132A was executed or twenty-one months fr om the end
of the financial year in which books of account or documents or assets seized or
r equisitioned ar e handed over under section 153C to the Assessing Officer
having jur isdiction over such other per son, whichever is later .]
Explan ation .In computing the per iod of limitation for the pur poses of this
section,
(i) the per iod dur ing which the assessment pr oceeding is stayed by an
or der or injunction of any cour t; or
(ii) the per iod commencing fr om the day on which the Assessing Officer
dir ects the assessee to get his accounts audited under sub-section (2A)
of section 142 and ending on the day on which the assessee is r equir ed
to fur nish a r epor t of such audit under that sub-section; or
(iii) the time taken in r eopening the whole or any par t of the pr oceeding
or in giving an oppor tunity to the assessee of being r e-hear d under the
pr oviso to section 129; or
(iv) in a case wher e an application made befor e the Settlement Commis-
sion under section 245C is r ejected by it or is not allowed to be
pr oceeded with by it, the per iod commencing fr om the date on which
such application is made and ending with the date on which the or der
under sub-section (1) of section 245D is r eceived by the Commis-
sioner under sub-section (2) of that section;
19
[or ]
19
[(v) the per iod commencing fr om the date on which an application is
of section 245Q and ending with the date on which the or der r ejecting
the application is r eceived by the Commissioner under sub-section (3)
of section 245R; or
(vi) the per iod commencing fr om the date on which an application is
of section 245Q and ending with the date on which the advance r uling
pr onounced by it is r eceived by the Commissioner under sub-section
(7) of section 245R; or ]
19a
[(vii) th e period com m en cin g from th e date of an n ulm en t of a proceedin g
or order of assessm en t or reassessm en t referred to in sub-section (2)
of section 153A till th e date of th e receipt of th e order settin g aside th e
order of such an n ulm en t, by th e Com m ission er,]
shall be excluded :
S. 153B I.T. ACT, 1961 1.680
1.681 CH. XIV - PROCEDURE FOR ASSESSMENT S. 153C
Provided that wher e immediately after the exclusion of the afor esaid per iod, the
per iod of limitation r efer r ed to in clause (a) or clause (b) of this
19b
[sub-section ]
available to the Assessing Officer for making an or der of assessment or r eassess-
ment, as the case may be, is less than sixty days, such r emaining per iod shall be
extended to sixty days and the afor esaid per iod of limitation shall be deemed to
be extended accor dingly.
(2) The author isation r efer r ed to in clause (a) and clause (b) of sub-section (1)
shall be deemed to have been executed,
(a) in the case of sear ch, on the conclusion of sear ch as r ecor ded in the
last panchnama dr awn in r elation to any per son in whose case the
war r ant of author isation has been issued;
(b) in the case of r equisition under section 132A, on the actual r eceipt of
the books of account or other documents or assets by the Author ised
Officer .
Assessment of income of any other person.
153C.
20
[(1) Notwithstanding anything contained in section 139, section 147,
section 148, section 149, section 151 and section 153, wher e the Assessing
Officer is satisfied that any money, bullion, jeweller y or other valuable ar ticle or
thing or books of account or documents seized or r equisitioned belongs or
belong to a per son other than the per son r efer r ed to in section 153A, then the
books of account or documents or assets seized or r equisitioned shall be handed
over to the Assessing Officer having jur isdiction over such other per son and that
Assessing Officer shall pr oceed against each such other per son and issue such
other per son notice and assess or r eassess income of such other per son in
accor dance with the pr ovisions of section 153A :]
20
[Provided that in case of such other per son, the r efer ence to the date of
initiation of the sear ch under section 132 or making of r equisition under section
132A in the second pr oviso to
20a
[sub-section (1) of] section 153A shall be
constr ued as r efer ence to the date of r eceiving the books of account or
documents or assets seized or r equisitioned by the Assessing Officer having
jur isdiction over such other per son.
(2) Wher e books of account or documents or assets seized or r equisitioned as
r efer r ed to in sub-section (1) has or have been r eceived by the Assessing Officer
having jur isdiction over such other per son after the due date for fur nishing the
r etur n of income for the assessment year r elevant to the pr evious year in which
sear ch is conducted under section 132 or r equisition is made under section 132A
and in r espect of such assessment year
(a) no r etur n of income has been fur nished by such other per son and no
notice under sub-section (1) of section 142 has been issued to him, or
(b) a r etur n of income has been fur nished by such other per son but no
notice under sub-section (2) of section 143 has been ser ved and
19b. Substituted for section by the Finance Act, 2008, w.r .e.f. 1-6-2003.
S. 154 I.T. ACT, 1961 1.682
limitation of ser ving the notice under sub-section (2) of section 143
has expir ed, or
(c) assessment or r eassessment, if any, has been made,
befor e the date of r eceiving the books of account or documents or assets seized
or r equisitioned by the Assessing Officer having jur isdiction over such other
per son, such Assessing Officer shall issue the notice and assess or r eassess total
income of such other per son of such assessment year in the manner pr ovided in
section 153A.]
21
[Prior approval necessary for assessment in cases of search or requisition.
153D. No or der of assessment or r eassessment shall be passed by an Assessing
Officer below the r ank of Joint Commissioner in r espect of each assess-
ment year r efer r ed to in clause (b) of
21a
[sub-section (1) of] section 153A or the
assessment year r efer r ed to in clause (b) of sub-section (1) of section 153B, except
with the pr ior appr oval of the Joint Commissioner .]
Rectification of mistake.
22
154.
23
[(1) With a view to r ectifying any mistake appar ent fr om the r ecor d
24
an
income-tax author ity r efer r ed to in section 116 may,
(a) amend any or der passed by it under the pr ovisions of this Act ;
25
[(b) amend any intimation or deemed intimation under sub-section (1) of
section 143.]]
26
[(1A) Wher e any matter
27
has been consider ed and decided in any pr oceeding
by way of appeal or r evision r elating to an or der r efer r ed to in sub-section (1), the
author ity passing such or der may, notwithstanding anything contained in any
No. 73, dated 7-1-1972, Cir cular No. 87, dated 19-6-1972 in super session of Cir cular No. 81,
dated 26-3-1972, Cir cular No. 581, dated 28-9-1990, Cir cular No. 669, dated 25-10-1993 and
tax Act.
substitution, sub-section (1) was amended by the Dir ect Taxes (Amendment) Act, 1964,
w.e.f. 6-10-1964, the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 and the
Finance (No. 2) Act, 1977, w.e.f. 10-7-1978 and substituted by the Taxation Laws (Amend-
ment) Act, 1984, w.e.f. 1-10-1984.
24. For the meaning of the ter ms/ expr essions mistake, r ecor d, mistakes appar ent and
mistake appar ent fr om the r ecor d, see Taxmanns Dir ect Taxes Manual, Vol. 3.
25. Substituted by the Finance Act, 1999, w.e.f. 1-6-1999. Pr ior to its substitution, clause (b),
as substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, r ead as
under :
(b) amend any intimation sent by it under sub-section (1) of section 143, or enhance or
r educe the amount of r efund gr anted by it under that sub-section.
27. For the meaning of the ter m any matter , see Taxmanns Dir ect Taxes Manual, Vol. 3.
law for the time being in for ce, amend the or der under that sub-section in r elation
to any matter other than the matter which has been so consider ed and decided.]
(2) Subject to the other pr ovisions of this section, the author ity concer ned
(a) may make an amendment under sub-section (1) of its own motion,
and
(b) shall make such amendment for r ect ifying any such mist ake
which has been br ought to its notice by the assessee, and wher e the
author ity concer ned is the
28
[***]
29
[Commissioner (Appeals)], by the
30
[Assessing] Officer also.
31
[* * *]
(3) An amendment, which has the effect of enhancing an assessment or r educing
a r efund or other wise incr easing the liability of the assessee, shall not be made
under this section unless the author ity concer ned has given notice to the assessee
of its intention so to do and has allowed the assessee a r easonable oppor tunity
of being hear d.
(4) Wher e an amendment is made under this section, an or der shall be passed in
wr iting by the income-tax author ity concer ned.
(5) Subject to the pr ovisions of section 241, wher e any such amendment has the
effect of r educing the assessment, the
32
[Assessing] Officer shall make any
r efund which may be due to such assessee.
(6) Wher e any such amendment has the effect of enhancing the assessment or
r educing a r efund alr eady made, the
32
[Assessing] Officer shall ser ve on the
assessee a notice of demand in the pr escr ibed for m specifying the sum payable
33
,
and such notice of demand shall be deemed to be issued under section 156 and
the pr ovisions of this Act shall apply accor dingly.
(7) Save as other wise pr ovided in section 155 or sub-section (4) of section 186 no
amendment under this section shall be made after the expir y of four year s
34
[fr om the end of the financial year in which the or der
35
sought to be amended
was passed.]
1-4-1988.
31. Pr oviso omitted by the Finance Act, 1994, w.e.f. 1-6-1994. Pr ior to its omission, pr oviso was
1-4-1988.
33. For the meaning of expr ession the sum payable, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
34. Substituted for fr om the date of the or der sought to be amended by the Taxation Laws
35. For t he meaning of t he t er m/ expr ession or der and complet ed assessment , see
36
[(8) Without pr ejudice to the pr ovisions of sub-section (7), wher e an application
for amendment under this section is made by the assessee on or after the 1st day
of June, 2001 to an income-tax author ity r efer r ed to in sub-section (1), the
author ity shall pass an or der , within a per iod of six months fr om the end of the
month in which the application is r eceived by it,
(a) making the amendment; or
(b) r efusing to allow the claim.]
Other amendments.
155. (1)
37
[Wher e, in r espect of any completed assessment
38
of a par tner in a
fir m for the assessment year commencing on the 1st day of Apr il, 1992, or
any ear lier assessment year ,] it is found
(a) on the assessment or r eassessment of the fir m, or
(b) on any r eduction or enhancement made in the income of the fir m
under this section, section 154, section 250, section 254, section 260,
section 262, section 263 or section 264,
39
[or ]
39
[(c) on any or der passed under sub-section (4) of section 245D on the
application made by the fir m,]
that the shar e of the par tner in the income of the fir m has not been included in
the assessment of the par tner or , if included, is not cor r ect, the
40
[Assessing]
Officer may amend the or der of assessment of the par tner with a view to the
inclusion of the shar e in the assessment or the cor r ection ther eof, as the case may
be; and the pr ovisions of section 154 shall, so far as may be, apply ther eto, the
per iod of four year s specified in sub-section (7) of that section being r eckoned
41
[fr om the end of the financial year in which the final or der was passed] in the
case of the fir m.
42
[(1A) Wher e in r espect of any completed assessment of a fir m it is found
(a) on the assessment or r eassessment of the fir m, or
(b) on any r eduction or enhancement made in the income of the fir m
under this section, section 154, section 250, section 254, section 260,
section 262, section 263 or section 264, or
(c) on any or der passed under sub-section (4) of section 245D on the
application made by the fir m,
S. 155 I.T. ACT, 1961 1.684
37. Substituted for Wher e in r espect of any completed assessment of a par tner in a fir m by
the Finance Act, 1992, w.e.f. 1-4-1993. Ear lier , the expr ession was amended by the Dir ect
Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989 and the Dir ect Tax Laws (Amendment)
38. For t he meaning of t he t er ms/ expr essions or der and complet ed assessment , see
1-4-1988.
41. Substituted for fr om the date of the final or der passed by the Taxation Laws (Amend-
ment) Act, 1984, w.e.f. 1-10-1984.
that any r emuner ation to any par tner is not deductible under clause (b) of section
40, the Assessing Officer may amend the or der of assessment of the par tner with
a view to adjusting the income of the par tner to the extent of the amount not so
deductible ; and the pr ovisions of section 154 shall, so far as may be, apply ther eto,
the per iod of four year s specified in sub-section (7) of that section being r eckoned
fr om the end of the financial year in which the final or der was passed in the case
of the fir m.]
(2) Wher e in r espect of any completed assessment of a member of an association
of per sons or of a body of individuals it is found
(a) on the assessment or r eassessment of the association or body, or
(b) on any r eduction or enhancement made in the income of the asso-
ciation or body under this section, section 154, section 250, section
254, section 260, section 262, section 263 or section 264,
43
[or ]
43
[(c) on any or der passed under sub-section (4) of section 245D on the
application made by the association or body,]
that the shar e of the member in the income of the association or body, as the case
may be, has not been included in the assessment of the member or , if included,
is not cor r ect, the
44
[Assessing] Officer may amend the or der of assessment of the
member with a view to the inclusion of the shar e in the assessment or the
cor r ection ther eof, as the case may be ; and the pr ovisions of section 154 shall,
so far as may be, apply ther eto, the per iod of four year s specified in sub-section
(7) of that section being r eckoned
45
[fr om the end of the financial year in which
the final or der was passed] in the case of the association or body, as the case may
be.
(3)
46
[* * *]
(4) Wher e as a r esult of pr oceedings initiated under section 147, a loss or
depr eciation has been r ecomputed and in consequence ther eof it is necessar y to
r ecompute the total income of the assessee for the succeeding year or year s to
which the loss or depr eciation allowance has been car r ied for war d and set off
under the pr ovisions of sub-section (1) of section 72, or sub-section (2) of section
73, or sub-section (1)
47
[or sub-section (3)] of section 74,
48
[or sub-section (3) of
section 74A,] the
49
[Assessing] Officer may pr oceed to r ecompute the total
income in r espect of such year or year s and make the necessar y amendment ;
1-4-1988.
ment) Act, 1984, w.e.f. 1-10-1984.
1-4-1988.
of four year s specified in sub-section (7) of that section being r eckoned
50
[fr om
the end of the financial year in which the or der was passed] under section 147.
51
[(4A) Wher e an allowance by way of investment allowance has been made
wholly or par tly to an assessee
52
in r espect of a ship or an air cr aft or any
machiner y or plant in any assessment year under section 32A and subse-
quently
(a) at any time befor e the expir y of eight year s fr om the end of the
pr evious year in which the ship or air cr aft was acquir ed or the
machiner y or plant was installed, the ship, air cr aft, machiner y or
plant is sold or other wise tr ansfer r ed by the assessee to any per son
other than the Gover nment, a local author ity, a cor por ation estab-
lished by a Centr al, State or Pr ovincial Act or a
53
Gover nment
company as defined in section 617 of the Companies Act, 1956 (1 of
1956), or in connection with any amalgamation or succession r e-
fer r ed to in sub-section (6) or sub-section (7) of section 32A ; or
(b) at any time befor e the expir y of ten year s fr om the end of the pr evious
year in which the ship or air cr aft was acquir ed or the machiner y or
plant was installed, the assessee does not utilise the amount cr edited
to the r eser ve account under sub-section (4) of section 32A for the
pur poses of acquir ing a new ship or a new air cr aft or new machiner y
or plant (other than machiner y or plant of the natur e r efer r ed to in
clauses (a), (b) and (d) of the
54
[second] pr oviso to sub-section (1) of
section 32A) for the pur poses of the business of the under taking ; or
(c) at any time befor e the expir y of ten year s r efer r ed to in clause (b) the
assessee utilises the amount cr edited to the r eser ve account under
sub-section (4) of section 32A
(i) for distr ibution by way of dividends or pr ofits ; or
(ii) for r emittance outside India as pr ofits or for the cr eation of any
asset outside India ; or
(iii) for any other pur pose which is not a pur pose of the business of the
under taking,
the investment allowance or iginally allowed shall be deemed to have been
wr ongly allowed, and the
55
[Assessing] Officer may, notwithstanding anything
contained in this Act, r ecompute the total income of the assessee for the r elevant
pr evious year and make the necessar y amendment; and the pr ovisions of
section 154 shall, so far as may be, apply ther eto, the per iod of four year s specified
in sub-section (7) of that section being r eckoned,
50. Substituted for fr om the date of the or der passed by the Taxation Laws (Amendment)
Act, 1984, w.e.f. 1-10-1984.
52. For the meaning of expr ession assessee, see Taxmanns Dir ect Taxes Manual, Vol. 3.
1-4-1988.
S. 155 I.T. ACT, 1961 1.686
(i) in a case r efer r ed to in clause (a), fr om the end of the pr evious year
in which the sale or other tr ansfer took place ;
(ii) in a case r efer r ed to in clause (b), fr om the end of the ten year s
r efer r ed to in that clause ;
(iii) in a case r efer r ed to in clause (c), fr om the end of the pr evious year
in which the amount was utilised.
Explan ation .For the pur poses of clause (b), new ship or new air cr aft or new
machiner y or plant shall have the same meanings as in the
56
[Explan ation below
sub-section (2) of section 32A].]
(5) Wher e an allowance by way of development r ebate has been made wholly or
par tly to an assessee in r espect of a ship, machiner y or plant installed after the
31st day of December , 1957, in any assessment year under section 33 or under
the cor r esponding pr ovisions of the Indian Income-tax Act, 1922 (11 of 1922), and
subsequently
(i) at any time befor e the expir y of eight year s fr om the end of the
pr evious year in which the ship was acquir ed or the machiner y or
plant was installed, the ship, machiner y or plant is sold or other wise
tr ansfer r ed
57
by the assessee to any per son other than the Gover n-
ment, a local author ity, a cor por ation established by a Centr al, State
or Pr ovincial Act or a
58
Gover nment company as defined in section
617 of the Companies Act, 1956 (1 of 1956), or in connection with any
amalgamation or succession r efer r ed to in sub-section (3) or sub-
section (4) of section 33 ; or
(ii) at any time befor e the expir y of the eight year s r efer r ed to in sub-
section (3) of section 34, the assessee utilises the amount cr edited to
the r eser ve account under clause (a) of that sub-section
(a) for distr ibution by way of dividends or pr ofits ; or
(c) for any other pur pose which is not a pur pose of the business of the
under taking,
the development r ebate or iginally allowed shall be deemed to have been
59
pr evious year and make the necessar y amendment; and the pr ovisions of
in sub-section (7) of that section being r eckoned fr om the end of the pr evious
year in which the sale or tr ansfer took place or the money was so utilised.
56. Substituted for Explan ation to clause (vi) of sub-section (1) of section 32 by the Taxation
Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f. 1-4-1988.
57. For the meaning of the expr ession other wise tr ansfer r ed, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
1-4-1988.
60
[(5A) Wher e an allowance by way of development allowance has been made
wholly or par tly to an assessee in r espect of the cost of planting in any ar ea in any
assessment year under section 33A and subsequently
(i) at any time befor e the expir y of eight year s fr om the end of the
pr evious year in which such allowance was made, the land is sold or
other wise tr ansfer r ed by the assessee to any per son other than the
Gover nment, a local author ity, a cor por ation established by a Centr al,
State or Pr ovincial Act or a Gover nment company
61
as defined in
section 617 of the Companies Act, 1956 (1 of 1956), or in connection
with any amalgamation or succession r efer r ed to in sub-section (5) or
sub-section (6) of section 33A ; or
(ii) at any time befor e the expir y of the eight year s r efer r ed to in sub-
section (3) of section 33A, the assessee utilises the amount cr edited to
the r eser ve account under clause (ii) of that sub-section
(a) for distr ibution by way of dividends or pr ofits ; or
(c) for any other pur pose which is not a pur pose of the business of the
under taking ;
the development allowance or iginally allowed shall be deemed to have been
62
pr evious year and make the necessar y amendment ; and the pr ovisions of section
154 shall, so far as may be, apply ther eto, the per iod of four year s specified in sub-
section (7) of that section being r eckoned fr om the end of the pr evious year in
which the sale or tr ansfer took place or the money was so utilised.]
63
[Explan ation .For the pur poses of this sub-section, wher e an assessee having
any leasehold or other r ight of occupancy in any land tr ansfer s such r ight, he
shall be deemed to have sold or other wise tr ansfer r ed such land.]
64
[(5B) Wher e any deduct ion in r espect of any expendit ur e on scient ific
r esear ch has been made in any assessment year under sub-section (2B) of
section 35 and the assessee fails to fur nish a cer tificate of completion of the
pr ogr amme obtained fr om the pr escr ibed author ity within one year of the
per iod allowed for its completion by such author ity, the deduction or iginally
made in excess of the expenditur e actually incur r ed shall be deemed to have
S. 155 I.T. ACT, 1961 1.688
1-4-1988.
was omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1992. Or iginal
sub-section (5) was inser ted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981.
been wr ongly made, and t he
65
[Assessing] Officer may, not wit hst anding
anything contained in this Act, r ecompute the total income of the assessee for
the r elevant pr evious year and make the necessar y amendment; and the
pr ovisions of section 154 shall, so far as may be, apply ther eto, the per iod of four
year s specified in sub-section (7) of that section being r eckoned fr om the end of
the pr evious year in which the per iod allowed for the completion of the
pr ogr amme by the pr escr ibed author ity expir ed.]
(6)
66
(7) Wher e as a r esult of any pr oceeding under this Act, in the assessment for any
year of a company in whose case an or der under section 104 has been made for
that year , it is necessar y to r ecompute the distr ibutable income of that company,
the
67
[Assessing] Officer may pr oceed to r ecompute the distr ibutable income and
deter mine the
68
[tax] payable on the basis of such r ecomputation and make the
necessar y amendment ; and the pr ovisions of section 154 shall, so far as may be,
apply ther eto, the per iod of four year s specified in sub-section (7) of that section
being r eckoned
69
[fr om the end of the financial year in which the final or der was
passed] in the case of the company in r espect of that pr oceeding.
(7A)
70
71
[(7B) Wher e in the assessment for any year , the capital gain ar ising fr om the
tr ansfer of a capital asset is not char ged under section 45 by vir tue of the
pr ovisions of clause (iv) or , as the case may be, clause (v) of section 47, but is
deemed under section 47A to be income char geable under the head Capital
gains of the pr evious year in which the tr ansfer took place by r eason of
(i) such capital asset being conver ted by the tr ansfer ee company into, or
being tr eated by it, as stock-in-tr ade of its business ; or
(ii) the par ent company or its nominees or , as the case may be, the holding
company ceasing to hold the whole of the shar e capital of the
subsidiar y company,
at any time befor e the expir y of the per iod of eight year s fr om the date of such
tr ansfer , the
72
[Assessing] Officer may, notwithstanding anything contained in
this Act, r ecompute the total income of the tr ansfer or company for the r elevant
pr evious year and make the necessar y amendment ; and the pr ovisions of section
154 shall, so far as may be, apply ther eto, the per iod of four year s specified in sub-
1-4-1988.
66. Pr ior to omission, sub-section (6) was amended by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1988.
68. Substituted for super -tax by the Finance Act, 1965, w.e.f. 1-4-1965.
ment) Act, 1984, w.e.f. 1-10-1984.
70. Pr ior to omission, sub-section (7A) was inser ted by the Finance Act, 1978, w.r .e.f. 1-4-1974
and amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
1-4-1988.
which the capital asset was so conver ted or tr eated or in which the par ent
company or its nominees or , as the case may be, the holding company ceased to
hold the whole of the shar e capital of the subsidiar y company.]
(8)
73
(8A)
74
(9)
75
(9A)
76
(10)
77
78
[(10A) Wher e in the assessment for any year , a capital gain ar ising fr om the
tr ansfer of a
79
[long-ter m capital asset], is char ged to tax and within a per iod of
six months after the date of such tr ansfer , the assessee has made any investment
or deposit in any specified asset within the meaning of Explan ation 1 to sub-
section (1) of section 54E, the
80
[Assessing] Officer shall amend the or der of
assessment so as to exclude the amount of the capital gain not char geable to tax
under the pr ovisions of
81
[sub-section (1) of] section 54E ; and the pr ovisions of
in sub-section (7) of that section being
82
[r eckoned fr om the end of the financial
year in which the assessment was made.]
(10B)
83
(10C)
84
S. 155 I.T. ACT, 1961 1.690
73. Pr ior to omission, sub-section (8) was inser ted by the Finance Act, 1978, w.r .e.f. 1-4-1974
and amended by the Finance Act, 1982, w.e.f. 1-4-1983, Finance Act, 1984, w.e.f. 1-10-1984,
Finance Act, 1986, w.e.f. 1-4-1987 and the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1988.
and amended by the Finance Act, 1982, w.e.f. 1-4-1983, Finance Act, 1986, w.e.f. 1-4-1987
and the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
75. Pr ior to omission, sub-section (9) was inser ted by the Finance Act, 1973, w.e.f. 1-4-1974 and
amended by the Finance Act, 1978, w.r .e.f. 1-4-1974, Taxation Laws (Amendment) Act,
1984, w.e.f. 1-10-1984 and Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
77. Pr ior to omission, sub-section (10) was inser ted by the Finance Act, 1973, w.e.f. 1-4-1974
and amended by the Finance Act, 1978, w.r .e.f. 1-4-1974, Taxation Laws (Amendment) Act,
1984, w.e.f. 1-10-1984 and Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
79. Substituted for capital asset, not being a shor t-ter m capital asset by the Finance Act,
1987, w.e.f. 1-4-1988.
1-4-1988.
82. Substituted for r eckoned fr om the date of the assessment by the Taxation Laws
83. Pr ior to omission, sub-section (10B) was inser ted by the Finance Act, 1978, w.e.f. 1-4-1978
84. Pr ior to omission, sub-section (10C) was inser ted by the Finance Act, 1982, w.e.f. 1-4-1983
and amended by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984 and the
85
[(11) Wher e in the assessment for any year , a capital gain ar ising fr om the
tr ansfer of any or iginal asset as is r efer r ed to in section 54H is char ged to tax and
within the per iod extended under that section the assessee acquir es the new asset
r efer r ed to in that section or , as the case may be, deposits or invests the amount
of such capital gain within the per iod so extended, the Assessing Officer shall
amend the or der of assessment so as to exclude the amount of the capital gain
not char geable to tax under any of the sections r efer r ed to in section 54H;
of four year s specified in sub-section (7) of section 154 being r eckoned fr om the
end of the pr evious year in which the compensation was r eceived by the
assessee.]
86
[(11A) Wher e in the assessment for any year , the deduction under section 10A
or section 10B or section 10BA has not been allowed on the gr ound that such
income has not been r eceived in conver tible for eign exchange in India, or having
been r eceived in conver tible for eign exchange outside India, or having been
conver ted into conver tible for eign exchange outside India, has not been br ought
into India, by or on behalf of the assessee with the appr oval of the Reser ve Bank
of India or such other author ity as is author ised under any law for the time being
in for ce for r egulating payments and dealings in for eign exchange and subse-
quently such income or par t ther eof has been or is r eceived in, or br ought into,
India in the manner afor esaid, the Assessing Officer shall amend the or der of
assessment so as to allow deduction under section 10A or section 10B or section
10BA, as the case may be, in r espect of such income or par t ther eof as is so
r eceived in, or br ought into, India, and the pr ovisions of section 154 shall, so far
as may be, apply ther eto, and the per iod of four year s shall be r eckoned fr om the
end of the pr evious year in which such income is so r eceived in, or br ought into,
India.]
87
[(12) Wher e in the assessment for any year commencing befor e the 1st day of
Apr il, 1988, the deduction under section 80-O in r espect of any income, being the
whole or any par t of income by way of r oyalty, commission, fees or any similar
payment as is r efer r ed to in that section, has not been allowed on the gr ound that
such income has not been r eceived in conver tible for eign exchange in India, or
having been r eceived in conver tible for eign exchange outside India, or having
been conver ted into conver tible for eign exchange outside India, has not been
br ought into India, by or on behalf of the assessee in accor dance with any law
for the time being in for ce for r egulating payments and dealings in for eign
exchange and subsequently such income or par t ther eof has been or is r eceived
in, or br ought into, India in the manner afor esaid, the Assessing Officer shall
amend the or der of assessment so as to allow deduction under section 80-O in
r espect of such income or par t ther eof as is so r eceived in, or br ought into, India;
85. Inser ted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. Ear lier sub-section (11) was
omitted by the Finance Act, 1985, w.e.f. 1-4-1986. Or iginal sub-section was inser ted by the
Finance Act, 1974, w.e.f. 1-4-1974.
87. Inser ted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. Ear lier sub-section (12) was
omitted by the Finance Act, 1987, w.e.f. 1-4-1988. Or iginal sub-section was inser ted by the
Finance Act, 1974, w.e.f. 1-4-1974.
of four year s specified in sub-section (7) of that section being r eckoned fr om the
end of the pr evious year in which such income is so r eceived in, or br ought into,
India; so, however , that the per iod fr om the 1st day of Apr il, 1988 to the 30th day
of September , 1991 shall be excluded in computing the per iod of four year s.]
88
[(13) Wher e in the assessment for any year , the deduction under section 80HHB
or section 80HHC or section 80HHD or section 80HHE or section 80-O or section
80R or section 80RR or section 80RRA has not been allowed on the gr ound that
such income has not been r eceived in conver tible for eign exchange in India, or
having been r eceived in conver tible for eign exchange outside India, or having
been conver ted into conver tible for eign exchange outside India, has not been
br ought into India, by or on behalf of the assessee with the appr oval of the
Reser ve Bank of India or such other author ity as is author ised under any law for
the time being in for ce for r egulating payments and dealings in for eign exchange
and subsequently such income or par t ther eof has been or is r eceived in, or
br ought into, India in the manner afor esaid, the Assessing Officer shall amend
the or der of assessment so as to allow deduction under section 80HHB or section
80HHC or section 80HHD or section 80HHE or section 80-O or section 80R or
section 80RR or section 80RRA, as the case may be, in r espect of such income
or par t ther eof as is so r eceived in, or br ought into, India; and the pr ovisions of
section 154 shall, so far as may be, apply ther eto, and the per iod of four year s shall
be r eckoned fr om the end of the pr evious year in which such income is so
r eceived in, or br ought into, India.]
89
[(14) Wher e in the assessment for any pr evious year or in any intimation or
deemed intimation under sub-section (1) of section 143 for any pr evious year ,
90
[cr edit for tax deducted or collected in accor dance with the pr ovisions of
section 199 or , as the case may be, section 206C] has not been given on the gr ound
that the cer tificate fur nished under section 203
91
[or section 206C] was not filed
with the r etur n and subsequently such cer tificate is pr oduced befor e the
Assessing Officer within two year s fr om the end of the assessment year in which
such income is assessable, the Assessing Officer shall amend the or der of
assessment or any intimation or deemed intimation under sub-section (1) of
section 143, as the case may be, and the pr ovisions of section 154 shall, so far as
may be, apply ther eto :
Provided that nothing contained in this sub-section shall apply unless the
income fr om which the tax has been deducted
91
[or income on which the tax has
been collected] has been disclosed in the r etur n of income filed by the assessee
for the r elevant assessment year .
S. 155 I.T. ACT, 1961 1.692
88. Inser ted by the Finance Act, 1999, w.e.f. 1-6-1999. Ear lier or iginal sub-section (13) was
inser ted by the Finance Act, 1975, w.e.f. 1-4-1975 and later on omitted by the Dir ect Tax
89. Sub-sections (14) and (15) inser ted by the Finance Act, 2002, w.e.f. 1-6-2002.
90. Substituted for cr edit for tax deducted in accor dance with the pr ovisions of section 199
(15) Wher e in the assessment for any year , a capital gain ar ising fr om the tr ansfer
of a capital asset, being land or building or both, is computed by taking the full
value of the consider ation r eceived or accr uing as a r esult of the tr ansfer to be
the value adopted or assessed by any author ity of a State Gover nment for the
pur pose of payment of stamp duty in accor dance with sub-section (1) of section
50C, and subsequently such value is r evised in any appeal or r evision or r efer ence
r efer r ed to in clause (b) of sub-section (2) of that section, the Assessing Officer
shall amend the or der of assessment so as to compute the capital gain by taking
the full value of the consider ation to be the value as so r evised in such appeal or
r evision or r efer ence; and the pr ovisions of section 154 shall, so far as may be,
apply ther eto, and the per iod of four year s shall be r eckoned fr om the end of the
pr evious year in which the or der r evising the value was passed in that appeal or
r evision or r efer ence.]
92
[(16) Wher e in the assessment for any year , a capital gain ar ising fr om the
tr ansfer of a capital asset, being a tr ansfer by way of compulsor y acquisition
under any law, or a tr ansfer , the consider ation for which was deter mined or
appr oved by the Centr al Gover nment or the Reser ve Bank of India, is computed
by taking the compensation or consider ation as r efer r ed to in clause (a) or , as the
case may be, the compensation or consider ation enhanced or fur ther enhanced
as r efer r ed to in clause (b) of sub-section (5) of section 45, to be the full value of
consider ation deemed to be r eceived or accr uing as a r esult of the tr ansfer of the
asset and subsequently such compensation or consider ation is r educed by any
cour t, Tr ibunal or other author ity, the Assessing Officer shall amend the or der
of assessment so as to compute the capital gain by taking the compensation or
consider ation as so r educed by the cour t, Tr ibunal or any other author ity to be
the full value of consider ation; and the pr ovisions of section 154 shall, so far as
may be, apply ther eto, and the per iod of four year s shall be r eckoned fr om the
end of the pr evious year in which the or der r educing the compensation was
passed by the cour t, Tr ibunal or other author ity.
(17) Wher e a deduction has been allowed to an assessee in any assessment year
under section 80RRB in r espect of any patent, and subsequently by an or der of
the Contr oller or the High Cour t under the Patents Act, 1970 (39 of 1970),
(i) the patent was r evoked, or
(ii) the name of the assessee was excluded fr om the patents r egister as
patentee in r espect of that patent,
the deduction fr om the income by way of r oyalty attr ibutable to the per iod
dur ing which the patent had been r evoked or the per iod for which the assessees
name was excluded as patentee in r espect of that patent, shall be deemed to have
been wr ongly allowed and the Assessing Officer may, notwithstanding anything
pr evious year and make necessar y amendment; and the pr ovisions of section 154
shall, so far as may be, apply ther eto, the per iod of four year s specified in sub-
92. Sub-sections (16) and (17) inser ted by the Finance Act, 2003, w.e.f. 1-4-2004.
which such or der of the Contr oller r efer r ed to in clause (b) of sub-section (1), or
the High Cour t r efer r ed to in clause (i) of sub-section (1) of section 2, of the
Patents Act, 1970 (39 of 1970), as the case may be, was passed.]
93
(a) additional compensation shall have the meaning assigned to it in
clause (1) of the Explan ation to sub-section (2) of section 54;
(b) additional consider ation, in r elation to the tr ansfer of any capital
asset the consider ation for which was deter mined or appr oved by the
Centr al Gover nment or the Reser ve Bank of India, means the differ -
ence between the amount of consider ation for such tr ansfer as
enhanced by any cour t, tr ibunal or other author ity and the amount of
consider ation which would have been payable if such enhancement
had not been made.]
Notice of demand
94
.
156. When any tax, inter est, penalty, fine or any other sum
95
[***] is payable in
consequence of any or der passed under this Act, the
96
[Assessing] Officer
shall
97
ser ve upon the assessee a notice of demand in the pr escr ibed for m
98
specifying the sum so payable:
98a
[Provided th at wh ere an y sum is determin ed to be payable by th e assessee un der
sub-section (1) of section 143, th e in tim ation un der th at sub-section sh all be
deem ed to be a n otice of dem an d for th e purposes of th is section .]
Intimation of loss.
157. When, in the cour se of the assessment of the total income of any assessee,
it is established that a loss has taken place which the assessee is entitled to
have car r ied for war d and set off under the pr ovisions of sub-section (1) of section
72, sub-section (2) of section 73,
99
[sub-section (1)
1
[or sub-section (3)] of section
74 or sub-section (3) of section 74A], the
2
[Assessing] Officer shall notify to the
assessee by an or der in wr iting the amount of the loss as computed by him for
the pur poses of sub-section (1) of section 72, sub-section (2) of section 73,
3
[sub-
section (1)
4
[or sub-section (3)] of section 74 or sub-section (3) of section 74A].
S. 157 I.T. ACT, 1961 1.694
94. For a depar tmental instr uction, see Taxmanns Master Guide to Income-tax Act.
95. (including annuity deposit r efer r ed to in Chapter XXII-A) omitted by the Finance Act,
1966, w.e.f. 1-4-1967. Or iginally, the said expr ession was inser ted by the Finance Act, 1964,
w.e.f. 1-4-1964.
1-4-1988.
97. For the meaning of the wor d shall, see Taxmanns Dir ect Taxes Manual, Vol. 3.
98. See r ule 15 and For m No. 7 for notice of demand. See r ule 38 and For m No. 28 for notice
of demand of advance tax.
99. Substituted for or sub-section (1) of section 74 by the Finance Act, 1974, w.e.f. 1-4-1975.
1-4-1988.
3. Substituted for or sub-section (1) of section 74 by the Finance Act, 1974, w.e.f. 1-4-1975.
Intimation of assessment of firm.
158.
5
[Whenever , in r espect of the assessment year commencing on the 1st day
of Apr il, 1992, or any ear lier assessment year , a r egister ed fir m is assessed],
or an unr egister ed fir m is assessed under the pr ovisions of clause (b) of section
183, the
6
[Assessing] Officer shall notify to the fir m by an or der in wr iting the
amount of its total income assessed and the appor tionment ther eof between the
sever al par tner s.
7
[CHAPTER XI V-A
SPECIAL PROVISION FOR AVOIDING REPETITIVE APPEALS
Procedure when assessee claims identical question of law is pending before High
Court or Supreme Court.
158A.
8
(1) Notwithstanding anything contained in this Act, wher e an assessee
claims that any question of law ar ising in his case for an assessment year
which is pending befor e the
9
[Assessing] Officer or any appellate author ity (such
case being her eafter in this section r efer r ed to as the r elevant case) is identical
with a question of law ar ising in his case for another assessment year which is
pending befor e the High Cour t on a r efer ence under section 256 or
10
[befor e the
Supr eme Cour t on a r efer ence under section 257 or in appeal under section 260A
befor e the High Cour t or in appeal under section 261 befor e the Supr eme Cour t]
(such case being her eafter in this section r efer r ed to as the other case), he may
fur nish to the
11
[Assessing] Officer or the appellate author ity, as the case may be,
a declar ation in the pr escr ibed for m and ver ified
12
in the pr escr ibed manner , that
if the
11
[Assessing] Officer or the appellate author ity, as the case may be, agr ees
to apply in the r elevant case the final decision on the question of law in the other
case, he shall not r aise such question of law in the r elevant case in appeal befor e
any appellate author ity or
13
[in appeal befor e the High Cour t under section 260A
or in appeal befor e the Supr eme Cour t under section 261].
1.695 CH. XIV-A - PROVISION FOR AVOIDING REPETITIVE APPEALS S. 158A
5. Substituted for Whenever a r egister ed fir m is assessed by the Finance Act, 1992, w.e.f.
1-4-1993. Ear lier the expr ession was amended by the Dir ect Tax Laws (Amendment) Act,
1989, w.e.f. 1-4-1989 and by the Dir ect Tax Laws (Amendment) Act, 1987, with effect fr om
the same date.
1-4-1988.
8. See r ule 16 and For m No. 8 for declar ation under section 158A(1) (duplicate [when
fur nished to Commissioner (Appeals)], tr iplicate [when fur nished to Appellate Tr ibunal]).
1-4-1988.
10. Substituted for befor e the Supr eme Cour t on a r efer ence under section 257 or in appeal
under section 261 by the Finance Act, 2002, w.e.f. 1-6-2002.
1-4-1988.
12. See r ule 16 and For m No. 8 for declar ation under section 158A(1) (duplicate [when
fur nished to Commissioner (Appeals)], tr iplicate [when fur nished to Appellate Tr ibunal]).
13. Substituted for for a r efer ence befor e the High Cour t under section 256 or the Supr eme
Cour t under section 257 or in appeal befor e the Supr eme Cour t under section 261 by the
Finance Act, 2002, w.e.f. 1-6-2002.
(2) Wher e a declar ation under sub-section (1) is fur nished to any appellate
author ity, the appellate author ity shall call for a r epor t fr om the
14
[Assessing]
Officer on the cor r ectness of the claim made by the assessee and, wher e the
14
[Assessing] Officer makes a r equest to the appellate author ity to give him an
oppor tunity of being hear d in the matter , the appellate author ity shall allow him
such oppor tunity.
(3) The
14
[Assessing] Officer or the appellate author ity, as the case may be, may,
by or der in wr iting,
(i) admit the claim of the assessee if he or it is satisfied that the question
of law ar ising in the r elevant case is identical with the question of law
in the other case; or
(ii) r eject the claim if he or it is not so satisfied.
(4) Wher e a claim is admitted under sub-section (3),
(a) the
14
[Assessing] Officer or , as t he case may be, t he appellat e
au t hor it y may make an or der disposing of t he r elevant case
without awaiting the final decision on the question of law in the other
case; and
(b) the assessee shall not be entitled to r aise, in r elation to the r elevant
case, such question of law in appeal befor e any appellate author ity or
15
[ in appeal befor e the High Cour t under section 260A or the Supr eme
Cour t under section 261]].
(5) When the decision on the question of law in the other case becomes final, it
shall be applied to the r elevant case and the
14
[Assessing] Officer or the appellate
author ity, as the case may be, shall, if necessar y, amend the or der r efer r ed to in
clause (a) of sub-section (4) confor mably to such decision.
(6) An or der under sub-section (3) shall be final and shall not be called in
question in any pr oceeding by way of appeal, r efer ence or r evision under this
Act.
Explan ation . In this section,
(a) appellate author ity means the
16
the Commissioner (Appeals) or the Appellate Tr ibunal;
(b) case, in r elation to an assessee, means any pr oceeding under this Act
for the assessment of the total income of the assessee or for the
imposition of any penalty or fine on him.]
S. 158A I.T. ACT, 1961 1.696
1-4-1988.
15. Substituted for for a r efer ence befor e the High Cour t under section 256 or the Supr eme
Cour t under section 257 or in appeal befor e the Supr eme Cour t under section 261 by the
Finance Act, 2002, w.e.f. 1-6-2002.
16. Substituted for Appellate Assistant Commissioner by the Dir ect Tax Laws (Amendment)
Act, 1987, w.e.f. 1-4-1988.
17
[CHAPTER XI V-B*
SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES
Definitions.
158B. In this Chapter , unless the context other wise r equir es,
18
[(a) block per iod means the per iod compr ising pr evious year s r elevant
to six assessment year s pr eceding the pr evious year in which the
sear ch was conducted under section 132 or any r equisition was made
under section 132A and also includes the per iod up to the date of the
commencement of such sear ch or date of such r equisition in the
pr evious year in which the said sear ch was conducted or r equisition
was made :
Provided that wher e the sear ch is initiated or the r equisition is made
befor e the 1st day of June, 2001, the pr ovisions of this clause shall
have effect as if for the wor ds six assessment year s, the wor ds ten
assessment year s had been substituted;]
(b) undisclosed income includes any money, bullion, jeweller y or other
valuable ar ticle or thing or any income based on any entr y in the
books of account or other documents or tr ansactions, wher e such
money, bullion, jeweller y, valuable ar ticle, thing, entr y in the books of
account or other document or tr ansaction r epr esents wholly or par tly
income or pr oper ty which has not been or would not have been
disclosed for the pur poses of this Act
19
[, or any expense, deduction or
allowance claimed under this Act which is found to be false].
Assessment of undisclosed income as a result of search.
158BA. (1) Notwithstanding anything contained in any other pr ovisions of this
Act, wher e after the 30th day of June, 1995 a sear ch is initiated under
section 132 or books of account, other documents or any assets ar e r equisitioned
under section 132A in the case of any per son, then, the Assessing Officer shall
pr oceed to assess the undisclosed income in accor dance with the pr ovisions of
this Chapter .
1.697 CH. XIV-B - PROCEDURE FOR ASSESSMENT OF SEARCH CASES S. 158BA
17. Chapter XIV-B, consisting of sections 158B to 158BH, inser ted by the Finance Act, 1995,
w.e.f. 1-7-1995. Ear lier Chapter XIV-B, dealing with Char ge of additional income-tax in
cer tain cases was inser ted along with section 158B by the Dir ect Tax Laws (Amendment)
Act, 1987, w.e.f. 1-4-1989 and later on omitted by the Dir ect Tax Laws (Amendment) Act,
1989, w.e.f. 1-4-1989.
as amended by the Finance (No. 2) Act, 1996, w.r .e.f. 1-7-1995, r ead as under :
(a) block per iod means the pr evious year s r elevant to ten assessment year s pr eceding
the pr evious year in which the sear ch was conducted under section 132 or any
r equisition was made under section 132A, and includes, in the pr evious year in
which such sear ch wasconducted or r equisition made, the per iod up to the date of
the commencement of such sear ch or , as the case may be, the date of such
r equisit ion;
*Non-oper ative qua sear ch, etc., made after 31-5-2003, see section 158BH.
(2) The total undisclosed income r elating to the block per iod shall be char ged to
tax, at the r ate specified in section 113, as income of the block per iod ir r espective
of the pr evious year or year s to which such income r elates and ir r espective of the
fact whether r egular assessment for any one or mor e of the r elevant assessment
year s is pending or not.
20
(a) the assessment made under this Chapter shall be in addition to the
r egular assessment in r espect of each pr evious year included in the
block per iod;
(b) the total undisclosed income r elating to the block per iod shall not
include the income assessed in any r egular assessment as income of
such block per iod;
(c) the income assessed in this Chapter shall not be included in the
r egular assessment of any pr evious year included in the block
per iod.]
(3) Wher e the assessee pr oves to the satisfaction of the Assessing Officer that any
par t of income r efer r ed to in sub-section (1) r elates to an assessment year for
which the pr evious year has not ended or the date of filing the r etur n of income
under sub-section (1) of section 139 for any pr evious year has not expir ed,
and such income or the tr ansactions r elating to such income ar e r ecor ded on or
befor e the date of the sear ch or r equisition in the books of account or other
documents maintained in the nor mal cour se r elating to such pr evious year s, the
said income shall not be included in the block per iod.
Computation of undisclosed income of the block period.
158BB. (1) The undisclosed income of the block per iod shall be the aggr egate
of the total income of the pr evious year s falling within the block per iod
computed,
21
[in accor dance with the pr ovisions of this Act, on the basis of
evidence found as a r esult of sear ch or r equisition of books of account or other
documents and such other mater ials or infor mation as ar e available with the
Assessing Officer and r elatable to such evidence], as r educed by the aggr egate
of the total income, or as the case may be, as incr eased by the aggr egate of the
losses of such pr evious year s, deter mined,
(a) wher e assessments under section 143 or section 144 or section
147 have been concluded
22
[pr ior to the date of commencement
of the sear ch or the date of r equisition], on the basis of such assess-
ments;
S. 158BB I.T. ACT, 1961 1.698
21. Substituted for in accor dance with the pr ovisions of Chapter IV, on the basis of evidence
found as a r esult of sear ch or r equisition of books of account or documents and such other
mater ials or infor mation as ar e available with the Assessing Officer by the Finance Act,
2002, w.r .e.f. 1-7-1995.
(b) wher e r etur ns of income have been filed under section 139
23
[or in
r esponse to a notice issued under sub-section (1) of section 142 or
section 148] but assessments have not been made till the date of
sear ch or r equisition, on the basis of the income disclosed in such
r etur ns;
24
[(c) wher e the due date for filing a r etur n of income has expir ed, but no
r etur n of income has been filed,
(A) on the basis of entr ies as r ecor ded in the books of account and
other documents maintained in the nor mal cour se on or befor e
the date of the sear ch or r equisition wher e such entr ies r esult in
computation of loss for any pr evious year falling in the block
per iod; or
(B) on the basis of entr ies as r ecor ded in the books of account and
other documents maintained in the nor mal cour se on or befor e
the date of the sear ch or r equisition wher e such income does not
exceed the maximum amount not char geable to tax for any
pr evious year falling in the block per iod;
(ca) wher e the due date for filing a r etur n of income has expir ed, but
no r etur n of income has been filed, as n il, in cases not falling under
clause (c);]
(d) wher e the pr evious year has not ended or the date of filing the r etur n
of income under sub-section (1) of section 139 has not expir ed, on the
basis of entr ies r elating to such income or tr ansactions as r ecor ded in
the books of account and other documents maintained in the nor mal
cour se on or befor e the date of the sear ch or r equisition r elating to
such pr evious year s;
(e) wher e any or der of settlement has been made under sub-section (4)
of section 245D, on the basis of such or der ;
(f) wher e an assessment of undisclosed income had been made ear lier
under clause (c) of section 158BC, on the basis of such assessment.
Explan ation .For the pur poses of deter mination of undisclosed income,
(a) the total income or loss of each pr evious year shall, for the pur pose of
aggr egation, be taken as the total income or loss computed in
accor dance with the pr ovisions of
25
[this Act] without giving effect to
set off of br ought for war d losses under Chapter VI or unabsor bed
depr eciation under sub-section (2) of section 32:
1.699 CH. XIV-B - PROCEDURE FOR ASSESSMENT OF SEARCH CASES S. 158BB
23. Substituted for or section 147 by the Finance Act, 2002, w.r .e.f. 1-7-1995.
24. Clauses (c) and (ca) substituted for clause (c), ibid. Pr ior to its substitution, clause (c) r ead
as under :
(c) wher e the due date for filing a r etur n of income has expir ed but no r etur n of income
has been filed, as n il
25. Substituted for Chapter IV, ibid.
26
[Provided that in computing deductions under Chapter VI-A for the
pur poses of the said aggr egation, effect shall be given to set off of
br ought for war d losses under Chapter VI or unabsor bed depr ecia-
tion under sub-section (2) of section 32;]
27
[(b) of a fir m, r etur ned income and total income assessed for each of the
pr evious year s falling within the block per iod shall be the income
deter mined befor e allowing deduction of salar y, inter est, commis-
sion, bonus or r emuner ation by whatever name called
28
[to any
par tner not being a wor king par tner ] :
Provided that undisclosed income of the fir m so deter mined shall
not be char geable to tax in the hands of the par tner s, whether on
allocation or on account of enhancement;]
(c) assessment under section 143 includes deter mination of income
under sub-section (1) or sub-section (1B) of section 143.
(2) In computing the undisclosed income of the block per iod, the pr ovisions of
sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply and r efer ences to
financial year in those sections shall be constr ued as r efer ences to the r elevant
pr evious year falling in the block per iod including the pr evious year ending with
the date of sear ch or of the r equisition.
(3) The bur den of pr oving to the satisfaction of the Assessing Officer that any
undisclosed income had alr eady been disclosed in any r etur n of income filed by
the assessee befor e the commencement of sear ch or of the r equisition, as the
case may be, shall be on the assessee.
(4) For the pur pose of assessment under this Chapter , losses br ought for war d
fr om the pr evious year under Chapter VI or unabsor bed depr eciation under sub-
section (2) of section 32 shall not be set off against the undisclosed income
deter mined in the block assessment under this Chapter , but may be car r ied
for war d for being set off in the r egular assessments.
Procedure for block assessment.
158BC. Wher e any sear ch has been conducted under section 132 or books of
account, other documents or assets ar e r equisitioned under section
132A, in the case of any per son, then,
29
[(a) the Assessing Officer shall
(i) in r espect of sear ch initiated or books of account or other
documents or any assets r equisitioned after the 30th day of June,
1995, but befor e the 1st day of Januar y, 1997, ser ve a notice to
such per son r equir ing him to fur nish within such time not being
less than fifteen days;
S. 158BC I.T. ACT, 1961 1.700
27. Substituted by the Finance (No. 2) Act, 1996, w.r .e.f. 1-7-1995.
29. Substituted by the Income-tax (Amendment) Act, 1997, w.e.f. 1-1-1997.
(ii) in r espect of sear ch initiated or books of account or other
documents or any assets r equisitioned on or after the 1st day of
Januar y, 1997, ser ve a notice to such per son r equir ing him to
fur nish within such time not being less than fifteen days but not
mor e than for ty-five days,
as may be specified in the notice a r etur n in the pr escr ibed for m
30
and
ver ified in the same manner as a r etur n under clause (i) of sub-section
(1) of section 142, setting for th his total income including the undis-
closed income for the block per iod :
Provided that no notice under section 148 is r equir ed to be issued for
the pur pose of pr oceeding under this Chapter :
Provided further that a per son who has fur nished a r etur n under this
clause shall not be entitled to file a r evised r etur n;]
(b) the Assessing Officer shall pr oceed to deter mine the undisclosed
income of the block per iod in the manner laid down in section 158BB
and the pr ovisions of section 142, sub-sections (2) and (3) of section
143
31
[, section 144 and section 145] shall, so far as may be, apply;
(c) the Assessing Officer , on deter mination of the undisclosed income of
the block per iod in accor dance with this Chapter , shall pass an or der
of assessment and deter mine the tax payable by him on the basis of
such assessment;
32
[(d) the assets seized under section 132 or r equisitioned under section
132A shall be dealt with in accor dance with the pr ovisions of section
132B.]
Undisclosed income of any other person.
158BD. Wher e the Assessing Officer is satisfied that any undisclosed income
belongs to any per son, other than the per son with r espect to whom
sear ch was made under section 132 or whose books of account or other
documents or any assets wer e r equisitioned under section 132A, then, the books
of account, other documents or assets seized or r equisitioned shall be handed
over to the Assessing Officer having jur isdiction over such other per son and that
Assessing Officer shall pr oceed
33
[under section 158BC] against such other
per son and the pr ovisions of this Chapter shall apply accor dingly.
Time limit for completion of block assessment.
158BE.
34
[(1) The or der under section 158BC shall be passed
1.701 CH. XIV-B - PROCEDURE FOR ASSESSMENT OF SEARCH CASES S. 158BE
30. See r ule 12(1A) (as it stood at the r elevant date) and For m No. 2B.
31. Substituted for and section 144 by the Finance Act, 2002, w.r .e.f. 1-7-1995.
32. Substituted, ibid., w.e.f. 1-6-2002. Pr ior to its substitution, clause (d) r ead as under :
(d) the assets seized under section 132 or r equisitioned under section 132A shall be
r etained to the extent necessar y and the pr ovisions of section 132B shall apply
subject to such modifications as may be necessar y and the r efer ences to r egular
assessment or r eassessment in section 132B shall be constr ued as r efer ences to
block assessment.
(a) within one year fr om the end of the month in which the last of the
author isations for sear ch under section 132 or for r equisition under
section 132A, as the case may be, was executed in cases wher e a
sear ch is initiated or books of account or other documents or any
assets ar e r equisitioned after the 30th day of June, 1995, but befor e
the 1st day of Januar y, 1997;
(b) within two year s fr om the end of the month in which the last of the
author isations for sear ch under section 132 or for r equisition under
section 132A, as the case may be, was executed in cases wher e a
sear ch is initiated or books of account or other documents or any
assets ar e r equisitioned on or after the 1st day of Januar y, 1997.
(2) The per iod of limitation for completion of block assessment in the case of the
other per son r efer r ed to in section 158BD shall be
(a) one year fr om the end of the month in which the notice under this
Chapter was ser ved on such other per son in r espect of sear ch initiated
or books of account or other documents or any assets r equisitioned
after the 30th day of June, 1995, but befor e the 1st day of Januar y,
1997; and
(b) two year s fr om the end of the month in which the notice under this
Chapter was ser ved on such other per son in r espect of sear ch initiated
or books of account or other documents or any assets ar e r equisi-
tioned on or after the 1st day of Januar y, 1997.]
35
[Explan ation 1.In computing the per iod of limitation for the pur poses of this
section,
(i) the per iod dur ing which the assessment pr oceeding is stayed by an
or der or injunction of any cour t; or
(ii) the per iod commencing fr om the day on which the Assessing Officer
dir ects the assessee to get his accounts audited under sub-section (2A)
of section 142 and ending on the day on which the assessee is r equir ed
to fur nish a r epor t of such audit under that sub-section; or
(iii) the time taken in r eopening the whole or any par t of the pr oceeding
or giving an oppor tunity to the assessee to be r e-hear d under the
pr oviso to section 129; or
S. 158BE I.T. ACT, 1961 1.702
1, as inser ted by the Finance (No. 2) Act, 1996, w.r .e.f. 1-7-1995 and amended by the Finance
(No. 2) Act, 1998, w.r .e.f. 1-7-1995, r ead as under :
Explan ation 1.In computing the per iod of limitation for the pur poses of this section, the
per iod
(i) dur ing which the assessment pr oceeding is stayed by an or der or injunction of any
cour t, or
(ii) commencing fr om the day on which the Assessing Officer dir ects the assessee to get
his accounts audited under sub-section (2A) of section 142 and ending on the day
on which the assessee is r equir ed to fur nish a r epor t of such audit under that sub-
sect ion,
shall be excluded.
(iv) in a case wher e an application made befor e the Settlement Commis-
sion under section 245C is r ejected by it or is not allowed to be
pr oceeded with by it, the per iod commencing on the date on which
such application is made and ending with the date on which the or der
under sub-section (1) of section 245D is r eceived by the Commis-
sioner under sub-section (2) of that section,
shall be excluded:
Provided that wher e immediately after the exclusion of the afor esaid per iod,
the per iod of limitation r efer r ed to in sub-section (1) or sub-section (2) available
to the Assessing Officer for making an or der under clause (c) of section 158BC
is less than sixty days, such r emaining per iod shall be extended to sixty days and
the afor esaid per iod of limitation shall be deemed to be extended accor dingly.]
36
[Explan ation 2.For the r emoval of doubts, it is her eby declar ed that the
author isation r efer r ed to in sub-section (1) shall be deemed to have been
executed,
(a) in the case of sear ch, on the conclusion of sear ch as r ecor ded in the
last panchnama dr awn in r elation to any per son in whose case the
war r ant of author isation has been issued;
(b) in the case of r equisition under section 132A, on the actual r eceipt of
the books of account or other documents or assets by the Author ised
Officer .]
Certain interests and penalties not to be levied or imposed.
158BF. No inter est under the pr ovisions of section 234A, 234B or 234C or
penalty under the pr ovisions of clause (c) of sub-section (1) of section 271
or section 271A or section 271B shall be levied or imposed upon the assessee in
r espect of the undisclosed income deter mined in the block assessment.
37
[Levy of interest and penalty in certain cases.
158BFA. (1) Wher e the r etur n of total income including undisclosed income
for the block per iod, in r espect of sear ch initiated under section 132
or books of account, other documents or any assets r equisitioned under section
132A on or after the 1st day of Januar y, 1997, as r equir ed by a notice under
clause (a) of section 158BC, is fur nished after the expir y of the per iod specified
in such notice, or is not fur nished, the assessee shall be liable to pay simple
inter est at the r ate of
38
[one] per cent of the tax on undisclosed income,
deter mined under clause (c) of section 158BC, for ever y month or par t of a month
compr ised in the per iod commencing on the day immediately following the
expir y of the time specified in the notice, and
(a) wher e the r etur n is fur nished after the expir y of the time afor esaid,
ending on the date of fur nishing the r etur n; or
1.703 CH. XIV-B - PROCEDURE FOR ASSESSMENT OF SEARCH CASES S. 158BFA
36. Inser ted by the Finance(No. 2) Act, 1998, w.r .e.f. 1-7-1995.
8-9-2003. Ear lier the quoted wor ds wer e substituted for two by the Finance Act, 2001,
w.e.f. 1-6-2001.
(b) wher e no r etur n has been fur nished, on the date of completion of
assessment under clause (c) of section 158BC.
(2) The Assessing Officer or the Commissioner (Appeals) in the cour se of any
pr oceedings under this Chapter , may dir ect that a per son shall pay by way of
penalty a sum which shall not be less than the amount of tax leviable but which
shall not exceed thr ee times the amount of tax so leviable in r espect of the
undisclosed income deter mined by the Assessing Officer under clause (c) of
section 158BC :
Provided that no or der imposing penalty shall be made in r espect of a per son if
(i) such per son has fur nished a r etur n under clause (a) of section 158BC;
(ii) the tax payable on the basis of such r etur n has been paid or , if the
assets seized consist of money, the assessee offer s the money so seized
to be adjusted against the tax payable;
(iii) evidence of tax paid is fur nished along with the r etur n; and
(iv) an appeal is not filed against the assessment of that par t of income
which is shown in the r etur n :
Provided further that the pr ovisions of the pr eceding pr oviso shall not apply
wher e the undisclosed income deter mined by the Assessing Officer is in excess
of the income shown in the r etur n and in such cases the penalty shall be imposed
on that por tion of undisclosed income deter mined which is in excess of the
amount of undisclosed income shown in the r etur n.
(3) No or der imposing a penalty under sub-section (2) shall be made,
(a) unless an assessee has been given a r easonable oppor tunity of being
heard;
(b) by the Assistant Commissioner
39
[or Deputy Commissioner ] or the
Assistant Dir ector
39
[or Deputy Dir ector ], as the case may be, wher e
the amount of penalty exceeds twenty thousand r upees except with
the pr evious appr oval of the
40
[Joint] Commissioner or the
40
[Joint]
Dir ector , as the case may be;
(c) in a case wher e the assessment is the subject-matter of an appeal to
the Commissioner (Appeals) under section 246
41
[or section 246A] or
an appeal to the Appellate Tr ibunal under section 253, after the expir y
of the financial year in which the pr oceedings, in the cour se of which
action for the imposition of penalty has been initiated, ar e completed,
or six months fr om the end of the month in which the or der of the
Commissioner (Appeals) or , as the case may be, the Appellate Tr ibunal
is r eceived by the Chief Commissioner or the Commissioner , which-
ever per iod expir es later ;
(d) in a case wher e the assessment is the subject-matter of r evision under
section 263, after the expir y of six months fr om the end of the month
in which such or der of r evision is passed;
S. 158BFA I.T. ACT, 1961 1.704
1.705 CH. XIV-B - PROCEDURE FOR ASSESSMENT OF SEARCH CASES S. 158BG
(e) in any case other than those mentioned in clauses (c) and (d), after the
expir y of the financial year in which the pr oceedings, in the cour se of
which action for the imposition of penalty has been initiated, ar e
completed, or six months fr om the end of the month in which
action for imposition of penalty is initiated, whichever per iod expir es
later ;
(f) in r espect of sear ch initiated under section 132 or books of account,
other documents or any assets r equisitioned under section 132A,
after the 30th day of June, 1995 but befor e the 1st day of Januar y,
1997.
Explan ation .In computing the per iod of limitation for the pur pose of this
section,
(i) the time taken in giving an oppor tunity to the assessee to be r ehear d
under the pr oviso to section 129;
(ii) the per iod dur ing which the immunity gr anted under section 245H
r emained in for ce; and
(iii) the per iod dur ing which the pr oceedings under sub-section (2) ar e
stayed by an or der or injunction of any cour t,
shall be excluded.
(4) An income-tax author ity on making an or der under sub-section (2) imposing
a penalty, unless he is himself an Assessing Officer , shall for thwith send a copy
of such or der to the Assessing Officer .]
42
[Authority competent to make the block assessment.
158BG. The or der of assessment for the block per iod shall be passed by an
Assessing Officer not below the r ank of an Assistant Commissioner
43
[or Deputy Commissioner ] or an Assistant Dir ector
43
[or Deputy Dir ector ], as
the case may be :
Provided that no such or der shall be passed without the pr evious appr oval
of
(a) the Commissioner or Dir ector , as the case may be, in r espect of sear ch
initiated under section 132 or books of account, other documents or
any assets r equisitioned under section 132A, after the 30th day of
June, 1995 but befor e the 1st day of Januar y, 1997;
(b) the
44
[Joint] Commissioner or the
44
[Joint] Dir ector , as the case may
be, in r espect of sear ch initiated under section 132 or books of
account, other documents or any assets r equisitioned under section
132A, on or after the 1st day of Januar y, 1997.]
42. Substituted by the Income-tax (Amendment) Act, 1997, w.e.f. 1-1-1997. Ear lier section
158BG was amended by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996.
Application of other provisions of this Act.
158BH. Save as other wise pr ovided in this Chapter , all other pr ovisions of this
Act shall apply to assessment made under this Chapter .]
45
[Chapter not to apply after certain date.
158BI. The pr ovisions of this Chapter shall not apply wher e a sear ch is initiated
under section 132, or books of account, other documents or any assets
ar e r equisitioned under section 132A after the 31st day of May, 2003.]
CHAPTER XV
LIABILITY IN SPECIAL CASES
A.Legal represen tatives
Legal representatives.
46
159. (1) Wher e a per son dies, his legal r epr esentative shall be liable to pay any
sum which the deceased would have been liable to pay if he had not died,
in the like manner and to the same extent as the deceased.
(2) For the pur pose of making an assessment (including an assessment, r eassess-
ment or r ecomputation under section 147) of the income of the deceased and for
the pur pose of levying any sum in the hands of the legal r epr esentative in
accor dance with the pr ovisions of sub-section (1),
(a) any pr oceeding taken against the deceased befor e his death shall be
deemed to have been taken against the legal r epr esentative and may
be continued against the legal r epr esentative fr om the stage at which
it stood on the date of the death of the deceased;
(b) any pr oceeding which could have been taken against the deceased if
he had sur vived, may be taken against the legal r epr esentative; and
(c) all the pr ovisions of this Act shall apply accor dingly.
(3) The legal r epr esentative of the deceased shall, for the pur poses of this Act, be
deemed to be an assessee.
(4) Ever y legal r epr esentative shall be per sonally liable for any tax payable by
him in his capacity as legal r epr esentative if, while his liability for tax r emains
undischar ged, he cr eates a char ge on or disposes of or par ts with any assets
47
of
the estate of the deceased, which ar e in, or may come into, his possession, but
such liability shall be limited to the value of the asset so char ged, disposed of or
par ted with.
(5) The pr ovisions of sub-section (2) of section 161, section 162, and section 167,
shall, so far as may be and to the extent to which they ar e not inconsistent with
the pr ovisions of this section, apply in r elation to a legal r epr esentative.
(6) The liability of a legal r epr esentative under this section shall, subject to the
pr ovisions of sub-section (4) and sub-section (5), be limited to the extent to which
the estate is capable of meeting the liability.
S. 159 I.T. ACT, 1961 1.706
47. For the meaning of the ter m assets, see Taxmanns Dir ect Taxes Manual, Vol. 3.
B.Represen tative assessees - Gen eral provision s
Representative assessee.
48
160. (1) For the pur poses of this Act, r epr esentative assessee means
(i) in r espect of the income of a non-r esident specified in
49
[***] sub-
section (1) of section 9, the agent of the non-r esident, including a
per son who is tr eated as an agent under section 163;
(ii) in r espect of the income of a minor , lunatic or idiot, the guar dian or
manager who is entitled to r eceive or is in r eceipt of such income on
behalf of such minor , lunatic or idiot;
(iii) in r espect of income which the Cour t of War ds, the Administr ator -
Gener al, the Official Tr ustee or any r eceiver or manager (including
any per son, whatever his designation, who in fact manages pr oper ty
on behalf of another ) appointed by or under any or der of a cour t,
r eceives or is entitled to r eceive, on behalf or for the benefit of
any per son, such Cour t of War ds, Administr ator -Gener al, Official
Tr ustee, r eceiver or manager ;
(iv) in r espect of income which a tr ustee
50
appointed under a tr ust
declar ed by a duly executed instr ument in wr iting whether testamen-
tar y or other wise [including any wakf
50
deed which is valid under the
Mussalman Wakf Validating Act, 1913 (6 of 1913),] r eceives or is
entitled to r eceive on behalf or for the benefit of any per son, such
tr ustee or tr ustees;
51
[(v) in r espect of income which a tr ustee appointed under an or al tr ust
r eceives or is entitled to r eceive on behalf or for the benefit of any
per son, such tr ustee or tr ustees.
Explan ation 1.A tr ust which is not declar ed by a duly executed instr ument in
wr iting [including any wakf deed which is valid under the Mussalman Wakf
Validating Act, 1913 (6 of 1913),] shall be deemed, for the pur poses of clause (iv),
to be a tr ust declar ed by a duly executed instr ument in wr iting if a statement in
wr iting, signed by the tr ustee or tr ustees, setting out the pur pose or pur poses of
the tr ust, par ticular s as to the tr ustee or tr ustees, the beneficiar y or beneficiar ies
and the tr ust pr oper ty, is for war ded to the
52
(i) wher e the tr ust has been declar ed befor e the 1st day of June, 1981,
within a per iod of thr ee months fr om that day; and
(ii) in any other case, within thr ee months fr om the date of declar ation of
the tr ust.
Explan ation 2.For the pur poses of clause (v), or al tr ust means a tr ust which
is not declar ed by a duly executed instr ument in wr iting [including any wakf
1.707 CH. XV - LIABILITY IN SPECIAL CASES - REPRESENTATIVE ASSESSEES S. 160
49. clause (i) of omitted by the Finance Act, 1976, w.e.f. 1-6-1976.
50. For the meaning of the ter ms tr ustee and wakf, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
1-4-1988.
deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913),]
and which is not deemed under Explan ation 1 to be a tr ust declar ed by a duly
executed instr ument in wr iting.]
(2) Ever y r epr esentative assessee shall be deemed to be an assessee for the
pur poses of this Act.
Liability of representative assessee.
161. (1) Ever y r epr esentative assessee, as r egar ds the income in r espect of
which he is a r epr esentative assessee, shall be subject to the same duties,
r esponsibilities and liabilities as if the income wer e income r eceived by or
accr uing to or in favour of him beneficially, and shall be liable to assessment in
his own name in r espect of that income; but any such assessment shall be deemed
to be made upon him in his r epr esentative capacity only, and the tax shall, subject
to the other pr ovisions contained in this Chapter , be levied upon and r ecover ed
fr om him in like manner and to the same extent as it would be leviable upon and
r ecover able fr om the per son r epr esented by him.
53
[(1A) Notwithstanding anything contained in sub-section (1), wher e any income
in r espect of which the per son mentioned in clause (iv) of sub-section (1) of
section 160 is liable as r epr esentative assessee consists of, or includes, pr ofits and
gains of business, tax shall be char ged on the whole of the income in r espect of
which such per son is so liable at the maximum mar ginal r ate :
Provided that the pr ovisions of this sub-section shall not apply wher e such
pr ofits and gains ar e r eceivable under a tr ust declar ed by any per son by will
exclusively for the benefit of any r elative dependent on him for suppor t and
maintenance, and such tr ust is the only tr ust so declar ed by him.
54
[***]
(2) Wher e any per son is, in r espect of any income, assessable under this Chapter
in the capacity of a r epr esentative assessee, he shall not, in r espect of that income,
be assessed under any other pr ovision of this Act.
Right of representative assessee to recover tax paid.
162. (1) Ever y r epr esentative assessee who, as such, pays any sum under this
Act, shall be entitled to r ecover the sum so paid fr om the per son on whose
behalf it is paid, or to r etain out of any moneys that may be in his possession or
may come to him in his r epr esentative capacity, an amount equal to the sum so
paid.
(2) Any r epr esentative assessee, or any per son who appr ehends that he may be
assessed as a r epr esentative assessee, may r etain out of any money payable by
him to the per son on whose behalf he is liable to pay tax (her einafter in this
section r efer r ed to as the pr incipal), a sum equal to his estimated liability under
this Chapter , and in the event of any disagr eement between the pr incipal and
such r epr esentative assessee or per son as to the amount to be so r etained, such
S. 162 I.T. ACT, 1961 1.708
54. Omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.
r epr esentative assessee or per son may secur e fr om the
55
[Assessing] Officer a
cer tificate stating the amount to be so r etained pending final settlement of the
liability, and the cer tificate so obtained shall be his war r ant for r etaining that
amount.
(3) The amount r ecover able fr om such r epr esentative assessee or per son at the
time of final settlement shall not exceed the amount specified in such cer tificate,
except to the extent to which such r epr esentative assessee or per son may at such
time have in his hands additional assets of the pr incipal.
C.Represen tative assesseesSpecial cases
Who may be regarded as agent.
56
163. (1) For the pur poses of this Act, agent, in r elation to a non-r esident,
includes any per son in India
(a) who is employed by or on behalf of the non-r esident; or
(b) who has any business connection with the non-r esident; or
(c) fr om or thr ough whom the non-r esident is in r eceipt of any income,
whether dir ectly or indir ectly; or
(d) who is the tr ustee of the non-r esident;
and includes also any other per son who, whether a r esident or non-r esident, has
acquir ed by means of a tr ansfer , a capital asset in India :
Provided that a br oker in India who, in r espect of any tr ansactions, does not deal
dir ectly with or on behalf of a non-r esident pr incipal but deals with or thr ougha
non-r esident br oker shall not be deemed to be an agent under this section in
r espect of such tr ansactions, if the following conditions ar e fulfilled, namely:
(i) the tr ansactions ar e car r ied on in the or dinar y cour se of business
thr ough the fir st-mentioned br oker ; and
(ii) the non-r esident br oker is car r ying on such tr ansactions in the
or dinar y cour se of his business and not as a pr incipal.
57
[Explan ation .For the pur poses of this sub-section, the expr ession business
connection shall have the meaning assigned to it in Explan ation 2 to clause (i)
of sub-section (1) of section 9 of this Act.]
(2) No per son shall be tr eated as the agent of a non-r esident unless he has had an
oppor tunity of being hear d by the
58
[Assessing] Officer as to his liability to be
tr eated as such.
1-4-1988.
56. See Cir cular No. 707, dated 11-7-1995. For r elevant case laws, see Taxmanns Master Guide
to Income-tax Act.
1-4-1988.
59
[Charge of tax where share of beneficiaries unknown.
164. (1)
60
[Subject to the pr ovisions of sub-sections (2) and (3), wher e] any
income in r espect of which the per sons mentioned in clauses (iii) and (iv)
of sub-section (1) of section 160 ar e liable as r epr esentative assessees or any par t
ther eof is not specifically r eceivable on behalf or for the benefit of
61
any one
per son or wher e the individual shar es of the per sons on whose behalf or for
whose benefit such income or such par t ther eof is r eceivable ar e indeter minate
or unknown (such income, such par t of the income and such per sons being
her eafter in this section r efer r ed to as r elevant income, par t of r elevant
income and beneficiar ies, r espectively),
62
[tax shall be char ged on the r elevant
income or par t of r elevant income at the maximum mar ginal r ate
63
:]
Provided that in a case wher e
64
[(i) none of the beneficiar ies has any other income char geable under this
Act exceeding the maximum amount not char geable to tax in the case
of an
65
[association of per sons] or is a beneficiar y under any other
tr ust; or ]
(ii) the r elevant income or par t of r elevant income is r eceivable under
66
[a tr ust declar ed by any per son by will and such tr ust is the only tr ust
so declar ed by him]; or
(iii) the r elevant income or par t of r elevant income is r eceivable under a
tr ust cr eated befor e the 1st day of Mar ch, 1970, by a non-testamen-
tar y instr ument and the
67
[Assessing] Officer is satisfied, having
r egar d to all the cir cumstances existing at the r elevant time, that the
tr ust was cr eated bon a fide exclusively for the benefit of the r elatives
of the settlor , or wher e the settlor is a Hindu undivided family,
exclusively for the benefit of the member s of such family, in cir cum-
stances wher e such r elatives or member s wer e mainly dependent on
the settlor for their suppor t and maintenance; or
S. 164 I.T. ACT, 1961 1.710
61. For the meaning of the ter m/ expr ession for the benefit of see Taxmanns Dir ect Taxes
Manual, Vol. 3.
62. Substituted for the por tion beginning with tax shall be char ged and ending with mor e
beneficial to the r evenue by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1980.
63. For the meaning of the ter m/ expr ession maximum mar ginal r ate, see Taxmanns Dir ect
64. Substituted for (i) none of the beneficiar ies has any other income char geable under this
Act; or by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1980.
66. Substituted for a tr ust declar ed by will by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1980.
1-4-1988.
(iv) the r elevant income is r eceivable by the tr ustees on behalf of a
pr ovident fund, super annuation fund, gr atuity fund, pension fund or
any other fund cr eated bon a fide by a per son car r ying on a business
or pr ofession exclusively for the benefit of per sons employed in such
business or pr ofession,
tax shall be char ged
68
[on the r elevant income or par t of r elevant income as if it]
wer e the total income of an
69
[association of per sons] :
70
[Provided further that wher e any income in r espect of which the per son
mentioned in clause (iv) of sub-section (1) of section 160 is liable as r epr esenta-
tive assessee consists of, or includes, pr ofits and gains of business, the pr eceding
pr oviso shall apply only if such pr ofits and gains ar e r eceivable under a tr ust
declar ed by any per son by will exclusively for the benefit of any r elative
dependent on him for suppor t and maintenance, and such tr ust is the only tr ust
so declar ed by him.]
71
[(2) In the case of r elevant income which is der ived fr om pr oper ty held under
tr ust wholly for char itable or r eligious pur poses,
72
[or which is of the natur e
r efer r ed to in sub-clause (iia) of clause (24) of section 2,]
73
[or which is of the
natur e r efer r ed to in sub-section (4A) of section 11,] tax shall be char ged on so
much of the r elevant income as is not exempt under section 11
74
[or section 12],
as if the r elevant income not so exempt wer e the income of an association of
per sons :
75
[Provided that in a case wher e the whole or any par t of the r elevant income is
not exempt under section 11 or section 12 by vir tue of the pr ovisions contained
in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be char ged on
the r elevant income or par t of r elevant income at the maximum mar ginal r ate.]]
76
[(3) In a case wher e the r elevant income is der ived fr om pr oper ty held under
tr ust in par t only for char itable or r eligious pur poses
77
[or is of the natur e
r efer r ed to in sub-clause (iia) of clause (24) of section 2]
78
[or is of the natur e
r efer r ed to in sub-section (4A) of section 11,] and either the r elevant income
68. Substituted for as if the r elevant income or par t of r elevant income by the Finance
(No. 2) Act, 1980, w.e.f. 1-4-1980.
dat e.
dat e.
applicable to pur poses other than char itable or r eligious pur poses (or any par t
ther eof)
79
[is not specifically r eceivable on behalf or for the benefit of any one
per son or the individual shar es of the beneficiar ies in the income so applicable
ar e indeter minate or unknown, the tax char geable on the r elevant income shall
be the aggr egate of
(a) the tax which would be char geable on that par t of the r elevant income
which is applicable to char itable or r eligious pur poses (as r educed by
the income, if any, which is exempt under section 11) as if such par t
(or such par t as so r educed) wer e the total income of an association
of per sons; and
(b) the tax on that par t of the r elevant income which is applicable to
pur poses other than char itable or r eligious pur poses, and which is
either not specifically r eceivable on behalf or for the benefit of any
one per son or in r espect of which the shar es of the beneficiar ies ar e
indeter minate or unknown, at the maximum mar ginal r ate :]
Provided that in a case wher e
80
[(i) none of the beneficiar ies in r espect of the par t of the r elevant income
which is not applicable to char itable or r eligious pur poses has any
other income char geable under this Act exceeding the maximum
amount not char geable to tax in the case of an association of per sons
or is a beneficiar y under any other tr ust; or ]
(ii) the r elevant income is r eceivable under
81
[a tr ust declar ed by any
per son by will and such tr ust is the only tr ust so declar ed by him]; or
(iii) the r elevant income is r eceivable under a tr ust cr eated befor e the 1st
day of Mar ch, 1970, by a non-testamentar y instr ument and the
82
[Assessing] Officer is satisfied, having r egar d to all the cir cumstan-
ces existing at the r elevant time, that the tr ust, to the extent it is not
for char itable or r eligious pur poses, was cr eated bon a fide exclu-
sively for the benefit of the r elatives of the settlor , or wher e the settlor
is a Hindu undivided family, exclusively for the benefit of the mem-
ber s of such family, in cir cumstances wher e such r elatives or mem-
ber s wer e mainly dependent on the settlor for their suppor t and
maintenance,
tax shall be char ged
83
[on the r elevant income] as if the r elevant income (as
r educed by the income, if any, which is exempt under section 11) wer e the total
income of an association of per sons :]
S. 164 I.T. ACT, 1961 1.712
79. Substituted for the por tion beginning with is not specifically r eceivable and ending with
whichever cour se would be mor e beneficial to the r evenue: by the Finance (No. 2) Act,
1980, w.e.f. 1-4-1980.
80. Substituted for (i) none of the beneficiar ies in r espect of the par t of the r elevant income
which is not applicable t o char it able or r eligious pur poses has any ot her income
char geable under this Act; or by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1980.
81. Substituted for a tr ust declar ed by will, ibid.
1-4-1988.
84
[Provided further that wher e the r elevant income consists of, or includes,
pr ofits and gains of business, the pr eceding pr oviso shall apply only if the income
is r eceivable under a tr ust declar ed by any per son by will exclusively for the
benefit of any r elative dependent on him for suppor t and maintenance, and such
tr ust is the only tr ust so declar ed by him :
Provided also that in a case wher e the whole or any par t of the r elevant income
is not exempt under section 11 or section 12 by vir tue of the pr ovisions contained
in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be char ged on
the r elevant income or par t of r elevant income at the maximum mar ginal r ate.]]
85
[Explan ation 1.For the pur poses of this section,
(i) any income in r espect of which the per sons mentioned in clause
(iii) and clause (iv) of sub-section (1) of section 160 ar e liable as
r epr esentative assessee or any par t ther eof shall be deemed as being
not specifically r eceivable on behalf or for the benefit of any one
per son unless the per son on whose behalf or for whose benefit such
income or such par t ther eof is r eceivable dur ing the pr evious year is
expr essly stated in the or der of the cour t or the instr ument of tr ust or
wakf deed, as the case may be, and is identifiable as such on the date
of such or der , instr ument or deed ;
(ii) the individual shar es of the per sons on whose behalf or for whose
benefit such income or such par t ther eof is r eceived shall be deemed
to be indeter minate or unknown unless the individual shar es of the
per sons on whose behalf or for whose benefit such income or such
par t ther eof is r eceivable, ar e expr essly stated in the or der of the cour t
or the instr ument of tr ust or wakf deed, as the case may be, and ar e
ascer tainable as such on the date of such or der , instr ument or deed.
Explan ation 2.

[Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f.
1-4-1989.]
86
[Charge of tax in case of oral trust.
164A. Wher e a tr ustee r eceives or is entitled to r eceive any income on behalf or
for the benefit of any per son under an or al tr ust, then, notwithstanding
anything contained in any other pr ovision of this Act, tax shall be char ged on such
income at the maximum mar ginal r ate.
(i)
87
[***]
(ii) or al tr ust shall have the meaning assigned to it in Explan ation 2
below sub-section (1) of section 160.]
1.713 CH. XV - LIABILITY IN SPECIAL CASES - REPRESENTATIVE ASSESSEES S. 164A
omission, clause (i) of Explan ation st ood as under :
(i) maximum mar ginal r ate shall have the meaning assigned to it in Explan ation 2
Case where part of trust income is chargeable.
165. Wher e par t only of the income of a tr ust is char geable under this Act, that
pr opor tion only of the income r eceivable by a beneficiar y fr om the tr ust
which the par t so char geable bear s to the whole income of the tr ust shall be
deemed to have been der ived fr om that par t.
D.Represen tative assessees - Miscellan eous provision s
Direct assessment or recovery not barred.
88
166. Nothing in the for egoing sections in this Chapter shall pr event either the
dir ect assessment of the per son on whose behalf or for whose benefit
income ther ein r efer r ed to is r eceivable, or the r ecover y fr om such per son of the
tax payable in r espect of such income.
Remedies against property in cases of representative assessees.
167. The
89
[Assessing] Officer shall have t he same r emedies against all
pr oper ty of any kind vested in or under the contr ol or management of any
r epr esentative assessee as he would have against the pr oper ty of any per son
liable to pay any tax, and in as full and ample a manner , whether the demand is
r aised against the r epr esentative assessee or against the beneficiar y dir ect.
90
[DD.Firm s, association of person s an d body of in dividuals]
91
[Charge of tax in the case of a firm.
92
167A. In the case of a fir m which is assessable as a fir m, tax shall be char ged
on its total income at the
93
[r ate as specified in the Finance Act of the
r elevant year ].]
94
[Charge of tax where shares of members in association of persons or body of
individuals unknown, etc.
95
167B. (1) Wher e the individual shar es of the member s of an association of
per sons or body of individuals (other than a company or a co-oper ative
society or a society r egister ed under the Societies Registr ation Act, 1860 (21 of
S. 167B I.T. ACT, 1961 1.714
88. See also Letter [F. No. 45/ 78/ 66-ITJ (5)], dated 24-2-1967. For details, see Taxmanns
1-4-1988.
90. Substituted for the existing sub-heading DD by the Finance Act, 1992, w.e.f. 1-4-1993.
Pr ior to substitution, sub-heading DD, as inser ted by the Finance Act, 1981, w.e.f. 1-4-1981
and later amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the
DD.Association of person s an d body of in dividuals
91. Inser ted by the Finance Act, 1992, w.e.f. 1-4-1993. Ear lier section 167A was omitted by the
Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Pr ior to omission, section 167A
was substituted by the Finance Act, 1985, w.e.f. 1-4-1985.
Income-tax Act.
93. Substituted for maximum mar ginal r ate by the Finance Act, 1997, w.e.f. 1-4-1998.
Income-tax Act.
1860) or under any law cor r esponding to that Act in for ce in any par t of India)
in the whole or any par t of the income of such association or body ar e
indeter minate or unknown, tax shall be char ged on the total income of the
association or body at the maximum mar ginal r ate :
Provided that, wher e the total income of any member of such association or body
is char geable to tax at a r ate which is higher than the maximum mar ginal
r ate, tax shall be char ged on the total income of the association or body at such
higher r ate.
(2) Wher e, in the case of an association of per sons or body of individuals as
afor esaid [not being a case falling under sub-section (1)],
(i) the total income of any member ther eof for the pr evious year
(excluding his shar e fr om such association or body) exceeds the
maximum amount which is not char geable to tax in the case of that
member under the Finance Act of the r elevant year , tax shall be
char ged on the total income of the association or body at the
maximum mar ginal r ate;
(ii) any member or member s ther eof is or ar e char geable to tax at a r ate
or r ates which is or ar e higher than the maximum mar ginal r ate, tax
shall be char ged on that por tion or por tions of the total income of the
association or body which is or ar e r elatable to the shar e or shar es of
such member or member s at such higher r ate or r ates, as the case
may be, and the balance of the total income of the association or body
shall be taxed at the maximum mar ginal r ate.
Explan ation .For the pur poses of this section, the individual shar es of the
member s of an association of per sons or body of individuals in the whole or any
par t of the income of such association or body shall be deemed to be indeter mi-
nate or unknown if such shar es (in r elation to the whole or any par t of such
income) ar e indeter minate or unknown on the date of for mation of such
association or body or at any time ther eafter .]
E.Executors
Executors.
168. (1) Subject as her einafter pr ovided, the income of the estate of a deceased
per son shall be char geable to tax in the hands of the executor ,
(a) if ther e is only one executor , then, as if the executor
96
wer e an
individual; or
(b) if ther e ar e mor e executor s than one, then, as if the executor s wer e an
association of per sons;
and for the pur poses of this Act, the executor shall be deemed to be r esident or
non-r esident accor ding as the deceased per son was a r esident or non-r esident
dur ing the pr evious year in which his death took place.
(2) The assessment of an executor under this section shall be made separ ately
fr om any assessment that may be made on him in r espect of his own income.
1.715 CH. XV - LIABILITY IN SPECIAL CASES - EXECUTORS S. 168
96. For the meaning of the ter m executor , see Taxmanns Dir ect Taxes Manual, Vol. 3.
(3) Separ ate assessments shall be made under this section on the total income of
each completed pr evious year or par t ther eof as is included in the per iod fr om
the date of the death to the date of complete distr ibution to the beneficiar ies of
the estate accor ding to their sever al inter ests
97
.
(4) In computing the total income of any pr evious year under this section, any
income of the estate of that pr evious year distr ibuted to, or applied to the benefit
of, any specific legatee of the estate dur ing that pr evious year shall be excluded;
but the income so excluded shall be included in the total income of the pr evious
year of such specific legatee.
Explan ation .In this section, executor includes an administr ator or other
per son administer ing the estate of a deceased per son
98
.
Right of executor to recover tax paid.
169. The pr ovisions of section 162 shall, so far as may be, apply in the case of an
executor in r espect of tax paid or payable by him as they apply in the case
of a r epr esentative assessee.
F.Succession to busin ess or profession
Succession to business otherwise than on death.
170. (1) Wher e a per son car r ying on any business or pr ofession (such per son
her einafter in this section being r efer r ed to as the pr edecessor ) has been
succeeded ther ein by any other per son (her einafter in this section r efer r ed to as
the successor ) who continues to car r y on that business or pr ofession,
(a) the pr edecessor shall be assessed in r espect of the income of the
pr evious year in which the succession took place up to the date of
succession;
(b) the successor shall be assessed in r espect of the income of the
pr evious year after the date of succession.
(2) Notwithstanding anything contained in sub-section (1), when the pr edecessor
cannot be found, the assessment of the income of the pr evious year in which the
succession took place up to the date of succession and of the pr evious year
pr eceding that year shall be made on the successor in like manner and to the
same extent as it would have been made on the pr edecessor , and all the
pr ovisions of this Act shall, so far as may be, apply accor dingly.
(3) When any sum payable under this section in r espect of the income of such
business or pr ofession for the pr evious year in which the succession took place
up to the date of succession or for the pr evious year pr eceding that year ,
assessed on the pr edecessor , cannot be r ecover ed fr om him, the
99
[Assessing]
Officer shall r ecor d a finding to that effect and the sum payable by the
pr edecessor shall ther eafter be payable by and r ecover able fr om the successor ,
S. 170 I.T. ACT, 1961 1.716
97. For the meaning of expr ession accor ding to their sever al inter ests, see Taxmanns Dir ect
98. For the meaning of expr ession other per son . . . deceased per son, see Taxmanns Dir ect
1-4-1988.
1.717 CH. XV - LIABILITY IN SPECIAL CASES - PARTITION S. 171
1-4-1988.
2. For the meaning of the expr ession gr oup of member s, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
1-4-1988.
and the successor shall be entitled to r ecover fr om the pr edecessor any sum so
paid.
(4) Wher e any business or pr ofession car r ied on by a Hindu undivided family is
succeeded to, and simultaneously with the succession or after the succession
ther e has been a par tition of the joint family pr oper ty between the member s or
gr oups of member s, the tax due in r espect of the income of the business or
pr ofession succeeded to, up to the date of succession, shall be assessed and
r ecover ed in the manner pr ovided in section 171, but without pr ejudice to the
Explan ation .For the pur poses of this section, income includes any gain
accr uing fr om the tr ansfer , in any manner whatsoever , of the business or
pr ofession as a r esult of the succession.
G.Partition
Assessment after partition of a Hindu undivided family.
171. (1) A Hindu family hither to assessed as undivided shall be deemed for the
pur poses of this Act to continue to be a Hindu undivided family, except
wher e and in so far as a finding of par tition has been given under this section in
r espect of the Hindu undivided family.
(2) Wher e, at the time of making an assessment under section 143 or section 144,
it is claimed by or on behalf of any member of a Hindu family assessed as
undivided that a par tition, whether total or par tial, has taken place among the
member s of such family, the
1
[Assessing] Officer shall make an inquir y ther einto
after giving notice of the inquir y to all the member s of the family.
(3) On the completion of the inquir y, the
1
[Assessing] Officer shall r ecor d a
finding as to whether ther e has been a total or par tial par tition of the joint family
pr oper ty, and, if ther e has been such a par tition, the date on which it has taken
place.
(4) Wher e a finding of total or par tial par tition has been r ecor ded by the
1
[Assessing] Officer under this section, and the par tition took place dur ing the
pr evious year ,
(a) the total income of the joint family in r espect of the per iod up to the
date of par tition shall be assessed as if no par tition had taken place;
and
(b) each member or gr oup of member s
2
shall, in addition to any tax for
which he or it may be separ ately liable and notwithstanding anything
contained in clause (2) of section 10, be jointly and sever ally liable for
the tax on the income so assessed.
(5) Wher e a finding of total or par tial par tition has been r ecor ded by the
3
[Assessing] Officer under this section, and the par tition took place after the
expir y of the pr evious year , the total income of the pr evious year of the joint
family shall be assessed as if no par tition had taken place; and the pr ovisions of
clause (b) of sub-section (4) shall, so far as may be, apply to the case.
(6) Notwithstanding anything contained in this section, if the
4
[Assessing] Officer
finds after completion of the assessment of a Hindu undivided family that the
family has alr eady effected a par tition, whether total or par tial, the
4
[Assessing]
Officer shall pr oceed to r ecover the tax fr om ever y per son who was a member
of the family befor e the par tition, and ever y such per son shall be jointly and
sever ally liable for the tax on the income so assessed.
(7) For the pur poses of this section, the sever al liability of any member or gr oup
of member s ther eunder shall be computed accor ding to the por tion of the joint
family pr oper ty allotted to him or it at the par tition, whether total or par tial.
(8) The pr ovisions of this section shall, so far as may be, apply in r elation to the
levy and collection of any penalty, inter est, fine or other sum in r espect of any
per iod up to date of the par tition, whether total or par tial, of a Hindu undivided
family as they apply in r elation to the levy and collection of tax in r espect of any
such per iod.
5
section, wher e a par tial par tition has taken place after the 31st day of December ,
1978, among the member s of a Hindu undivided family hither to
6
assessed as
undivided,
(a) no claim that such par tial par tition has taken place shall be inquir ed
into under sub-section (2) and no finding shall be r ecor ded under sub-
section (3) that such par tial par tition had taken place and any finding
r ecor ded under sub-section (3) to that effect whether befor e or after
the 18th day of June, 1980, being the date of intr oduction of the
Finance (No. 2) Bill, 1980, shall be null and void;
(b) such family shall continue to be liable to be assessed under this Act as
if no such par tial par tition had taken place;
(c) each member or gr oup of member s of such family immediately
befor e such par tial par tition and the family shall be jointly and
sever ally liable for any tax, penalty, inter est, fine or other sum payable
under this Act by the family in r espect of any per iod, whether befor e
or after such par tial par tition;
(d) the sever al liability of any member or gr oup of member s afor esaid
shall be computed accor ding to the por tion of the joint family
pr oper ty allotted to him or it at such par tial par tition,
and the pr ovisions of this Act shall apply accor dingly.]
(a) par tition means
S. 171 I.T. ACT, 1961 1.718
1-4-1988.
6. For the meaning of the ter m assessed, see Taxmanns Dir ect Taxes Manual, Vol. 3.
(i) wher e the pr oper ty admits of a physical division, a physical
division of the pr oper ty, but a physical division of the income
without a physical division of the pr oper ty pr oducing the income
shall not be deemed to be a par tition; or
(ii) wher e the pr oper ty does not admit of a physical division, then
such division as the pr oper ty admits of, but a mer e sever ance of
status shall not be deemed to be a par tition;
(b) par tial par tition means a par tition which is par tial as r egar ds the
per sons constituting the Hindu undivided family, or the pr oper ties
belonging to the Hindu undivided family, or both.
H.Profits of n on -residen ts from occasion al sh ippin g busin ess
Shipping business of non-residents.
7
172. (1) The pr ovisions of t his sect ion shall, not wit hst anding anyt hing
contained in the other pr ovisions of this Act, apply for the pur pose of the
levy and r ecover y of tax in the case of any ship, belonging to or char ter ed by a
non-r esident, which car r ies passenger s, livestock, mail or goods shipped at a por t
in India
8
[***].
(2) Wher e such a ship car r ies passenger s, livestock, mail or goods shipped at a
por t in India,
9
[seven and a half] per cent of the amount paid or payable on
account of such car r iage to the owner or the char ter er or to any per son on his
behalf, whether that amount is paid or payable in or out of India, shall be deemed
to be income accr uing in India to the owner or char ter er on account of such
car r iage.
(3) Befor e the depar tur e fr om any por t in India of any such ship, the master of
the ship shall pr epar e and fur nish to the
10
[Assessing] Officer a r etur n of the full
amount paid or payable to the owner or char ter er or any per son on his behalf,
on account of the car r iage of all passenger s, livestock, mail or goods shipped at
that por t since the last ar r ival of the ship ther eat:
Provided that wher e the
10
[Assessing] Officer is satisfied that it is not possible for
the master of the ship to fur nish the r etur n r equir ed by this sub-section befor e
the depar tur e of the ship fr om the por t and pr ovided the master of the ship has
made satisfactor y ar r angements for the filing of the r etur n and payment of the
tax by any other per son on his behalf, the
10
[Assessing] Officer may, if the r etur n
is filed within thir ty days of the depar tur e of the ship, deem the filing of the
r etur n by the per son so author ised by the master as sufficient compliance with
this sub-section.
1.719 CH. XV - LIABILITY IN SPECIAL CASES - PROFITS OF NON-RESIDENTS S. 172
7. See also Cir cular No. 723, dated 19-9-1995; Cir cular No. 730, dated 14-12-1995; Cir cular
No. 732, dated 20-12-1995 and Cir cular No. 9/ 2001, dated 9-7-2001. For details, see
8. unless the Income-tax Officer is satisfied that ther e is an agent of the non-r esident fr om
whom the tax will be r ecover able under the other pr ovisions of this Act omitted by the
Finance Act, 1975, w.e.f. 1-6-1975.
9. Substituted for one-sixth by the Finance Act, 1975, w.e.f. 1-6-1975.
1-4-1988.
(4) On r eceipt of the r etur n, the
11
[Assessing] Officer shall assess the income
r efer r ed to in sub-section (2) and deter mine the sum payable as tax ther eon at
the r ate or r ates
12
[in for ce] applicable to the total income of a company which
has not made the ar r angements r efer r ed to in section 194 and such sum shall be
payable by the master of the ship.
13
[(4A) No or der assessing the income and deter mining the sum of tax payable
ther eon shall be made under sub-section (4) after the expir y of nine months fr om
the end of the financial year in which the r etur n under sub-section (3) is
fur nished:
Provided that wher e the r etur n under sub-section (3) has been fur nished befor e
the 1st day of Apr il, 2007, such or der shall be made on or befor e the 31st day of
December , 2008.]
(5) For the pur pose of deter mining the tax payable under sub-section (4), the
11
[Assessing] Officer may call for such accounts or documents as he may r equir e.
(6) A por t clear ance shall not be gr anted to the ship until the Collector of Customs,
or other officer duly author ised to gr ant the same, is satisfied that the tax
assessable under this section has been duly paid or that satisfactor y ar r ange-
ments have been made for the payment ther eof.
(7) Nothing in this section shall be deemed to pr event the owner or char ter er of
a ship fr om claiming befor e the expir y of the assessment year r elevant to the
pr evious year in which the date of depar tur e of the ship fr om the Indian por t falls,
that an assessment be made of his total income of the pr evious year and the tax
payable on the basis ther eof be deter mined in accor dance with the other
pr ovisions of this Act, and if he so claims, any payment made under this section
in r espect of the passenger s, livestock, mail or goods shipped at Indian por ts
dur ing that pr evious year shall be tr eated as a payment in advance of the tax
14
leviable for that assessment year , and the differ ence between the sum so paid
and the amount of tax found payable by him on such assessment shall be paid
by him or r efunded to him, as the case may be.
15
[(8) For the pur poses of this section, the amount r efer r ed to in sub-section (2)
shall include the amount paid or payable by way of demur r age char ge or
handling char ge or any other amount of similar natur e.]
I.Recovery of tax in respect of n on -residen ts
Recovery of tax in respect of non-resident from his assets.
173. Without pr ejudice to the pr ovisions of sub-section (1) of section 161 or of
section 167, wher e the per son entitled to the income r efer r ed to in clause
(i) of sub-section (1) of section 9 is a non-r esident, the tax char geable ther eon,
whether in his name or in the name of his agent who is liable as a r epr esentative
S. 173 I.T. ACT, 1961 1.720
1-4-1988.
12. Substituted for for the time being by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
14. For the meaning of the expr ession payment in advance of the tax, see Taxmanns Dir ect
assessee, may be r ecover ed by deduction under any of the pr ovisions of Chapter
XVII-B and any ar r ear s of tax may be r ecover ed also in accor dance with the
pr ovisions of this Act fr om any assets of the non-r esident which ar e, or may at
any time come, within India.
J.Person s leavin g In dia
Assessment of persons leaving India.
174. (1) Notwithstanding anything contained in section 4, when it appear s to the
16
[Assessing] Officer that any individual may leave India dur ing the
cur r ent assessment year or shor tly after its expir y and that he has no pr esent
intention of r etur ning to India, the total income of such individual for the per iod
fr om the expir y of the pr evious year for that assessment year up to the pr obable
date of his depar tur e fr om India shall be char geable to tax in that assessment
year .
(2) The total income of each completed pr evious year or par t of any pr evious year
included in such per iod shall be char geable to tax at the r ate or r ates in for ce in
that assessment year , and separ ate assessments shall be made in r espect of each
such completed pr evious year or par t of any pr evious year .
(3) The
16
[Assessing] Officer may estimate the income of such individual for such
per iod or any par t ther eof, wher e it cannot be r eadily deter mined in the manner
pr ovided in this Act.
(4) For the pur pose of making an assessment under sub-section (1), the
16
[Assess-
ing] Officer may ser ve a notice upon such individual r equir ing him to fur nish
within such time, not being less than seven days, as may be specified in the notice,
a r etur n in the same for m and ver ified in the same manner
17
[as a r etur n under
clause (i) of sub-section (1) of section 142], setting for th his total income for each
completed pr evious year compr ised in the per iod r efer r ed to in sub-section (1)
and his estimated total income for any par t of the pr evious year compr ised in that
per iod; and the pr ovisions of this Act shall, so far as may be, and subject to the
pr ovisions of this section, apply as if the notice wer e a
18
[notice issued under
clause (i) of sub-section (1) of section 142].
(5) The tax char geable under this section shall be in addition to the tax, if any,
char geable under any other pr ovision of this Act.
(6) Wher e the pr ovisions of sub-section (1) ar e applicable, any notice issued by
the
19
[Assessing] Officer under
20
[clause (i) of sub-section (1) of section 142 or ]
section 148 in r espect of any tax char geable under any other pr ovision of this Act
may, notwithstanding anything contained in
20
[clause (i) of sub-section (1) of
section 142 or ] section 148, as the case may be, r equir e the fur nishing of the
1.721 CH. XV - LIABILITY IN SPECIAL CASES - PERSONS LEAVING INDIA S. 174
1-4-1988.
17. Substituted for as a r etur n under sub-section (2) of section 139, ibid., w.e.f. 1-4-1989.
18. Substituted for notice issued under sub-section (2) of section 139.
20. Substituted for sub-section (2) of section 139 or sub-section (1) of, ibid.
r etur n by such individual within such per iod, not being less than seven days, as
the
21
[Assessing] Officer may think pr oper .
22
[JA.Association of person s or body of in dividuals or
artificial juridical person form ed for a particular
even t or purpose
Assessment of association of persons or body of individuals or artificial juridical
person formed for a particular event or purpose.
174A. Notwithstanding anything contained in section 4, wher e it appear s to the
Assessing Officer that any association of per sons or a body of individuals
or an ar tificial jur idical per son, for med or established or incor por ated for a
par ticular event or pur pose is likely to be dissolved in the assessment year in
which such association of per sons or a body of individuals or an ar tificial
jur idical per son was for med or established or incor por ated or immediately after
such assessment year , the total income of such association or body or jur idical
per son for the per iod fr om the expir y of the pr evious year for that assessment
year up to the date of its dissolution shall be char geable to tax in that assessment
year , and the pr ovisions of sub-sections (2) to (6) of section 174 shall, so far as may
be, apply to any pr oceedings in the case of any such per son as they apply in the
case of per sons leaving India.]
K.Person s tryin g to alien ate th eir assets
Assessment of persons likely to transfer property to avoid tax.
175. Notwithstanding anything contained in section 4, if it appear s to the
21
[Assessing] Officer dur ing any cur r ent assessment year that any per son is
likely to char ge, sell, tr ansfer , dispose of or other wise par t with any of his assets
with a view to avoiding payment of any liability under the pr ovisions of this Act,
the total income of such per son for the per iod fr om the expir y of the pr evious
year for that assessment year to the date when the
21
[Assessing] Officer com-
mences pr oceedings under this section shall be char geable to tax in that
assessment year , and the pr ovisions of sub-sections (2), (3), (4), (5) and (6) of
section 174 shall, so far as may be, apply to any pr oceedings in the case of any
such per son as they apply in the case of per sons leaving India.
L.Discon tin uan ce of busin ess, or dissolution
Discontinued business.
23
176. (1) Notwithstanding anything contained in section 4, wher e any business
or pr ofession is discontinued in any assessment year , the income of the
per iod fr om the expir y of the pr evious year for that assessment year up to the
date of such discontinuance may, at the discr etion of the
21
be char ged to tax in that assessment year .
S. 176 I.T. ACT, 1961 1.722
1-4-1988.
22. Sub-heading JA, consisting of section 174A, inser ted by the Finance Act, 2002, w.e.f.
1-4-2002.
23. See also Instr uction No. 703, dated 12-6-1974. For details, see Taxmanns Master Guide to
Income-tax Act.
(2) The total income of each completed pr evious year or par t of any pr evious year
included in such per iod shall be char geable to tax at the r ate or r ates in for ce in
that assessment year , and separ ate assessments shall be made in r espect of each
such completed pr evious year or par t of any pr evious year .
(3) Any per son discontinuing any business or pr ofession shall give to the
24
[Assessing] Officer notice of such discontinuance within fifteen days ther eof.
25
[(3A) Wher e any business is discontinued in any year , any sum r eceived after
the discontinuance shall be deemed to be the income of the r ecipient and
char ged to tax accor dingly in the year of r eceipt, if such sum would have been
included in the total income of the per son who car r ied on the business had such
sum been r eceived befor e such discontinuance.]
(4) Wher e any pr ofession is discontinued in any year on account of the cessation
of the pr ofession by, or the r etir ement or death of, the per son car r ying on the
pr ofession, any sum r eceived after the discontinuance shall be deemed to be the
income of the r ecipient and char ged to tax accor dingly in the year of r eceipt, if
such sum would have been included in the total income of the afor esaid per son
had it been r eceived befor e such discontinuance.
(5) Wher e an assessment is to be made under the pr ovisions of this section, the
24
[Assessing] Officer may ser ve on the per son whose income is to be assessed or ,
in the case of a fir m, on any per son who was a par tner of such fir m at the time
of its discontinuance or , in the case of a company, on the pr incipal officer ther eof,
a notice containing all or any of the r equir ements which may be included in a
notice under
26
[clause (i) of sub-section (1) of section 142] and the pr ovisions of
this Act shall, so far as may be, apply accor dingly as if the notice wer e a notice
issued under
26
[clause (i) of sub-section (1) of section 142].
(6) The tax char geable under this section shall be in addition to the tax, if any,
char geable under any other pr ovision of this Act.
(7) Wher e the pr ovisions of sub-section (1) ar e applicable, any notice issued by
the
27
[Assessing] Officer under
28
[clause (i) of sub-section (1) of section 142 or ]
section 148 in r espect of any tax char geable under any other pr ovisions of this
Act may, notwithstanding anything contained in
29
[clause (i) of sub-section (1) of
section 142 or ] section 148, as the case may be, r equir e the fur nishing of the
r etur n by the per son to whom the afor esaid notices ar e issued within such per iod,
not being less than seven days, as the
30
[Assessing] Officer may think pr oper .
Association dissolved or business discontinued.
177. (1) Wher e any business or pr ofession car r ied on by an association of
per sons has been discontinued or wher e an association of per sons is
1.723 CH. XV - LIABILITY IN SPECIAL CASES - DISCONTINUANCE OF BUSINESS S. 177
1-4-1988.
26. Substituted for sub-section (2) of section 139 by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989.
28. Substituted for sub-section (2) of section 139, ibid., w.e.f. 1-4-1989.
29. Substituted for sub-section (2) of section 139 or sub-section (1) of, ibid.
dissolved, the
31
[Assessing] Officer shall make an assessment of the total income
of the association of per sons as if no such discontinuance or dissolution had
taken place, and all the pr ovisions of this Act, including the pr ovisions r elating to
the levy of a penalty or any other sum char geable under any pr ovision of this Act
shall apply, so far as may be, to such assessment.
(2) Without pr ejudice to the gener ality of the for egoing sub-section, if the
31
[Assessing] Officer or the
32
[* * *]
33
[Commissioner (Appeals)] in the cour se of
any pr oceeding under this Act in r espect of any such association of per sons as
is r efer r ed to in that sub-section is satisfied that the association of per sons was
guilty of any of the acts specified in Chapter XXI, he may impose or dir ect the
imposition of a penalty in accor dance with the pr ovisions of that Chapter .
(3) Ever y per son who was at the time of such discontinuance or dissolution a
member of the association of per sons, and the legal r epr esentative of any such
per son who is deceased, shall be jointly and sever ally liable for the amount of tax,
penalty or other sum payable, and all the pr ovisions of this Act, so far as may be,
shall apply to any such assessment or imposition of penalty or other sum.
(4) Wher e such discontinuance or dissolution takes place after any pr oceedings
in r espect of an assessment year have commenced, the pr oceedings may be
continued against the per sons r efer r ed to in sub-section (3) fr om the stage at
which the pr oceedings stood at the time of such discontinuance or dissolution,
and all the pr ovisions of this Act shall, so far as may be, apply accor dingly.
(5) Nothing in this section shall affect the pr ovisions of sub-section (6) of
section 159.
Company in liquidation.
178. (1) Ever y per son
(a) who is the liquidator of any company which is being wound up,
whether under the or der s of a cour t or other wise ; or
(b) who has been appointed the r eceiver of any assets of a company,
(her einafter r efer r ed to as the liquidator ) shall, within thir ty days after he has
become such liquidator , give notice of his appointment as such to the
34
[Assess-
ing] Officer who is entitled to assess the income of the company.
(2) The
34
[Assessing] Officer shall, after making such inquir ies or calling for such
infor mation as he may deem fit, notify to the liquidator within thr ee months fr om
the date on which he r eceives notice of the appointment of the liquidator the
amount which, in the opinion of the
35
[Assessing] Officer , would be sufficient to
S. 178 I.T. ACT, 1961 1.724
1-4-1988.
1-4-1988.
1.725 CH. XV - LIABILITY IN SPECIAL CASES - PRIVATE COMPANIES S. 179
pr ovide for any tax which is then, or is likely ther eafter to become, payable by
the company.
36
[(3) The liquidator
(a) shall not, without the leave of the
37
sioner ], par t with any of the assets of the company or the pr oper ties
in his hands until he has been notified by the
38
[Assessing] Officer
under sub-section (2) ; and
(b) on being so notified, shall set aside an amount, equal to the amount
notified and, until he so sets aside such amount, shall not par t with any
of the assets of the company or the pr oper ties in his hands :
Provided that nothing contained in this sub-section shall debar the liquidator
fr om par ting with such assets or pr oper ties for the pur pose of the payment of the
tax payable by the company or for making any payment to secur ed cr editor s
whose debts ar e entitled under law to pr ior ity of payment over debts due to
Gover nment on the date of liquidation or for meeting such costs and expenses
of the winding up of the company as ar e in the opinion of the
39
[Chief Commis-
sioner or Commissioner ] r easonable.
(4) If the liquidator fails to give the notice in accor dance with sub-section (1) or
fails to set aside the amount as r equir ed by sub-section (3) or par ts with any of
the assets of the company or the pr oper ties in his hands in contr avention of the
pr ovisions of that sub-section, he shall be per sonally liable for the payment of the
tax which the company would be liable to pay :
Provided that if the amount of any tax payable by the company is notified under
sub-section (2), the per sonal liability of the liquidator under this sub-section shall
be to the extent of such amount.]
(5) Wher e ther e ar e mor e liquidator s than one, the obligations and liabilities
attached to the liquidator under this section shall attach to all the liquidator s
jointly and sever ally.
(6) The pr ovisions of this section shall have effect notwithstanding anything to
the contr ar y contained in any other law for the time being in for ce.
40
[M.Private com pan ies]
Liability of directors of private company in liquidation.
179.
41
[(1)] Notwithstanding anything contained in the Companies Act, 1956
(1 of 1956),
42
[wher e any tax due fr om a pr ivate company in r espect of any
1-4-1988.
40. Substituted for M.Private compan y in liquidation by the Taxation Laws (Amendment)
Act, 1975, w.e.f. 1-10-1975.
42. Substituted for when any pr ivate company is wound up after the commencement of this
Act, and any tax assessed on the company, whether befor e or in the cour se of or after its
liquidation, in r espect of any income of any pr evious year , ibid.
S. 180A I.T. ACT, 1961 1.726
income of any pr evious year or fr om any other company in r espect of any income
of any pr evious year dur ing which such other company was a pr ivate company]
cannot be r ecover ed, then, ever y per son who was a dir ector of the pr ivate
company at any time dur ing the r elevant pr evious year shall be jointly and
sever ally liable for the payment of such tax unless he pr oves that the non-
r ecover y cannot be attr ibuted to any gr oss neglect, misfeasance or br each of
duty on his par t in r elation to the affair s of the company.
43
[(2) Wher e a pr ivate company is conver ted into a public company and the tax
assessed in r espect of any income of any pr evious year dur ing which such
company was a pr ivate company cannot be r ecover ed, then, nothing contained
in sub-section (1) shall apply to any per son who was a dir ector of such pr ivate
company in r elation to any tax due in r espect of any income of such pr ivate
company assessable for any assessment year commencing befor e the 1st day of
Apr il, 1962.]
N.Special provision s for certain k in ds of in com e
44
Royalties or copyright fees for literary or artistic work.
180. Wher e the time taken by the author of a liter ar y or ar tistic wor k in the
making ther eof is mor e than twelve months, the amount r eceived or
r eceivable by him dur ing any pr evious year on account of any lump sum
consider ation for the assignment or gr ant of any of his inter ests in the copyr ight
of that wor k or of r oyalties or copyr ight fees (whether r eceivable in lump sum
or other wise), in r espect of that wor k, shall, if he so claims, be allocated for
pur poses of assessment in such manner and t o such per iod as may be
pr escr ibed :
45
[Provided that nothing contained in this section shall apply in r elation to the
pr evious year r elevant to the assessment year commencing on or after the 1st
day of Apr il, 2000.]
Explan ation .For the pur poses of this section, the expr ession author includes
a joint author , and the expr ession lump sum, in r egar d to r oyalties or copyr ight
fees, includes an advance payment on account of such r oyalties or copyr ight fees
which is not r etur nable.
46
[Consideration for know-how.
180A. Wher e the time taken by an individual, who is r esident in India, for
developing any know-how is mor e than twelve months, he may elect that
the gr oss amount of any lump sum consider ation r eceived or r eceivable by him
dur ing the pr evious year
47
[r elevant to the assessment year commencing on the
1st day of Apr il, 2000 or ear lier assessment year s] for allowing use of such know-
how shall be tr eated for the pur poses of char ging income-tax for that year and
for each of the two immediately pr eceding pr evious year s as if one-thir d ther eof
wer e included in his income char geable to tax for each of those year s r espec-
44. See r ule 9(2) for manner of computation of tax on r oyalty, etc., in cer tain cases.
1.727 CH. XVI - SPECIAL PROVISIONS - ASSESSMENT OF FIRMS S. 184
tively and if he so elects, notwithstanding anything contained in any other
pr ovision of this Act,
(a) such gr oss amount shall be so tr eated, and
(b) the assessments for each of the two pr eceding pr evious year s shall, if
made, be accor dingly r ectified under section 154, the per iod of four
year s specified in sub-section (7) of that section being r eckoned fr om
the end of the financial year in which the assessment r elating to the
pr evious year in which the amount was r eceived or r eceivable by
such individual is made.
Explan ation .For the pur poses of this section, the expr ession know-how has
the meaning assigned to it in section 35AB.]
48
[***]
CHAPTER XVI
SPECIAL PROVISIONS APPLICABLE TO FIRMS
49
[A.Assessm en t of f irm s]
Assessment of registered firms.
182.
50
Assessment of unregistered firms.
183.
51
52
[Assessment as a firm.
184. (1) A fir m shall be assessed as a fir m for the pur poses of this Act, if
(i) the par tner ship is evidenced by an instr ument
53
; and
(ii) the individual shares of the partners are specified
54
in that instrument
53
.
48. Section 181 and sub-heading O.Liability of State Govern m en ts omitted by the Finance
Act, 1988, w.e.f. 1-4-1989. Pr ior to its omission, section 181 was amended by the Finance
Act, 1965, w.e.f. 1-4-1965.
dat e.
50. Pr ior to omission, section 182 was omitted by the Dir ect Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989 and later r eintr oduced by the Dir ect Tax Laws (Amendment) Act, 1989,
w.e.f. 1-4-1989.
51. Pr ior to omission, section 183, as amended by the Taxation Laws (Amendment) Act, 1970,
w.e.f. 1-4-1971 and the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 was
omit t ed by t he Dir ect Tax Laws (Amendment ) Act , 1987, w.e.f. 1-4-1989 and lat er
r eintr oduced by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
52. Substituted for sub-heading B and sections 184, 185 and 186 by the Finance Act, 1992,
w.e.f. 1-4-1993. Pr ior to substitution, sub-heading B and sections 184, 185 and 186 wer e
amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, the Taxation Laws
(Amendment) Act, 1975, w.e.f. 1-4-1976, the Taxation Laws (Amendment) Act, 1984, w.e.f.
1-10-1984, the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988/ 1-4-1989, the
Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989 and the Dir ect Tax Laws (Second
Amendment) Act, 1989, w.e.f. 1-4-1989.
53. For the meaning of ter m instr ument, see Taxmanns Dir ect Taxes Manual, Vol. 3.
54. For the meaning of ter m specified, see Taxmanns Dir ect Taxes Manual, Vol. 3.
S. 185 I.T. ACT, 1961 1.728
(2) A cer tified copy of the instr ument of par tner ship r efer r ed to in sub-section (1)
shall accompany the r etur n of income of the fir m of the pr evious year r elevant
to the assessment year commencing on or after the 1st day of Apr il, 1993 in
r espect of which assessment as a fir m is fir st sought.
Explan ation .For the pur poses of this sub-section, the copy of the instr ument of
par tner ship shall be cer tified in wr iting by all the par tner s (not being minor s) or ,
wher e the r etur n is made after the dissolution of the fir m, by all per sons (not
being minor s) who wer e par tner s in the fir m immediately befor e its dissolution
and by the legal r epr esentative of any such par tner who is deceased.
(3) Wher e a fir m is assessed as such for any assessment year , it shall be assessed
in the same capacity for ever y subsequent year if ther e is no change in the
constitution of the fir m or the shar es of the par tner s as evidenced by the
instr ument of par tner ship on the basis of which the assessment as a fir m was
fir st sought.
(4) Wher e any such change had taken place in the pr evious year , the fir m shall
fur nish a cer tified copy of the r evised instr ument of par tner ship along with the
r etur n of income for the assessment year r elevant to such pr evious year and all
the pr ovisions of this section shall apply accor dingly.
55
[(5) Notwithstanding anything contained in any other pr ovision of this Act,
wher e, in r espect of any assessment year , ther e is on the par t of a fir m any such
failur e as is mentioned in section 144, the fir m shall be so assessed that no
deduction by way of any payment of inter est, salar y, bonus, commission or
r emuner ation, by whatever name called, made by such fir m to any par tner of
such fir m shall be allowed in computing the income char geable under the head
Pr ofits and gains of business or pr ofession and such inter est, salar y, bonus,
commission or r emuner ation shall not be char geable to income-tax under clause
(v) of section 28.]
56
[Assessment when section 184 not complied with.
185. Notwithstanding anything contained in any other pr ovision of this Act,
wher e a fir m does not comply with the pr ovisions of section 184 for any
assessment year , the fir m shall be so assessed that no deduction by way of any
payment of inter est, salar y, bonus, commission or r emuner ation, by whatever
name called, made by such fir m to any par tner of such fir m shall be allowed in
(5) Notwithstanding anything contained in the for egoing pr ovisions of this section, wher e,
in r espect of any assessment year , ther e is on the par t of a fir m any such failur e as is
mentioned in section 144, the fir m shall not be assessed as such for the said assessment
year and, ther eupon, the fir m shall be assessed in the same manner as an association of
per sons, and all the pr ovisions of this Act shall apply accor dingly.
56. Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Pr ior to its substitution, section 185
r ead as under :
185. Assessmen t wh en section 184 n ot complied with .Wher e a fir m does not comply
with the pr ovisions of section 184 for any assessment year , the fir m shall be assessed for
that assessment year in the same manner as an association of per sons, and all the
pr ovisions of this Act shall apply accor dingly.
1.729 CH. XVI - SPECIAL PROVISIONS - CHANGES IN CONSTITUTION, ETC. S. 189
or pr ofession and such inter est, salar y, bonus, commission or r emuner ation
shall not be char geable to income-tax under clause (v) of section 28.]
C.Ch an ges in con stitution , succession an d dissolution
56a
Change in constitution of a firm.
187. (1) Wher e at the time of making an assessment under section 143 or
section 144 it is found that a change has occur r ed in the constitution of a
fir m, the assessment shall be made on the fir m as constituted at the time of
making the assessment.
57
[***]
(2) For the pur poses of this section, ther e is a change in the constitution of the
fir m
(a) if one or mor e of the par tner s cease to be par tner s
58
or one or mor e
new par tner s ar e admitted, in such cir cumstances that one or mor e
of the per sons who wer e par tner s of the fir m befor e the change
continue as par tner or par tner s after the change ; or
58
(b) wher e all the par tner s continue with a change in their r espective
shar es or in the shar es of some of them :
59
[Provided that nothing contained in clause (a) shall apply to a case wher e the
fir m is dissolved on the death of any of its par tner s.]
Succession of one firm by another firm.
188. Wher e a fir m car r ying on a business or pr ofession is succeeded by another
fir m, and the case is not one cover ed by section 187, separ ate assessments
shall be made on the pr edecessor fir m and the successor fir m in accor dance with
the pr ovisions of section 170.
60
[Joint and several liability of partners for tax payable by firm.
188A. Ever y per son who was, dur ing the pr evious year , a par tner of a fir m, and
the legal r epr esentative of any such per son who is deceased, shall be
jointly and sever ally liable along with the fir m for the amount of tax, penalty or
other sum payable by the fir m for the assessment year to which such pr evious
year is r elevant, and all the pr ovisions of this Act, so far as may be, shall apply to
the assessment of such tax or imposition or levy of such penalty or other sum.]
Firm dissolved or business discontinued.
189. (1) Wher e any business or pr ofession car r ied on by a fir m has been
discontinued or wher e a fir m is dissolved, the
61
make an assessment of the total income of the fir m as if no such discontinuance
56a. In view of substitution of sections 184, 185 & 186 by sections 184 & 185 by the Finance Act,
1992, w.e.f. 1-4-1993, ther e is no section with number 186.
57. Omitted by the Finance Act, 1992, w.e.f. 1-4-1993. Pr ior to omission, the pr oviso was
omit t ed by t he Dir ect Tax Laws (Amendment ) Act , 1987, w.e.f. 1-4-1989 and lat er
r eintr oduced by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
58. For the meaning of the ter ms/ expr essions cease to be par tner s and or , see Taxmanns
S. 189A I.T. ACT, 1961 1.730
or dissolution had taken place, and all the pr ovisions of this Act, including
the pr ovisions r elating to the levy of a penalty or any other sum char geable
under any pr ovision of this Act, shall apply, so far as may be, to such assess-
ment.
(2) Without pr ejudice to the gener ality of the for egoing sub-section, if the
62
63
[***]
64
[Commissioner (Appeals)] in the cour se of any
pr oceeding under this Act in r espect of any such fir m as is r efer r ed to in that sub-
section is satisfied that the fir m was guilty of any of the acts specified in Chapter
XXI, he may impose or dir ect the imposition of a penalty in accor dance with the
pr ovisions of that Chapter .
(3) Ever y per son who was at the time of such discontinuance or dissolution a
par tner of the fir m, and the legal r epr esentative of any such per son who is
deceased, shall be jointly and sever ally liable for the amount of tax, penalty or
other sum payable, and all the pr ovisions of this Act, so far as may be, shall apply
to any such assessment or imposition of penalty or other sum.
Explan ation .
65
(4) Wher e such discontinuance or dissolution takes place after any pr oceedings
in r espect of an assessment year have commenced, the pr oceedings may be
continued against the per son r efer r ed to in sub-section (3) fr om the stage at
which the pr oceedings stood at the time of such discontinuance or dissolution,
and all the pr ovisions of this Act shall, so far as may be, apply accor dingly.
(5) Nothing in this section shall affect the pr ovisions of sub-section (6) of section
159.
66
[Provisions applicable to past assessments of firms.
189A. In r elation to the assessment of any fir m and its par tner s for the assess-
ment year commencing on the 1st day of Apr il, 1992, or any ear lier
assessment year , the pr ovisions of this Chapter as they stood immediately befor e
the 1st day of Apr il, 1993, shall continue to apply.]
1-4-1988.
65. Pr ior to omission, Explan ation , as inser ted by the Taxation Laws (Amendment) Act, 1975,
w.e.f. 1-10-1975 was omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989 and later r eintr oduced by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
66. Inser ted by the Finance Act, 1992, w.e.f. 1-4-1993. Ear lier section 189A, which made
pr ovisions applicable to past assessments of fir ms and inser ted by the Dir ect Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1989, was omitted by the Dir ect Tax Laws (Amendment)
1.731 CH. XVII - COLLECTION & RECOVERY - GENERAL S. 191
CHAPTER XVI I
66a
COLLECTION AND RECOVERY OF TAX
A.Gen eral
Deduction at source and advance payment.
67
190. (1) Notwithstanding that the r egular assessment in r espect of any
income is to be made in a later assessment year , the tax on such income
shall be payable by deduction
68
[or collection] at sour ce or by advance payment
69
[or by payment under sub-section (1A) of section 192], as the case may be, in
accor dance with the pr ovisions of this Chapter .
(2) Nothing in this section shall pr ejudice the char ge of tax on such income under
the pr ovisions of sub-section (1) of section 4.
Direct payment.
70
191.
71
[***] In the case of income in r espect of which pr ovision is not made
under this Chapter for deducting income-tax at the time of payment,
and in any case wher e income-tax has not been deducted in accor dance with
the pr ovisions of this Chapter , income-tax shall be payable by the assessee
dir ect.
72
[***]
73
[Explanation.For th e rem oval of doubts, it is h ereby declared th at if an y
person , in cludin g th e prin cipal officer of a com pan y,
(a) wh o is required to deduct an y sum in accordan ce with th e provision s
of th is Act; or
(b) referred to in sub-section (1A) of section 192, bein g an em ployer,
does n ot deduct, or after so deductin g fails to pay, or does n ot pay, th e wh ole or an y
part of th e tax, as required by or un der th is Act, an d wh ere th e assessee h as also
failed to pay such tax directly, th en , such person sh all, with out prejudice to an y
oth er con sequen ces wh ich h e m ay in cur, be deem ed to be an assessee in default
with in th e m ean in g of sub-section (1) of section 201, in respect of such tax.]
66a. For electr onic payment of tax, see r ule 125.
67. For clar ification r egar ding tax deduction at sour ce under Chapter XVII clar ifying that
payment of any sum shall be liable for deduction of tax only under one section, see
Cir cular No. 720, dated 30-8-1995. For details, see Taxmanns Master Guide to Income-tax
Act .
71. (1) omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
72. Sub-section (2) omitted, ibid.
73. Substituted by the Finance Act, 2008, w.r .e.f. 1-6-2003. Pr ior to its substitution, Explan a-
tion as inser ted by the Finance Act, 2003, w.e.f. 1-6-2003, r ead as under :
Explan ation .For the r emoval of doubts, it is her eby declar ed that if any per son r efer r ed
to in section 200 and in the cases r efer r ed to in section 194, the pr incipal officer and the
company of which he is the pr incipal officer does not deduct the whole or any par t of the
tax and such tax has not been paid by the assessee dir ect, then, such per son, the pr incipal
officer and the company shall, without pr ejudice to any other consequences which he or
it may incur , be deemed to be an assessee in default as r efer r ed to in sub-section (1) of
section 201 in r espect of such tax.
S. 192 I.T. ACT, 1961 1.732
B.Deduction at source
Salary.
74
192.
75
(1) Any per son r esponsible for paying any income char geable under
the head Salar ies shall, at the time of payment, deduct income-tax
76
[***] on the amount payable at the aver age r ate of income-tax
77
[***] computed
on the basis of the
78
[r ates in for ce] for the financial year in which the payment
is made, on the estimated income of the assessee under this head for that
financial year .
79
[(1A) Without pr ejudice to the pr ovisions contained in sub-section (1), the
per son r esponsible for paying any income in the natur e of a per quisite which is
not pr ovided for by way of monetar y payment, r efer r ed to in clause (2) of section
17, may pay, at his option, tax on the whole or par t of such income without making
any deduction ther efr om at the time when such tax was other wise deductible
under the pr ovisions of sub-section (1).
(1B) For the pur pose of paying tax under sub-section (1A), tax shall be deter -
mined at the aver age of income-tax computed on the basis of the r ates in for ce
for the financial year , on the income char geable under the head Salar ies
including the income r efer r ed to in sub-section (1A), and the tax so payable shall
be constr ued as if it wer e, a tax deductible at sour ce, fr om the income under the
head Salar ies as per the pr ovisions of sub-section (1), and shall be subject to the
pr ovisions of this Chapter .]
80
[(2) Wher e, dur ing the financial year , an assessee is employed simultaneously
under mor e than one employer , or wher e he has held successively employment
under mor e than one employer , he may fur nish to the per son r esponsible for
making the payment r efer r ed to in sub-section (1) (being one of the said
employer s as the assessee may, having r egar d to the cir cumstances of his case,
choose), such details of the income under the head Salar ies due or r eceived by
him fr om the other employer or employer s, the tax deducted at sour ce ther efr om
and such other par ticular s, in such for m and ver ified in such manner as may be
pr escr ibed
81
, and ther eupon the per son r esponsible for making the payment
r efer r ed to above shall take into account the details so fur nished for the pur poses
of making the deduction under sub-section (1).]
74. See also Letter [F. No. 12/ 71/ 65-IT(B)(Extr act)], dated 5-3-1966, Cir cular No. 504, dated
8-2-1988, Cir cular No. 483, dated 4-3-1987, Cir cular No. 147, dated 28-10-1974, Letter
[F.No. 237/ 4/ 75-A & PAC], dated 23-11-1976, Cir cular No. 285, dated 21-10-1980, Cir cular
10-10-1997, Cir cular No. 758, dated 7-11-1997, Cir cular No. 761, dated 13-1-1998, Cir cular
No. 9/ 2003, dated 18-11-2003, Cir cular No. 6/ 2004, dated 6-12-2004 [r ead with cor r igendum
275/ 192/ 2004-IT(B), dated 25-1-2005] and Cir cular No. 11/ 2006, dated 16-11-2006. For
75. See r ules 26A, 26B, 28(1), 28AA, 28AB, 30, 31, 31A, 31AB, 33, 36 and 37 and For m Nos. 12B,
12BA, 13, 16, 16AA, 24Q and 26AS.
77. and aver age r ate of super -tax r espectively omitted, ibid.
78. Substituted for r ates of tax in for ce by the Finance Act, 1968, w.e.f. 1-4-1968.
80. Inser ted by the Finance Act, 1987, w.e.f. 1-6-1987. Or iginal sub-section was omitted by the
Finance Act, 1965, w.e.f. 1-4-1965.
81. See r ule 26A and For m No. 12B.
82
[(2A) Wher e the assessee, being a Gover nment ser vant or an employee in a
83
[company, co-oper ative society, local author ity, univer sity, institution, associa-
tion or body] is entitled to the r elief under sub-section (1) of section 89, he may
fur nish to the per son r esponsible for making the payment r efer r ed to in sub-
section (1), such par ticular s, in such for m and ver ified in such manner as may be
pr escr ibed, and ther eupon the per son r esponsible as afor esaid shall compute the
r elief on the basis of such par ticular s and take it into account in making the
deduction under sub-section (1).]
84
[Explan ation .For the pur poses of this sub-section, Univer sity means a
Univer sity established or incor por ated by or under a Centr al, State or Pr ovincial
Act, and includes an institution declar ed under section 3 of the Univer sity Gr ants
Commission Act, 1956 (3 of 1956), to be a Univer sity for the pur poses of that Act.]
85
[(2B) Wher e an assessee who r eceives any income char geable under the head
Salar ies has, in addition, any income char geable under any other head of
income (not being a loss under any such head other than the loss under the head
Income fr om house pr oper ty) for the same financial year , he may send to the
per son r esponsible for making the payment r efer r ed to in sub-section (1) the
par ticular s of
(a) such other income and of any tax deducted ther eon under any other
pr ovision of this Chapter ;
(b) the loss, if any, under the head Income fr om house pr oper ty,
in such for m and ver ified in such manner as may be pr escr ibed
86
, and ther eupon
the per son r esponsible as afor esaid shall take
(i) such other income and tax, if any, deducted ther eon; and
(ii) the loss, if any, under the head Income fr om house pr oper ty,
also into account for the pur poses of making the deduction under sub-
section (1) :
Provided that this sub-section shall not in any case have the effect of r educing
the tax deductible except wher e the loss under the head Income fr om house
pr oper tyhas been taken into account, fr om income under the head Salar ies
below the amount that would be so deductible if the other income and the tax
deducted ther eon had not been taken into account.]
87
[(2C) A per son r esponsible for paying any income char geable under the head
Salar ies shall fur nish to the per son to whom such payment is made a statement
giving cor r ect and complete par ticular s of per quisites or pr ofits in lieu of salar y
pr ovided to him and the value ther eof in such for m and manner as may be
pr escr ibed
88
.]
1.733 CH. XVII - COLLECTION & RECOVERY - DEDUCTION AT SOURCE S. 192
82. Inser ted by the Finance Act, 1987, w.e.f. 1-6-1987. See r ule 21AA and For m No. 10E.
83. Substituted for public sector under taking by the Finance Act, 1989, w.e.f. 1-6-1989.
section (2B) was inser ted by the Finance Act, 1987, w.e.f. 1-6-1987.
86. See r ule 26B.
88. See r ule 26A and For m Nos. 12BA and 16.
(3) The per son r esponsible for making the payment r efer r ed to in sub-section (1)
89
90
[or sub-section (2) or sub-section (2A) or sub-section (2B)]
may, at the time of making any deduction, incr ease or r educe the amount to be
deducted under this section for the pur pose of adjusting any excess or deficiency
ar ising out of any pr evious deduction or failur e to deduct dur ing the financial
year .
(4) The tr ustees of a r ecognised pr ovident fund, or any per son author ised by the
r egulations of the fund to make payment of accumulated balances due to
employees, shall, in cases wher e sub-r ule (1) of r ule 9 of Par t A of the Four th
Schedule applies, at the time an accumulated balance due to an employee is paid,
make ther efr om the deduction pr ovided in r ule 10 of Par t A of the Four th
Schedule.
91
(5) Wher e any contr ibution made by an employer , including inter est on
such contr ibutions, if any, in an appr oved super annuation fund is paid to the
employee,
92
[tax] on the amount so paid shall be deducted by the tr ustees of the
fund to the extent pr ovided in r ule 6 of Par t B of the Four th Schedule.
93
(6) For the pur poses of deduction of tax on salar y payable in for eign cur r ency,
the value in r upees of such salar y shall be calculated at the pr escr ibed r ate of
exchange.
94
[***]
95
Interest on securities.
96
193. The per son r esponsible for paying
97
[to a r esident] any income
98
[by way
of inter est on secur ities] shall,
99
[at the time of cr edit of such income to the
account of the payee or at the time of payment ther eof in cash or by issue of a
cheque or dr aft or by any other mode, whichever is ear lier ], deduct income-tax
1
[***] at the r ates in for ce on the amount of the inter est payable :
2
[***]
S. 193 I.T. ACT, 1961 1.734
90. Inser ted by the Finance Act, 1987, w.e.f. 1-6-1987. Ear lier or sub-section (2) was omitted
91. See r ule 33.
92. Substituted for income-tax and super -tax by the Finance Act, 1965, w.e.f. 1-4-1965.
93. See r ules 26 and 115.
94. Explan ation omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
95. See r ules 28(1), 28AA, 28AB, 29C, 30, 31, 31A, 31AB, 37 and 37A and For m Nos. 13, 15G, 15H,
16A, 26Q, 26AS and 27Q.
96. See also Cir cular No. 2, dated 6-2-1969, Cir cular No. 28P (XXXIV-4), dated 16-5-1966,
Cir cular No. 735, dated 30-1-1996, Cir cular No. 741, dated 18-4-1996, Cir cular No. 745,
dat ed 19-7-1996, Cir cular No. 3/ 2002, dat ed 28-6-2002, Cir cular No. 11/ 2002, dat ed
22-11-2002, Cir cular No. 2/ 2003, dated 11-3-2003, Cir cular No. 3/ 2003, dated 11-3-2003
and Cir cular No. 4/ 2004, dated 13-5-2004. For details, see Taxmanns Master Guide to
Income-tax Act.
98. Substituted for char geable under the head Inter est on secur ities by the Finance Act,
1988, w.e.f. 1-4-1989.
99. Substituted for at the time of payment by the Finance Act, 1989, w.e.f. 1-6-1989.
2. Omitted by the Finance Act, 1992, w.e.f. 1-6-1992. Pr ior to omission, fir st pr oviso was
1.735 CH. XVII - COLLECTION AND RECOVERY - DEDUCTION AT SOURCE S. 193
3
[Provided
4
[***] that no tax shall be deducted fr om
(i) any inter est payable on 4 per cent National Defence Bonds, 1972,
wher e the bonds ar e held by an individual, not being a non-r esident;
or
5
[(ia) any inter est payable to an individual on 4 per cent National
Defence Loan, 1968, or 4 per cent National Defence Loan, 1972; or ]
6
[(ib) any inter est payable on National Development Bonds; or ]
(ii)
7
[***]
8
[(iia) any int er est payable on 7-Year Nat ional Savings Cer t ificat es
(IV Issue); or ]
9
[(iib) any inter est payable on such debentur es, issued by any institution or
author ity, or any public sector company, or any co-oper ative society
(including a co-oper ative land mor tgage bank or a co-oper ative land
development bank), as the Centr al Gover nment may, by notification
10
in the Official Gazette, specify in this behalf;]
11
[***]]
(iii) any inter est payable on 6 per cent Gold Bonds, 1977, or 7 per cent
Gold Bonds, 1980, wher e the Bonds ar e held by an individual not being
a non-r esident, and the holder ther eof makes a declar ation in wr iting
befor e the per son r esponsible for paying the inter est that the total
nominal value of the 6 per cent Gold Bonds, 1977, or , as the case may
be, the 7 per cent Gold Bonds, 1980, held by him (including such bonds,
if any, held on his behalf by any other per son) did not in either case
exceed ten thousand r upees at any time dur ing the per iod to which
the inter est r elates;
(iiia)
12
[* * *]
3. Substituted by the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965. Or iginal pr oviso was inser ted
by the Taxation Laws (Amendment) Act, 1962, w.e.f. 13-12-1962.
4. Wor d fur ther omitted by the Finance Act, 1992, w.e.f. 1-6-1992. Ear lier , fur ther was
4-12-1965.
Act, 1970, w.e.f. 1-4-1970.
10. For specified debentur es/ bonds, see Taxmanns Dir ect Taxes Cir cular s and Taxmanns
Year ly Tax Digest & Refer encer .
11. Explan ation omitted by the Finance Act, 1987, w.e.f. 1-4-1987. Omitted Explan ation was
12. Omitted by the Finance Act, 1997, w.e.f. 1-6-1997. Pr ior to its omission, clause (iiia), as
(iiia) any inter est payable on such secur ities of the Centr al Gover nment or a State
Gover nment, to such class of per sons, and subject to such conditions, as the
Centr al Gover nment may, by notification in the Official Gazette, specify in this
behalf;
13
[(iv) any inter est payable on any secur ity of the Centr al Gover nment or a
State Gover nment:]
14
[Provided that nothing contained in this clause shall apply to the
inter est exceeding r upees ten thousand payable on 8% Savings (Tax-
able) Bonds, 2003 dur ing the financial year ;]
15
[(v) any inter est payable to an individual, who is r esident in India, on
debentur es issued by a company in which the public ar e substantially
inter ested, being debentur es listed on a r ecognised stock exchange in
India in accor dance with the Secur ities Contr acts (Regulation) Act,
1956 (42 of 1956), and any r ules made ther eunder , if
(a) the inter est is paid by the company by an account payee cheque;
and
(b) the amount of such inter est or , as the case may be, the aggr egate
of the amounts of such inter est paid or likely to be paid dur ing the
financial year by the company to such individual does not exceed
16
[two thousand and five hundr ed r upees];]
17
[(vi) any inter est payable to the Life Insur ance Cor por ation of India
established under the Life Insur ance Cor por ation Act, 1956 (31 of
1956), in r espect of any secur ities owned by it or in which it has full
beneficial inter est; or
(vii) any inter est payable to the Gener al Insur ance Cor por ation of India
(her eafter in this clause r efer r ed to as the Cor por ation) or to any of
the four companies (her eafter in this clause r efer r ed to as such
company), for med by vir tue of the schemes fr amed under sub-
sect ion (1) of sect ion 16 of t he Gener al Insu r ance Bu siness
(Nationalisation) Act, 1972 (57 of 1972), in r espect of any secur ities
owned by the Cor por ation or such company or in which the Cor po-
r ation or such company has full beneficial inter est; or
(viii) any inter est payable to any other insur er in r espect of any secur ities
owned by it or in which it has full beneficial inter est;]
17a
[(ix) an y in terest payable on an y security issued by a com pan y, wh ere such
security is in dem aterialised form an d is listed on a recogn ised stock
S. 193 I.T. ACT, 1961 1.736
13. Substituted by the Finance Act, 1997, w.e.f. 1-6-1997. Pr ior to its substitution, clause (iv),
(iv ) any inter est payable on any other secur ity of the Centr al or State Gover nment,
wher e the secur ity is held by an individual, not being a non-r esident, and the holder
ther eof makes a declar ation in wr iting befor e the per son r esponsible for paying the
inter est that
(a) he has not pr eviously been assessed under this Act or under the Indian
Income-tax Act, 1922 (11 of 1922);
(b) his total income of the pr evious year in which the inter est is due is not likely
to exceed the maximum amount not char geable to tax; and
(c) t he t ot al nominal value of t he secur it ies held by him (including such
secur ities, if any, as ar e held on his behalf by any other per son) did not exceed
two thousand five hundr ed r upees at any time dur ing the said pr evious year ;
14. Inser ted by the Finance Act, 2007, w.e.f. 1-6-2007. See also Notification F-4(10)-W&M/
2003, dated 31-5-2007. For details, see Taxmanns Master Guide to Income-tax Act.
16. Substituted for one thousand r upees by the Finance Act, 1989, w.e.f. 1-6-1989.
17. Clauses (vi), (vii) and (viii) inser ted by the Finance Act, 2002, w.e.f. 1-6-2002.
exch an ge in In dia in accordan ce with th e Securities Con tracts (Regu-
lation ) Act, 1956 (42 of 1956) an d th e rules m ade th ereun der.]
18
[Explan ation
19
[***].For the pur poses of this section, wher e any income by
way of inter est on secur ities is cr edited to any account, whether called Inter est
payable account or Suspense account or by any other name, in the books of
account of the per son liable to pay such income, such cr editing shall be deemed
to be cr edit of such income to the account of the payee and the pr ovisions of this
section shall apply accor dingly.]
Explan ation 2.
20
Dividends.
21
194.
22
The pr incipal officer of an Indian company or a company which has
made the pr escr ibed ar r angements for the declar ation and payment of
dividends (including dividends on pr efer ence shar es) within India, shall, befor e
making any payment in cash or befor e issuing any cheque or war r ant in r espect
of any dividend or befor e making any distr ibution or payment to a shar eholder ,
23
[who is r esident in India,] of any dividend within the meaning of sub-clause (a)
or sub-clause (b) or sub-clause (c) or sub-clause (d) or sub-clause (e) of clause (22)
of section 2, deduct fr om the amount of such dividend, income-tax
24
[***] at the
r ates in for ce :
25
[Provided that no such deduction shall be made in the case of a shar eholder ,
being an individual, if
(a) the dividend is paid by the company by an account payee cheque; and
18. Inser ted by the Finance Act, 1989, w.e.f. 1-6-1989. Or iginal Explan ation , which was inser ted
by the Finance Act, 1965, w.e.f. 1-4-1965, was omitted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
19. Figur e 1 omitted by the Finance Act, 1992, w.e.f. 1-6-1992. Ear lier , Explan ation was
r enumber ed as Explan ation 1 by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
20. Pr ior to omission, Explan ation 2, as inser ted by the Finance (No. 2) Act, 1991, w.e.f.
Explan ation 2.For the pur poses of this section, the expr ession scheduled bank shall
have the meaning assigned to it in clause (ii) of the Explan ation t o clause (viia) of sub-
section (1) of section 36.
21. See a lso Cir cu la r No. P(XXI-16), da t ed 8-1-1965, Cir cu la r No. 3P(XXI-19), da t ed
22. See r ules 27, 28(1), 28AA, 28AB, 29, 29C, 30, 31, 31A, 31AB, 37 and 37A and For m Nos. 13,
15G, 15H, 16A, 26AS, 26Q and 27Q.
25. Su bst it u t ed for t he fir st a nd second pr ovisos by t he Fina nce Act , 2002, w.e.f.
1-6-2002. Pr ior to their substitution, the fir st pr oviso, as inser ted by the Finance (No. 2) Act,
1977, w.e.f. 1-10-1977, later on substituted by the Finance Act, 1984, w.e.f. 1-6-1984 and
amended by the Finance Act, 1987, w.e.f. 1-6-1987 and Finance (No. 2) Act, 1991, w.e.f.
1-10-1991, and the second pr oviso, as inser ted by the Finance Act, 1997, w.e.f. 1-6-1997,
r ead as under :
Provided that no such deduction shall be made in the case of a shar eholder , being an
individual, of a company in which the public ar e substantially inter ested, if
(a) the dividend is paid by such company by an account payee cheque; and
(Con td. on p. 1.738)
(b) the amount of such dividend or , as the case may be, the aggr egate of
the amounts of such dividend distr ibuted or paid or likely to be
distr ibuted or paid dur ing the financial year by the company to the
shar eholder , does not exceed
26
[two thousand five hundr ed] r upees:
Provided further that the pr ovisions of this section shall not apply to such income
cr edited or paid to
(a) the Life Insur ance Cor por ation of India established under the Life
Insur ance Cor por ation Act, 1956 (31 of 1956), in r espect of any shar es
owned by it or in which it has full beneficial inter est;
(b) the Gener al Insur ance Cor por ation of India (her eafter in this pr oviso
r efer r ed to as the Cor por ation) or to any of the four companies
(her eafter in this pr oviso r efer r ed to as such company), for med by
vir tue of the schemes fr amed under sub-section (1) of section 16 of
the Gener al Insur ance Business (Nationalisation) Act, 1972 (57 of
1972), in r espect of any shar es owned by the Cor por ation or such
company or in which the Cor por ation or such company has full
beneficial inter est;
(c) any other insur er in r espect of any shar es owned by it or in which it
has full beneficial inter est :]
27
[Provided also that no such deduction shall be made in r espect of any dividends
r efer r ed to in section 115-O.]
28
[Interest other than Interest on securities.
29
194A.
30
(1) Any per son
31
, not being an individual or a Hindu undivided family,
who is r esponsible for paying
31
to a r esident any income by way of
S. 194A I.T. ACT, 1961 1.738
(b) the amount of such dividend or , as the case may be, the aggr egate of the amounts
of such dividend distr ibuted or paid or likely to be distr ibuted or paid dur ing the
financial year by the company to the shar eholder , does not exceed two thousand
five hundr ed r upees :
Provided further that no such deduction shall be made in r espect of any dividends
r efer r ed to in section 115-O.
Pr ior to its omission by the Finance Act, 1993, w.e.f. 1-6-1993, second pr oviso was amended
by the Finance Act, 1965, w.e.f. 1-4-1965, the Finance (No. 2) Act, 1977, w.e.f. 1-10-1977 and
26. Substituted for one thousand by the Finance Act, 2003, w.r .e.f. 1-8-2002.
No. 22/ 68-IT(B), dated 28-3-1968/ 13-5-1968 as modified by Letter [F. No. 12/ 23/ 68-IT(B)],
dated 7-11-1968, Cir cular No. 65, dated 2-9-1971, Letter [F. No. 12/ 12/ 68-IT (A-II)], dated
23-9-1968, Letter [F. No. 12/ 113/ 68-IT(A-II)], dated 28-10-1968, Letter [F. No. 275/ 109/ 92-
IT(B)], dat ed 21-9-1994, Cir cular No. 526, dat ed 5-12-1988, Cir cular No. 626, dat ed
No. 715, dated 8-8-1995, Cir cular No. 716, dated 9-8-1995, Cir cular No. 9/ 2002, dated
11-9-2002, Cir cular No. 3/ 2002, dated 28-6-2002, Cir cular No. 11/ 2002, dated 22-11-2002,
Cir cular No. 12/ 2002, dated 22-11-2002, Cir cular No. 2/ 2003, dated 11-3-2003 and Cir cular
No. 3/ 2003, dated 11-3-2003. For details, see Taxmanns Master Guide to Income-tax Act.
30. See r ules 28(1), 28AA, 28AB, 29C, 30, 31, 31A, 31AB, 31AC, 31ACA and 37 and For m Nos.
13, 15G, 15H, 16A, 26AS, 26Q, 26QA and 26QAA.
31. For t he meaning of t he expr essions any per son and r esponsible for paying, see
inter est other than income
32
[by way of inter est on secur ities], shall, at the time
of cr edit of such income to the account of the payee
33
or at the time of payment
ther eof in cash or by issue of a cheque or dr aft or by any other mode, whichever
is ear lier , deduct income-tax ther eon at the r ates in for ce :
34
[Provided that an individual or a Hindu undivided family, whose total sales,
gr oss r eceipts or tur nover fr om the business or pr ofession car r ied on by him
exceed the monetar y limits specified under clause (a) or clause (b) of section
44AB dur ing the financial year immediately pr eceding the financial year in
which such inter est is cr edited or paid, shall be liable to deduct income-tax under
this section.]
35
[Explan ation .For the pur poses of this section, wher e any income by way of
inter est as afor esaid is cr edited to any account, whether called Inter est payable
account or Suspense account or by any other name, in the books of account
of the per son liable to pay such income, such cr editing shall be deemed to be
cr edit of such income to the account of the payee and the pr ovisions of this
section shall apply accor dingly.]
(2)
36
(3) The pr ovisions of sub-section (1) shall not apply
37
[(i) wher e the amount of such income or , as the case may be, the
aggr egate of the amounts of such income cr edited or paid or likely to
be cr edited or paid dur ing the financial year by the per son r efer r ed
1.739 CH. XVII - COLLECTION AND RECOVERY - DEDUCTION AT SOURCE S. 194A
32. Substituted for char geable under the head Inter est on secur ities by the Finance Act,
1988, w.e.f. 1-4-1989.
33. For the meaning of the expr ession at the time of cr edit . . . account of the payee, see
34. Inser ted by the Finance Act, 2002, w.e.f. 1-6-2002. Ear lier the pr oviso was omitted by the
Finance Act, 1992, w.e.f. 1-6-1992 and pr ior to omission, it r ead as under :
Provided that no such deduction shall be made in a case wher e the per son (not being a
company or a r egister ed fir m) entitled to r eceive such income fur nishes to the per son
r esponsible for making the payment
(a) an affidavit, or
(b) a statement in wr iting,
declar ing t hat his est imat ed t ot al income assessable for t he assessment year next
following the financial year in which the income is cr edited or paid will be less than the
minimum liable to income-tax.
36. Pr ior to omission, sub-section (2) was amended by the Finance Act, 1968, w.e.f. 1-4-1968.
37. Substituted by the Finance Act, 1975, w.e.f. 1-4-1975. Section 20(2) of the Finance Act, 1975
makes an independent pr ovision r elating to substitution of clause (i). Sub-section (2) of
section 20 r ead as under :
(2) Notwithstanding the substitution of clause (i) of sub-section (3) of section 194A of the
Income-tax Act, by sub-section (1) of this section nothing in section 201 or section 276B
of that Act shall apply to, or in r elation to, any failur e to deduct income-tax under sub-
section (1) of the said section 194A on any income by way of inter est other than income
char geable under the head Inter est on secur ities cr edited or paid on or after the 1st day
of Apr il, 1975, but befor e the 1st day of June, 1975, wher e the income so cr edited or paid
at any one time does not exceed four hundr ed r upees.
to in sub-section (1) to the account of, or to, the payee,
38
[does not
exceed
(a) ten thousand r upees, wher e the payer is a banking company to
which the Banking Regulation Act, 1949 (10 of 1949) applies
(including any bank or banking institution, r efer r ed to in section
51 of that Act);
(b) ten thousand r upees, wher e the payer is a co-oper ative society
engaged in car r ying on the business of banking;
(c) ten thousand r upees, on any deposit with post office under any
scheme fr amed by the Centr al Gover nment and notified
38a
by it
in this behalf; and
(d) five thousand r upees in any other case]:]
39
[Provided that in r espect of the income cr edited or paid in r espect
of
(a) time deposits with a banking company to which the Banking
Regulation Act, 1949 (10 of 1949) applies (including any bank or
banking institution r efer r ed to in section 51 of that Act); or
(b) time deposits with a co-oper ative society engaged in car r ying on
the business of banking;
(c) deposits with a public company which is for med and r egister ed
in India with the main object of car r ying on the business of
pr oviding long-ter m finance for constr uction or pur chase of
houses in India for r esidential pur poses
40
[and which is eligible for
deduction under clause (viii) of sub-section (1) of section 36]
41
[***],
42
[* * *] the afor esaid amount shall be computed with r efer ence to the
income cr edited or paid by a br anch of the banking company or the
co-oper ative society or the public company, as the case may be;]
S. 194A I.T. ACT, 1961 1.740
38. Substituted for does not exceed five th ousan d rupees by the Finance Act, 2007, w.e.f.
1-6-2007. Ear lier the italicised wor ds wer e amended by the Finance Act, 1987, w.e.f. 1-6-
1987 and Finance Act, 2000, w.e.f. 1-6-2000.
38a. Notified scheme is Senior Citizen Saving Scheme, 2004. For details, see Taxmanns Master
Guide to Income-tax Act & Taxmanns Income-tax Rules.
pr oviso, as inser ted by the Finance Act, 1995, w.e.f. 1-7-1995, r ead as under :
Provided that in r espect of the income cr edited or paid in r espect of time deposits with
a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies
(including any bank or banking institution r efer r ed to in section 51 of that Act) or with a
co-oper ative society engaged in car r ying on the business of banking, the pr ovisions of this
clause shall have effect as if for the wor ds two thousand five hundr ed r upees, the wor ds
ten thousand r upees had been substituted and the afor esaid amount shall be computed
with r efer ence to the income cr edited or paid by a br anch of the banking company or the
co-oper ative society, as the case may be;
41. Wor ds and which is for the time being appr oved by the Centr al Gover nment for the
pur pose of clause (viii) of sub-section (1) of section 36 omitted by the Finance Act, 1999,
w.e.f. 1-4-2000.
42. The following por tion in the pr oviso omitted by the Finance Act, 2001, w.e.f. 1-6-2001 :
the pr ovisions of this clause shall have effect as if for the wor ds two thousand five
hundr ed r upees, the wor ds ten thousand r upees had been substituted and
(ii)
43
[***]
(iii) to such income cr edited or paid to
(a) any banking company to which the Banking Regulation Act, 1949
(10 of 1949), applies, or any co-oper ative society engaged in
car r ying on the business of banking (including a co-oper ative
land mor tgage bank), or
(b) any financial cor por ation established by or under a Centr al, State
or Pr ovincial Act, or
(c) the Life Insur ance Cor por ation of India established under the
Life Insur ance Cor por ation Act, 1956 (31 of 1956), or
(d) the Unit Tr ust of India established under the Unit Tr ust of India
Act, 1963 (52 of 1963), or
(e) any company or co-oper ative society car r ying on the business of
insur ance, or
(f) such other institution, association or body
44
[or class of institu-
tions, associations or bodies] which the Centr al Gover nment may,
for r easons to be r ecor ded in wr iting, notify
45
in this behalf in the
Official Gazette;
46
[(iv) to such income cr edited or paid by a fir m to a par tner of the fir m;]
(v) to such income cr edited or paid by a co-oper ative society
47
[to a
member ther eof or ] to any other co-oper ative society;]
48
[(vi) to such income cr edited or paid in r espect of deposits under any
scheme fr amed by the Centr al Gover nment and notified
49
by it in this
behalf in the Official Gazette;
50
[(vii) to such income cr edited or paid in r espect of deposits (other than time
deposits made on or after the 1st day of July, 1995) with a banking
company to which the Banking Regulation Act, 1949 (10 of 1949)
applies (including any bank or banking institution r efer r ed to in
section 51 of that Act);
(viia) to such income cr edited or paid in r espect of,
43. Clause (ii) omitted by the Finance Act, 1999, w.e.f. 1-4-2000. Pr ior to its omission, clause
(ii) r ead as under :
(ii) to such income cr edited or paid befor e the 1st day of October , 1967;
45. For complete list of notified institutions, see Taxmanns Master Guide to Income-tax Act.
46. Reintr oduced by the Dir ect Tax Laws (Amendment) Act, 1989, with r etr ospective effect
fr om 1-4-1988. Ear lier , it was omitted by the Dir ect Tax Laws (Amendment) Act, 1987, with
effect fr om the same date. Or iginal clause (iv) was inser ted by the Finance Act, 1968, w.e.f.
1-4-1968.
49. For specified cer tificates/ deposit scheme, see Taxmanns Master Guide to Income-tax Act.
50. Substituted for clause (vii) by the Finance Act, 1995, w.e.f. 1-7-1995. Pr ior to its substitu-
t ion, clause (vii) was amended by the Finance Act, 1992, w.e.f. 1-6-1992, and the Finance
(No. 2) Act, 1991, w.e.f. 1-10-1991.
(a) deposits with a pr imar y agr icultur al cr edit society or a pr imar y
cr edit society or a co-oper ative land mor tgage bank or a co-
oper ative land development bank;
(b) deposits (other than time deposits made on or after the 1st day of
July, 1995) with a co-oper ative society, other than a co-oper ative
society or bank r efer r ed to in sub-clause (a), engaged in car r ying
on the business of banking;]
51
[(viii) to such income cr edited or paid by the Centr al Gover nment under
any pr ovision of this Act or the Indian Income-tax Act, 1922 (11 of
1922), or the Estate Duty Act, 1953 (34 of 1953), or the Wealth-tax Act,
1957 (27 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or the Super
Pr ofits Tax Act, 1963 (14 of 1963), or the Companies (Pr ofits) Sur tax
Act, 1964 (7 of 1964), or the Inter est-tax Act, 1974 (45 of 1974);]
52
[(ix) to such income cr edited or paid by way of inter est on the compensa-
tion amount awar ded by the Motor Accidents Claims Tr ibunal wher e
the amount of such income or , as the case may be, the aggr egate of
the amounts of such income cr edited or paid dur ing the financial year
does not exceed fifty thousand r upees;]
53
[(x) to such income which is paid or payable by an infr astr uctur e capital
company or infr astr uctur e capital fund or a public sector company
in r elation to a zer o coupon bond issued on or after the 1st day of June,
2005 by such company or fund or public sector company.]
54
[Explan ation 1.For the pur poses of clauses (i), (vii) and (viia), time deposits
means deposits (excluding r ecur r ing deposits) r epayable on the expir y of fixed
per iods.
Explan ation 2.
55
[***]]
56
[(4) The per son r esponsible for making the payment r efer r ed to in sub-section
(1) may, at the time of making any deduction, incr ease or r educe the amount to
be deducted under this section for the pur pose of adjusting any excess or
deficiency ar ising out of any pr evious deduction or failur e to deduct dur ing the
financial year .]
Explan ation .[Om itted by th e Fin an ce Act, 1992, w.e.f. 1-6-1992.]
S. 194A I.T. ACT, 1961 1.742
54. Explan ation 1 and Explan ation 2 subst it ut ed for Explan ation by the Finance Act, 2005,
w.e.f. 1-6-2005. Pr ior to its substitution, Explan ation , as inser ted by the Finance Act, 1995,
Explan ation .For the pur poses of clauses (i), (vii) and (viia), time deposits means
deposits (excluding r ecur r ing deposits) r epayable on the expir y of fixed per iods.
55. Omitted by the Finance Act, 2006, w.e.f. 1-4-2006. Pr ior to its omission, Explan ation 2 r ead
as under :
Explan ation 2.For the pur poses of clause (x), infr astr uctur e capital company and
infr astr uctur e capital fund shall have the meanings r espectively assigned to them in
clauses (a) and (b) of Explan ation 1 t o clause (23G) of section 10.
1.743 CH. XVII - COLLECTION AND RECOVERY - DEDUCTION AT SOURCE S. 194BB
57
[Winnings from lottery or crossword puzzle.
58
194B.
59
The per son r esponsible for paying to any per son any income by way
of winnings fr om any lotter y or cr osswor d puzzle
60
[or car d game
and other game of any sor t] in an amount exceeding
61
[five thousand r upees]
shall, at the time of payment ther eof, deduct income-tax ther eon at the r ates in
for ce :
62
[***]]
63
[Provided
64
[***] that in a case wher e the winnings ar e wholly in kind or par tly
in cash and par tly in kind but the par t in cash is not sufficient to meet the liability
of deduction of tax in r espect of whole of the winnings, the per son r esponsible
for paying shall, befor e r eleasing the winnings, ensur e that tax has been paid in
r espect of the winnings.]
65
[Winnings from horse race.
194BB.
66
Any per son, being a bookmaker or a per son to whom a licence has
been gr anted by the Gover nment under any law for the time being in
for ce for hor se r acing in any r ace cour se or for ar r anging for wager ing or
betting in any r ace cour se, who is r esponsible for paying to any per son any
income by way of winnings fr om any hor se r ace in an amount exceeding
67
[two
thousand five hundr ed r upees] shall, at the time of payment ther eof, deduct
income-tax ther eon at the r ates in for ce.
68
[***]]
Income-tax Act.
59. See r ules 30, 31, 31A, 31AB and 37 and For m Nos. 16A, 26AS and 26Q.
61. Substituted for one thousand r upees by the Finance Act, 1986, w.e.f. 1-6-1986.
62. The fir st pr oviso omitted by the Finance Act, 1999, w.e.f. 1-4-2000. Pr ior to its omission,
t he fir st pr oviso r ead as under :
Provided that no deduction shall be made under this section fr om any payment made
befor e the 1st day of June, 1972:
64. Wor d fur ther omitted by the Finance Act, 1999, w.e.f. 1-4-2000.
67. Substituted for five th ousan d rupees by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
Ear lier italicised wor ds wer e substituted by the Finance Act, 1986, w.e.f. 1-6-1986.
68. Pr oviso omitted by the Finance Act, 1999, w.e.f. 1-4-2000. Pr ior to its omission, the
pr oviso r ead as under :
Provided that no deduction shall be made under this section fr om any payment made
befor e the 1st day of June, 1978.
S. 194C I.T. ACT, 1961 1.744
69
[Payments to contractors and sub-contractors.
70
194C.
71 72
[(1) Any per son r esponsible for paying any sum to any r esident
(her einafter in this section r efer r ed to as the contr actor ) for car r ying
out any wor k (including supply of labour for car r ying out any wor k
73
) in
pur suance of a contr act between the contr actor
73
and
(a) the Centr al Gover nment or any State Gover nment; or
(b) any local author ity; or
(c) any cor por ation established by or under a Centr al, State or Pr ovincial
Act; or
(d) any company; or
(e) any co-oper ative society; or
8-3-1994, Cir cular No. 713, dated 2-8-1995, Cir cular No. 714, dated 3-8-1995, Cir cular No.
715, dated 8-8-1995, Cir cular No. 723, dated 19-9-1995 and Cir cular No. 13/ 2006, dated
71. See r ules 28, 28AA, 28AB, 29D, 30, 31, 31A, 31AB and 37 and For m Nos. 13, 15-I, 15J, 16A,
26AS and 26Q.
(1), as amended by the Finance Act, 1973, w.e.f. 1-4-1973, Finance Act, 1992, w.e.f. 1-6-1992
(1) Any per son r esponsible for paying any sum to any r esident (her eafter in this section
r efer r ed to as the contr actor ) for car r ying out any wor k (including supply of labour for
car r ying out any wor k) in pur suance of a contr act between the contr actor and
(a) the Centr al Gover nment or any State Gover nment; or
(b) any local author ity; or
(c) any cor por ation established by or under a Centr al, State or Pr ovincial Act; or
(d) any company; or
(e) any co-oper ative society; or
(f ) any author ity, constituted in India by or under any law, engaged either for the
pur pose of dealing with and satisfying the need for housing accommodation or for
the pur pose of planning, development or impr ovement of cities, towns and villages,
or for both; or
(g) any society r egister ed under the Societies Registr ation Act, 1860 (21 of 1860) or
under any law cor r esponding to that Act in for ce in any par t of India; or
(h ) any tr ust; or
(i) any Univer sity established or incor por ated by or under a Centr al, State or Pr ovin-
cial Act and an institution declar ed to be a Univer sity under section 3 of the
Univer sity Gr ants Commission Act, 1956 (3 of 1956); or
(j) any fir m,
shall, at the time of cr edit of such sum to the account of the contr actor or at the time of
payment ther eof in cash or by issue of a cheque or dr aft or by any other mode, whichever
is ear lier , deduct an amount equal to
(i) one per cent in case of adver tising,
(ii) in any other case two per cent,
of such sum as income-tax on income compr ised ther ein.
73. For t he meaning of t he expr essions car r ying out any wor k and cont r act or , see
(f) any author ity, constituted in India by or under any law, engaged
housing accommodation or for the pur pose of planning, development
or impr ovement of cities, towns and villages, or for both; or
(g) any society r egister ed under the Societies Registr ation Act, 1860 (21
of 1860) or under any law cor r esponding to that Act in for ce in any
par t of India; or
(h ) any tr ust; or
(i) any univer sity established or incor por ated by or under a Centr al,
State or Pr ovincial Act and an institution declar ed to be a univer sity
under section 3 of the Univer sity Gr ants Commission Act, 1956 (3 of
1956) ; or
(j) any fir m; or
(k) any individual or a Hindu undivided family
73a
[or an association of
person s or a body of in dividuals, wh eth er in corporated or n ot, oth er
th an th ose fallin g un der an y of th e precedin g clauses], whose total
sales, gr oss r eceipts or tur nover fr om the business or pr ofession
car r ied on by him exceed the monetar y limits specified under clause
(a) or clause (b) of section 44AB dur ing the financial year immediately
pr eceding the financial year in which such sum is cr edited or paid to
the account of the contr actor ,
shall, at the time of cr edit of such sum to the account of the contr actor or at the
time of payment ther eof in cash or by issue of a cheque or dr aft or by any other
mode, whichever is ear lier , deduct an amount equal to
(i) one per cent in case of adver tising,
(ii) in any other case two per cent,
of such sum as income-tax on income compr ised ther ein:
Provided that no individual or a Hindu undivided family shall be liable to deduct
income-tax on the sum cr edited or paid to the account of the contr actor wher e
such sum is cr edited or paid exclusively for per sonal pur poses of such individual
or any member of Hindu undivided family.]
(2) Any per son (being a contr actor and not being an individual or a Hindu
undivided family) r esponsible for paying any sum to any r esident (her eafter in
this section r efer r ed to as the sub-contr actor ) in pur suance of a contr act with the
sub-contr actor for car r ying out, or for the supply of labour for car r ying out, the
whole or any par t of the wor k under taken by the contr actor or for supplying
whether wholly or par tly any labour which the contr actor has under taken to
supply shall, at the time of cr edit of such sum to the account of the sub-contr actor
or at the time of payment ther eof in cash or by issue of a cheque or dr aft or by
any other mode, whichever is ear lier , deduct an amount equal to one per cent of
such sum as income-tax on income compr ised ther ein :
74
[Provided that an individual or a Hindu undivided family, whose total sales,
gr oss r eceipts or tur nover fr om the business or pr ofession car r ied on by him
exceed the monetar y limits specified under clause (a) or clause (b) of section
1.745 CH. XVII - COLLECTION AND RECOVERY - DEDUCTION AT SOURCE S. 194C
which such sum is cr edited or paid to the account of the sub-contr actor , shall
be liable to deduct income-tax under this sub-section.]
75
[Explan ation I.For the pur poses of sub-section (2), the expr ession contr ac-
tor shall also include a contr actor who is car r ying out any wor k (including
supply of labour for car r ying out any wor k) in pur suance of a contr act between
the contr actor and the Gover nment of a for eign State or a for eign enter pr ise or
any association or body established outside India.]
76
[
77
[Explan ation II].For the pur poses of this section, wher e any sum r efer r ed
to in sub-section (1) or sub-section (2) is cr edited to any account, whether called
Suspense account or by any other name, in the books of account of the per son
liable to pay such income, such cr editing shall be deemed to be cr edit of such
income to the account of the payee and the pr ovisions of this section shall apply
accor dingly.]
78
[Explan ation III.For the pur poses of this section, the expr ession wor k shall
also include
(a) adver tising;
(b) br oadcasting and telecasting including pr oduction of pr ogr ammes
for such br oadcasting or telecasting;
(c) car r iage of goods and passenger s by any mode of tr anspor t other than
by r ailways;
(d) cater ing.]
(3) No deduction shall be made under sub-section (1) or sub-section (2) fr om
79
[(i) the amount of any sum cr edited or paid or likely to be cr edited or paid
to the account of, or to, the contr actor or sub-contr actor , if such sum
does not exceed twenty thousand r upees:
Provided that wher e the aggr egate of the amounts of such sums
cr edited or paid or likely to be cr edited or paid dur ing the financial
year exceeds fifty thousand r upees, the per son r esponsible for paying
such sums r efer r ed to in sub-section (1) or , as the case may be,
sub-section (2) shall be liable to deduct income-tax
80
[under this
section:]
81
[Provided further that no deduction shall be made under sub-
section (2), fr om the amount of any sum cr edited or paid or likely to
be cr edited or paid dur ing the pr evious year to the account of the sub-
S. 194C I.T. ACT, 1961 1.746
77. Renumber ed by the Finance Act, 1994, w.e.f. 1-6-1994.
clause (i), as amended by the Finance Act, 1982, w.e.f. 1-6-1982 and Finance Act, 1995, w.e.f.
(i) any sum cr edited or paid in pur suance of any contr act the consider ation for which
does not exceed twenty thousand r upees; or
80. Substituted for under this section; or by the Finance Act, 2005, w.e.f. 1-6-2005.
81. Second and thir d pr ovisos inser ted, ibid.
contr actor dur ing the cour se of business of plying, hir ing or leasing
goods car r iages, on pr oduction of a declar ation to the per son con-
cer ned paying or cr editing such sum, in the pr escr ibed for m
82
and
ver ified in the pr escr ibed manner and within such time as may be
pr escr ibed, if such sub-contr actor is an individual who has not
owned mor e than two goods car r iages at any time dur ing the pr evious
year :
Provided also that the per son r esponsible for paying any sum as
afor esaid to the sub-contr actor r efer r ed to in the second pr oviso shall
furnish to the prescribed income-tax authority or the person authorised
by it such par ticular s as may be pr escr ibed in such for m and within
such time as may be pr escr ibed; or ]
(ii) any sum cr edited or paid befor e the 1st day of June, 1972;
83
[or ]
83
[(iii) any sum cr edited or paid befor e the 1st day of June, 1973, in
pur suance of a contr act between the contr actor and a co-oper ative
society or in pur suance of a contr act between such contr actor and the
sub-contr actor in r elation to any wor k (including supply of labour for
car r ying out any wor k) under taken by the contr actor for the co-
oper ative society.]
84
[Explan ation .For the pur poses of clause (i), goods car r iage shall have the
same meaning as in the Explan ation to sub-section (7) of section 44AE.]
(4)
85
[***]
(5)
85
[***]]
86
[Insurance commission.
87
194D.
88
Any per son r esponsible for paying to a r esident any income by way of
r emuner ation or r ewar d, whether by way of commission or other wise,
for soliciting or pr ocur ing insur ance business (including business r elating to the
continuance, r enewal or r evival of policies of insur ance) shall, at the time of
1.747 CH. XVII - COLLECTION AND RECOVERY - DEDUCTION AT SOURCE S. 194D
82. See r ule 29D and For m Nos. 15-I & 15J.
85. Omitted by the Finance Act, 2003, w.e.f. 1-6-2003. Pr ior to their omission, sub-sections (4)
and (5), as amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988, r ead
as under :
(4) Wher e the Assessing Officer is satisfied that the total income of the contr actor or the
sub-contr actor justifies the deduction of income-tax at any lower r ate or no deduction of
income-tax, as the case may be, the Assessing Officer shall, on an application made by the
contr actor or the sub-contr actor in this behalf, give to him such cer tificate as may be
appr opr iat e.
(5) Wher e any such cer tificate is given, the per son r esponsible for paying the sum r efer r ed
to in sub-section (1) or sub-section (2) shall, until such cer tificate is cancelled by the
Assessing Officer , deduct income-tax at the r ates specified in such cer tificate or deduct no
tax, as the case may be.
Income-tax Act.
88. See r ules 28(1), 28AA, 28AB, 30, 31, 31A, 31AB and 37 and For m Nos. 13, 16A, 26AS and 26Q.
cr edit of such income to the account of the payee or at the time of payment
is ear lier , deduct income-tax ther eon at the r ates in for ce :
Provided that no deduction shall be made under this section fr om any such
income cr edited or paid befor e the 1st day of June, 1973:]
89
[Provided further that no deduction shall be made under this section in a case
wher e the amount of such income or , as the case may be, the aggr egate of the
amounts of such income cr edited or paid or likely to be cr edited or paid dur ing
the financial year to the account of, or to, the payee, does not exceed five
thousand r upees.]
90
[Payments to non-resident sportsmen or sports associations.
91
194E. Wher e any income r efer r ed to in section 115BBA is payable to a non-
r esident spor tsman (including an athlete) who is not a citizen of India or
a non-r esident spor ts association or institution, the per son r esponsible for
making the payment shall, at the time of cr edit of such income to the account of
the payee or at the time of payment ther eof in cash or by issue of a cheque or dr aft
or by any other mode, whichever is ear lier , deduct income-tax ther eon at the r ate
of ten per cent.]
92
[Payments in respect of deposits under National Savings Scheme, etc.
93
194EE. The per son r esponsible for paying to any per son any amount r efer r ed
to in clause (a) of sub-section (2) of section 80CCA shall, at the time of
payment ther eof, deduct income-tax ther eon at the r ate of twenty per cent :
Provided that no deduction shall be made under this section wher e the amount
of such payment or , as the case may be, the aggr egate amount of such payments
to the payee dur ing the financial year is less than two thousand five hundr ed
r upees :
Provided further that nothing contained in this section shall apply to the payment
of the said amount to the heir s of the assessee.]
94
[Payments on account of repurchase of units by Mutual Fund or Unit Trust of
India.
95
194F. The per son r esponsible for paying to any per son any amount r efer r ed to
in sub-section (2) of section 80CCB shall, at the time of payment ther eof,
deduct income-tax ther eon at the r ate of twenty per cent.]
S. 194F I.T. ACT, 1961 1.748
90. Inser ted by the Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-11-1989. Ear lier
section 194E, as inser ted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988,
was omitted by the Dir ect Tax Laws (Amendment) Act, 1989, with r etr ospective effect
fr om the same date.
91. See r ules 30, 31, 31A, 31AB and 37A and For m Nos. 16A, 26AS and 27Q.
93. See r ules 29C, 30, 31, 31A, 31AB and 37 and For m Nos. 15G, 15H, 16A, 26AS and 26Q.
96
[Commission, etc., on the sale of lottery tickets.
97
194G.
98
[(1)] Any per son who is r esponsible for paying, on or after the 1st day
of October , 1991 to any per son, who is or has been stocking, distr ibuting,
pur chasing or selling lotter y tickets, any income by way of commission, r emu-
ner ation or pr ize (by whatever name called) on such tickets in an amount
exceeding one thousand r upees shall, at the time of cr edit of such income to the
account of the payee or at the time of payment of such income in cash or by the
issue of a cheque or dr aft or by any other mode, whichever is ear lier , deduct
income-tax ther eon at the r ate of ten per cent.
(2)
99
[***]
(3)
99
[***]
Explan ation .For the pur poses of this section, wher e any income is cr edited to
any account, whether called Suspense Account or by any other name, in the
books of account of the per son liable to pay such income, such cr editing shall be
deemed to be cr edit of such income to the account of the payee and the
pr ovisions of this section shall apply accor dingly.]
1
[Commission or brokerage
2
.
194H. Any per son, not being an individual or a Hindu undivided family, who is
r esponsible for paying, on or after the 1st day of June, 2001, to a r esident,
any income by way of commission (not being insur ance commission r efer r ed to
in section 194D) or br oker age, shall, at the time of cr edit of such income to the
account of the payee or at the time of payment of such income in cash or by the
issue of a cheque or dr aft or by any other mode, whichever is ear lier , deduct
income-tax ther eon at the r ate of
3
[ten] per cent :
1.749 CH. XVII - COLLECTION AND RECOVERY - DEDUCTION AT SOURCE S. 194H
97. See r ules 28, 28AA, 28AB, 30, 31, 31A, 31AB and 37 and For m Nos. 13, 16A, 26AS and 26Q.
98. Renumber ed by the Finance Act, 1992, w.e.f. 1-6-1992.
99. Omitted by the Finance Act, 2003, w.e.f. 1-6-2003. Pr ior to their omission, sub-sections (2)
and (3), as inser ted by the Finance Act, 1992, w.e.f. 1-6-1992, r ead as under :
(2) Wher e the Assessing Officer is satisfied that the total income of any per son who is or
has been stocking, distr ibuting, pur chasing or selling lotter y tickets justifies the deduction
of income-tax at any lower r ate or no deduction of income-tax, as the case may be, the
Assessing Officer shall, on an application made by such per son in this behalf, give to him
such cer tificate as may be appr opr iate.
(3) Wher e any such cer tificate is given, the per son r esponsible for paying the income
r efer r ed to in sub-section (1) shall, until such cer tificate is cancelled by the Assessing
Officer , deduct income-tax at the r ates specified in such cer tificate or deduct no tax, as
the case may be.
1. Reintr oduced by the Finance Act, 2001, w.e.f. 1-6-2001. Ear lier section 194H was omitted
by the Finance Act, 1999, w.e.f. 1-4-2000. Pr ior to its omission, section 194H, was inser ted
by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991 and later on amended by the Finance Act,
1992, w.e.f. 1-6-1992.
See also Cir cular No. 6/ 2003, dated 3-9-2003. For details, see Taxmanns Master Guide to
Income-tax Act.
3. Substituted for five by the Finance Act, 2007, w.e.f. 1-6-2007. Ear lier five was substi-
tuted for ten by the Finance Act, 2002, w.e.f. 1-6-2002.
Provided that no deduction shall be made under this section in a case wher e the
amount of such income or , as the case may be, the aggr egate of the amounts of
such income cr edited or paid or likely to be cr edited or paid dur ing the financial
year to the account of, or to, the payee, does not exceed two thousand five
hundr ed r upees :
4
[Provided further that an individual or a Hindu undivided family, whose total
sales, gr oss r eceipts or tur nover fr om the business or pr ofession car r ied on by
him exceed the monetar y limits specified under clause (a) or clause (b) of section
which such commission or br oker age is cr edited or paid, shall be liable to deduct
income-tax under this section:]
5
[Provided also that no deduction shall be made under this section on any
commission or br oker age payable by Bhar at Sanchar Nigam Limited or
Mahanagar Telephone Nigam Limited to their public call office fr anchisees.]
(i) commission or br oker age includes any payment r eceived or r eceiv-
able, dir ectly or indir ectly, by a per son acting on behalf of another
per son for ser vices r ender ed (not being pr ofessional ser vices) or for
any ser vices in the cour se of buying or selling of goods or in r elation
to any tr ansaction r elating to any asset, valuable ar ticle or thing, not
being secur ities;
(ii) the expr ession pr ofessional ser vices means ser vices r ender ed by a
per son in the cour se of car r ying on a legal, medical, engineer ing or
ar chitectur al pr ofession or the pr ofession of accountancy or techni-
cal consultancy or inter ior decor ation or such other pr ofession as is
notified by the Boar d for the pur poses of section 44AA;
(iii) the expr ession secur ities shall have the meaning assigned to it in
clause (h ) of section 2 of the Secur ities Contr acts (Regulation) Act,
1956 (42 of 1956)
6
;
(iv) wher e any income is cr edited to any account, whether called Sus-
pense account or by any other name, in the books of account of the
per son liable to pay such income, such cr editing shall be deemed to
be cr edit of such income to the account of the payee and the
7
[Rent.
8
194-I. Any per son, not being an individual or a Hindu undivided family, who is
r esponsible for paying to
9
[a r esident] any income by way of r ent
10
, shall,
at the time of cr edit of such income to the account of the payee or at the time of
S. 194-I I.T. ACT, 1961 1.750
6. For definition of the ter m secur ity, see footnote No. 7 on page 1.26.
(Con td. on p. 1.751)
payment ther eof in cash or by the issue of a cheque or dr aft or by any other mode,
whichever is ear lier ,
11
[deduct income-tax ther eon at the r ate of
12
[(a) ten per cent for the use of any machiner y or plant or equipment;
(b) fifteen per cent for the use of any land or building (including factor y
building) or land appur tenant to a building (including factor y build-
ing) or fur nitur e or fittings wher e the payee is an individual or a Hindu
undivided family; and
(c) twenty per cent for the use of any land or building (including factor y
building) or land appur tenant to a building (including factor y build-
ing) or fur nitur e or fittings wher e the payee is a per son other than an
individual or a Hindu undivided family:]]
of such income or , as the case may be, the aggr egate of the amounts of such
income cr edited or paid or likely to be cr edited or paid dur ing the financial year
by the afor esaid per son to the account of, or to, the payee, does not exceed one
hundr ed and twenty thousand r upees :
13
which such income by way of r ent is cr edited or paid, shall be liable to deduct
income-tax under this section.]
14
[(i) r ent means any payment, by whatever name called, under any lease,
sub-lease, tenancy or any other agr eement or ar r angement for the
use of (either separ ately or together ) any,
(a) land; or
(b) building (including factor y building); or
1.751 CH. XVII - COLLECTION AND RECOVERY - DEDUCTION AT SOURCE S. 194-I
13-2-1996, Cir cular No. 5/ 2001, dated 2-3-2001, Cir cular No. 5/ 2002, dated 30-7-2002,
Cir cular No. 12/ 2002, dated 22-11-2002 and Cir cular No. 1/ 2008, dated 10-1-2008. For
See r ules 28, 28AA, 28AB, 30, 31, 31A, 31AB and 37 and For m Nos. 13, 16A, 26AS and 26Q.
9. Substituted for any per son by the Finance Act, 2003, w.e.f. 1-6-2003.
10. For the meaning of the ter m r ent, see Taxmanns Dir ect Taxes Manual, Vol. 3.
11. Substituted for deduct income-tax ther eon at the r ate of twenty per cent: by the Finance
Act, 1995, w.e.f. 1-7-1995.
12. Clauses (a), (b) and (c) subst it ut ed for clauses (a) and (b) by the Finance Act, 2007, w.e.f.
1-6-2007. Pr ior to its substitution, clauses (a) and (b) r ead as under :
(a) fifteen per cent if the payee is an individual or a Hindu undivided family; and
(b) twenty per cent in other cases :
14. Substituted by the Taxation Laws (Amendment) Act, 2006, w.e.f. 13-7-2006. Pr ior t o it s
subst it ut ion, clause (i) r ead as under :
(i) r ent means any payment, by whatever name called, under any lease, sub-lease,
tenancy or any other agr eement or ar r angement for the use of any land or any
building (including factor y building), together with fur nitur e, fittings and the land
appur tenant ther eto, whether or not such building is owned by the payee;
(c) land appur tenant to a building (including factor y building); or
(d) machiner y; or
(e) plant; or
(f) equipment; or
(g) fur nitur e; or
(h ) fittings,
whether or not any or all of the above ar e owned by the payee;]
(ii) wher e any income is cr edited to any account, whether called Sus-
pense account or by any other name, in the books of account of the
per son liable to pay such income, such cr editing shall be deemed to
be cr edit of such income to the account of the payee and the
15
[Fees for professional or technical services.
16
17
194J. (1) Any per son, not being an individual or a Hindu undivided family,
who is r esponsible for paying to a r esident any sum by way of
(a) fees for pr ofessional ser vices, or
(b) fees for technical ser vices,
18
[or ]
18
[(c) r oyalty, or
(d) any sum r efer r ed to in clause (va) of section 28,]
shall, at the time of cr edit of such sum to the account of the payee or at the time
of payment ther eof in cash or by issue of a cheque or dr aft or by any other mode,
whichever is ear lier , deduct an amount equal to
19
[ten] per cent of such sum as
income-tax on income compr ised ther ein :
Provided that no deduction shall be made under this section
(A) fr om any sums as afor esaid cr edited or paid befor e the 1st day of July,
1995; or
(B) wher e the amount of such sum or , as the case may be, the aggr egate
of the amounts of such sums cr edited or paid or likely to be cr edited
or paid dur ing the financial year by the afor esaid per son to the
account of, or to, the payee, does not exceed
(i) twenty thousand r upees, in the case of fees for pr ofessional
ser vices r efer r ed to in clause (a), or
S. 194J I.T. ACT, 1961 1.752
15. Sections 194J and 194K inser ted by the Finance Act, 1995, w.e.f. 1-7-1995.
18-10-1995 and Cir cular No. 766, dated 24-4-1998. For details, see Taxmanns Master Guide
to Income-tax Act.
19. Substituted for five by the Finance Act, 2007, w.e.f. 1-6-2007.
(ii) twenty thousand r upees, in the case of fees for technical ser vices
r efer r ed to in
20
[clause (b), or ]
21
[(iii) twenty thousand r upees, in the case of r oyalty r efer r ed to in
clause (c), or
(iv) twenty thousand r upees, in the case of sum r efer r ed to in clause
(d) :]
22
which such sum by way of fees for pr ofessional ser vices or technical ser vices is
cr edited or paid, shall be liable to deduct income-tax under this section :]
23
[Provided also that no individual or a Hindu undivided family r efer r ed to in the
second pr oviso shall be liable to deduct income-tax on the sum by way of fees for
pr ofessional ser vices in case such sum is cr edited or paid exclusively for per sonal
pur poses of such individual or any member of Hindu undivided family.]
(2)
24
[***]
(3)
24
[***]
(a) pr ofessional ser vices means ser vices r ender ed by a per son in the
cour se of car r ying on legal, medical, engineer ing or ar chitectur al
pr ofession or the pr ofession of accountancy or technical consultancy
or inter ior decor ation or adver tising or such other pr ofession as is
notified by the Boar d for the pur poses of section 44AA or of this
section;
(b) fees for technical ser vices shall have the same meaning as in
Explan ation 2 to clause (vii) of sub-section (1) of section 9;
25
[(ba) r oyalty shall have the same meaning as in Explan ation 2 to clause
(vi) of sub-section (1) of section 9;]
1.753 CH. XVII - COLLECTION AND RECOVERY - DEDUCTION AT SOURCE S. 194J
20. Subst it ut ed for clause (b) : by t he Taxat ion Laws (Amendment ) Act , 2006, w.e.f.
13-7-2006.
24. Omitted, ibid. Pr ior to their omission, sub-sections (2) and (3) r ead as under :
(2) Wher e the Assessing Officer is satisfied that the total income of any per son in r eceipt
of the sum r efer r ed to in sub-section (1) justifies the deduction of income-tax at any lower
r ate or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an
application made by that per son in this behalf, give to him such cer tificate as may be
appr opr iat e.
(3) Wher e any such cer tificate is given, the per son r esponsible for paying the sum r efer r ed
to in sub-section (1) shall, until such cer tificate is cancelled by the Assessing Officer ,
deduct income-tax at the r ates specified in such cer tificate or deduct no tax, as the case
may be.
(c) wher e any sum r efer r ed to in sub-section (1) is cr edited to any
account, whether called suspense account or by any other name,
in the books of account of the per son liable to pay such sum,
such cr editing shall be deemed to be cr edit of such sum to the
account of the payee and the pr ovisions of this section shall apply
accor dingly.
26
[Income in respect of units.
27
194K. Wher e any income is payable to a r esident in r espect of units of a Mutual
Fund specified under clause (23D) of section 10 or of the Unit Tr ust of
India, the per son r esponsible for making the payment shall, at the time of cr edit
of such income to the account of payee or at the time of payment ther eof in cash
or by issue of a cheque or dr aft or by any other mode, whichever is ear lier , deduct
income-tax ther eon at the r ate of ten per cent :
Provided that the pr ovisions of this section shall not apply wher e the amount of
such income or , as the case may be, the aggr egate of the amounts of such income
cr edited or paid or likely to be cr edited or paid dur ing the financial year by the
S. 194K I.T. ACT, 1961 1.754
26. Substituted by the Finance Act, 2002, w.e.f. 1-6-2002. Pr ior to its substitution, section 194K,
as inser ted by the Finance Act, 1995, w.e.f. 1-7-1995 and amended by the Finance Act, 1999,
194K. In com e in respect of un its.(1) Wher e any income is payable to a r esident in r espect
of units of a Mutual Fund specified under clause (23D) of section 10 or of the Unit Tr ust
of India the per son r esponsible for making the payment shall, at the time of cr edit of such
income to the account of payee or at the time of payment ther eof in cash or by issue of
a cheque or dr aft or by any other mode, whichever is ear lier , deduct income-tax ther eon
at the r ate of,
(a) twenty per cent, if the payee is a company, and
(b) fifteen per cent in the case of other payees :
Provided that no deduction shall be made under this sub-section fr om any such income
cr edited or paid on or after the 1st day of June, 1999.
(2) The pr ovisions of sub-section (1) shall not apply
(i) wher e the amount of such income or , as the case may be, the aggr egate of the
amounts of such income cr edited or paid or likely to be cr edited or paid dur ing the
financial year by the per son r esponsible for making the payment to the account of,
or to, the payee does not exceed ten thousand r upees :
Provided that the amount of ten thousand r upees shall be computed with r efer ence
to the income cr edited or paid,
(a) in r espect of a br anch office of the Mutual Fund or of the Unit Tr ust of India,
as the case may be, and
(b) under a par ticular scheme under which the units have been issued;
(ii) to such income cr edited or paid befor e the 1st day of July, 1995;
(iii) to such income cr edited or paid in r espect of units issued under such scheme
alr eady in oper ation of the Mutual Fund or of the Unit Tr ust of India, as the Centr al
Gover nment may, by notification in the Official Gazette, specify in this behalf
having r egar d to the plan of payment of income ther eunder to the unit-holder s; and
(iv ) to such income cr edited or paid in r espect of units issued under any scheme of the
Unit Tr ust of India to any institution or fund wher e such income is not liable to
inclusion in its total income under the pr ovisions of sections 11 and 12 or clause (22)
or clause (22A) or clause (23) or clause (23AA) or clause (23C) of section 10.
(Con td. on p. 1.755)
1.755 CH. XVII - COLLECTION AND RECOVERY - DEDUCTION AT SOURCE S. 194L
per son r esponsible for making the payment to the account of, or to, the payee
does not exceed
28
[two thousand five hundr ed] r upees :
Provided further that the amount of one thousand* r upees shall be computed
with r efer ence to the income cr edited or paid
(a) in r espect of a br anch office of the Mutual Fund or of the Unit Tr ust
of India, as the case may be, and
(b) under a par ticular scheme under which the units have been issued :
29
[Provided also that no deduction shall be made under this section fr om any
such income cr edited or paid on or after the 1st day of Apr il, 2003.]
(a) Unit Tr ust of India means the Unit Tr ust of India established under
the Unit Tr ust of India Act, 1963 (52 of 1963);
(b) wher e any income as afor esaid is cr edited to any account, whether
called Suspense account or by any other name, in the books of
account of the per son liable to pay such income, such cr editing shall
be deemed to be cr edit of such income to the account of the payee and
the pr ovisions of this section shall apply accor dingly.]
30
[Payment of compensation on acquisition of capital asset.
194L. Any per son r esponsible for paying to a r esident any sum being in the
natur e of compensation or the enhanced compensation or the consider -
ation or the enhanced consider ation on account of compulsor y acquisition,
under any law for the time being in for ce, of any capital asset shall, at the time
of payment of such sum in cash or by issue of a cheque or dr aft or by any other
mode, whichever is ear lier , deduct an amount equal to ten per cent of such sum
as income-tax on income compr ised ther ein :
to a r esident dur ing the financial year does not exceed one hundr ed thousand
r upees:]
(a) Unit Tr ust of India means the Unit Tr ust of India established under the Unit Tr ust
of India Act, 1963 (52 of 1963);
(b) wher e any income as afor esaid is cr edited to any account, whether called Suspense
account or by any other name, in the books of account of the per son liable to pay
such income, such cr editing shall be deemed to be cr edit of such income to the
account of the payee and the pr ovisions of this section shall apply accor dingly.
27. See r ules 28(1), 28AA, 28AB, 29C, 30, 31, 31A, 31AB and 37 and For m Nos. 13, 15G, 15H,
16A, 26AS and 26Q. See also Cir cular No. 715, dated 8-8-1995, Cir cular No. 3/ 2002, dated
No. 2/ 2003, dated 11-3-2003 and Cir cular No. 3/ 2003, dated 11-3-2003. For details, see
28. Substituted for one thousand by the Finance Act, 2003, w.r .e.f. 1-8-2002.
*Wor ds two thousand five hundr ed should be substituted for the wor ds one thousand.
31
[Provided further that no deduction shall be made under this section fr om any
payment made on or after the 1st day of June, 2000.]
32
[Payment of compensation on acquisition of certain immovable property
33
.
194LA. Any per son r esponsible for paying to a r esident any sum, being in the
natur e of compensation or the enhanced compensation or the consi-
der ation or the enhanced consider ation on account of compulsor y acquisition,
under any law for the time being in for ce, of any immovable pr oper ty (other than
agr icultur al land), shall, at the time of payment of such sum in cash or by issue
of a cheque or dr aft or by any other mode, whichever is ear lier , deduct an
amount equal to ten per cent of such sum as income-tax ther eon:
to a r esident dur ing the financial year does not exceed one hundr ed thousand
r upees.
(i) agr icultur al land means agr icultur al land in India including land
situate in any ar ea r efer r ed to in items (a) and (b) of sub-clause (iii) of
clause (14) of section 2;
(ii) immovable pr oper ty means any land (other than agr icultur al land)
or any building or par t of a building.]
Other sums.
34
195.
35
[(1)
36
Any per son r esponsible for paying to a non-r esident, not being a
company, or to a for eign company, any inter est
37
[***] or any other sum
char geable under the pr ovisions of this Act (not being income char geable under
the head Salar ies
38
[***]) shall, at the time of cr edit of such income to the account
of the payee or at the time of payment ther eof in cash or by the issue of a cheque
or dr aft or by any other mode, whichever is ear lier , deduct income-tax ther eon
at the r ates in for ce :
S. 195 I.T. ACT, 1961 1.756
33. See r ule 30, 31, 31A, 31AB and 37 and For m Nos. 16A, 26AS and 26Q.
34. See also Cir cular No. 370, dated 3-10-1983, Letter [F. No. 391/ 3/ 78-FTD], dated 9-7-1984,
Cir cular No. 152, dated 27-11-1974, Letter [F. No. 12/ 29/ 6-IT(B)], dated 1-6-1965, Cir cular
No. 43, dated 20-6-1970, Cir cular No. 20(II-4), dated 3-8-1961, Cir cular No. 588, dated
No. 769, dated 6-8-1998, Cir cular No. 786, dated 7-2-2000, Cir cular No. 790, dated 20-4-2000
and Cir cular No. 10/ 2002, dated 9-10-2002. For details, see Taxmanns Master Guide to
Income-tax Act.
was amended by the Finance Act, 1965, w.e.f. 1-4-1965 and the Finance Act, 1975, w.e.f.
1-4-1975.
36. See r ules 26, 28(1), 28AA, 28AB, 29B, 30, 31, 31A, 31AB and 37A and For m Nos. 13, 15C, 15D,
16A, 26AS and 27Q.
37. Wor ds (not being inter est on secur ities) omitted by the Finance Act, 2003, w.e.f. 1-6-2003.
38. Wor ds or dividends omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
39
[Provided that in the case of inter est payable by the Gover nment or a public
sector bank within the meaning of clause (23D) of section 10 or a public financial
institution within the meaning of that clause, deduction of tax shall be made only
at the time of payment ther eof in cash or by the issue of a cheque or dr aft or by
any other mode :]
40
[Provided further that no such deduction shall be made in r espect of any
dividends r efer r ed to in section 115-O.]
Explan ation .For the pur poses of this section, wher e any inter est or other sum
as afor esaid is cr edited to any account, whether called Inter est payable account
or Suspense account or by any other name, in the books of account of the
per son liable to pay such income, such cr editing shall be deemed to be cr edit of
such income to the account of the payee and the pr ovisions of this section shall
apply accor dingly.]
(2) Wher e the per son r esponsible for paying any such sum char geable under this
Act (other than
41
[***]
42
[***]
43
[***]
44
[***] salar y) to a non-r esident consider s that
the whole of such sum would not be income char geable in the case of the
r ecipient, he may make an application to the
45
[Assessing] Officer to deter mine,
46
[by gener al or special or der ], the appr opr iate pr opor tion of such sum so
char geable, and upon such deter mination, tax shall be deducted under sub-
section (1) only on that pr opor tion of the sum which is so char geable.
47
[***]
48
[(3) Subject to r ules
49
made under sub-section (5), any per son entitled to r eceive
any inter est or other sum on which income-tax has to be deducted under sub-
section (1) may make an application in the pr escr ibed for m to the
45
[Assessing]
Officer for the gr ant of a cer tificate author ising him to r eceive such inter est or
other sum without deduction of tax under that sub-section, and wher e any such
cer tificate is gr anted, ever y per son r esponsible for paying such inter est or other
sum to the per son to whom such cer tificate is gr anted shall, so long as the
cer tificate is in for ce, make payment of such inter est or other sum without
deducting tax ther eon under sub-section (1).
39. Inser ted by the Dir ect Tax Laws (Second Amendment) Act, 1989, w.r .e.f. 1-6-1987.
40. Inser ted by the Finance Act, 2003, w.e.f. 1-4-2003. Ear lier the second pr oviso was inser ted
by the Finance Act, 1997, w.e.f. 1-6-1997 and later on omitted by the Finance Act, 2002,
w.e.f. 1-6-2002.
41. Wor ds inter est including omitted by the Finance Act, 1976, w.e.f. 1-6-1976.
42. Wor ds inter est on secur ities omitted by the Finance Act, 2003, w.e.f. 1-6-2003.
43. Wor d , dividend omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
1-4-1988.
46. Substituted for in the pr escr ibed manner by the Finance Act, 1988, w.r .e.f. 1-3-1988. The
expr ession in the pr escr ibed manner was ear lier substituted for by gener al or special
or der by the Finance Act, 1987, w.e.f. 1-6-1987.
47. Omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. Pr ior to omission, pr oviso was
inser ted by the Finance Act, 1987, w.e.f. 1-6-1987
49. See r ule 29B and For m Nos. 15C and 15D.
(4) A cer tificate gr anted under sub-section (3) shall r emain in for ce till the expir y
of the per iod specified ther ein or , if it is cancelled by the
50
[Assessing] Officer
befor e the expir y of such per iod, till such cancellation.
(5) The Boar d may, having r egar d to the convenience of assessees and the
inter ests of r evenue, by notification in the Official Gazette, make r ules specifying
the cases in which, and the cir cumstances under which, an application may be
made for the gr ant of a cer tificate under sub-section (3) and the conditions
subject to which such cer tificate may be gr anted and pr oviding for all other
matter s connected ther ewith.]
50a
[(6) Th e person referred to in sub-section (1) sh all furn ish th e in form ation
relatin g to paym en t of an y sum in such f orm an d m an n er as m ay be prescribed
by th e Board.]
51
[Income payable net of tax.
52
195A.
53
[In a case other than that r efer r ed to in sub-section (1A) of section 192,
wher e under an agr eement] or other ar r angement, the tax char geable on
any income r efer r ed to in the for egoing pr ovisions of this Chapter is to be bor ne
by the per son by whom the income is payable, then, for the pur poses of deduction
of tax under those pr ovisions such income shall be incr eased to such amount as
would, after deduction of tax ther eon at the r ates in for ce for the financial year
in which such income is payable, be equal to the net amount payable under such
agr eement or ar r angement.]
54
[Interest or dividend or other sums payable to Government, Reserve Bank or
certain corporations.
196. Notwithstanding anything contained in the for egoing pr ovisions of this
Chapter , no deduction of tax shall be made by any per son fr om any sums
payable to
(i) the Gover nment, or
(ii) the Reser ve Bank of India, or
(iii) a cor por ation established by or under a Centr al Act which is, under
any law for the time being in for ce, exempt fr om income-tax on its
income, or
(iv) a Mutual Fund specified under clause (23D) of section 10,
wher e such sum is payable to it by way of inter est or dividend in r espect of any
secur ities or shar es owned by it or in which it has full beneficial inter est, or any
other income accr uing or ar ising to it.]
S. 196 I.T. ACT, 1961 1.758
1-4-1988.
52. S ee a lso Cir cu la r No. 785, da t ed 24-11-1999. For det a ils, see Ta xma nns Dir ect
Taxes Cir cular s.
53. Substituted for Wher e, under an agr eement by the Finance Act, 2002, w.e.f. 1-6-2002.
substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
55
[Income in respect of units of non-residents.
56
196A. (1) Any per son r esponsible for paying to a non-r esident, not being a
company, or to a for eign company, any income in r espect of units of a
Mutual Fund specified under clause (23D) of section 10 or of the Unit Tr ust of
India shall, at the time of cr edit of such income to the account of the payee or at
the time of payment ther eof in cash or by the issue of a cheque or dr aft or by
any other mode, whichever is ear lier , deduct income-tax ther eon at the r ate of
twenty per cent :
57
[Provided that no deduction shall be made under this section fr om any such
income cr edited or paid on or after the 1st day of Apr il, 2003.]
(2) Notwithstanding anything contained in sub-section (1), no deduction of tax
shall be made fr om any income payable in r espect of units of the Unit Tr ust of
India to a non-r esident Indian or a non-r esident Hindu undivided family, wher e
the units have been acquir ed fr om the Unit Tr ust of India out of the funds in a
Non-r esident (Exter nal) Account maintained with any bank in India or by
r emittance of funds in for eign cur r ency, in accor dance, in either case, with the
pr ovisions of the For eign Exchange Regulation Act, 1973 (46 of 1973), and the
r ules made ther eunder .
Explan ation .For the pur poses of this section
(a)
58
for eign cur r ency shall have the meaning assigned to it in the
For eign Exchange Regulation Act, 1973 (46 of 1973);
(b) non-r esident Indian shall have the meaning assigned to it in clause
(e) of section 115C;
(c) Unit Tr ust of India means the Unit Tr ust of India established under
the Unit Tr ust of India Act, 1963 (52 of 1963);
(d) wher e any income as afor esaid is cr edited to any account, whether
called Suspense account or by any other name, in the books of
account of the per son liable to pay such income, such cr editing shall
be deemed to be cr edit of such income to the account of the payee and
the pr ovisions of this section shall apply accor dingly.]
59
[Income from units.
60
196B.
61
[Wher e any income in r espect of units r efer r ed to in section 115AB or
by way of long-ter m capital gains ar ising fr om the tr ansfer of such units
1.759 CH. XVII - COLLECTION AND RECOVERY - DEDUCTION AT SOURCE S. 196B
was substituted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 15-3-1989 and later
amended by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991 and the Finance Act, 1994, w.e.f.
1-6-1994.
57. Inser ted by the Finance Act, 2003, w.e.f. 1-4-2003. Ear lier the pr oviso was inser ted by the
Finance Act, 1999, w.e.f. 1-6-1999 and later on omitted by the Finance Act, 2002, w.e.f.
1-6-2002.
58. For definition of for eign cur r ency, see Appendix.
61. Substituted for Wher e any income is payable in r espect of units r efer r ed to in section
115AB to an Offshor e Fund by the Finance Act, 1993, w.e.f. 1-6-1993.
is payable to an Offshor e Fund], the per son r esponsible for making the payment
shall, at the time of cr edit of such income to the account of the payee or at the
time of payment ther eof in cash or by the issue of a cheque or dr aft or by any
other mode, whichever is ear lier , deduct income-tax ther eon at the r ate of ten per
cent.]
62
[Income from foreign currency bonds or shares
63
of Indian company.
64
196C.
65
[Wher e any income by way of inter est or dividends in r espect of
66
[bonds
or Global Depositor y Receipts] r efer r ed to in section 115AC or by way of
long-ter m capital gains ar ising fr om the tr ansfer of such
66
[bonds or Global
Depositor y Receipts] is payable to a non-r esident], the per son r esponsible for
making the payment shall, at the time of cr edit of such income to the account of
the payee or at the time of payment ther eof in cash or by the issue of a cheque
or dr aft or by any other mode, whichever is ear lier , deduct income-tax ther eon
at the r ate of ten per cent :
67
[Provided that no such deduction shall be made in r espect of any dividends
68
[Income of Foreign Institutional Investors from securities.
69
196D. (1) Wher e any income in r espect of secur ities r efer r ed to in clause (a) of
sub-section (1) of section 115AD is payable to a For eign Institutional
Investor , the per son r esponsible for making the payment shall, at the time of
cr edit of such income to the account of the payee or at the time of payment
is ear lier , deduct income-tax ther eon at the r ate of twenty per cent :
70
[Provided that no such deduction shall be made in r espect of any dividends
(2) No deduction of tax shall be made fr om any income, by way of capital gains
ar ising fr om the tr ansfer of secur ities r efer r ed to in section 115AD, payable to a
For eign Institutional Investor .]
S. 196D I.T. ACT, 1961 1.760
63. Should be r ead as bonds or global depositor y r eceipts.
65. Substituted for Wher e any income by way of inter est or dividends is payable in r espect
of bonds or shar es r efer r ed to in section 115AC to a non-r esident by the Finance Act, 1993,
w.e.f. 1-6-1993.
66. Substituted for bonds or shar es by the Finance Act, 2001, w.e.f. 1-4-2002.
1-6-2002.
1-6-2002.
Certificate for deduction at lower rate.
197.
71
(1)
72
[Subject to r ules made under sub-section (2A),
73
[wher e, in the case
of any income of any per son
74
[or sum payable to any per son], income-tax
is r equir ed to be deducted at the time of cr edit or , as the case may be, at the time
of payment at the r ates in for ce under the pr ovisions of sections 192, 193,
75
[194,]
194A,
76
[194C,] 194D,
76
[194G]
77
[, 194H]
78
[, 194-I]
79
[, 194J]
80
[, 194K]
81
[***]
82
[, 194LA] and 195, the Assessing Officer is satisfied] that the total income
83
[***]
of the r ecipient justifies the deduction of income-tax
84
[***] at any lower r ates or
no deduction of income-tax
84
[***], as the case may be, the
85
[Assessing] Officer
shall, on an application made by the assessee in this behalf, give to him such
cer tificate as may be appr opr iate.
(2) Wher e any such cer tificate is given, the per son r esponsible for paying the
income shall, until such cer tificate is cancelled by the
85
deduct income-tax
86
[***] at the r ates specified in such cer tificate or deduct no
tax, as the case may be.
87
[(2A) The Boar d may, having r egar d to the convenience of assessees and the
71. See r ules 28(1), 28AA, 28AB and 29 and For m No. 13.
See also Letter [F. No. 1(54)-63/ TPL], dated 18-5-1963, Letter [F.No. 20/ 23/ 67-IT(A-I)],
dated 28-7-1967, Cir cular No. 774, dated 17-3-1999 and Instr uction No. 8/ 2006, dated
72. Substituted for Wher e, in the case of any income of any per son other than a company
73. Substituted by the Finance Act, 1992, w.e.f. 1-6-1992. Ear lier , amendments wer e made by
the Finance Act, 1965, w.e.f. 1-4-1965, Finance (No. 2) Act, 1967, w.e.f. 1-4-1967, Finance Act,
Finance Act, 1986, w.e.f. 1-4-1987 and Dir ect Tax Laws (Amdt.) Act, 1987, w.e.f. 1-4-1988.
81. , 194L omitted by the Finance Act, 2003, w.e.f. 1-6-2003. Ear lier it was inser ted by the
Finance Act, 1999, w.e.f. 1-6-1999.
83. Wor ds or the total wor ld income omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
84. Wor ds or super -tax omitted, ibid.
85. Substituted for Income-tax by the Dir ect Tax Laws (Amendment) Act, 1987 w.e.f.
1-4-1988.
86. Wor ds and super -tax omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
(3)
88
[***]
89
[No deduction to be made in certain cases.
90
197A.
91
(1) Not wit hst a nding a nyt hing cont a ined in
92
[***] sect ion 194
93
[***]
94
[or section 194EE], no deduction of tax shall be made under any
of the said sections in the case of an individual, who is r esident in India, if such
individual fur nishes to the per son r esponsible for paying any income of the
natur e r efer r ed to in
95
[***] section 194
96
[
97
[***] or , as the case may be, section
194EE], a declar ation in wr iting in duplicate in the pr escr ibed for m and ver ified
in the pr escr ibed manner to the effect that
98
[the tax on his estimated total
income of the pr evious year in which such income is to be included in computing
his total income will be n il.]
99
[(1A) Notwithstanding anything contained in
1
[section 193 or ] section 194A or
section 194K, no deduction of tax shall be made under
2
[any] of the said sections
in the case of a per son (not being a company or a fir m), if such per son fur nishes
to the per son r esponsible for paying any income of the natur e r efer r ed to in
1
[section 193 or ] section 194A or section 194K, as the case may be, a declar ation
in wr iting in duplicate in the pr escr ibed for m and ver ified in the pr escr ibed
manner to the effect that the tax on his estimated total income of the pr evious
year in which such income is to be included in computing his total income will
be n il.]
S. 197A I.T. ACT, 1961 1.762
88. Sub-section (3) omitted by the Finance Act, 1986, w.e.f. 1-4-1987. Pr ior to its omission, sub-
section (3) was substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
90. See also Cir cular No. 351, dated 26-11-1982 and Cir cular No. 4/ 2002, dated 16-7-2002. For
91. See r ule 29C and For m Nos. 15G and 15H.
92. Wor ds section 193 or omitted by the Finance Act, 1999, w.e.f. 1-6-1999.
93. Wor ds or section 194A omitted by the Finance Act, 1992, w.e.f. 1-6-1992.
95. Wor ds or section 193 or omitted by the Finance Act, 1999, w.e.f. 1-6-1999.
96. Substituted for or , as the case may be, section 194A by the Finance (No. 2) Act, 1991, w.e.f.
1-10-1991.
97. Wor ds or section 194A omitted by the Finance Act, 1992, w.e.f. 1-6-1992.
98. Substituted for his estimated total income of the pr evious year in which such income is
to be included in computing his total income will be less than the minimum liable to
income-tax by the Finance Act, 1990, w.e.f. 1-4-1990.
(1A), as inser ted by the Finance Act, 1992, w.e.f. 1-6-1992, r ead as under :
(1A) Notwithstanding anything contained in section 194A, no deduction of tax shall be
made under that section in the case of a per son (not being a company or a fir m), if such
per son fur nishes to the per son r esponsible for paying any income of the natur e r efer r ed
to in that section, a declar ation in wr iting in duplicate in the pr escr ibed for m and ver ified
in the pr escr ibed manner to the effect that the tax on his estimated total income of the
pr evious year in which such income is to be included in computing his total income will
be n il.
2. Substituted for either , ibid.
3
[(1B) The pr ovisions of this section shall not apply wher e the amount of any
income of the natur e r efer r ed to in sub-section (1) or sub-section (1A), as the case
may be, or the aggr egate of the amounts of such incomes cr edited or paid or
likely to be cr edited or paid dur ing the pr evious year in which such income is to
be included exceeds the maximum amount which is not char geable to income-
tax.]
4
[(1C) Notwithstanding anything contained in section 193 or section 194 or
section 194A or section 194EE or section 194K or sub-section (1B) of this section,
no deduction of tax shall be made in the case of an individual r esident in India,
who is of the age of sixty-five year s or mor e at any time dur ing the pr evious year
5
[***], if such individual fur nishes to the per son r esponsible for paying any income
of the natur e r efer r ed to in section 193 or section 194 or section 194A or section
194EE or section 194K, as the case may be, a declar ation in wr iting in duplicate
6
and ver ified in the pr escr ibed manner to the effect that
the tax on his estimated total income of the pr evious year in which such income
is to be included in computing his total income will be n il.]
7
[(1D) Notwithstanding anything contained in this section, no deduction of tax
shall be made by the Offshor e Banking Unit fr om the inter est paid
(a) on deposit made on or after the 1st day of Apr il, 2005, by a non-
r esident or a per son not or dinar ily r esident in India; or
(b) on bor r owing, on or after the 1st day of Apr il, 2005, fr om a non-
r esident or a per son not or dinar ily r esident in India.
Explan ation .For the pur poses of this sub-section Offshor e Banking Unit shall
have the same meaning as assigned to it in clause (u) of section 2 of the Special
Economic Zones Act, 2005
8
.]
(2) The per son r esponsible for paying any income of the natur e r efer r ed to in sub-
section (1)
9
10
[or sub-section (1C)] shall deliver or cause to
be deliver ed to the
11
[Chief Commissioner or Commissioner ] one copy of the
declar ation r efer r ed to in sub-section (1)
12
13
[or sub-section
(1C)] on or befor e the seventh day of the month next following the month in
which the declar ation is fur nished to him.]
5. Wor ds and is entitled to a deduction fr om the amount of income-tax on his total income
r efer r ed to in section 88B omitted by the Finance Act, 2007, w.r .e.f. 1-4-2006.
6. See r ule 29C and For m No. 15H.
8. For text of section 2(u) of the Special Economic Zones Act, 2005, see Appendix.
1-4-1988.
Tax deducted is income received.
198. All sums deducted in accor dance with
14
[the for egoing pr ovisions of this
Chapter ] shall, for the pur pose of computing the income of an assessee, be
deemed to be income r eceived :
15
[Provided that the sum being the tax paid, under sub-section (1A) of section 192
for the pur pose of computing the income of an assessee, shall not be deemed to
be income r eceived.]
16-28
[Credit for tax deducted.
199. (1) An y deduction m ade in accordan ce with th e foregoin g provision s of th is
Ch apter an d paid to th e Cen tral Govern m en t sh all be treated as a paym en t
of tax on beh alf of th e person from wh ose in com e th e deduction was m ade, or of
th e own er of th e security, or of th e depositor or of th e own er of property or of th e
un it-h older, or of th e sh areh older, as th e case m ay be.
(2) An y sum referred to in sub-section (1A) of section 192 an d paid to th e Cen tral
Govern m en t sh all be treated as th e tax paid on beh alf of th e person in respect of
wh ose in com e such paym en t of tax h as been m ade.
S. 199 I.T. ACT, 1961 1.764
14. Substituted for the por tion beginning with the wor ds the pr ovisions of sections 192 and
ending with section 196D by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004. Pr ior to its
substitution, the quoted por tion, as amended by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967, Finance Act, 1972, w.e.f. 1-4-1972, Finance Act, 1973, w.e.f. 1-4-1973, Finance
Act , 1978, w.e.f. 1-4-1978, Dir ect Tax Laws (Second Amendment ) Act , 1989, w.e.f.
1-11-1989, Finance (No. 2) Act, 1991, w.e.f. 1-10-1991, Finance Act, 1992, w.e.f. 1-6-1992,
the pr ovisions of sections 192 to 194, section 194A, section 194B, section 194BB, section
194C, section 194D, section 194E, section 194EE, section 194F, section 194G, section
194H, section 194-I, section 194J, section 194K, section 194L, section 195, section 196A,
section 196B, section 196C and section 196D.
16-28. Substituted by the Finance Act, 2008, w.e.f. 1-4-2008. Pr ior to its substitution, section 199
as amended by the Finance Act, 2006, w.e.f. 1-4-2006, Finance Act, 2005, w.e.f. 1-4-2005,
Finance (No. 2) Act, 2004, w.e.f. 1-4-2005/ 1-10-2004, Finance Act, 2002, w.e.f. 1-6-2002,
Finance Act, 1992, w.e.f. 1-6-1992, Finance (No. 2) Act, 1991, w.e.f. 1-10-1991, Dir ect Tax
Laws (Second Amendment) Act, 1989, w.e.f. 1-11-1989, Dir ect Tax Laws (Amendment)
Act, 1968, w.e.f. 1-4-1968, Finance Act, 1968, w.r .e.f. 1-4-1962, Finance (No. 2) Act, 1967,
w.e.f. 1-4-1967, Finance Act, 1965, w.e.f. 1-4-1965, r ead as under :
199. Credit for tax deducted.(1) Any deduction made in accor dance with the for egoing
pr ovisions of this Chapter and paid to the Centr al Gover nment shall be tr eated as a
payment of tax on behalf of the per son fr om whose income the deduction was made, or
of the owner of the secur ity, or depositor or owner of pr oper ty or of unit-holder or of
the shar eholder , as the case may be, and cr edit shall be given to him for the amount so
deduct ed on t he pr oduct ion of t he cer t ificat e fur nished under sect ion 203 in t he
assessment made under this Act for the assessment year for which such income is
assessable :
(Con td. on p. 1.765)
(3) Th e Board m ay, for th e purposes of givin g credit in respect of tax deducted or
tax paid in term s of th e provision s of th is Ch apter, m ak e such rules as m ay be
n ecessary, in cludin g th e rules for th e purposes of givin g credit to a person oth er
th an th ose referred to in sub-section (1) an d sub-section (2) an d also th e
assessm en t year f or wh ich such credit m ay be given .]
Duty of person deducting tax.
200.
29
[(1)]
30
Any per son deducting any sum in accor dance with
31
[the for egoing
pr ovisions of this Chapter ] shall pay within the pr escr ibed time, the sum so
deducted to the cr edit of the Centr al Gover nment or as the Boar d dir ects.
Provided that
(i) in a case wher e such per son or owner or depositor or unit-holder or shar eholder is
a per son, whose income is included under the pr ovisions of section 60, section 61,
section 64, section 93 or section 94 in the total income of another per son, the
payment shall be deemed to have been made on behalf of, and the cr edit shall be
given to, such other per son;
(ii) in any other case, wher e the dividend on any shar e is assessable as the income of
a per son other than the shar eholder , the payment shall be deemed to have been
made on behalf of, and the cr edit shall be given to, such other per son in such
cir cumstances as may be pr escr ibed :
Provided further that wher e any pr oper ty, deposit, secur ity, unit or shar e is owned jointly
by two or mor e per sons not constituting a par tner ship, the payment shall be deemed to
have been made on behalf of, and cr edit shall be given to, each such per son in the same
pr opor tion in which r ent, inter est on deposit or on secur ity or income in r espect of unit
or dividend on shar e is assessable as his income.
(2) Any sum r efer r ed to in sub-section (1A) of section 192 and paid to the Centr al
Gover nment shall be tr eated as the tax paid on behalf of the per son in r espect of whose
income, such payment of tax has been made and cr edit shall be given to him for the
amount so paid on pr oduction of the cer tificate fur nished under section 203 in the
assessment under this Act for the assessment year for which such income is assessable.
(3) Wher e any deduction is made in accor dance with the for egoing pr ovisions of this
Chapter on or after the 1st day of Apr il, 2008 and paid to the Centr al Gover nment, the
amount of tax deducted and specified in the statement r efer r ed to in section 203AA shall
be tr eated as tax paid on behalf of the per sons r efer r ed to in sub-section (1) or , as the case
may be, sub-section (2) and cr edit shall be given to him for the amount so deducted in the
assessment made under this Act for the assessment year for which such income is
assessable without the pr oduction of cer tificate.
29. Section 200 r enumber ed as sub-section (1) ther eof by the Finance Act, 2002, w.e.f.
1-6-2002.
30. See r ule 30.
1978, w.e.f. 1-4-1978, Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-11-1989,
Finance (No. 2) Act, 1991, w.e.f. 1-10-1991, Finance Act, 1992, w.e.f. 1-6-1992, Finance Act,
1993, w.e.f. 1-6-1993, Finance Act, 1994, w.e.f. 1-6-1994, Finance Act, 1995, w.e.f. 1-7-1995
194C, section 194D, section 194E, section 194EE, section 194F, section 194G, section 194H,
section 194-I, section 194J, section 194K, section 194L, section 195, section 196A, section
196B, section 196C and section 196D.
S. 201 I.T. ACT, 1961 1.766
32
[(2) Any per son being an employer , r efer r ed to in sub-section (1A) of section 192
shall pay, within the pr escr ibed time, the tax to the cr edit of the Centr al
Gover nment or as the Boar d dir ects.]
33
[(3) Any per son deducting any sum on or after the 1st day of Apr il, 2005 in
accor dance with the for egoing pr ovisions of this Chapter or , as the case may be,
any per son being an employer r efer r ed to in sub-section (1A) of section 192 shall,
after paying the tax deducted to the cr edit of the Centr al Gover nment within the
pr escr ibed time, pr epar e quar ter ly statements for the per iod ending on the 30th
June, the 30th September , the 31st December and the 31st Mar ch in each
financial year and deliver or cause to be deliver ed to the pr escr ibed income-tax
author ity
34
or the per son author ised by such author ity such statement in such
for m
35
and ver ified in such manner and setting for th such par ticular s and within
such time as may be pr escr ibed.]
Consequences of failure to deduct or pay.
36
201.
37-40
[(1) Wh ere an y person , in cludin g th e prin cipal officer of a com pan y,
(a) wh o is required to deduct an y sum in accordan ce with th e provision s
of th is Act; or
(b) referred to in sub-section (1A) of section 192, bein g an em ployer,
does n ot deduct, or does n ot pay, or after so deductin g fails to pay, th e wh ole or an y
part of th e tax, as required by or un der th is Act, th en , such person , sh all, with out
prejudice to an y oth er con sequen ces wh ich h e m ay in cur, be deem ed to be an
assessee in default in respect of such tax:
Provided th at n o pen alty sh all be ch arged un der section 221 from such person ,
un less th e Assessin g Officer is satisfied th at such person , with out good an d
sufficien t reason s, h as failed to deduct an d pay such tax.]
34. Pr escr ibed author ity is Dir ector Gener al of Income-tax (Systems)/ NSDL.
35. See r ule 31A and For m Nos. 24Q and 26Q.
36. See also Cir cular Nos. 685, 686 and 696, dated 17-6-1994, 12-8-1994 and 28-2-1995,
r espectively. For details, see Taxmanns Master Guide to Income-tax Act.
37-40. Substituted by the Finance Act, 2008, w.r .e.f. 1-6-2002. Pr ior to its substitution, sub-
section (1) as amended by the Finance Act, 2002, w.e.f. 1-6-2002, Finance Act, 2001, w.r .e.f.
1-4-1962, Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 and Finance Act, 1966,
(1) If any such per son r efer r ed to in section 200 and in the cases r efer r ed to in section
194, the pr incipal officer and the company of which he is the pr incipal officer does not
deduct the whole or any par t of the tax or after deducting fails to pay the tax as r equir ed
by or under this Act, he or it shall, without pr ejudice to any other consequences which
he or it may incur , be deemed to be an assessee in default in r espect of the tax :
Provided that no penalty shall be char ged under section 221 fr om such per son, pr incipal
officer or company unless the Assessing Officer is satisfied that such per son or pr incipal
officer or company, as the case may be, has without good and sufficient r easons failed
to deduct and pay the tax.
41
[(1A)
42
Without pr ejudice to the pr ovisions of sub-section (1), if any such per son,
pr incipal officer or company as is r efer r ed to in that sub-section does not deduct
43
[the whole or any par t of the tax] or after deducting fails to pay the tax as
r equir ed by or under this Act, he or it shall be liable to pay simple inter est at
44
[on e
per cen t for every m on th or part of a m on th ] on the amount of such tax fr om the
date on which such tax was deductible to the date on which such tax is actually
paid
45
[and such inter est shall be paid befor e fur nishing the quar ter ly statement
for each quar ter in accor dance with the pr ovisions of sub-section (3) of section
200].]
(2) Wher e the tax has not been paid as afor esaid after it is deducted,
46
[the amount
of the tax together with the amount of simple inter est ther eon r efer r ed to in sub-
section (1A)] shall be a char ge upon all the assets of the per son, or the company,
as the case may be, r efer r ed to in sub-section (1).
Deduction only one mode of recovery.
202. The power to
47
[r ecover ] tax by deduction under
48
[the for egoing pr ovisions
of this Chapter ] shall be without pr ejudice to any other mode of r ecover y.
42. See r ule 119A.
44. Substituted for twelve per cent per annum by the Finance Act, 2007, w.e.f. 1-4-2008.
Ear lier wor d twelve was substituted for fifteen by the Taxation Laws (Amendment)
Act, 2003, w.e.f. 8-9-2003, fifteen was substituted for eighteen by the Finance Act, 2001,
w.e.f. 1-6-2001, eighteen was substituted for fifteen by the Finance Act, 1999, w.e.f.
1-6-1999, fifteen was substituted for twelve by the Taxation Laws (Amendment) Act,
1984, w.e.f. 1-10-1984, twelve was substituted for nine by the Finance Act, 1972, w.e.f.
1-4-1972 and nine was substituted for six by the Taxation Laws (Amendment) Act, 1967,
w.e.f. 1-10-1967.
46. Substituted for it by the Finance Act, 1966, w.e.f. 1-4-1966.
47. Substituted for levy by the Finance Act, 1987, w.e.f. 1-6-1987.
48. Substituted for the por tion beginning with the wor ds sections 192 and ending with
section 196D by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004. Pr ior to its substitution,
the quoted por tion, as amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967, Finance
1978, Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-11-1989, Finance (No. 2)
1993, Finance Act, 1994, w.e.f. 1-6-1994, Finance Act, 1995, w.e.f. 1-7-1995 and Finance Act,
1999, w.e.f. 1-6-1999, r ead as under :
sections 192 to 194, section 194A, section 194B, section 194BB, section 194C, section 194D,
section 194E, section 194EE, section 194F, section 194G, section 194H, section 194-I,
section 194J, section 194K, section 194L, section 195, section 196A, section 196B, section
196C and section 196D.
49
[Certificate for tax deducted.
50
203.
51
[(1)]
52
Ever y per son deducting tax in accor dance with
53
[the for egoing
pr ovisions of this Chapter ]
54
[shall, within such per iod as may be pr e-
scr ibed fr om the time of cr edit or payment of the sum, or , as the case may be,
fr om the time of issue of a cheque or war r ant for payment of any dividend to a
shar eholder ], fur nish to the per son to whose account such cr edit is given or to
whom such payment is made or the cheque or war r ant is issued, a cer tificate to
the effect that tax has been deducted, and specifying the amount so deducted,
the r ate at which the tax has been deducted and such other par ticular s as may
be pr escr ibed.]
55
[(2) Ever y per son, being an employer , r efer r ed to in sub-section (1A) of section
192 shall, within such per iod, as may be pr escr ibed, fur nish to the per son in
r espect of whose income such payment of tax has been made, a cer tificate to the
effect that tax has been paid to the Centr al Gover nment, and specify the amount
so paid, the r ate at which the tax has been paid and such other par ticular s as may
be pr escr ibed.]
56
[(3) Wher e the tax has been deducted or paid in accor dance with the for egoing
pr ovisions of this Chapter on or after the 1st day of Apr il,
57
[2010], ther e shall be
no r equir ement to fur nish a cer tificate r efer r ed to in sub-section (1) or , as the
case may be, sub-section (2).]
S. 203 I.T. ACT, 1961 1.768
No. 785, dated 24-11-1999, Cir cular No. 6/ 2006, dated 23-6-2006, Cir cular F.No. 142/ 44/
2006-TPL, dated 25-4-2007 and Cir cular No. 2/ 2007, dated 21-5-2007. For details, see
51. Section 203 r enumber ed as sub-section (1) ther eof by the Finance Act, 2002, w.e.f.
1-6-2002.
52. See r ule 31 and For m Nos. 16, 16A and 16AA.
su bst it u t ion, t he qu ot ed por t ion, a s a mended by t he Fina nce Act , 1972, w.e.f.
1-4-1972, Finance Act, 1973, w.e.f. 1-4-1973, Finance Act, 1978, w.e.f. 1-4-1978, Dir ect Tax
Laws (Second Amendment) Act, 1989, w.e.f. 1-11-1989, Finance (No. 2) Act, 1991, w.e.f.
194C, section 194D, section 194E, section 194EE, section 194F, section 194G, section 194H,
section 194-I, section 194J, section 194K, section 194L, section 195, section 196A, section
196B, section 196C and section 196D,
54. Substituted for shall, at the time of cr edit of payment of the sum, or , as the case may be,
at the time of issue of a cheque or war r ant for payment of any dividend to a shar eholder
57. Substituted for 2008 by the Finance Act, 2008, w.e.f. 1-4-2008. Ear lier 2008 substituted
for 2006 by the Finance Act, 2006, w.e.f. 1-4-2006 and 2006 was substituted for 2005
58
[Tax deduction and collection account number.
203A. (1) Ever y per son, deducting tax or collecting tax in accor dance with the
pr ovisions of this Chapter , who has not been allotted a tax deduction
account number or , as the case may be, a tax collection account number , shall,
within such time as may be pr escr ibed
59
, apply to the Assessing Officer for the
allotment of a tax deduction and collection account number .
(2) Wher e a tax deduction account number or , as the case may be, a tax
collection account number or a tax deduction and collection account number
has been allotted to a per son, such per son shall quote such number
(a) in all challans for the payment of any sum in accor dance with the
pr ovisions of section 200 or sub-section (3) of section 206C;
(b) in all cer tificates fur nished under section 203 or sub-section (5) of
section 206C;
60
[(ba) in all the quar ter ly statements pr epar ed and deliver ed or caused to be
section 200 or sub-section (3) of section 206C;]
(c) in all the r etur ns, deliver ed in accor dance with the pr ovisions of
section 206 or sub-section (5A) or sub-section (5B) of section 206C to
any income-tax author ity; and
(d) in all other documents per taining to such tr ansactions as may be
pr escr ibed in the inter ests of r evenue.]
section 203A, as inser ted by the Finance Act, 1987, w.e.f. 1-6-1987 and later on amended
by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988, Dir ect Tax Laws (Second
Amendment) Act, 1989, w.e.f. 1-11-1989, Finance (No. 2) Act, 1991, w.e.f. 1-10-1991, Finance
1-6-1994, Finance Act, 1995, w.e.f. 1-7-1995, Finance Act, 1999, w.e.f. 1-6-1999, r ead as
under :
203A. Tax deduction accoun t n umber.(1) Ever y per son deducting tax in accor dance
with the pr ovisions of sections 192 to 194, section 194A, section 194B, section 194BB,
section 194C, section 194D, section 194E, section 194EE, section 194F, section 194G,
section 194H, section 194-I, section 194J, section 194K, section 194L, section 195, section
196A, section 196B, section 196C and section 196D, if he has not been allotted any tax-
deduction account number , shall, within such time as may be pr escr ibed, apply to the
Assessing Officer for the allotment of a tax deduction account number .
(2) Wher e a tax deduction account number has been allotted to a per son, such per son shall
quote such number ,
(a) in all challans for the payment of any sum in accor dance with the pr ovisions of
section 200;
(b) in all cer tificates issued in accor dance with the pr ovisions of section 203;
(c) in all the r etur ns deliver ed in accor dance with the pr ovisions of sections 206, 206A
and 206B to any income-tax author ity; and
(d) in all other documents per taining to such tr ansactions as may be pr escr ibed in the
inter ests of r evenue.
59. See r ule 114A and For m No. 49B.
S. 204 I.T. ACT, 1961 1.770
61
[Furnishing of statement of tax deducted.
203AA. The pr escr ibed income-tax author ity or the per son author ised by such
author ity r efer r ed to in sub-section (3) of section 200, shall, within the
pr escr ibed time after the end of each financial year beginning on or after the 1st
day of Apr il,
62
[2008] pr epar e and deliver to ever y per son fr om whose income the
tax has been deducted or in r espect of whose income the tax has been paid a
statement in the pr escr ibed for m specifying the amount of tax deducted or paid
and such other par ticular s as may be pr escr ibed.
63
]
Meaning of person responsible for paying.
204. For the pur poses of
64
[the for egoing pr ovisions of this Chapter ] and
65
section 285, the expr ession per son r esponsible for paying means
(i) in the case of payments of income char geable under the head
Salar ies, other than payments by the Centr al Gover nment or the
Gover nment of a State, the employer himself or , if the employer is a
company, the company itself, including the pr incipal officer ther eof;
(ii) in the case of payments of income char geable under the head
Inter est on secur ities, other than payments made by or on behalf of
the Centr al Gover nment or the Gover nment of a State, the local
author ity, cor por ation or company, including the pr incipal officer
ther eof;
66
[(iia) in the case of any sum payable to a non-r esident Indian, being any sum
r epr esenting consider ation for the tr ansfer by him of any for eign
exchange asset, which is not a shor t-ter m capital asset, the author ised
dealer r esponsible for r emitting such sum to the non-r esident Indian
or for cr editing such sum to his Non-r esident (Exter nal) Account
maintained in accor dance with the For eign Exchange Regulation Act,
1973 (46 of 1973), and any r ules made ther eunder ;]
(iii)
67
[in the case of cr edit, or , as the case may be, payment] of any other
sum char geable under the pr ovisions of this Act, the payer himself, or ,
if the payer is a company, the company itself including the pr incipal
officer ther eof.
63. See r ule 31AB and For m No. 26AS.
64. Substituted for the por tion beginning with the wor ds sections 192 to 194 and ending with
sections 195 to 203 by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004. Pr ior to its
1978, w.e.f. 1-4-1978, Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-11-1989,
Finance (No. 2) Act, 1991, w.e.f. 1-10-1991, Finance Act, 1994, w.e.f. 1-6-1994, Finance Act,
1995, w.e.f. 1-7-1995 and Finance Act, 1999, w.e.f. 1-6-1999, r ead as under :
section 194J, section 194K, section 194L, sections 195 to 203.
65. Section 285 has since been omitted by the Finance Act, 1987, w.e.f. 1-6-1987.
67. Substituted for in the case of payments by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
68
(a) non-r esident Indian and for eign exchange asset shall have the
meanings assigned to them in Chapter XII-A;
(b) author ised dealer
69
shall have the meaning assigned to it in clause (b)
of section 2 of the For eign Exchange Regulation Act, 1973 (46 of
1973).]
Bar against direct demand on assessee.
205. Wher e tax is deductible at the sour ce under
70
[the for egoing pr ovisions
of this Chapter ], the assessee shall not be called upon to pay the tax himself
to the extent to which tax has been deducted fr om that income.
71
[Persons deducting tax to furnish prescribed returns.
72
206.
73
[(1)] The pr escr ibed per son
74
in the case of ever y office of Gover nment,
the pr incipal officer in the case of ever y company, the pr escr ibed per son
74
in the case of ever y local author ity or other public body or association, ever y
pr ivate employer and ever y other per son r esponsible for deducting tax
75
[befor e
the 1st day of Apr il, 2005] under the for egoing pr ovisions of this Chapter
76
[shall,
within the pr escr ibed time after the end of each financial year , pr epar e and
deliver or cause to be deliver ed] to the pr escr ibed income-tax author ity
77

78
[or
such other author ity or agency as may be pr escr ibed], such r etur ns
79
in such
69. For definition of author ised dealer , see footnote 40 on p. 1.431 an te.
70. Substituted for the por tion beginning with the wor ds sections 192 to 194 and ending with
section 196D by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004. Pr ior to its substitution,
the quoted por tion, as amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967, Finance
1978, Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-11-1989, Finance (No. 2)
1993, Finance Act, 1994, w.e.f. 1-6-1994, Finance Act, 1995, w.e.f. 1-7-1995 and Finance Act,
1999, w.e.f. 1-6-1999, r ead as under :
section 194J, section 194K, section 194L, section 195, section 196A, section 196B, section
196C and section 196D.
was amended by the Finance Act, 1965, w.e.f. 1-4-1965.
72. See also Cir cular No. 719, dated 22-8-1995, Cir cular No. 744, dated 6-5-1996, Cir cular No.
796, dated 10-10-2000, Cir cular No. 797, dated 10-10-2000, Cir cular No. 8/ 2003, dated
73. Section 206 r enumber ed as sub-section (1) by the Finance Act, 1997, w.e.f. 1-4-1997.
74. See r ule 36 for pr escr ibed per sons.
76. Substituted for shall pr epar e, within the pr escr ibed time after the end of each financial
year , and deliver or cause to be deliver ed by the Finance (No. 2) Act, 1991, w.e.f. 27-9-1991.
77. See r ule 36A. The pr escr ibed author ity under r ule 36A is Dir ector Gener al of Income-tax
(Syst ems)/ NSDL.
79. See r ules 36 and 37 and For m Nos. 24 and 26. Also see r ule 37A and For m No. 27Q.
for m and ver ified in such manner and setting for th such par ticular s as may be
pr escr ibed:]
80
[Provided that the Boar d may, if it consider s necessar y or expedient so to do,
fr ame a scheme
81
for the pur poses of filing such r etur ns with such other
author ity or agency r efer r ed to in this sub-section.]
82
[(2) Without pr ejudice to the pr ovisions of sub-section (1), the per son r espon-
sible for deducting tax under the for egoing pr ovisions of this Chapter other than
83
[the pr escr ibed per son in the case of ever y office of the Gover nment and ] the
pr incipal officer in the case of ever y company may, at his option, deliver or cause
to be deliver ed such r etur n to the pr escr ibed income-tax author ity in accor dance
with such scheme as may be specified by the Boar d in this behalf, by notification
in the Official Gazette
84
, and subject to such conditions as may be specified
ther ein, on or befor e the pr escr ibed time after the end of each financial year , on
a floppy, diskette, magnetic car tr idge tape, CD-ROM or any other computer
r eadable media (her einafter r efer r ed to as the computer media) and in the
manner as may be specified in that scheme :
85
[Provided that the pr escr ibed per son in the case of ever y office of Gover nment
and the pr incipal officer in the case of ever y company r esponsible for deducting
tax under the for egoing pr ovisions of this Chapter shall, deliver or cause to be
deliver ed, within the pr escr ibed time after the end of each financial year , such
r etur ns on computer media under the said scheme.]
(3) Notwithstanding anything contained in any other law for the time being in
for ce, a r etur n filed on computer media shall be deemed to be a r etur n for the
S. 206 I.T. ACT, 1961 1.772
81. See Scheme for Fur nishing of Paper Retur ns of Tax Deducted at Sour ce, 2005.
82. Sub-sections (2), (3) and (4) substituted for sub-sections (2) and (3) by the Finance Act,
2003, w.e.f. 1-6-2003. Pr ior to their substitution, sub-sections (2) and (3), as inser ted by the
(2) Notwithstanding anything contained in any other law for the time being in for ce, a
r etur n filed on a floppy, diskette, magnetic car tr idge tape, CD-ROM or any other computer
r eadable media as may be specified by the Boar d (her einafter r efer r ed to as the computer
media) shall be deemed to be a r etur n for the pur poses of this section and the r ules made
ther eunder and shall be admissible in any pr oceedings ther eunder , without fur ther pr oof
of pr oduction of the or iginal, as evidence of any contents of the or iginal or of any fact
stated ther ein.
(3) A r etur n filed under sub-section (2) shall fulfil the following conditions, namely :
(a) while r eceiving r etur ns on computer media, necessar y checks by scanning the
documents filed on computer media will be car r ied out and the media will be duly
authenticated by the Assessing Officer ; and
(b) the Assessing Officer shall also take due car e to pr eser ve the computer media by
duplicating, tr ansfer r ing, master ing or stor age without loss of data.
84. See Electr onic Filing of Retur ns of Tax Deducted at Sour ce Scheme, 2003. See also r ule
37B and For m No. 27A.
pr oviso r ead as under :
Provided that the pr incipal officer shall, in the case of ever y company r esponsible for
deducting tax under the for egoing pr ovisions of this Chapter , deliver or cause to be
deliver ed, within the pr escr ibed time after the end of each financial year , such r etur ns on
computer media under the said scheme.
pur poses of this section and the r ules made ther eunder and shall be admissible
in any pr oceedings t her eunder , wit hout fur t her pr oof of pr oduct ion of
the or iginal, as evidence of any contents of the or iginal or of any fact stated
ther ein.
(4) Wher e the Assessing Officer consider s that the r etur n deliver ed or caused to
be deliver ed under sub-section (2) is defective, he may intimate the defect to the
per son r esponsible for deducting tax or the pr incipal officer in the case of a
company, as the case may be, and give him an oppor tunity of r ectifying the defect
within a per iod of fifteen days fr om the date of such intimation or within such
fur ther per iod which, on an application made in this behalf, the Assessing Officer
may, in his discr etion, allow; and if the defect is not r ectified within the said per iod
of fifteen days or , as the case may be, the fur ther per iod so allowed, then,
notwithstanding anything contained in any other pr ovision of this Act, such
r etur n shall be tr eated as an invalid r etur n and the pr ovisions of this Act shall
apply as if such per son had failed to deliver the r etur n.]
86
[Furnishing of quarterly return in respect of payment of interest to residents
without deduction of tax.
206A. (1) Any banking company or co-oper ative society or public company
r efer r ed to in the pr oviso to clause (i) of sub-section (3) of section 194A
r esponsible for paying to a r esident any income
87
[not exceeding ten thousand
r upees, wher e the payer is a banking company or a co-oper ative society, and five
thousand r upees in any other case] by way of inter est (other than inter est on
secur ities), shall pr epar e quar ter ly r etur ns for the per iod ending on the 30th June,
the 30th September , the 31st December and the 31st Mar ch in each financial year
and deliver or cause to be deliver ed to the pr escr ibed income-tax author ity
88
or
the per son author ised by such author ity the quar ter ly r etur ns as afor esaid, in the
pr escr ibed for m
89
, ver ified in such manner and within such time as may be
pr escr ibed, on a floppy, diskette, magnetic car tr idge tape, CD-ROM or any other
computer r eadable media.
86. Inser ted by the Finance Act, 2005, w.e.f. 1-6-2005. Ear lier or iginal section 206A was
inser ted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967 and ther eafter amended by the
Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Pr ior to its omission by the
Finance (No. 2) Act, 1996, w.e.f. 1-10-1996, section 206A r ead as under :
206A. Person payin g in terest to residen ts with out deduction of tax, to furn ish prescribed
return .Any per son r esponsible for paying any income r efer r ed to in section 194A shall
pr epar e, and within thir ty days fr om the 31st day of Mar ch in each year , deliver or cause
to be deliver ed to the Assessing Officer in the pr escr ibed for m and ver ified in the
pr escr ibed manner , a r etur n in wr iting showing
(a) the name and addr ess of ever y per son who has fur nished to him an affidavit or a
statement under the pr oviso to sub-section (1) of section 194A;
(b) the amount of the income cr edited or paid dur ing the financial year to each such
per son and the time or times at which the same was cr edited or paid, as the case may
be; and
(c) such other par ticular s as may be pr escr ibed.
87. Substituted for not exceeding five thousand r upees by the Finance Act, 2007, w.e.f.
1-6-2007.
88. Pr escr ibed author ity is Dir ector Gener al of Income-tax (Systems) or per son author ised by
him.
89. See r ules 31AC and 31ACA and For m Nos. 26QA and 26QAA.
(2) The Centr al Gover nment may, by notification in the Official Gazette, r equir e
any per son other than a per son mentioned in sub-section (1) r esponsible for
paying to a r esident any income liable for deduction of tax at sour ce under
Chapter XVII, to pr epar e and deliver or cause to be deliver ed quar ter ly r etur ns
in the pr escr ibed for m and ver ified in such manner and within such time as may
be pr escr ibed, to the pr escr ibed income-tax author ity or the per son author ised
by such author ity on a floppy, diskette, magnetic car tr idge tape, CD-ROM or any
other computer r eadable media.]
Person paying dividend to certain residents without deduction of tax to furnish
prescribed return.
206B.
90
91
[BB.Collection at source
Profits and gains from the business of trading in alcoholic liquor, forest produce,
scrap, etc.
92
206C.
93
[
94
(1) Ever y per son, being a seller shall, at the time of debiting of the
amount payable by the buyer to the account of the buyer or at the time
of r eceipt of such amount
95
fr om the said buyer in cash or by the issue of a cheque
or dr aft or by any other mode, whichever is ear lier , collect fr om the buyer of any
goods of the natur e specified in column (2) of the Table below, a sum equal to the
per centage, specified in the cor r esponding entr y in column (3) of the said Table,
of such amount as income-tax:
90. Pr ior to its omission, section 206B, as inser ted by the Finance (No. 2) Act, 1977, w.e.f.
1-10-1977 and later on amended by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
206B. Person payin g dividen d to certain residen ts with out deduction of tax to furn ish
prescribed form .Any per son r esponsible for paying any dividend r efer r ed to in section
194 shall pr epar e, and within thir ty days fr om the 31st day of Mar ch in each year , deliver
or cause to be deliver ed to the Assessing Officer in the pr escr ibed for m and ver ified in the
pr escr ibed manner , a r etur n in wr iting showing
(a) the name and addr ess of ever y per son who has fur nished to him a statement under
the fir st pr oviso to section 194;
(b) the amount of the dividend paid or distr ibuted dur ing the financial year to each
such per son; and
(c) such other par ticular s as may be pr escr ibed.
Income-tax Act.
was amended by the Dir ect Tax Laws (Amendment) Act, 1989, w.r .e.f. 1-6-1988.
94. See r ules 31AA, 31AB, 37C to 37H and For m Nos. 13, 26AS, 27B, 27C, 27D, 27E and 27EQ.
95. For the meaning of the expr ession such amount, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
S. 206C I.T. ACT, 1961 1.774
96
[TABLE
Sl. No. Nature of goods Percen tage
(1) (2) (3)
(i) Alcoholic Liquor for human consumption One per cent
(ii) Tendu leaves Five per cent
(iii) Timber obtained under a for est lease Two and one-half per cent
(iv) Timber obtained by any mode other Two and one-half per cent
than under a for est lease
(v) Any other for est pr oduce not being Two and one-half per cent
timber or tendu leaves
(vi) Scr ap One per cent:]
97
[Provided that ever y per son, being a seller shall at the time, dur ing the per iod
beginning on the 1st day of June, 2003 and ending on the day immediately
pr eceding the date on which the Taxation Laws (Amendment) Act, 2003 comes
into for ce, of debiting of the amount payable by the buyer to the account of the
buyer or of r eceipt of such amount fr om the said buyer in cash or by the issue
of a cheque or dr aft or by any other mode, whichever is ear lier , collect fr om the
buyer of any goods of the natur e specified in column (2) of the Table as it stood
immediately befor e the 1st day of June, 2003, a sum equal to the per centage,
specified in the cor r esponding entr y in column (3) of the said Table, of such
amount as income-tax in accor dance with the pr ovisions of this section as they
stood immediately befor e the 1st day of June, 2003.]]
98
[(1A) Notwithstanding anything contained in sub-section (1), no collection of tax
shall be made in the case of a buyer , who is r esident in India, if such buyer
fur nishes to the per son r esponsible for collecting tax, a declar ation in wr iting in
duplicate in the pr escr ibed for m
99
and ver ified in the pr escr ibed manner to the
1.775 CH. XVII - COLLECTION AND RECOVERY - COLLECTION AT SOURCE S. 206C
substitution, the Table, as amended by the Finance Act, 1992, w.e.f. 1-4-1992, Finance
(No. 2) Act, 1996, w.e.f. 1-10-1996 and Finance Act, 2003, w.e.f. 1-6-2003, r ead as under :
TABLE
Sl. No. Nature of goods Percen tage
(1) (2) (3)
(i) Alcoholic liquor for human consumption and tendu leaves Ten per cent
(ii) Timber obtained under a for est lease Fifteen per cent
(iii) Timber obtained by any mode other than under a for est lease Five per cent
(iv ) Any other for est pr oduce not being timber or tendu leaves Fifteen per cent
(v) Scr ap Ten per cent :
subst it ut ion, pr oviso r ead as under :
Provided that wher e the Assessing Officer , on an application made by the buyer , gives a
cer tificate in the pr escr ibed for m that to the best of his belief any of the goods r efer r ed
to in the afor esaid Table ar e to be utilised for the pur poses of manufactur ing, pr ocessing
or pr oducing ar ticles or things and not for tr ading pur poses, the pr ovisions of this sub-
section shall not apply so long as the cer tificate is in for ce.
99. See r ule 37C and For m No. 27C.
S. 206C I.T. ACT, 1961 1.776
effect that the goods r efer r ed to in column (2) of the afor esaid Table ar e to be
utilised for the pur poses of manufactur ing, pr ocessing or pr oducing ar ticles or
things and not for tr ading pur poses.
(1B) The per son r esponsible for collecting tax under this section shall deliver or
cause to be deliver ed to the Chief Commissioner or Commissioner one copy of
the declar ation r efer r ed to in sub-section (1A) on or befor e the seventh day of
the month next following the month in which the declar ation is fur nished to
him.]
1
[(1C) Ever y per son, who gr ants a lease or a licence or enter s into a contr act or
other wise tr ansfer s any r ight or inter est either in whole or in par t in any par king
lot or toll plaza or mine or quar r y, to another per son, other than a public sector
company (her eafter in this section r efer r ed to as licensee or lessee) for the use
of such par king lot or toll plaza or mine or quar r y for the pur pose of business
shall, at the time of debiting of the amount payable by the licensee or lessee to
the account of the licensee or lessee or at the time of r eceipt of such amount fr om
the licensee or lessee in cash or by the issue of a cheque or dr aft or by any other
mode, whichever is ear lier , collect fr om the licensee or lessee of any such licence,
contr act or lease of the natur e specified in column (2) of the Table below, a sum
equal to the per centage, specified in the cor r esponding entr y in column (3) of the
said Table, of such amount as income-tax:
TABLE
Sl. No. Nature of con tract or licen ce Percen tage
or lease, etc.
(1) (2) (3)
( i) Par king lot Two per cent
(ii) Toll plaza Two per cent
(iii) Mining and quar r ying Two per cent .]
2
[Explan ation 1.For the pur poses of this sub-section, mining and quar r ying
shall not include mining and quar r ying of miner al oil.
Explan ation 2.For the pur poses of Explan ation 1, miner al oil includes
petr oleum and natur al gas.]
(2) The power to r ecover tax by collection under sub-section (1)
3
[or sub-section
(1C)] shall be without pr ejudice to any other mode of r ecover y.
(3) Any per son collecting any amount under sub-section (1)
3
[or sub-section (1C)]
shall pay within
4
[the pr escr ibed time] the amount so collected to the cr edit of the
Centr al Gover nment or as the Boar d dir ects :
5
[Provided that the per son collecting tax on or after the 1st day of Apr il, 2005 in
accor dance with the for egoing pr ovisions of this section shall, after paying the
4. Substituted for seven days by the Taxation Laws (Amendment) Act, 2003, w.e.f. 8-9-2003.
See also r ule 37CA.
tax collected to the cr edit of the Centr al Gover nment within the pr escr ibed time,
pr epar e quar ter ly statements for the per iod ending on the 30th June, the 30th
September , the 31st December and the 31st Mar ch in each financial year and
deliver or cause to be deliver ed to the pr escr ibed income-tax author ity
6
, or the
per son author ised by such author ity, such statement in such for m and ver ified
in such manner and setting for th such par ticular s and within such time as may
be pr escr ibed.
7
]
8-9
[(4) An y am oun t collected in accordan ce with th e provision s of th is section an d
paid to th e credit of th e Cen tral Govern m en t sh all be deem ed to be a paym en t of
tax on beh alf of th e person from wh om th e am oun t h as been collected an d credit
sh all be given to such person for th e am oun t so collected in a particular
assessm en t year in accordan ce with th e rules as m ay be prescribed by th e Board
from tim e to tim e.]
(5) Ever y per son collecting tax in accor dance with the pr ovisions of this section
shall within
10
[such per iod as may be pr escr ibed
11
fr om the time of debit] or
r eceipt of the amount fur nish to the buyer
12
[or licensee or lessee] to whose
account such amount is debited or fr om whom such payment is r eceived, a
cer tificate to the effect that tax has been collected, and specifying the sum so
collected, the r ate at which the tax has been collected and such other par ticular s
11
:
13
[Provided that no cer tificate may be fur nished in a case wher e tax has been
collected in accor dance with the for egoing pr ovisions of this section on or after
the 1st day of Apr il,
14
[2010] :
6. Dir ector Gener al of Income-tax (Systems)/ NSDL.
7. See r ule 31AA and For m No. 27EQ.
8-9. Substituted by the Finance Act, 2008, w.e.f. 1-4-2008. Pr ior to its substitution, sub-section
(4) as amended by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005, Finance Act, 2005, w.e.f.
(4) Any amount collected in accor dance with the pr ovisions of this section and paid under
sub-section (3) shall be deemed as payment of tax on behalf of the per son fr om whom the
amount has been collected and cr edit shall be given to him for the amount so collected
on the pr oduction of the cer tificate fur nished under sub-section (5) in the assessment
made under this Act for the assessment year for which such income is assessable :
Provided that wher e any amount is collected in accor dance with the pr ovisions of this
section on or after the 1st day of Apr il, 2008 and paid under sub-section (3) to the cr edit
of the Centr al Gover nment, the amount of tax collected and specified in the statement
r efer r ed to in the second pr oviso to sub-section (5) shall be deemed as payment of tax on
behalf of the per son fr om whom the amount has been collected and cr edit shall be given
to him for the amount so collected in the assessment made under this Act for the
assessment year for which such income is assessable without the pr oduction of cer tifi-
cat e.
10. Substituted for ten days fr om the date of debit by the Taxation Laws (Amendment) Act,
2003, w.e.f. 8-9-2003.
11. See r ule 37D and For m No. 27D.
for 2006 by the Finance Act, 2006, w.e.f. 1-4-2006 and 2006 was substituted for 2005
Provided further that the pr escr ibed income-tax author ity or the per son
author ised by such author ity r efer r ed to in sub-section (3) shall, within the
pr escr ibed time after the end of each financial year
15
[beginning on or after the
1st day of Apr il, 2008], pr epar e and deliver to the buyer r efer r ed to in sub-section
(1) or , as the case may be, to the licensee or lessee r efer r ed to in sub-section (1C),
a statement in the pr escr ibed for m
16
specifying the amount of tax collected and
such other par ticular s as may be pr escr ibed.]
17
[(5A) Ever y per son collecting tax
18
[befor e the 1st day of Apr il, 2005] in
accor dance with the pr ovisions of this section shall
19
[pr epar e within the pr e-
scr ibed time after the end of each financial year ], and deliver or cause to be
deliver ed to the pr escr ibed income-tax author ity
20

21
[or such other author ity or
agency as may be pr escr ibed ] such r etur ns in such for m and ver ified in such
manner and setting for th such par ticular s and within such time as may be
pr escr ibed
22
:]
23
[Provided that the Boar d may, if it consider s necessar y or expedient so to do,
fr ame a scheme
24
for the pur poses of filing such r etur ns with such other
author ity or agency r efer r ed to in this sub-section.]
25
[(5B) Without pr ejudice to the pr ovisions of sub-section (5A), any per son
collecting tax, other than in a case wher e the seller is a company, the Centr al
Gover nment or a State Gover nment, may at his option, deliver or cause to be
deliver ed such r etur n to the pr escr ibed income-tax author ity
20
in accor dance
S. 206C I.T. ACT, 1961 1.778
16. See r ule 31AB and For m No. 26AS.
19. Substituted for pr epar e half year ly r etur ns for the per iod ending on 30th September and
31st Mar ch in each financial year by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004.
20. The pr escr ibed author ity under r ule 37F is Dir ector Gener al of Income-tax (Systems)/
NSDL.
22. See r ule 37E and For m No. 27E.
24. See Scheme for Fur nishing of Paper Retur ns of Tax Collected at Sour ce, 2005.
25. Sub-sections (5B), (5C) and (5D) substituted for sub-sections (5B) and (5C) by the Finance
(No. 2) Act, 2004, w.e.f. 1-4-2005. Pr ior to their substitution, sub-sections (5B) and (5C), as
inser ted by the Finance Act, 1999, w.e.f 1-6-1999, r ead as under :
(5B) Notwithstanding anything contained in any other law for the time being in for ce, a
r etur n filed on a floppy, diskette, magnetic car tr idge tape, CD-ROM or any other computer
r eadable media as may be specified by the Boar d (her einafter r efer r ed to as the computer
media) shall be deemed to be a r etur n for the pur poses of sub-section (5A) and the r ules
made ther eunder and shall be admissible in any pr oceedings ther eunder , without fur ther
pr oof of pr oduction of the or iginal, as evidence of any contents of the or iginal or of any
fact stated ther ein.
(5C) A r etur n filed under sub-section (5B) shall fulfil the following conditions, namely:
(a) while r eceiving r etur ns on computer media, necessar y checks by scanning the
documents filed on computer media will be car r ied out and the media will be duly
authenticated by the Assessing Officer ; and
(b) the Assessing Officer shall also take due car e to pr eser ve the computer media by
duplicating, tr ansfer r ing, master ing or stor age without loss of data.
with such scheme
26
as may be specified by the Boar d in this behalf, by notification
in the Official Gazette, and subject to such conditions as may be specified ther ein,
on or befor e the pr escr ibed time after the end of each financial year , on a floppy,
diskette, magnetic car tr idge tape, CD-ROM or any other computer r eadable
media (her einafter r efer r ed to as the computer media) and in the manner as may
be specified in that scheme
27
:
Provided that wher e the per son collecting tax is a company or the Centr al
Gover nment or a State Gover nment, such per son shall, in accor dance with the
pr ovisions of this section, deliver or cause to be deliver ed, within the pr escr ibed
time after the end of each financial year , such r etur ns on computer media under
the said scheme.
(5C) Notwithstanding anything contained in any other law for the time being in
for ce, a r etur n filed on computer media shall be deemed to be a r etur n for the
pur poses of sub-section (5A) and the r ules made ther eunder and shall be
admissible in any pr oceedings made ther eunder , without fur ther pr oof of
pr oduction of the or iginal, as evidence of any contents of the or iginal or of any
facts stated ther ein.
(5D) Wher e the Assessing Officer consider s that the r etur n deliver ed or caused
to be deliver ed under sub-section (5B) is defective, he may intimate the defect to
the per son collecting tax and give him an oppor tunity of r ectifying the defect
within a per iod of fifteen days fr om the date of such intimation or within such
fur ther per iod which, on an application made in this behalf, the Assessing Officer
may, in his discr etion, allow; and if the defect is not r ectified within the said per iod
of fifteen days or , as the case may be, the fur ther per iod so allowed, then,
notwithstanding anything contained in any other pr ovision of this Act, such
r etur n shall be tr eated as an invalid r etur n and the pr ovisions of this Act shall
apply as if such per son had failed to deliver the r etur n.]
(6) Any per son r esponsible for collecting the tax who fails to collect the tax in
accor dance with the pr ovisions of this section, shall, notwithstanding such
failur e, be liable to pay the tax to the cr edit of the Centr al Gover nment in
accor dance with the pr ovisions of sub-section (3).
28
[(6A) If any per son r esponsible for collecting tax in accor dance with the
pr ovisions of this section does not collect the whole or any par t of the tax or after
collecting, fails to pay the tax as r equir ed by or under this Act, he shall, without
pr ejudice to any other consequences which he may incur , be deemed to be an
assessee in default in r espect of the tax:
Provided that no penalty shall be char ged under section 221 fr om such per son
unless the Assessing Officer is satisfied that the per son has without good and
sufficient r easons failed to collect and pay the tax.]
(7) Without pr ejudice to the pr ovisions of sub-section (6), if the
29
[per son
r esponsible for collecting tax] does not collect the tax or after collecting the tax
26. See Electr onic Filing of Retur ns of Tax Collected at Sour ce Scheme, 2005.
27. See r ule 37EA and For m No. 27B. See also Electr onic Filing of Retur ns of Tax Collected
at Sour ce Scheme, 2005.
29. Substituted for seller , ibid.
fails to pay it as r equir ed under this section, he shall be liable to pay simple
30
[one] per cent per month or par t ther eof on the amount
of such tax fr om the date on which such tax was collectible to the date on which
the tax was actually paid
31
[and such inter est shall be paid befor e fur nishing the
quar ter ly statement for each quar ter in accor dance with the pr ovisions of sub-
section (3)].
(8) Wher e the tax has not been paid as afor esaid, after it is collected, the amount
of the tax together with the amount of simple inter est ther eon r efer r ed to in sub-
section (7) shall be a char ge upon all the assets of the
32
[per son r esponsible for
collecting tax].]
33
[(9) Wher e the Assessing Officer is satisfied that the total income of the buyer
34
[or licensee or lessee] justifies the collection of the tax at any lower r ate than
the r elevant r ate specified in sub-section (1)
34
[or sub-section (1C)], the Assessing
Officer shall, on an application
35
made by the buyer
36
[or licensee or lessee] in this
behalf, give to him a cer tificate for collection of tax at such lower r ate than the
r elevant r ate specified in sub-section (1)
36
[or sub-section (1C)].
(10) Wher e a cer tificate under sub-section (9) is given, the per son r esponsible for
collecting the tax shall, until such cer tificate is cancelled by the Assessing Officer ,
collect the tax at the r ates specified in such cer tificate.
(11) The Boar d may, having r egar d to the convenience of assessees and the
37
(a) buyer means a per son who obtains in any sale, by way of auction,
tender or any other mode, goods of the natur e specified in the Table
in sub-section (1) or the r ight to r eceive any such goods but does not
include,
38
[(i) a public sector company, the Centr al Gover nment, a State Gov-
er nment, and an embassy, a high commission, legation, commis-
S. 206C I.T. ACT, 1961 1.780
8-9-2003. Ear lier the quoted wor ds wer e substituted for two by the Finance Act, 2001,
w.e.f. 1-6-2001.
32. Substituted for seller , ibid., w.e.f. 1-4-2007.
33. Sub-sections (9), (10) and (11) inser ted by the Finance Act, 1999, w.e.f. 1-6-1999.
35. See r ules 37G and 37H and For m No. 13.
38. Substituted by the Taxation Laws (Amendment) Act, 2003, w.e.f. 8-9-2003. Ear lier sub-
clauses (i) and (ii), as subst it ut ed for sub-clauses (i), (ii) and (iii) by the Finance Act, 2003,
(i ) a public sector company, or
(ii ) a buyer in the r etail sale of such goods obtained in pur suance of such sale;
sion, consulate and the tr ade r epr esentation, of a for eign State
and a club; or
(ii) a buyer in the r etail sale of such goods pur chased by him for
per sonal consumption;]
39
[(b) scr ap means waste and scr ap fr om the manufactur e or mechanical
wor king of mater ials which is definitely not usable as such because
of br eakage, cutting up, wear and other r easons;
(c) seller means the Centr al Gover nment, a State Gover nment or any
local author ity or cor por ation or author ity established by or under a
Centr al, State or Pr ovincial Act, or any company or fir m or co-
oper ative society and also includes an individual or a Hindu undi-
vided family whose total sales, gr oss r eceipts or tur nover fr om
the business or pr ofession car r ied on by him exceed the monetar y
limits specified under clause (a) or clause (b) of section 44AB dur ing
the financial year immediately pr eceding the financial year in which
the goods of the natur e specified in the Table in sub-section (1) ar e
sold.]]
40
[Tax collection account number.
206CA. (1) Ever y per son collecting tax in accor dance with the pr ovisions of
section 206C, shall, within such time as may be pr escr ibed
41
, apply to the
Assessing Officer for the allotment of a tax-collection account number
42
.
(2) Wher e a tax collection account number has been allotted to a per son, such
per son shall quote such number
(a) in all challans for the payment of any sum in accor dance with the
pr ovisions of sub-section (3) of section 206C;
(b) in all cer tificates fur nished under sub-section (5) of section 206C;
(c) in all the r etur ns deliver ed in accor dance with the pr ovisions of sub-
section (5A) or sub-section (5B) of section 206C to any income-tax
author ity; and
(d) in all other documents per taining to such tr ansactions as may be
pr escr ibed in the inter est of r evenue :]
43
[Provided that the pr ovisions of this section shall not apply on or after the 1st
day of October , 2004.]
1.781 CH. XVII - COLLECTION AND RECOVERY - COLLECTION AT SOURCE S. 206CA
39. Clauses (b) and (c) substituted for clause (b) by the Finance Act, 2003, w.e.f. 1-6-2003. Pr ior
t o it s subst it ut ion, clause (b) r ead as under :
(b) seller means the Centr al Gover nment, a State Gover nment or any local author ity
or cor por ation or author ity established by or under a Centr al, State or Pr ovincial
Act, or any company or fir m or co-oper ative society.
41. See r ule 114AA.
42. See r ule 114AA and For m No. 49B.
C.Advan ce paym en t of tax
43a
44
[Liability for payment of advance tax.
207. Tax shall be payable in advance dur ing any financial year , in accor dance
with the pr ovisions of sections 208 to 219 (both inclusive), in r espect of the
total income of the assessee which would be char geable to tax for the assessment
year immediately following that financial year , such income being her eafter in
this Chapter r efer r ed to as cur r ent income
45
.]
46
[Conditions of liability to pay advance tax.
208. Advance tax shall be payable dur ing a financial year in ever y case
wher e the amount of such tax payable by the assessee dur ing that year ,
as computed in accor dance with the pr ovisions of this Chapter , is
47
[five
thousand] r upees or mor e.]
Computation of advance tax.
209.
48
[(1) The amount of advance tax payable by an assessee in the financial
year shall, subject to the pr ovisions of sub-sections (2) and (3), be computed
as follows, namely :
(a) wher e the calculation is made by the assessee for the pur poses of
payment of advance tax under sub-section (1) or sub-section (2) or
sub-section (5) or sub-section (6) of section 210, he shall fir st estimate
his cur r ent income and income-tax ther eon shall be calculated at the
r ates in for ce in the financial year ;
(b) wher e the calculation is made by the Assessing Officer for the pur pose
of making an or der under sub-section (3) of section 210, the total
income of the latest pr evious year in r espect of which the assessee has
been assessed by way of r egular assessment or the total income
S. 209 I.T. ACT, 1961 1.782
43a. For electr onic payment of tax, see r ule 125.
44. Substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Or iginal
section 207 was ear lier amended by the Finance Act, 1972, w.e.f. 1-4-1972.
45. For the meaning of expr ession cur r ent income, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
46. Substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Pr ior to the
substitution by the said Amendment Act, section 208 was fir st substituted by the Finance
Act, 1969, w.e.f. 1-4-1969 and was later amended by the Finance Act, 1972, w.e.f. 1-4-1972,
the Finance (No. 2) Act, 1977, w.e.f. 1-9-1977, the Finance Act, 1978, w.e.f. 1-6-1978, the
Finance Act, 1979, w.e.f. 1-4-1979, the Finance (No. 2) Act, 1980, w.e.f. 1-9-1980, the Finance
Act, 1981, w.e.f. 1-6-1981, the Taxation Laws (Amendment) Act, 1984, w.e.f. 2-4-1985 and
47. Substituted for one thousand five hundr ed by the Finance (No. 2) Act, 1996, w.e.f.
1-10-1996.
48. Substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Sub-section
(1) was ear lier amended by the Finance Act, 1963, w.e.f. 1-4-1963, the Finance Act, 1964,
w.r .e.f. 1-4-1963, the Dir ect Taxes (Amendment) Act, 1964, w.e.f. 6-10-1964, the Finance Act,
1965, w.e.f. 1-4-1965, the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967, the Finance Act, 1969,
w.e.f. 1-4-1969, the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, the Finance Act,
1972, w.e.f. 1-4-1972, the Finance Act, 1973, w.e.f. 1-4-1973, the Finance Act, 1974, w.e.f.
1-4-1974 and the Finance Act, 1978, w.e.f. 1-6-1978.
r etur ned by the assessee in any r etur n of income fur nished by him for
any subsequent pr evious year , whichever is higher , shall be taken and
income-tax ther eon shall be calculated at the r ates in for ce in the
financial year ;
(c) wher e the calculation is made by the Assessing Officer for the pur pose
of making an amended or der under sub-section (4) of section 210, the
total income declar ed in the r etur n fur nished by the assessee for the
later pr evious year , or , as the case may be, the total income in r espect
of which the r egular assessment, r efer r ed to in that sub-section has
been made, shall be taken and income-tax ther eon shall be calculated
at the r ates in for ce in the financial year ;
(d) the income-tax calculated under clause (a) or clause (b) or clause (c)
shall, in each case, be r educed by the amount of income-tax which
would be deductible
49
[or collectible] at sour ce dur ing the said
financial year under any pr ovision of this Act fr om any income (as
computed befor e allowing any deductions admissible under this Act)
which has been taken into account in computing the cur r ent income
or , as the case may be, the total income afor esaid; and the amount of
income-tax as so r educed shall be the advance tax payable.]
50
[(2) Wher e the Finance Act of the r elevant year pr ovides that, in the case of any
class of assessees, net agr icultur al income (as defined in that Act) shall be taken
into account for the pur poses of computing advance tax, then, the net agr icul-
tur al income to be taken into account in the case of any assessee falling in that
class, shall be
(a) in cases
51
[wher e the Assessing Officer makes an or der under sub-
section (3) or sub-section (4) of section 210],
(i) if the total income of the latest pr evious year in r espect of which
the assessee has been assessed by way of r egular assessment
for ms the basis of computation of advance tax payable by him,
the net agr icultur al income which has been taken into account
for the pur poses of char ging income-tax for the assessment year
r elevant to that pr evious year ; or
52
[(ii) if the total income declar ed by the assessee for the later pr evious
year r efer r ed to in sub-section (4) of section 210 for ms the basis
of computation of advance tax, the net agr icultur al income as
r etur ned by the assessee in the r etur n of income for the assess-
ment year r elevant to such later pr evious year ;]
1.783 CH. XVII - COLLECTION AND RECOVERY - ADVANCE PAYMENT OF TAX S. 209
51. Substituted for wh ere th e assessee sen ds a statem en t un der sub-section (1) of section 209A
or wher e the Income-tax Officer makes an or der under sub-section (1) or sub-section (3)
of section 210 by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Ear lier the
italicised wor ds wer e inser ted by the Finance Act, 1978, w.e.f. 1-6-1978.
S. 210 I.T. ACT, 1961 1.784
53
[(b) in cases wher e the advance tax is paid by the assessee on the basis of
his estimate of his cur r ent income under sub-section (1) or sub-
section (2) or sub-section (5) or sub-section (6) of section 210, the net
agr icultur al income, as estimated by him, of the per iod which would
be the pr evious year for the immediately following assessment year .]
(3) Wher e the Finance Act of the r elevant year specifies any separ ate r ate or r ates
for the pur poses of computing advance tax in the case of ever y Hindu undivided
family which has at least one member whose total income of the pr evious year
exceeds the maximum amount not char geable to income-tax in his case, then, the
54
[Assessing] Officer shall, for making an or der under
55
[sub-section (3) or sub-
section (4) of] section 210 in the case of any such Hindu undivided family, compute
(subject to the pr ovisions of section 164) the advance tax at such r ate or r ates
(a) in a case wher e the total income of the latest pr evious year in r espect
of which the Hindu undivided family has been assessed by way of
r egular assessment for ms the basis of computation of advance tax, if
the total income of any member of the family for the assessment year
r elevant to such latest pr evious year exceeds the maximum amount
not char geable to income-tax in his case;
(b) in a case wher e the total income of the pr evious year
56
[in r espect of
which a r etur n of income is fur nished by the Hindu undivided family
under section 139 or in r esponse to a notice under sub-section (1) of
section 142] for ms the basis of computation of advance tax, if the total
income of any member of the family for the assessment year r elevant
to such pr evious year exceeds the maximum amount not char geable
to income-tax in his case.
Computation and payment of advance tax by assessee.
57
209A. [Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f. 1-4-1988.
Origin al section was in serted by th e Fin an ce Act, 1978, w.e.f. 1-6-1978.]
58
[Payment of advance tax by the assessee of his own accord or in pursuance of
order of Assessing Officer.
210. (1) Ever y per son who is liable to pay advance tax under section 208
(whether or not he has been pr eviously assessed by way of r egular
assessment) shall, of his own accor d, pay, on or befor e each of the due dates
53. Substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Pr ior to
subst it ut ion, clause (b) was amended by the Finance Act, 1978, w.e.f. 1-6-1978.
1-4-1988.
56. Substituted for on the basis of which tax has been paid by the Hindu undivided family
under section 140A by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
57. Omitted section 209A was amended by the Finance Act, 1979, w.e.f. 1-4-1979 and the
amended by the Finance Act, 1963, w.e.f. 1-4-1963, the Dir ect Taxes (Amendment) Act,
1964, w.e.f. 6-10-1964, the Finance Act, 1969, w.e.f. 1-4-1969 and the Taxation Laws
specified in section 211, the appr opr iate per centage, specified in that section, of
the advance tax on his cur r ent income, calculated in the manner laid down in
section 209.
(2) A per son who pays any instalment or instalments of advance tax under sub-
section (1), may incr ease or r educe the amount of advance tax payable in the
r emaining instalment or instalments to accor d with his estimate of his cur r ent
income and the advance tax payable ther eon, and make payment of the said
amount in the r emaining instalment or instalments accor dingly.
(3) In the case of a per son who has been alr eady assessed by way of r egular
assessment in r espect of the total income of any pr evious year
59
[***], the
Assessing Officer , if he is of opinion that such per son is liable to pay advance tax,
may, at any time dur ing the financial year but not later than the last day of
Febr uar y, by or der in wr iting, r equir e such per son to pay advance tax calculated
in the manner laid down in section 209, and issue to such per son a notice of
demand under section 156 specifying the instalment or instalments in which
such tax is to be paid.
(4) If, after the making of an or der by the Assessing Officer under sub-section (3)
and at any time befor e the 1st day of Mar ch, a r etur n of income is fur nished by
the assessee under section 139 or in r esponse to a notice under sub-section (1) of
section 142, or a r egular assessment of the assessee is made in r espect of a
pr evious year later than that r efer r ed to in sub-section (3), the Assessing Officer
may make an amended or der and issue to such assessee a notice of demand
under section 156 r equir ing the assessee to pay, on or befor e the due date or each
of the due dates specified in section 211 falling after the date of the amended
or der , the appr opr iate per centage, specified in section 211, of the advance tax
computed on the basis of the total income declar ed in such r etur n or in r espect
of which the r egular assessment afor esaid has been made.
(5) A per son who is ser ved with an or der of the Assessing Officer under sub-
section (3) or an amended or der under sub-section (4) may, if in his estimation
the advance tax payable on his cur r ent income would be less than the amount
of the advance tax specified in such or der or amended or der , send an intimation
60
to the Assessing Officer to that effect and pay such
advance tax as accor ds with his estimate, calculated in the manner laid down in
section 209, at the appr opr iate per centage ther eof specified in section 211, on or
befor e the due date or each of the due dates specified in section 211 falling after
the date of such intimation.
(6) A per son who is ser ved with an or der of the Assessing Officer under sub-
section (3) or amended or der under sub-section (4) shall, if in his estimation the
advance tax payable on his cur r ent income would exceed the amount of advance
tax specified in such or der or amended or der or intimated by him under sub-
section (5), pay on or befor e the due date of the last instalment specified in section
211, the appr opr iate par t or , as the case may be, the whole of such higher amount
59. Wor ds and who has not paid any advance tax under sub-section (1) omitted by the
Finance Act, 2002, w.e.f. 1-6-2002.
60. See r ule 39 and For m No. 28A for for m of estimate of advance tax.
of advance tax as accor ds with his estimate, calculated in the manner laid down
in section 209.]
61
[Instalments of advance tax and due dates.
62
211.
63
[(1) Advance tax on the cur r ent income calculated in the manner laid
down in section 209 shall be payable by
(a) all the companies, who ar e liable to pay the same, in four instalments
dur ing each financial year and the due date of each instalment and
the amount of such instalment shall be as specified in Table I below:
TABLE I
Due date of in stalm en t Am oun t payable
On or befor e the 15th June Not less than fifteen per centof
such advance tax.
On or befor e the 15th September Not less t han for t y-five per
cent of such advance tax, as
r educed by the amount, if any,
paid in the ear lier instalment.
On or befor e the 15th December Not less than seventy-five per
cent of such advance tax, as
r educed by t he amount or
amounts, if any, paid in the
e a r lie r in s t a lme n t or
instalments.
On or befor e the 15th Mar ch The whole amount of such
advance tax as r educed by the
amount or amounts, if any, paid
in t he ear lier inst alment or
instalments;
(b) all the assessees (other than companies), who ar e liable to pay the
same, in thr ee instalments dur ing each financial year and the due date
of each instalment and the amount of such instalment shall be as
specified in Table II below :
TABLE II
Due date of in stalmen t Amoun t payable
On or befor e the 15th September Not less than thir ty per cent of
such advance tax.
S. 211 I.T. ACT, 1961 1.786
amended by the Finance Act, 1969, w.e.f. 1-4-1969, the Finance Act, 1972, w.e.f. 1-4-1972
and the Finance Act, 1978, w.e.f. 1-6-1978.
tax Act.
(1), was substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 and
later amended by the Finance Act, 1992, w.e.f. 1-4-1992.
On or befor e the 15th December Not less than sixty per cent of
such advance tax, as r educed
by the amount, if any, paid in
the ear lier instalment.
On or befor e the 15th Mar ch The whole amount of such
advance tax as r educed by the
amount or amounts, if any, paid
in t he ear lier inst alment or
instalments :
Provided that any amount paid by way of advance tax on or befor e the 31st day
of Mar ch shall also be tr eated as advance tax paid dur ing the financial year
ending on that day for all the pur poses of this Act.]
(2) If the notice of demand issued under section 156 in pur suance of an or der of
the Assessing Officer under sub-section (3) or sub-section (4) of section 210 is
ser ved after any of the due dates specified in sub-section (1), the appr opr iate par t
or , as the case may be, the whole of the amount of the advance tax specified in
such notice shall be payable on or befor e each of such of those dates as fall after
the date of ser vice of the notice of demand.]
Estimate by assessee.
Commission receipts.
213.
64
65
Interest payable by Government.
66
214. (1) The Centr al Gover nment shall pay simple inter est at
67
[fifteen] per
cent per annum on the amount by which the aggr egate sum of any
instalments of advance tax paid dur ing any financial year in which they ar e
payable under sections 207 to 213 exceeds the amount of the
68
[assessed tax]
Due date of in stalmen t Amoun t payable
64. Pr ior to omission section 213 was amended by the Finance Act, 1965, w.e.f. 1-4-1965, the
Taxation Laws (Amendment) Act, 1967, w.e.f. 1-10-1967, the Finance Act, 1969, w.e.f. 1-4-
1969, the Finance Act, 1972, w.e.f. 1-4-1972 and the Taxation Laws (Amendment) Act, 1984,
w.e.f. 1-10-1984.
65. See r ule 119A.
66. See also Letter [F.No. 12/ 80/ 64-IT(B)], dated 1-3-1965, Letter [F.No. 400/ 59/ 75-ITCC],
dat ed 10-10-1973, Let t er [F.No. 12/ 12/ 68-IT(A-II)], dat ed 11-12-1968 and Inst r uct ion
No. 947, dated 23-4-1976. For details, see Taxmanns Dir ect Taxes Cir cular s.
Ear lier , twelve was substituted for nine by the Finance Act, 1972, w.e.f. 1-4-1972, nine
was substituted for six by the Taxation Laws (Amendment) Act, 1967, w.e.f. 1-10-1967
and six was substituted for four by the Finance Act, 1965, w.e.f. 1-4-1965.
68. Substituted for tax deter mined on r egular assessment by the Taxation Laws (Amend-
ment) Act, 1984, w.e.f. 1-4-1985.
fr om the 1st day of Apr il next following the said financial year to the date of the
r egular assessment for the assessment year immediately following the said
financial year , and wher e any such instalment is paid after the expir y of the
financial year , dur ing which it is payable by r eason of the pr ovisions of section
213, inter est as afor esaid shall also be payable on that instalment fr om the date
of its payment to the date of r egular assessment :
69
[Provided that in r espect of any amount r efunded on a pr ovisional assessment
under section 141A, no inter est shall be paid for any per iod after the date of such
pr ovisional assessment.]
70
[(1A) Wher e as a r esult of an or der under section 147 or section 154 or section
155 or section 250 or section 254 or section 260 or section 262 or section 263 or
section 264
71
[or an or der of the Settlement Commission under sub-section (4) of
section 245D], the amount on which inter est was payable under sub-section (1)
or r educed accor dingly, and in a case wher e the inter est is r educed, the
72
[Assessing] Officer shall ser ve on the assessee, a notice of demand in the
pr escr ibed for m specifying the amount of the excess inter est payable and
r equir ing him to pay such amount ; and such notice of demand shall be deemed
to be a notice under section 156 and the pr ovisions of this Act shall apply
accor dingly.]
(2) On any por tion of such amount which is r efunded under this Chapter , inter est
shall be payable only up to the date on which the r efund was made.
73
[(3) This section and sections 215, 216 and 217 shall not apply in r espect of any
assessment for the assessment year commencing on the 1st day of Apr il, 1989,
or any subsequent assessment year and, in the application of the said sections to
the assessment for any ear lier assessment year , r efer ences ther ein [except in
sub-section (1A) and sub-section (3) of section 215] to the other pr ovisions of this
Act shall be constr ued as r efer ences to those pr ovisions as for the time being in
for ce and applicable to the r elevant assessment year .]
74
[Explan ation 1.In this section, assessed tax shall have the same meaning as
in sub-section (5) of section 215.
for the fir st time under section 147, the assessment so made shall be r egar ded as
a r egular assessment for the pur poses of this section.]
section (1A) was inser ted by the Finance Act, 1968, w.e.f. 1-4-1968.
S. 214 I.T. ACT, 1961 1.788
Interest payable by assessee.
75
215.
76
[
77
(1) Wher e, in any financial year , an assessee has paid
78
[advance tax
under section 209A or section 212 on the basis of his own estimate
(including r evised estimate)], and the advance tax so paid is less than seventy-five
per cent of the assessed tax, simple inter est at the r ate of
79
[fifteen] per cent per
annum fr om the 1st day of Apr il next following the said financial year up to the
date of the r egular assessment shall be payable by the assessee upon the amount
by which the advance tax so paid falls shor t of the assessed tax :]
80
[Provided that in the case of an assessee, being a company, the pr ovisions of this
sub-section shall have effect as if for the wor ds seventy-five per cent, the wor ds
eighty-thr ee and one-thir d per cent had been substituted.]
81
[(2) Wher e befor e the date of completion of a r egular assessment, tax is paid by
the assessee under section 140A or other wise,
(i) inter est shall be calculated in accor dance with the for egoing pr ovi-
sion up to the date on which the tax is so paid ; and
(ii) ther eafter , inter est shall be calculated at the r ate afor esaid on the
amount by which the tax as so paid (in so far as it r elates to income
subject to advance tax) falls shor t of the assessed tax.]
82
[(3) Wher e as a r esult of an or der under section 147 or section 154 or section
155 or section 250 or section 254 or section 260 or section 262 or section 263 or
section 264
83
[or an or der of the Settlement Commission under sub-section (4) of
section 245D], the amount on which inter est was payable under sub-section (1)
(i) in a case wher e the inter est is incr eased, the
84
ser ve on the assessee, a notice of demand in the pr escr ibed for m
shall apply accor dingly ;
shall be r efunded.]
75. See also Letter [F.No. 400/ 40/ 73-ITCC], dated 19-10-1973 and Cir cular No. 492, dated
21-7-1987. For details, see Taxmanns Dir ect Taxes Cir cular s.
78. Substituted for advance tax under section 212 on the basis of his own estimate by the
Finance Act, 1978, w.e.f. 1-6-1978.
Ear lier , twelve was substituted for nine by the Finance Act, 1972, w.e.f. 1-4-1972.
81. Substituted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971. Initially, sub-
section (2) was substituted by the Finance Act, 1963, w.e.f. 1-4-1963 which was later on
S. 216 I.T. ACT, 1961 1.790
(4) In such cases and under such cir cumstances as may be pr escr ibed
85
, the
86
[Assessing] Officer may r educe or waive the inter est payable by the assessee
under this section.
87
[(5) In this section and sections 217 and 273, assessed tax means the tax
deter mined on the basis of the r egular assessment (r educed by the amount of tax
deductible in accor dance with the pr ovisions of sections 192 to 194, section 194A
88
[, section 194C]
89
[, section 194D]
90
[, section 195 and section 196A] so far as such
tax r elates to income subject to advance tax and so far as it is not due to var iations
in the r ates of tax made by the Finance Act enacted for the year for which the
r egular assessment is made.]
91
[(6) Wher e, in r elation to an assessment year , an assessment is made for the fir st
time under section 147, the assessment so made shall be r egar ded as a r egular
assessment for the pur poses of this section and sections 216, 217 and 273.]
92
Interest payable by assessee in case of under-estimate, etc.
93
216. Wher e, on making the r egular assessment, the
94
[Assessing] Officer finds
that any assessee has
95
[(a) under
96
[section 209A or section 212] under -estimated the advance
tax payable by him and ther eby r educed the amount payable in either
of the fir st two instalments ; or ]
(b) under section 213 wr ongly defer r ed the payment of advance tax on
a par t of his income ;
he may dir ect that the assessee shall pay simple inter est at
97
[fifteen] per cent per
annum
(i) in the case r efer r ed to in clause (a), for the per iod dur ing which the
payment was deficient, on the differ ence between the amount paid in
each such instalment and the amount which should have been paid,
85. See r ule 40.
1-4-1988.
90. Substituted for and section 195 by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
92. See r ule 119A.
93. See also Letter [F.No. 400/ 58/ 78-ITCC], dated 29-2-1980. For details, see Taxmanns Dir ect
Taxes Cir cular s.
1-4-1988.
96. Substituted for sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) of
section 212 by the Finance Act, 1978, w.e.f. 1-6-1978.
having r egar d to the aggr egate advance tax actually paid dur ing the
year ; and
(ii) in the case r efer r ed to in clause (b), for the per iod dur ing which the
payment of advance tax was so defer r ed.
Explan ation .For the pur poses of this section, any instalment due befor e the
expir y of six months fr om the commencement of the pr evious year in r espect of
which it is to be paid shall be deemed to have become due fifteen days after the
expir y of the said six months.
Interest payable by assessee when no estimate made.
98
217.
99
[(1) Wher e, on making the r egular assessment,
1
[the
2
[Assessing] Officer
finds
(a) that any such per son as is r efer r ed to in clause (a) of sub-section (1)
of section 209A has not sent the statement r efer r ed to in that clause
or the estimate in lieu of such statement r efer r ed to in sub-section (2)
of that section ; or
(b) that any such per son as is r efer r ed to in clause (b) of sub-section (1)
of section 209A has not sent the estimate r efer r ed to in that clause,]
simple inter est at the r ate of
3
[fifteen] per cent per annum fr om the 1st day of
Apr il next following the financial year in which the advance tax was payable in
accor dance with the said
4
[sub-section (1) or sub-section (2)] up to the date of the
r egular assessment shall be payable by the assessee upon the amount equal to
the assessed tax as defined in sub-section (5) of section 215.]
5
[(1A) Wher e, on making the r egular assessment, the
6
[Assessing] Officer finds
that
7
[any per son who is r equir ed to send an estimate under sub-section (4) of
section 209A or ] any such per son as is r efer r ed to in sub-section (3A) of section
212 has not sent the estimate r efer r ed to ther ein, simple inter est at the r ate
of
8
[fifteen] per cent per annum fr om the 1st day of Apr il next following the
financial year in which the advance tax was payable in accor dance with the said
1. Substituted for the Income-tax Officer finds that any such per son as is r efer r ed to in sub-
section (3) of section 212 has not sent the estimate r efer r ed to ther ein by the Finance Act,
1978, w.e.f. 1-6-1978.
1-4-1988.
4. Substituted for sub-section by the Finance Act, 1978, w.e.f. 1-6-1978.
1-4-1988.
9
[sub-section (4) or , as the case may be, sub-section (3A)] up to the date of the
r egular assessment shall be payable by the assessee upon the amount by which
the advance tax paid by him falls shor t of the assessed tax as defined in sub-
section (5) of section 215.]
(2) The pr ovisions of sub-sections (2), (3) and (4) of section 215 shall apply to
inter est payable under this section as they apply to inter est payable under that
section.
When assessee deemed to be in default.
218.
10
[If any assessee does not pay on the date specified in sub-section (1) of
section 211, any instalment of the advance tax that he is r equir ed to pay by
an or der of the Assessing Officer under sub-section (3) or sub-section (4) of
section 210 and does not, on or befor e the date on which any such instalment as
is not paid becomes due, send to the Assessing Officer an intimation under sub-
section (5) of section 210 or does not pay on the basis of his estimate of his cur r ent
income the advance tax payable by him under sub-section (6) of section 210, he
shall be deemed to be an assessee in default in r espect of such instalment or
instalments.]
Credit for advance tax.
219. Any sum, other than a penalty or inter est, paid by or r ecover ed fr om an
assessee as advance tax in pur suance of this Chapter shall be tr eated as a
payment of tax in r espect of the income of the per iod which would be the
pr evious year for an assessment for the assessment year next following the
financial year in which it was payable, and cr edit ther efor shall be given to
the assessee in the r egular assessment.
11
[***]
D.Collection an d recovery
When tax payable and when assessee deemed in default.
12
220. (1) Any amount, other wise than by way of advance tax, specified as
payable in a notice of demand under section 156 shall be paid within
13
[thir ty] days of the ser vice of the notice at the place and to the per son mentioned
in the notice :
S. 220 I.T. ACT, 1961 1.792
9. Substituted for sub-section by the Finance Act, 1978, w.e.f. 1-6-1978.
10. Substituted for sub-sections (1) to (3) of section 218, which wer e ear lier substituted by the
Finance Act, 1978, w.e.f. 1-6-1978 and later on amended by the Finance Act, 1979, w.e.f.
1-4-1979, by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
11. Pr oviso omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Or iginal
pr oviso was inser ted by the Finance Act, 1968, w.e.f. 1-4-1968.
12. See also Cir cular No. 334, dated 3-4-1982, Instr uction No. 96, dated 21-8-1969 and Cir cular
No. 530, dated 6-3-1989 r ead with Cir cular No. 589, dated 16-1-1991. For details, see
13. Subst it ut ed for t hir t y-five by t he Dir ect Tax Laws (Amendment ) Act , 1987, w.e.f.
1-4-1989.
Provided that, wher e the
14
[Assessing] Officer has any
15
r eason to believe that it
will be
15
detr imental to r evenue if the full per iod of
16
[thir ty] days afor esaid is
allowed, he may, with the pr evious appr oval of the
17
dir ect that the sum specified in the notice of demand shall be paid within such
per iod being a per iod less than the per iod of
18
[thir ty] days afor esaid, as may be
specified by him in the notice of demand.
19
(2) If the amount specified in any notice of demand under section 156 is not paid
within the per iod limited under sub-section (1), the assessee shall be liable to pay
simple inter est at
20
[
21
[one] per cent for ever y month or par t of a month compr ised
in the per iod commencing fr om the day immediately following the end of the
per iod mentioned in sub-section (1) and ending with the day on which the
amount is paid :]
22
[Provided that, wher e as a r esult of an or der under section 154, or section 155,
or section 250, or section 254, or section 260, or section 262, or section 264
23
[or
an or der of the Settlement Commission under sub-section (4) of section 245D],
the amount on which inter est was payable under this section had been r educed,
the inter est shall be r educed accor dingly and the excess inter est paid, if any,
shall be r efunded :]
23
[Provided further that in r espect of any per iod commencing on or befor e the
31st day of Mar ch, 1989 and ending after that date, such inter est shall, in r espect
of so much of such per iod as falls after that date, be calculated at the r ate of one
and one-half per cent, for ever y month or par t of a month.]
24
[(2A) Notwithstanding anything contained in sub-section (2),
25
[the
26
[Chief
Commissioner or Commissioner ] may] r educe or waive the amount of inter est
1.793 CH. XVII - COLLECTION AND RECOVERY S. 220
1-4-1988.
15. For the meaning of the ter ms r eason to believe and detr imental to r evenue, see
16. Subst it ut ed for t hir t y-five by t he Dir ect Tax Laws (Amendment ) Act , 1987, w.e.f.
1-4-1989.
17. Substituted for the Deputy Commissioner by the Finance (No. 2) Act, 1998, w.e.f.
1-10-1998. Ear lier Deput y Commissioner was subst it ut ed for Inspect ing Assist ant
Commissioner by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
18. Subst it ut ed for "t hir t y-five" by t he Dir ect Tax Laws (Amendment ) Act , 1987, w.e.f.
1-4-1989.
19. See r ule 119A.
20. Substituted for fifteen per cent per annum fr om the day commencing after the end of the
per iod mentioned in sub-section (1) by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989.
8-9-2003. Ear lier one and one-four th was substituted for one and one-half by the
Finance Act, 2001, w.e.f. 1-6-2001.
25. Substituted for the Boar d may by the Taxation Laws (Amendment & Miscellaneous
1-4-1988.
27
[paid or ] payable by an assessee under the said sub-section if
28
[he is satisfied]
that
(i) payment of such amount
29
[has caused or ] would cause genuine
har dship to the assessee ;
(ii) default in the payment of the amount on which inter est
29
[has been
paid or ] was payable under the said sub-section was due to cir cum-
stances beyond the contr ol of the assessee ; and
(iii) the assessee has co-oper ated in any inquir y r elating to the assessment
or any pr oceeding for the r ecover y of any amount due fr om him.]
(3) Without pr ejudice to the pr ovisions contained in sub-section (2)
30
, on an
application made by the assessee befor e the expir y of the due date under sub-
section (1), the
31
[Assessing] Officer may extend the time for payment or allow
payment by instalments, subject to such conditions as he may think fit to impose
in the cir cumstances of the case.
(4) If the amount is not paid within the time limited under sub-section (1) or
extended under sub-section (3), as the case may be, at the place and to the per son
mentioned in the said notice the assessee shall be deemed to be in default.
(5) If, in a case wher e payment by instalments is allowed under sub-section (3),
the assessee commits defaults in paying any one of the instalments within the
time fixed under that sub-section, the assessee shall be deemed to be in default
as to the whole of the amount then outstanding, and the other instalment or
instalments shall be deemed to have been due on the same date as the instalment
actually in default.
(6) Wher e an assessee has pr esented an appeal under section 246
32
[or section
246A] the
33
[Assessing] Officer may, in his discr etion and subject to such
conditions as he may think fit to impose in the cir cumstances of the case, tr eat
the assessee as not being in default in r espect of the amount in dispute in the
appeal, even though the time for payment has expir ed, as long as such appeal
r emains undisposed of.
(7) Wher e an assessee has been assessed in r espect of income ar ising outside
India in a countr y the laws of which pr ohibit or r estr ict the r emittance of money
to India, the
33
[Assessing] Officer shall not tr eat the assessee as in default in
r espect of that par t of the tax which is due in r espect of that amount of his income
S. 220 I.T. ACT, 1961 1.794
27. Inser ted by the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986, w.r .e.f.
1-10-1984.
28. Substituted for , on the r ecommendation made by the Commissioner in this behalf, it is
satisfied, ibid., w.e.f. 1-4-1987.
30. For the meaning of the expr ession without pr ejudice to the pr ovisions contained in sub-
section (2), see Taxmanns Dir ect Taxes Manual, Vol. 3.
1-4-1988.
1-4-1988.
which, by r eason of such pr ohibition or r estr iction, cannot be br ought into India,
and shall continue to tr eat the assessee as not in default in r espect of such par t
of the tax until the pr ohibition or r estr iction is r emoved.
Explan ation .For the pur poses of this section, income shall be deemed to have
been br ought into India if it has been utilised or could have been utilised for
the pur poses of any expenditur e actually incur r ed by the assessee outside India
or if the income, whether capitalised or not, has been br ought into India in any
for m.
Penalty payable when tax in default.
34
221.
35
[(1) When an assessee is in default or is deemed to be in default in
making a payment of tax, he shall, in addition to the amount of the
ar r ear s
36
and the amount of inter est payable under sub-section (2) of section 220,
be liable, by way of penalty, to pay such amount as the
37
[Assessing] Officer may
dir ect
38
, and in the case of a continuing default, such fur ther amount or amounts
as the
39
[Assessing] Officer may, fr om time to time, dir ect, so, however , that the
total amount of penalty does not exceed the amount of tax in ar r ear s :
Provided that befor e levying any such penalty, the assessee shall be given a
r easonable oppor tunity of being hear d :
40
[Provided further that wher e the assessee pr oves to the satisfaction of the
39
[Assessing] Officer that the default was for good and sufficient r easons
41
, no
penalty shall be levied under this section.]
42
[Explan ation .For the r emoval of doubt, it is her eby declar ed that an assessee
shall not cease to be liable to any penalty under this sub-section mer ely by r eason
of the fact that befor e the levy of such penalty he has paid the tax.]
(2) Wher e as a r esult of any final or der the amount of tax, with r espect to
the default in the payment of which the penalty was levied, has been wholly
r educed, the penalty levied shall be cancelled and the amount of penalty paid
shall be r efunded.
34. See also Letter [F.No. 16/ 87/ 67-IT(B)], dated 10-7-1967, Cir cular No. 685, dated 17-6-1994,
Cir cular No. 686, dated 12-8-1994 and Cir cular No. 696, dated 28-2-1995. For details, see
36. For the meaning of the ter ms/ expr essions ar r ear s and may dir ect, see Taxmanns
1-4-1988.
38. For the meaning of the ter ms/ expr essions ar r ear s and may dir ect, see Taxmanns
1-4-1988.
w.e.f. 10-9-1986.
41. For the meaning of the ter m good and sufficient r easons, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
Certificate to Tax Recovery Officer
42a
.
222.
43
[(1) When an assessee is in default or is deemed to be in default in
making a payment of tax, the Tax Recover y Officer may dr aw up under his
signatur e a statement in the pr escr ibed for m
44
specifying the amount of ar r ear s
due fr om the assessee (such statement being her eafter in this Chapter and in the
Second Schedule r efer r ed to as cer tificate) and shall pr oceed to r ecover fr om
such assessee the amount specified in the cer tificate by one or mor e of the modes
mentioned below, in accor dance with the r ules laid down in the Second
Schedule]
(a) attachment and sale of the assessees movable pr oper ty ;
(b) attachment and sale of the assessees immovable pr oper ty ;
(c) ar r est of the assessee and his detention in pr ison ;
(d) appointing a r eceiver for the management of the assessees movable
and immovable pr oper ties.
45
[Explan ation .For the pur poses of this sub-section, the assessees movable or
immovable pr oper ty shall include any pr oper ty which has been tr ansfer r ed,
dir ectly or indir ectly on or after the 1st day of June, 1973, by the assessee to his
spouse or minor child or sons wife or sons minor child, other wise than for
adequate consider ation, and which is held by, or stands in the name of, any of the
per sons afor esaid; and so far as the movable or immovable pr oper ty so tr ans-
fer r ed to his minor child or his sons minor child is concer ned, it shall, even after
the date of attainment of major ity by such minor child or sons minor child, as
the case may be, continue to be included in the assessees movable or immovable
pr oper ty for r ecover ing any ar r ear s due fr om the assessee in r espect of any
per iod pr ior to such date.]
46
[(2) The Tax Recover y Officer may take action under sub-section (1), notwith-
standing that pr oceedings for r ecover y of the ar r ear s by any other mode have
been taken.]
S. 222 I.T. ACT, 1961 1.796
42a. See r ule 117C.
43. Substituted for the following por tion in sub-section (1), as amended by the Dir ect Tax
Laws (Amendment) Act, 1989, w.r .e.f. 1-4-1988 and the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989 :
When an assessee is in default or is deemed to be in default in making a payment of tax,
the Assessing Officer may for war d to the Tax Recover y Officer a cer tificate under his
signatur e specifying the amount of ar r ear s due fr om the assessee, and the Tax Recover y
Officer on r eceipt of such cer tificate, shall pr oceed to r ecover fr om such assessee the
amount specified ther ein by one or mor e of the modes mentioned below, in accor dance
with the r ules laid down in the Second Schedule
44. See r ule 117B and For m No. 57 for for m of statement dr awn by TRO.
substitution, sub-section (2) was amended by the Dir ect Tax Laws (Amendment) Act, 1989,
w.r .e.f. 1-4-1988.
47
[Tax Recovery Officer by whom recovery is to be effected.
223. (1) The Tax Recover y Officer competent to take action under section 222
shall be
(a) the Tax Recover y Officer within whose jur isdiction the assessee
car r ies on his business or pr ofession or within whose jur isdiction the
pr incipal place of his business or pr ofession is situate, or
(b) the Tax Recover y Officer within whose jur isdiction the assessee
r esides or any movable or immovable pr oper ty of the assessee is
situate,
the jur isdiction for this pur pose being the jur isdiction assigned to the Tax
Recover y Officer under the or der s or dir ections issued by the Boar d, or by the
Chief Commissioner or Commissioner who is author ised in this behalf by the
Boar d in pur suance of section 120.
(2) Wher e an assessee has pr oper ty within the jur isdiction of mor e than one Tax
Recover y Officer and the Tax Recover y Officer by whom the cer tificate is dr awn
up
(a) is not able to r ecover the entir e amount by sale of the pr oper ty,
movable or immovable, within his jur isdiction, or
(b) is of the opinion that, for the pur pose of expediting or secur ing the
r ecover y of the whole or any par t of the amount under this Chapter ,
it is necessar y so to do,
he may send the cer tificate or , wher e only a par t of the amount is to be r ecover ed,
a copy of the cer tificate cer tified in the pr escr ibed manner
48
and specifying the
amount to be r ecover ed to a Tax Recover y Officer within whose jur isdiction the
assessee r esides or has pr oper ty and, ther eupon, that Tax Recover y Officer shall
also pr oceed to r ecover the amount under this Chapter as if the cer tificate or
copy ther eof had been dr awn up by him.]
49
[Validity of certificate and cancellation or amendment thereof.
224. It shall not be open to the assessee to dispute the cor r ectness of any
cer tificate dr awn up by the Tax Recover y Officer on any gr ound whatso-
ever , but it shall be lawful for the Tax Recover y Officer to cancel the cer tificate
if, for any r eason, he thinks it necessar y so to do, or to cor r ect any cler ical or
ar ithmetical mistake ther ein.]
substitution, section 223, was amended by the Dir ect Tax Laws (Amendment) Act, 1989,
w.r .e.f. 1-4-1988 and the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975.
48. See r ule 117B and For m No. 57.
amended by the Dir ect Tax Laws (Amendment) Act, 1989, w.r .e.f. 1-4-1988.
50
[Stay of proceedings in pursuance of certificate and amendment or cancellation
thereof.
225. (1) It shall be lawful for the Tax Recover y Officer to gr ant time for the
payment of any tax and when he does so, he shall stay the pr oceedings for
the r ecover y of such tax until the expir y of the time so gr anted.
(2) Wher e the or der giving r ise to a demand of tax for which a cer tificate has been
dr awn up is modified in appeal or other pr oceeding under this Act, and, as a
consequence ther eof, the demand is r educed but the or der is the subject-matter
of fur ther pr oceeding under this Act, the Tax Recover y Officer shall stay the
r ecover y of such par t of the amount specified in the cer tificate as per tains to the
said r eduction for the per iod for which the appeal or other pr oceeding r emains
pending.
(3) Wher e a cer tificate has been dr awn up and subsequently the amount of the
outstanding demand is r educed
51
as a r esult of an appeal or other pr oceeding
under this Act, the Tax Recover y Officer shall, when the or der which was the
subject-matter of such appeal or other pr oceeding has become final and
conclusive, amend the cer tificate, or cancel it, as the case may be.]
Other modes of recovery.
226.
52
[(1) Wher e no cer tificate has been dr awn up under section 222, the
Assessing Officer may r ecover the tax by any one or mor e of the modes
pr ovided in this section.
(1A) Wher e a cer tificate has been dr awn up under section 222, the Tax Recover y
Officer may, without pr ejudice to the modes of r ecover y specified in that section,
r ecover the tax by any one or mor e of the modes pr ovided in this section.]
(2) If any assessee is in r eceipt of any income char geable under the head
Salar ies, the
53
[Assessing] Officer
54
[or Tax Recover y Officer ] may r equir e any
per son paying the same to deduct fr om any payment subsequent to the date of
such r equisition any ar r ear s of tax due fr om such assessee, and such per son shall
comply with any such r equisition and shall pay the sum so deducted to the cr edit
of the Centr al Gover nment or as the Boar d dir ects :
Provided that any par t of the salar y exempt fr om attachment in execution of a
decr ee of a civil cour t under section 60 of the Code of Civil Pr ocedur e, 1908 (5
of 1908)
55
, shall be exempt fr om any r equisition made under this sub-section.
S. 226 I.T. ACT, 1961 1.798
51. For the meaning of the ter m r educed, see Taxmanns Dir ect Taxes Manual, Vol. 3.
53. Substituted for Income-tax by the Dir ect Tax Laws (Amendment) Act, 1989, w.r .e.f.
1-4-1988.
55. For text of section 60 of the Code of Civil Pr ocedur e, 1908, see Appendix.
(3) (i) The
56
[Assessing] Officer
57
[or Tax Recover y Officer ] may, at any time or
fr om time to time, by notice in wr iting r equir e any per son fr om whom money is
due or may become due
58
to the assessee or any per son who holds or may
subsequently hold money
59
for or on account of the assessee to pay to the
60
[Assessing] Officer
61
[or Tax Recover y Officer ] either for thwith upon the
money becoming due or being held or at or within the time specified in the notice
(not being befor e the money becomes due or is held) so much of the money as
is sufficient to pay the amount due by the assessee in r espect of ar r ear s or the
whole of the money when it is equal to or less than that amount.
(ii) A notice under this sub-section may be issued to any per son who holds or
may subsequently hold any money for or on account of the assessee jointly with
any other per son and for the pur poses of this sub-section, the shar es of the joint
holder s in such account shall be pr esumed, until the contr ar y is pr oved, to be
equal.
(iii) A copy of the notice shall be for war ded to the assessee at his last addr ess
known to the
60
[Assessing] Officer
61
[or Tax Recover y Officer ], and in the case of
a joint account to all the joint holder s at their last addr esses known to the
60
[Assessing] Officer
61
[or Tax Recover y Officer ].
(iv) Save as other wise pr ovided in this sub-section, ever y per son to whom a notice
is issued under this sub-section shall be bound to comply with such notice, and,
in par ticular , wher e any such notice is issued to a post office, banking company
or an insur er , it shall not be necessar y for any pass book, deposit r eceipt, policy
or any other document to be pr oduced for the pur pose of any entr y, endor sement
or the like being made befor e payment is made, notwithstanding any r ule,
pr actice or r equir ement to the contr ar y.
(v) Any claim r especting any pr oper ty in r elation to which a notice under this sub-
section has been issued ar ising after the date of the notice shall be void as against
any demand contained in the notice.
(vi) Wher e a per son to whom a notice under this sub-section is sent objects to it
by a statement on oath that the sum demanded or any par t ther eof is not due to
the assessee or that he does not hold any money for or on account of the assessee,
then nothing contained in this sub-section shall be deemed to r equir e such
per son to pay any such sum or par t ther eof, as the case may be, but if it
is discover ed that such statement was false in any mater ial par ticular , such
1-4-1988.
58. For the meaning of the expr ession may become due, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
59. For the meaning of the expr ession or may subsequently hold money, see Taxmanns
1-4-1988.
per son shall be per sonally liable to the
62
[Assessing] Officer
63
[or Tax Recover y
Officer ] to the extent of his own liability to the assessee on the date of the notice,
or to the extent of the assessees liability for any sum due under this Act,
whichever is less.
(vii) The
62
[Assessing] Officer
63
[or Tax Recover y Officer ] may, at any time or
fr om time to time, amend or r evoke any notice issued under this sub-section or
extend the time for making any payment in pur suance of such notice.
(viii) The
62
[Assessing] Officer
63
[or Tax Recover y Officer ] shall gr ant a r eceipt
for any amount paid in compliance with a notice issued under this sub-section,
and the per son so paying shall be fully dischar ged fr om his liability to the assessee
to the extent of the amount so paid.
(ix) Any per son dischar ging any liability to the assessee after r eceipt of a notice
under this sub-section shall be per sonally liable to the
62
[Assessing] Officer
63
[or
Tax Recover y Officer ] to the extent of his own liability to the assessee so
dischar ged or to the extent of the assessees liability for any sum due under this
Act, whichever is less.
(x) If the per son to whom a notice under this sub-section is sent fails to make
payment in pur suance ther eof to the
62
[Assessing] Officer
63
[or Tax Recover y
Officer ], he shall be deemed to be an assessee in default in r espect of the amount
specified in the notice and fur ther pr oceedings may be taken against him for the
r ealisation of the amount as if it wer e an ar r ear of tax due fr om him, in the
manner pr ovided in sections 222 to 225 and the notice shall have the same effect
as an attachment of a debt by the Tax Recover y Officer in exer cise of his power s
under section 222.
(4) The
62
[Assessing] Officer
63
[or Tax Recover y Officer ] may apply to the cour t
in whose custody ther e is money belonging to the assessee for payment to him
of the entir e amount of such money, or , if it is mor e than the tax due, an amount
sufficient to dischar ge the tax.
64
[(5) The
65
[Assessing] Officer
66
[or Tax Recover y Officer ] may, if so author ised
by the
67
[Chief Commissioner or Commissioner ] by gener al or special or der ,
r ecover any ar r ear s of tax due fr om an assessee by distr aint and sale of his
movable pr oper ty in the manner laid down in the Thir d Schedule.]
Recovery through State Government.
227. If the r ecover y of tax in any ar ea has been entr usted to a State Gover nment
under clause (1) of ar ticle 258 of the Constitution, the State Gover nment
may dir ect, with r espect to that ar ea or any par t ther eof; that tax shall be
S. 227 I.T. ACT, 1961 1.800
1-4-1988.
65. Substituted for Income-tax by the Dir ect Tax Laws (Amendment) Act, 1989, w.r .ef.
1-4-1988.
1-4-1988.
r ecover ed ther ein with, and as an addition to, any municipal tax or local r ate, by
the same per son and in the same manner as the municipal tax or local r ate is
r ecover ed.
Recovery of Indian tax in Pakistan and Pakistan tax in India.
228.
68
69
[Recovery of tax in pursuance of agreements with foreign countries.
228A. (1) Wher e an agr eement is enter ed into by the Centr al Gover nment
with the Gover nment of any countr y outside India for r ecover y of
income-tax under this Act and the cor r esponding law in for ce in that countr y and
the Gover nment of that countr y or any author ity under that Gover nment which
is specified in this behalf in such agr eement sends to the Boar d a cer tificate for
the r ecover y of any tax due under such cor r esponding law fr om a per son having
any pr oper ty in India, the Boar d may for war d such cer tificate to any Tax
Recover y Officer within whose jur isdiction such pr oper ty is situated and
ther eupon such Tax Recover y Officer shall
(a) pr oceed to r ecover the amount specified in the cer tificate in the
manner in which he would pr oceed to r ecover the amount
70
[specified
in a cer tificate dr awn up by him under section 222]; and
(b) r emit any sum so r ecover ed by him to the Boar d after deducting his
expenses in connection with the r ecover y pr oceedings.
71
[(2) Wher e an assessee is in default or is deemed to be in default in making a
payment of tax, the Tax Recover y Officer may, if the assessee has pr oper ty in a
countr y outside India (being a countr y with which the Centr al Gover nment has
enter ed into an agr eement for the r ecover y of income-tax under this Act and the
cor r esponding law in for ce in that countr y), for war d to the Boar d a cer tificate
dr awn up by him under section 222 and the Boar d may take such action ther eon
as it may deem appr opr iate having r egar d to the ter ms of the agr eement with
such countr y.]
1.801 CH. XVII - COLLECTION AND RECOVERY S. 228A
68. Pr ior to its omission, section 228, was amended by the Dir ect Tax Laws (Amendment) Act,
1989, w.r .e.f. 1-4-1988.
70. Substituted for specified in a cer tificate r eceived fr om an Assessing Officer by the Dir ect
Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Ear lier it was amended by the Dir ect Tax
Laws (Amendment) Act, 1989, w.r .e.f. 1-4-1988.
(2) Notwithstanding the issue of a cer tificate under section 222 to the Tax Recover y
Officer , wher e an assessee is in default or is deemed to be in default in making a payment
of tax, the Assessing Officer may, if the assessee has pr oper ty in a countr y outside India
(being a countr y with which the Centr al Gover nment has enter ed into an agr eement for
the r ecover y of income-tax under this Act and the cor r esponding law in for ce in that
countr y), for war d to the Boar d a cer tificate specifying the amount of ar r ear s due fr om the
assessee and the Boar d may take such action ther eon as it may deem appr opr iate having
r egar d to the ter ms of the agr eement with such countr y.
Recovery of penalties, fine, interest and other sums.
229. Any sum imposed by way of inter est, fine, penalty, or any other sum
payable under the pr ovisions of this Act, shall be r ecover able in the manner
pr ovided in this Chapter for the r ecover y of ar r ear s of tax.
Tax clearance certificate.
72
230.
73
[(1) Subject to such exceptions as the Centr al Gover nment may, by
notification in the Official Gazette, specify in this behalf, no per son,
(a) who is not domiciled in India;
(b) who has come to India in connection with business, pr ofession or
employment; and
(c) who has income der ived fr om any sour ce in India,
shall leave the ter r itor y of India by land, sea or air unless he fur nishes to such
author ity
74
(i) an under taking in the pr escr ibed for m
75
fr om his employer ; or
(ii) thr ough whom such per son is in r eceipt of the income,
to the effect that tax payable by such per son who is not domiciled in India shall
be paid by the employer r efer r ed to in clause (i) or the per son r efer r ed to in clause
S. 230 I.T. ACT, 1961 1.802
72. See Instr uction No. 1/ 2004, dated 5-2-2004 and Cir cular No. 2/ 2004, dated 10-2-2004. For
73. Sub-sections (1) and (1A) substituted for sub-section (1) by the Finance Act, 2003, w.e.f.
1-6-2003. Pr ior to its substitution, sub-section (1), as amended by the Dir ect Tax Laws
(1) Subject to such exceptions as the Centr al Gover nment may, by notification in the
Official Gazette, specify in this behalf, no per son
(a) who is not domiciled in India; or
(b) who is domiciled in India at the time of his depar tur e, but
(i) intends to leave India as an emigr ant; or
(ii) intends to pr oceed to another countr y on a wor k per mit with the object of
taking up any employment or other occupation in that countr y; or
(iii) in r espect of whom cir cumstances exist which, in the opinion of an income-
tax author ity, r ender it necessar y for him to obtain a cer tificate under this
sect ion,
shall leave the ter r itor y of India by land, sea or air unless he fir st obtains fr om such
author ity as may be appointed by the Centr al Gover nment in this behalf (her einafter in
this section r efer r ed to as the competent author ity) a cer tificate stating that he has no
liabilities under this Act, the Excess Pr ofits Tax Act, 1940 (15 of 1940), the Business Pr ofits
Tax Act, 1947 (21 of 1947), the Indian Income-tax Act, 1922 (11 of 1922), the Wealth-tax Act,
1957 (27 of 1957), the Expenditur e-tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18
of 1958), or that satisfactor y ar r angements have been made for the payment of all or any
of such taxes which ar e or may become payable by that per son:
Provided that in the case of a per son not domiciled in India the competent author ity may,
if it is satisfied that such per son intends to r etur n to India, issue an exemption cer tificate
either in r espect of a single jour ney or in r espect of all jour neys to be under taken by that
per son within such per iod as may be specified in the cer tificate.
74. See r ule 42(1).
75. See r ule 43(1) and For m No. 30A.
(ii), and the pr escr ibed author ity
76
shall, on r eceipt of the under taking, imme-
diately give to such per son a no objection cer tificate
77
, for leaving India:
Provided that nothing contained in sub-section (1) shall apply to a per son who is
not domiciled in India but visits India as a for eign tour ist or for any other pur pose
not connected with business, pr ofession or employment.
(1A) Subject to such exceptions as the Centr al Gover nment may, by notification
in the Official Gazette, specify in this behalf, ever y per son, who is domiciled in
India at the time of his depar tur e fr om India, shall fur nish, in the pr escr ibed
for m
78
to the income-tax author ity or such other author ity as may be pr e-
scr ibed
79
(a) the per manent account number allotted to him under section 139A:
Provided that in case no such per manent account number has been
allotted to him, or his total income is not char geable to income-tax or
he is not r equir ed to obtain a per manent account number under this
Act, such per son shall fur nish a cer tificate in the pr escr ibed for m;
(b) the pur pose of his visit outside India;
(c) the estimated per iod of his stay outside India:
80
Provided that no per son
(i) who is domiciled in India at the time of his depar tur e; and
(ii) in r espect of whom cir cumstances exist which, in the opinion of an
income-tax author ity r ender it necessar y for such per son to obtain a
cer tificate under this section,
shall leave the ter r itor y of India by land, sea or air unless he obtains a cer tificate
fr om the income-tax author ity stating that he has no liabilities under this Act, or
the Wealth-tax Act, 1957 (27 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or the
Expenditur e-tax Act, 1987 (35 of 1987), or that satisfactor y ar r angements have
been made for the payment of all or any of such taxes which ar e or may become
payable by that per son :
Provided* that no income-tax author ity shall make it necessar y for any per son
who is domiciled in India to obtain a cer tificate under this section unless he
r ecor ds the r easons ther efor and obtains the pr ior appr oval of the Chief
Commissioner of Income-tax.]
(2) If the owner or char ter er of any ship or air cr aft car r ying per sons fr om any
place in the ter r itor y of India to any place outside India allows any per son to
whom sub-section (1)
81
[or the fir st pr oviso to sub-section (1A)] applies to tr avel
by such ship or air cr aft without fir st satisfying himself that such per son is in
possession of a cer tificate as r equir ed by that sub-section, he shall be per sonally
76. See r ule 42(1).
77. See r ule 43(2) and For m No. 30B.
78. See r ule 43(3) and For m No. 30C.
79. See r ule 42(2).
80. See r ule 43(4)/ (5) and For m Nos. 31 & 33.
*Wor d fur ther should occur after the wor d Pr ovided.
liable to pay the whole or any par t of the amount of tax, if any, payable by such
per son as the
82
[Assessing] Officer may, having r egar d to the cir cumstances of
the case, deter mine.
(3) In r espect of any sum payable by the owner or char ter er of any ship or air cr aft
under sub-section (2), the owner or char ter er , as the case may be, shall be
deemed to be an assessee in default for such sum, and such sum shall be
r ecover able fr om him in the manner pr ovided in this Chapter as if it wer e an
ar r ear of tax.
83
(4) The Boar d may make r ules for r egulating any matter necessar y for , or
incidental to, the pur pose of car r ying out the pr ovisions of this section.
Explan ation .For the pur poses of this section, the expr essions owner and
char ter er include any r epr esentative, agent or employee empower ed by the
owner or char ter er to allow per sons to tr avel by the ship or air cr aft.
Restrictions on registration of transfers of immovable property in certain cases.
230A.
84
Period for commencing recovery proceedings.
231.
85
1-4-1988.
83. See r ules 42 and 43 and For m Nos. 30A, 30B, 30C, 31 and 33.
84. Pr ior to its omission, section 230A, as inser ted by the Dir ect Taxes (Amendment) Act, 1964,
w.e.f. 6-10-1964, a nd la t er on a mended by t he Fina nce (No. 2) Act , 1971, w.e.f.
1-10-1971, Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988, Finance Act, 1988,
230A. Restriction s on registration of tran sfers of im m ovable property in certain cases.
(1) Notwithstanding anything contained in any other law for the time being in for ce, wher e
any document r equir ed to be r egister ed under the pr ovisions of clause (a) to clause (e) of
sub-section (1) of section 17 of the Indian Registr ation Act, 1908 (16 of 1908), pur por ts to
tr ansfer , assign, limit, or extinguish the r ight, title or inter est of any per son to or in any
pr oper ty valued at mor e than five lakh r upees, no r egister ing officer appointed under that
Act shall r egister any such document, unless the Assessing Officer cer tifies that
(a) such per son has either paid or made satisfactor y pr ovision for payment of all
existing liabilities under this Act, the Excess Pr ofits Tax Act, 1940 (15 of 1940), the
Business Pr ofits Tax Act, 1947 (21 of 1947), the Indian Income-tax Act, 1922 (11 of
1922), the Wealth-tax Act, 1957 (27 of 1957), the Expenditur e-tax Act, 1957 (29 of
1957), the Gift-tax Act, 1958 (18 of 1958), the Super Pr ofits Tax Act, 1963 (14 of 1963),
and the Companies (Pr ofits) Sur tax Act, 1964 (7 of 1964), or
(b) the r egistr ation of the document will not pr ejudicially affect the r ecover y of any
existing liability under any of the afor esaid Acts.
(2) The application for the cer tificate r equir ed under sub-section (1) shall be made by the
per son r efer r ed to in that sub-section and shall be in such for m and shall contain such
par ticular s as may be pr escr ibed.
(3) The pr ovisions of sub-section (1) shall not apply in a case wher e the per son r efer r ed to
in that sub-section is any such institution, association or body, or belongs to any such class
of institutions, associations or bodies, as the Boar d may, for r easons to be r ecor ded in
wr iting, notify in this behalf in the Official Gazette.
1984, w.e.f. 1-10-1984.
S. 231 I.T. ACT, 1961 1.804
1.805 CH. XVII - COLLECTION AND RECOVERY - INTEREST CHARGEABLE S. 234A
Recovery by suit or under other law not affected.
232. The sever al modes of r ecover y specified in this Chapter shall not affect in
any way
(a) any other law for the time being in for ce r elating to the r ecover y of
debts due to Gover nment; or
(b) the r ight of the Gover nment to institute a suit for the r ecover y of the
ar r ear s due fr om the assessee;
and it shall be lawful for the
86
[Assessing] Officer or the Gover nment, as the case
may be, to have r ecour se to any such law or suit, notwithstanding that the tax due
is being r ecover ed fr om the assessee by any mode specified in this Chapter .
E.Tax payable un der provision al assessm en t
Recovery of tax payable under provisional assessment.
233. [Om itted by th e Taxation Laws (Am en dm en t) Act, 1970, w.e.f. 1-4-1971.]
Tax paid by deduction or advance payment.
234.
87
88
[F.In terest ch argeable in certain cases
89
Interest for defaults in furnishing return of income.
234A. (1) Wher e the r etur n of income for any assessment year under sub-
section (1) or sub-section (4) of section 139, or in r esponse to a notice under
sub-section (1) of section 142, is fur nished after the due date, or is not fur nished,
the assessee shall
90
be liable to pay simple inter est at the r ate of
91
[one] per cent
for ever y month or par t of a month compr ised in the per iod commencing on the
date immediately following the due date, and,
(a) wher e the r etur n is fur nished after the due date, ending on the date
of fur nishing of the r etur n; or
of the assessment under section 144,
1-4-1988.
1970, w.r .e.f. 1-4-1968/ 1-4-1971.
89. For CBDTs Instr uctions on r eduction/ waiver of inter est char ged under section 234A/
234B/ 234C, see Taxmanns Income-tax Rules.
90. For the meaning of the ter m shall, see Taxmanns Dir ect Taxes Manual, Vol. 3.
S. 234A I.T. ACT, 1961 1.806
92. Substituted for the wor ds on the amount of the tax on the total income as deter mined
under sub-section (1) of section 143 or on r egular assessment as r educed by the advance
tax, if any, paid and any tax deducted or collected at sour ce by the Finance Act, 2006, w.e.f.
1-4-2007. Ear lier the quoted wor ds wer e amended by the Dir ect Tax Laws (Amendment)
Act, 1989, w.e.f. 1-4-1989.
95. Omitted by the Finance Act, 2001, w.r .e.f. 1-4-1989. Pr ior to its omission, Explan ation 4, as
inser ted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, r ead as under :
Explan ation 4.In this sub-section, tax on the total income as deter mined under sub-
section (1) of section 143 or on r egular assessment shall, for the pur poses of computing
the inter est payable under section 140A, be deemed to be tax on total income as declar ed
in the r etur n.
92
[on the amount of the tax on the total income as deter mined under sub-section
(1) of section 143, and wher e a r egular assessment is made, on the amount of the
tax on the total income deter mined under r egular assessment, as r educed by the
amount of,
(i) advance tax, if any, paid;
(ii) any tax deducted or collected at sour ce;
(iii) any r elief of tax allowed under section 90 on account of tax paid in a
countr y outside India;
(iv) any r elief of tax allowed under section 90A on account of tax paid in
a specified ter r itor y outside India r efer r ed to in that section;
(v) any deduction, fr om the Indian income-tax payable, allowed under
section 91, on account of tax paid in a countr y outside India; and
(vi) any tax cr edit allowed to be set off in accor dance with the pr ovisions
of section 115JAA.]
Explan ation 1.In this section, due date means the date specified in sub-
section (1) of section 139 as applicable in the case of the assessee.
93
[Explan ation 2.In this sub-section, tax on the total income as deter mined
under sub-section (1) of section 143 shall not include the additional income-tax,
if any, payable under section 143.]
for the fir st time under section 147
94
[or section 153A], the assessment so made
shall be r egar ded as a r egular assessment for the pur poses of this section.
Explan ation 4.
95
[* * *]
(2) The inter est payable under sub-section (1) shall be r educed by the inter est, if
any, paid under section 140A towar ds the inter est char geable under this section.
(3) Wher e the r etur n of income for any assessment year , r equir ed by a notice
under section 148
96
[or section 153A] issued
97
[after the deter mination of income
under sub-section (1) of section 143 or ] after the completion of an assessment
under sub-section (3) of section 143 or section 144 or section 147, is fur nished
1.807 CH. XVII - COLLECTION AND RECOVERY - INTEREST CHARGEABLE S. 234B
2. Omitted, ibid.
after the expir y of the time allowed under such notice, or is not fur nished, the
assessee shall be liable to pay simple inter est at the r ate of
98
[one] per cent for
ever y month or par t of a month compr ised in the per iod commencing on the day
immediately following the expir y of the time allowed as afor esaid, and,
(a) wher e the r etur n is fur nished after the expir y of the time afor esaid,
ending on the date of fur nishing the r etur n; or
of t he r eassessment or r ecomput at ion under sect ion 147
99
[or
r eassessment under section 153A],
on the amount by which the tax on the total income deter mined on the basis of
such r eassessment or r ecomputation exceeds the tax on the total income
deter mined
1
[under sub-section (1) of section 143 or ] on the basis of the ear lier
assessment afor esaid.
Explan ation .
2
[* * *]
(4) Wher e as a r esult of an or der under section 154 or section 155 or section 250
or section 254 or section 260 or section 262 or section 263 or section 264 or an
or der of the Settlement Commission under sub-section (4) of section 245D, the
amount of tax on which inter est was payable under sub-section (1) or sub-section
(3) of this section has been incr eased or r educed, as the case may be, the inter est
shall be incr eased or r educed accor dingly, and
(i) in a case wher e the inter est is incr eased, the Assessing Officer shall
ser ve on the assessee a notice of demand in the pr escr ibed for m
shall be r efunded.
(5) The pr ovisions of this section shall apply in r espect of assessments for the
assessment year commencing on the 1st day of Apr il, 1989 and subsequent
assessment year s.]
3
[Interest for defaults in payment of advance tax.
234B. (1) Subject to the other pr ovisions of this section, wher e, in any financial
year , an assessee who is liable to pay advance tax under section 208 has
failed to pay such tax or , wher e the advance tax paid by such assessee under the
pr ovisions of section 210 is less than ninety per cent of the assessed tax, the
assessee shall
4
be liable to pay simple inter est at the r ate of
5
[one] per cent for
ever y month or par t of a month compr ised in the per iod fr om the 1st day of Apr il
next following such financial year
6
[to the date of deter mination of total income
under sub-section (1) of section 143
7
[and wher e a r egular assessment is made,
to the date of such r egular assessment, on an amount]] equal to the assessed tax
or , as the case may be, on the amount by which the advance tax paid as afor esaid
falls shor t of the assessed tax.
8
[Explan ation 1.In this section, assessed tax means the tax on the total income
deter mined under sub-section (1) of section 143 and wher e a r egular assessment
is made, the tax on the total income deter mined under such r egular assessment
as r educed by the amount of,
(i) any tax deducted or collected at sour ce in accor dance with the
pr ovisions of Chapter XVII on any income which is subject to such
deduction or collection and which is taken into account in computing
such total income;
(ii) any r elief of tax allowed under section 90 on account of tax paid in a
(iii) any r elief of tax allowed under section 90A on account of tax paid in
(iv) any deduction, fr om the Indian income-tax payable, allowed under
(v) any tax cr edit allowed to be set off in accor dance with the pr ovisions
of section 115JAA.]
for the fir st time under section 147
9
[or section 153A], the assessment so made
shall be r egar ded as a r egular assessment for the pur poses of this section.
10
[Explan ation 3.In Explan ation 1 and in sub-section (3) tax on the total
income deter mined under sub-section (1) of section 143 shall not include the
additional income-tax, if any, payable under section 143.]
S. 234B I.T. ACT, 1961 1.808
6. Substituted for to the date of the r egular assessment by the Dir ect Tax Laws (Amend-
ment) Act, 1989, w.e.f. 1-4-1989.
7. Substituted for or r egular assessment, on an amount by the Finance Act, 1995, w.r .e.f.
1-4-1989.
1, as substituted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989 and
Finance Act, 2001, w.r .e.f. 1-4-1989 r ead as under :
Explan ation 1.In t his sect ion, assessed t ax means t he t ax on t he t ot al income
deter mined under sub-section (1) of section 143 or on r egular assessment as r educed by
the amount of tax deducted or collected at sour ce in accor dance with the pr ovisions of
Chapter XVII on any income which is subject to such deduction or collection and which
is taken into account in computing such total income.
(2) Wher e, befor e the date of
11
[deter mination of total income under sub-section
(1) of section 143 or ] completion of a r egular assessment, tax is paid by the
assessee under section 140A or other wise,
(i) inter est shall be calculated in accor dance with the for egoing pr ovi-
sions of this section up to the date on which the tax is so paid, and
r educed by the inter est, if any, paid under section 140A towar ds the
inter est char geable under this section;
(ii) ther eafter , inter est shall be calculated at the r ate afor esaid on the
amount by which the tax so paid together with the advance tax paid
falls shor t of the assessed tax.
(3) Wher e, as a r esult of an or der of r eassessment or r ecomputation under
section 147
12
[or section 153A], the amount on which inter est was payable under
sub-section (1) is incr eased, the assessee shall be liable to pay simple inter est at
the r ate of
13
[one] per cent for ever y month or par t of a month compr ised in the
per iod commencing on the day following
14
[the date of deter mination of total
income under sub-section (1) of section 143
15
[and wher e a r egular assessment
is made as is r efer r ed to in sub-section (1) following the date of such r egular
assessment]] and ending on the date of the r eassessment or r ecomputation under
section 147
16
[or section 153A], on the amount by which the tax on the total
income deter mined on the basis of the r eassessment or r ecomputation exceeds
the tax on the total income deter mined
17
[under sub-section (1) of section 143 or ]
on the basis of the r egular assessment afor esaid.
Explan ation .
18
[* * *]
(4) Wher e, as a r esult of an or der under section 154 or section 155 or section 250
amount on which inter est was payable under sub-section (1) or sub-section (3)
(i) in a case wher e the inter est is incr eased, the Assessing Officer shall
ser ve on the assessee a notice of demand in the pr escr ibed for m
specifying the sum payable and such notice of demand shall be
1.809 CH. XVII - COLLECTION AND RECOVERY - INTEREST CHARGEABLE S. 234B
14. Substituted for the date of the r egular assessment by the Dir ect Tax Laws (Amendment)
Act, 1989, w.e.f. 1-4-1989.
15. Substituted for or r egular assessment r efer r ed to in sub-section (1) by the Finance Act,
1995, w.r .e.f. 1-4-1989.
17. Substituted for the date of the r egular assessment by the Dir ect Tax Laws (Amendment)
Act, 1989, w.e.f. 1-4-1989.
18. Omitted, ibid.
shall be r efunded.
assessment year s.]
19
[Interest for deferment of advance tax.
234C. (1)
20
[Wher e in any financial year ,
(a) the company which is liable to pay advance tax under section 208 has
failed to pay such tax or
(i) the advance tax paid by the company on its cur r ent income on or
befor e the 15th day of June is less than fifteen per cent of the tax
due on the r etur ned income or the amount of such advance tax
paid on or befor e the 15th day of September is less than for ty-five
per cent of the tax due on the r etur ned income or the amount of
such advance tax paid on or befor e the 15th day of December is
less than seventy-five per cent of the tax due on the r etur ned
income, then, the company shall
21
be liable to pay simple inter est
at the r ate of
22
[one] per cent per month for a per iod of thr ee
months on the amount of the shor tfall fr om fifteen per cent or
for ty-five per cent or seventy-five per cent, as the case may be, of
the tax due on the r etur ned income;
(ii) the advance tax paid by the company on its cur r ent income on or
befor e the 15th day of Mar ch is less than the tax due on the
r etur ned income, then, the company shall be liable to pay simple
22
[one] per cent on the amount of the
shor tfall fr om the tax due on the r etur ned income:
Provided that if the advance tax paid by the company on its cur r ent
income on or befor e the 15th day of June or the 15th day of
September , is not less than twelve per cent or , as the case may be,
S. 234C I.T. ACT, 1961 1.810
20. Substituted for the por tion beginning with the wor ds Wher e in any financial year and
ending with the wor ds as the case may be, sixty per cent of the tax due on the r etur ned
income: by the Finance Act, 1994, w.e.f. 1-4-1995. Ear lier , the quoted por tion, as amended
by the Finance (No. 2) Act, 1991, w.r .e.f. 1-4-1989 and the Finance Act, 1992, w.e.f. 1-6-1992,
r ead as under :
Wher e in any financial year , the assessee who is liable to pay advance tax under section
208 has failed to pay such tax or the advance tax paid by the assessee on his cur r ent income
on or befor e the 15th day of September is less than thir ty per cent of the tax due on the
r etur ned income or the amount of such advance tax paid on or befor e the 15th day of
December is less than sixty per cent of the tax due on the r etur ned income, then, the
assessee shall be liable to pay simple inter est at the r ate of one and one-half per cent
per month of the shor tfall for a per iod of thr ee months on the amount of the shor tfall
fr om thir ty per cent or , as the case may be, sixty per cent of the tax due on the r etur ned
income.
Finance Act, 2001, w.e.f. 1-6-2001.
thir ty-six per cent of the tax due on the r etur ned income, then, it shall
not be liable to pay any inter est on the amount of the shor tfall on those
dates;
(b) the assessee, other than a company, who is liable to pay advance tax
under section 208 has failed to pay such tax or ,
(i) the advance tax paid by the assessee on his cur r ent income on or
befor e the 15th day of September is less than thir ty per cent of the
tax due on the r etur ned income or the amount of such advance
tax paid on or befor e the 15th day of December is less than sixty
per cent of the tax due on the r etur ned income, then, the assessee
shall be liable to pay simple inter est at the r ate of
23
[one] per cent
per month for a per iod of thr ee months on the amount of the
shor tfall fr om thir ty per cent or , as the case may be, sixty per cent
of the tax due on the r etur ned income;
(ii) the advance tax paid by the assessee on his cur r ent income on or
befor e the 15th day of Mar ch is less than the tax due on the
r etur ned income, then, the assessee shall be liable to pay simple
23
[one] per cent on the amount of the
shor tfall fr om the tax due on the r etur ned income :]
24
[Provided that nothing contained in this sub-section shall apply to any shor tfall
in the payment of the tax due on the r etur ned income wher e such shor tfall is on
account of under -estimate or failur e to estimate
(a) the amount of capital gains; or
(b) income of the natur e r efer r ed to in sub-clause (ix) of clause (24) of
section 2,
and the assessee has paid the whole of the amount of tax payable in r espect of
income r efer r ed to in clause (a) or clause (b), as the case may be, had such income
been a par t of the total income, as par t of the
25
[r emaining instalments of advance
tax which ar e due or wher e no such instalments ar e due], by the 31st day of
Mar ch of the financial year :]
26
[Provided further that nothing contained in this sub-section shall apply to any
shor tfall in the payment of the tax due on the r etur ned income wher e such
1.811 CH. XVII - COLLECTION AND RECOVERY - INTEREST CHARGEABLE S. 234C
Finance Act, 2001, w.e.f. 1-6-2001.
25. Substituted for instalment of advance tax which is immediately due or wher e no such
instalment is so due by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
26. Second pr oviso inser ted by the Taxation Laws (Amendment) Act, 2000, w.e.f. 4-1-2001.
Ear lier , the second pr oviso, as inser ted by the Taxation Laws (Amendment) Act, 1991, w.e.f.
15-1-1991 and later on omitted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997, r ead as
under :
Provided further that nothing contained in this sub-section shall apply to any shor tfall in
the payment of the tax due on the r etur ned income wher e such shor tfall is on account of
(a) r estr icting the amount of deduction under the thir d pr oviso to clause (ii) of sub-
(Con td. on p. 1.812)
shor tfall is on account of incr ease in the r ate of sur char ge under section 2 of the
Finance Act, 2000 (10 of 2000), as amended by the Taxation Laws (Amendment)
Act, 2000 (1 of 2001), and the assessee has paid the amount of shor tfall, on or
befor e the 15th day of Mar ch, 2001 in r espect of the instalment of advance tax
due on the 15th day of June, 2000, the 15th day of September , 2000 and the 15th
day of December , 2000 :]
27
[Provided also that nothing contained in this sub-section shall apply to any
shor tfall in the payment of the tax due on the r etur ned income wher e such
shor tfall is on account of incr ease in the r ate of sur char ge under section 2 of the
Finance Act, 2000 (10 of 2000) as amended by the Taxation Laws (Amendment)
Act, 2001 (4 of 2001) and the assessee has paid the amount of shor tfall on or
befor e the 15th day of Mar ch, 2001 in r espect of the instalment of advance tax
due on the 15th day of June, 2000, the 15th day of September , 2000 and 15th day
of December , 2000.]
28
[Explan ation .In this section, tax due on the r etur ned income means the tax
char geable on the total income declar ed in the r etur n of income fur nished by the
assessee for the assessment year commencing on the 1st day of Apr il immedi-
ately following the financial year in which the advance tax is paid or payable, as
r educed by the amount of,
(i) any tax deductible or collectible at sour ce in accor dance with the
pr ovisions of Chapter XVII on any income which is subject to such
deduction or collection and which is taken into account in computing
such total income;
S. 234C I.T. ACT, 1961 1.812
(b) incr ease in the r ate of sur char ge under section 2 of the Finance Act, 1990 (12 of
1990), as amended by the Taxation Laws (Amendment) Act, 1991,
and the assessee has paid the amount of shor tfall,
(i) wher e it is a domestic company and
(1) the case falls under clause (a), as par t of the instalment of advance tax which
is immediately due;
(2) the case falls under clause (b), on or befor e the 15th day of November , 1990,
in r espect of the instalment of advance tax due on the 15th day of September ,
1990;
(ii) wher e it is not a domestic company and
(1) the case falls under clause (a), as par t of the instalment of advance tax which
is immediately due;
(2) the case falls under clause (b), as par t of the instalment of advance tax due
on or befor e the 15th day of Mar ch, 1991.
27. Thir d pr oviso inser ted by the Taxation Laws (Amendment) Act, 2001, w.r .e.f. 3-2-2001.
28. Substituted by the Finance Act, 2006, w.e.f. 1-4-2007. Pr ior to its substitution, Explan a-
tion , as amended by the Taxation Laws (Amendment) Act, 1991, w.e.f. 15-1-1991 and
Explan ation .In this section, tax due on the r etur ned income means the tax char ge-
able on the total income declar ed in the r etur n of income fur nished by the assessee for
the assessment year commencing on the 1st day of Apr il immediately following the
financial year in which the advance tax is paid

or payable, as r educed by the amount of
tax deductible or collectible at sour ce in accor dance with the pr ovisions of Chapter
XVII on any income which is subject to such deduction or collection and which is taken
into account in computing such total income.
(ii) any r elief of tax allowed under section 90 on account of tax paid in a
(iii) any r elief of tax allowed under section 90A on account of tax paid in
(iv) any deduction, fr om the Indian income-tax payable, allowed under
(v) any tax cr edit allowed to be set off in accor dance with the pr ovisions
of section 115JAA.]
assessment year s.]]
29
[Interest on excess refund.
234D. (1) Subject to the other pr ovisions of this Act, wher e any r efund is
gr anted to the assessee under sub-section (1) of section 143, and
(a) no r efund is due on r egular assessment; or
(b) the amount r efunded under sub-section (1) of section 143 exceeds the
amount r efundable on r egular assessment,
the assessee shall be liable to pay simple inter est at the r ate of
30
[one-half] per
cent on the whole or the excess amount so r efunded, for ever y month or par t of
a month compr ised in the per iod fr om the date of gr ant of r efund to the date of
such r egular assessment.
(2) Wher e, as a r esult of an or der under section 154 or section 155 or section 250
amount of r efund gr anted under sub-section (1) of section 143 is held to be
cor r ectly allowed, either in whole or in par t, as the case may be, then, the inter est
char geable, if any, under sub-section (1) shall be r educed accor dingly.
Explan ation .Wher e, in r elation to an assessment year , an assessment is made
for the fir st time under section 147 or section 153A, the assessment so made shall
be r egar ded as a r egular assessment for the pur poses of this section.]
CHAPTER XVI I I
RELIEF RESPECTING TAX ON DIVIDENDS IN CERTAIN CASES
Relief to shareholders in respect of agricultural income-tax attributable to
dividends.
235. [Om itted by th e Fin an ce (No. 2) Act, 1971, w.e.f. 1-4-1972. Prior to its
om ission , section was am en ded by th e Taxation Laws (Am en dm en t) Act,
1970, w.e.f. 1-4-1971 an d with retrospective effect from 1-4-1962, th e Fin an ce Act,
1966, w.e.f. 1-4-1966, an d th e Fin an ce Act, 1965, w.e.f. 1-4-1965.]
1.813 CH. XVIII - RELIEF RESPECTING TAX ON DIVIDENDS S. 235
30. Substituted for two-thir d by the Taxation Laws (Amendment) Act, 2003, w.e.f. 8-9-2003.
Relief to company in respect of dividend paid out of past taxed profits.
236.
31
(1) Wher e in r espect of any pr evious year r elevant to the assessment
year commencing after the 31st day of Mar ch, 1960, an Indian company or
a company which has made the pr escr ibed ar r angements for the declar ation and
payment of dividends within India, pays any dividend wholly or par tly out of its
pr ofits and gains actually char ged to income-tax for any assessment year ending
befor e the 1st day of Apr il, 1960, and deducts tax ther efr om in accor dance with
the pr ovisions of Chapter XVII-B, cr edit shall be given to the company against the
income-tax, if any, payable by it on the pr ofits and gains of the pr evious year
dur ing which the dividend is paid, of a sum calculated in accor dance with the
pr ovisions of sub-section (2), and, wher e the amount of cr edit so calculated
exceeds the income-tax payable by the company as afor esaid, the excess shall be
refunded.
(2) The amount of income-tax to be given as cr edit under sub-section (1) shall be
a sum equal to ten per cent of so much of the dividends r efer r ed to in sub-section
(1) as ar e paid out of the pr ofits and gains actually char ged to income-tax for any
assessment year ending befor e the 1st day of Apr il, 1960.
Explan ation 1.For the pur poses of this section, the aggr egate of the dividends
declar ed by a company in r espect of any pr evious year shall be deemed fir st to
have come out of the distr ibutable income of that pr evious year and the balance,
if any, out of the undistr ibuted par t of the distr ibutable income of one or mor e
pr evious year s immediately pr eceding that pr evious year as would be just
sufficient to cover the amount of such balance and as has not likewise been taken
into account for cover ing such balance of any other pr evious year .
Explan ation 2.The expr ession distr ibutable income of any pr evious year shall
mean the total income
32
[(as computed befor e making any deduction under
Chapter VI-A)] assessed for that year as r educed by
(i) the amount of tax payable by the company in r espect of
33
[its] total
income;
(ii) the amount of any other tax levied under any law for the time being
in for ce on the company by the Gover nment or by a local author ity
in excess of the amount, if any, which has been allowed in computing
the total income;
34
[(iii) any sum with r efer ence to which a deduction is allowable to the
company under the pr ovisions of section 80G; and]
(iv) in the case of a banking company, the amount actually tr ansfer r ed to
a r eser ve fund under section 17 of the Banking Companies Act, 1949
(10 of 1949),
S. 236 I.T. ACT, 1961 1.814
31. See r ule 27.
33. Substituted for the said, ibid.
and as incr eased by
(a) any pr ofits and gains or r eceipts of the company, not included in its
total income
35
[(as computed befor e making any deduction under
Chapter VI-A)]; and
(b) any amount attr ibutable to any allowance made in computing
the pr ofits and gains of the company for pur poses of assessment,
which the company has not taken into account in its pr ofit and loss
account.
36
[Relief to certain charitable institutions or funds in respect of certain dividends.
236A. (1)
37
[Wher e seventy-five per cent of the shar e capital of any company is
thr oughout the pr evious year beneficially held by an institution or fund
established in India for a char itable pur pose the income fr om dividend wher eof
is exempt under section 11], cr edit shall be given to the institution or fund against
the tax, if any, payable by it, of a sum calculated in accor dance with the pr ovisions
of sub-section (2), in r espect of its income fr om dividends (other than dividends
on pr efer ence shar es) declar ed or distr ibuted dur ing the pr evious year r elevant
to any assessment year beginning on or after the 1st day of Apr il,
38
[1966]
39
[by such a company], and wher e the amount of cr edit so calculated exceeds
the tax, if any, payable by the said institution or fund, the excess shall be
refunded.
40
[(2) The amount to be given as cr edit under sub-section (1) shall be a sum which
bear s to the amount of the tax payable by the company under the pr ovisions of
the annual Finance Act with r efer ence to the r elevant amount of distr ibutions of
dividends by it the same pr opor tion as the amount of the dividends (other than
dividends on pr efer ence shar es) r eceived by the institution or fund fr om the
company bear s to the total amount of dividends (other than dividends on
pr efer ence shar es) declar ed or distr ibuted by the company dur ing the pr evious
year .
Explan ation .In sub-section (2) of this section and in section 280ZB, the
expr ession the r elevant amount of distr ibutions of dividends has the meaning
assigned to it in the Finance Act of the r elevant year .]]
1.815 CH. XVIII - RELIEF RESPECTING TAX ON DIVIDENDS S. 236A
37. Substituted for In the case of an institution or fund r efer r ed to in clause (iii) of sub-section
(2) of section 104 by the Finance Act, 1987, w.e.f. 1-4-1988.
39. Substituted for by such a company as is r efer r ed to in the said clause by the Finance Act,
1987, w.e.f. 1-4-1988.
CHAPTER XI X
REFUNDS
Refunds.
41
237. If any per son satisfies the
42
[Assessing] Officer that the amount of tax
paid by him or on his behalf or tr eated as paid by him or on his behalf
for any assessment year exceeds the amount with which he is pr oper ly char ge-
able
43
under this Act for that year , he shall be entitled to a r efund
43
of the excess.
Person entitled to claim refund in certain special cases.
44
238. (1) Wher e the income of one per son is included under any pr ovision of
this Act in the total income of any other per son, the latter alone shall be
entitled to a r efund under this Chapter in r espect of such income.
45
[(1A) Wher e the value of fr inge benefits pr ovided or deemed to have been
pr ovided by one employer is included under any pr ovisions of Chapter XII-H in
the value of fr inge benefits pr ovided or deemed to have been pr ovided by any
other employer , the latter alone shall be entitled to a r efund under this Chapter
in r espect of such fr inge benefits.]
(2) Wher e thr ough death, incapacity, insolvency, liquidation or other cause, a
per son is unable to claim or r eceive any r efund due to him, his legal r epr esenta-
tive or the tr ustee or guar dian or r eceiver , as the case may be, shall be entitled
to claim or r eceive such r efund for the benefit of such per son or his estate.
Form of claim for refund and limitation.
46
239.
47
(1) Ever y claim for r efund under this Chapter shall be made in the
pr escr ibed for m and ver ified in the pr escr ibed manner .
48
[(2) No such claim shall be allowed, unless it is made within the per iod specified
her eunder , namely :
(a) wher e the claim is in r espect of income which is assessable for any
assessment year commencing on or befor e the 1st day of Apr il, 1967,
four year s fr om the last day of such assessment year ;
S. 239 I.T. ACT, 1961 1.816
41. See also Cir cular No. 23 (LXXII-18), dated 3-8-1962 and Letter [F. No. 91/ 31/ 64-ITJ], dated
9-6-1964. For details, see Taxmanns Master Guide to Income-tax Act. See also Taxmanns
Income-tax Rules.
1-4-1988.
43. For the meaning of the expr essions pr oper ly char geable, and r efund see Taxmanns
44. See also Cir cular No. 22(LXXII-17), dated 8-8-1961. For details, see Taxmanns Master
46. For or der of the Boar d under section 119(2)(b) condoning delay in filing application
for r efund, r efer Taxmanns Income-tax Rules. See also Cir cular No. 7/ 2007, dated
23-10-2007.
47. See r ule 41 and For m No. 30 for claim for r efund.
(b) wher e the claim is in r espect of income which is assessable for the
assessment year commencing on the fir st day of Apr il, 1968, thr ee
year s fr om the last day of the assessment year ;
(c) wher e the claim is in r espect of income which is assessable for any
other assessment year ,
49
[one] year fr om the last day of such assess-
ment year ;]
50
[(d) wher e the claim is in r espect of fr inge benefits which ar e assessable
for any assessment year commencing on or after the fir st day of Apr il,
2006, one year fr om the last day of such assessment year .]
Refund on appeal, etc.
240. Wher e, as a r esult of any or der passed in appeal or other pr oceeding under
this Act
51
, r efund of any amount becomes due to the assessee, the
52
[Assess-
ing] Officer shall, except as other wise pr ovided in this Act, r efund the amount to
the assessee without his having to make any claim in that behalf:
53
[Provided that wher e, by the or der afor esaid,
(a) an assessment is set aside or cancelled and an or der of fr esh assess-
ment is dir ected to be made, the r efund, if any, shall become due only
on the making of such fr esh assessment;
(b) the assessment is annulled, the r efund shall become due only of the
amount, if any, of the tax paid in excess of the tax char geable on the
total income r etur ned by the assessee.]
Power to withhold refund in certain cases.
241.
54
Correctness of assessment not to be questioned.
242. In a claim under this Chapter , it shall not be open to the assessee to
question the cor r ectness of any assessment or other matter decided which
has become final and conclusive or ask for a r eview of the same, and the assessee
shall not be entitled to any r elief on such claim except r efund of tax wr ongly paid
or paid in excess.
1.817 CH. XIX - REFUNDS S. 242
49. Substituted for two by the Finance Act, 1992, w.e.f. 1-4-1993.
51. For the meaning of the expr ession other pr oceeding under this Act, see Taxmanns
1-4-1988.
54. Pr ior to its omission, section 241 was amended by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1988 and later on substituted by the Dir ect Tax Laws (Second Amendment)
Act, 1989, w.e.f. 1-4-1989.
55
Interest on delayed refunds.
243.
56
[(1) If the
57
[Assessing] Officer does not gr ant the r efund,
(a) in any case wher e the total income of the assessee does not consist
solely of income fr om inter est on secur ities or dividends, within thr ee
months fr om the end of the month in which the total income is
deter mined under this Act, and
(b) in any other case, within thr ee months fr om the end of the month in
which the claim for r efund is made under this Chapter ,
the Centr al Gover nment shall pay the assessee simple inter est at
58
[fifteen] per
cent per annum on the amount dir ected to be r efunded fr om the date immedi-
ately following the expir y of the per iod of thr ee months afor esaid to the date of
the or der gr anting the r efund.
Explan ation .If the delay in gr anting the r efund within the per iod of thr ee
months afor esaid is attr ibutable to the assessee, whether wholly or in par t, the
per iod of the delay attr ibutable to him shall be excluded fr om the per iod for
which inter est is payable.]
(2) Wher e any question ar ises as to the per iod to be excluded for the pur poses of
calculation of inter est under the pr ovisions of this section, such question shall
be deter mined by the
59
[Chief Commissioner or Commissioner ] whose decision
shall be final.
60
[(3) The pr ovisions of this section shall not apply in r espect of any assessment
for the assessment year commencing on the 1st day of Apr il, 1989 or any
subsequent assessment year s.]
Interest on refund where no claim is needed.
61
244. (1) Wher e a r efund is due to the assessee in pur suance of an or der
r efer r ed to in section 240 and the
62
[Assessing] Officer does not gr ant the
r efund within a per iod of
63
[thr ee months fr om the end of the month in which
such or der is passed], the Centr al Gover nment shall pay to the assessee simple
S. 244 I.T. ACT, 1961 1.818
55. See r ule 119A.
56. Substituted for sub-section (1) by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971.
1-4-1988.
Ear lier twelve was substituted for nine by the Finance Act, 1972, w.e.f. 1-4-1972. Section
84 of the Amendment Act, 1984 has clar ified that the incr ease in the r ate of inter est will
apply in r espect of any per iod falling after 30-9-1984, and also in those cases wher e the
inter est became char geable or payable fr om an ear lier date.
1-4-1988.
61. See r ule 119A.
63. Substituted for six months fr om the date of such or der by the Taxation Laws (Amend-
ment) Act, 1970, w.e.f. 1-4-1971.
inter est at
64
[fifteen] per cent per annum on the amount of r efund due fr om
the date immediately following the expir y of the per iod of
65
[thr ee] months
afor esaid to the date on which the r efund is gr anted.
66
[(1A) Wher e the whole or any par t of the r efund r efer r ed to in sub-section (1)
is due to the assessee, as a r esult of any amount
67
having been paid by him after
the 31st day of Mar ch, 1975, in pur suance of any or der of assessment
68
or penalty
and such amount or any par t ther eof having been found in appeal or other
pr oceeding under this Act to be in excess of the amount which such assessee is
liable to pay as tax or penalty, as the case may be, under this Act, the Centr al
Gover nment shall pay to such assessee simple inter est at the r ate specified in sub-
section (1) on the amount so found to be in excess fr om the date on which such
amount was paid to the date on which the r efund is gr anted :
Provided that wher e the amount so found to be in excess was paid in instalments,
such inter est shall be payable on the amount of each such instalment or any par t
of such instalment, which was in excess, fr om the date on which such instalment
was paid to the date on which the r efund is gr anted :
Provided further that no inter est under this sub-section shall be payable for a
per iod of one month fr om the date of the passing of the or der in appeal or other
pr oceeding :
Provided also that wher e any inter est is payable to an assessee under this sub-
section, no inter est under sub-section (1) shall be payable to him in r espect of the
amount so found to be in excess.]
(2) Wher e a r efund is withheld under the pr ovisions of section 241, the Centr al
Gover nment shall pay inter est at the afor esaid r ate on the amount of r efund
ultimately deter mined to be due as a r esult of the appeal or fur ther pr oceeding
for the per iod commencing after the expir y of
69
[thr ee months fr om the end of
the month in which the or der r efer r ed to in section 241 is passed] to the date the
r efund is gr anted.
70
[(3) The pr ovisions of this section shall not apply in r espect of any assessment
for the assessment year commencing on the 1st day of Apr il, 1989, or any
subsequent assessment year s.]
65. Substituted for six by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
67. For the meaning of the ter m amount, see Taxmanns Dir ect Taxes Manual, Vol. 3.
68. For the meaning of the expr ession or der of assessment, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
69. Substituted for six months fr om the date of the or der r efer r ed to in section 241 by the
S. 244A I.T. ACT, 1961 1.820
71
[Interest on refunds.
72
244A. (1)
73
[Wher e r efund of any amount becomes due to the assessee under
this Act], he shall, subject to the pr ovisions of this section, be entitled to
r eceive, in addition to the said amount, simple inter est ther eon calculated in the
following manner , namely :
(a) wher e the r efund is out of any tax
74
[paid under section 115WJ or ]
75
[collected at sour ce under section 206C or ] paid by way of advance
tax or tr eated as paid under section 199, dur ing the financial year
immediately pr eceding the assessment year , such inter est shall be
calculated at the r ate of
76
[one-half

per cent] for ever y month or par t
of a month compr ised in the per iod fr om the 1st day of Apr il of the
assessment year to the date on which the r efund is gr anted:
Provided that no inter est shall be payable if the amount of r efund is
less than ten per cent of the tax as deter mined
77
[under
78
[sub-section
(1) of section 115WE or ] sub-section (1) of section 143 or ] on r egular
assessment;
(b) in any other case, such inter est shall be calculated at the r ate of
79
[one-
half per cent] for ever y month or par t of a month compr ised in the
per iod or per iods fr om the date or , as the case may be, dates of
payment of the tax or penalty to the date on which the r efund is
gr anted.
Explan ation .For the pur poses of this clause, date of payment of tax or penalty
means the date on and fr om which the amount of tax or penalty specified in
the notice of demand issued under section 156 is paid in excess of such
demand.
(2) If the pr oceedings r esulting in the r efund ar e delayed for r easons attr ibutable
to the assessee, whether wholly or in par t, the per iod of the delay so attr ibutable
72. See also Cir cular No. 20D(XXII-22), dated 20-8-1968 and Instr uction No. 2/ 2007, dated
73. Substituted for Wher e, in pur suance of any or der passed under this Act, r efund of any
amount becomes due to the assessee by the Dir ect Tax Laws (Amendment) Act, 1989,
w.e.f. 1-4-1989.
76. Substituted for two-thir d per cent by the Taxation Laws (Amendment) Act, 2003, w.e.f.
8-9-2003. Ear lier two-thir d per cent was substituted for thr ee-four th per cent by the
Finance Act, 2002, w.e.f. 1-6-2002, thr ee-four th per cent was substituted for one per
cent by the Finance Act, 2001, w.e.f. 1-6-2001 and one per cent was substituted for one
and one-half per cent by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
79. Substituted for two-thir d per cent by the Taxation Laws (Amendment) Act, 2003, w.e.f.
8-9-2003. Ear lier two-thir d per cent was substituted for thr ee-four th per cent by the
Finance Act, 2002, w.e.f. 1-6-2002, thr ee-four th per cent was substituted for one per
cent by the Finance Act, 2001, w.e.f. 1-6-2001 and one per cent was substituted for one
and one-half per cent by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
to him shall be excluded fr om the per iod for which inter est is payable, and wher e
any question ar ises as to the per iod to be excluded, it shall be decided by the Chief
Commissioner or Commissioner whose decision ther eon shall be final.
(3) Wher e, as a r esult of an or der under
80
[sub-section (3) of section 115WE or
section 115WF or section 115WG or ]
81
[sub-section (3) of section 143 or section
144 or ] section 147 or section 154 or section 155 or section 250 or section 254 or
section 260 or section 262 or section 263 or section 264 or an or der of the
Settlement Commission under sub-section (4) of section 245D, the amount on
which inter est was payable under sub-section (1) has been incr eased or r educed,
as the case may be, the inter est shall be incr eased or r educed accor dingly, and
in a case wher e the inter est is r educed, the Assessing Officer shall ser ve on the
assessee a notice of demand in the pr escr ibed for m specifying the amount of the
excess inter est paid and r equir ing him to pay such amount; and such notice of
demand shall be deemed to be a notice under section 156 and the pr ovisions of
this Act shall apply accor dingly.
assessment year commencing on the 1st day of Apr il, 1989, and subsequent
assessment year s :]
82
[Provided that in r espect of assessment of fr inge benefits, the pr ovisions of this
sub-section shall have effect as if for the figur es 1989, the figur es 2006 had
been substituted.]
Set off of refunds against tax remaining payable.
83
245. Wher e under any of the pr ovisions of this Act, a r efund is found
84
to be
due to any per son, the
85
86
(Appeals)]
87
[, Commissioner (Appeals)] or
88
sioner ], as the case may be, may, in lieu of payment
89
of the r efund, set off the
amount to be r efunded or any par t of that amount, against the sum, if any,
r emaining payable under this Act by the per son to whom the r efund is due, after
giving an intimation in wr iting to such per son of the action pr oposed to be taken
under this section.
83. See also Cir cular No. 3-D(LXXII-21), dated 29/ 31-1-1968. For details, see Taxmanns
84. For the meaning of the expr ession is found, see Taxmanns Dir ect Taxes Manual, Vol. 3.
1-4-1988.
1-4-1988.
89. For the meaning of the expr ession in lieu of payment, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
90
[CHAPTER XI X-A
SETTLEMENT OF CASES
91
[Definitions.
245A. In this Chapter , unless the context other wise r equir es,
(a) Bench means a Bench of the Settlement Commission;
92
[(b) case means any pr oceeding for assessment under this Act, of any
per son in r espect of any assessment year or assessment year s which
may be pending befor e an Assessing Officer on the date on which an
application under sub-section (1) of section 245C is made:
Provided that
(i) a pr oceeding for assessment or r eassessment or r ecomputation
under section 147;
(ii) a pr oceeding for assessment or r eassessment for any of the
assessment year s r efer r ed to in clause (b) of section 153A in case
of a per son r efer r ed to in section 153A or section 153C;
(iii) a pr oceeding for assessment or r eassessment for the assessment
year r efer r ed to in clause (b) of sub-section (1) of section 153B in
case of a per son r efer r ed to in section 153A or section 153C;
(iv) a pr oceeding for making fr esh assessment in pur suance of an
or der under section 254 or section 263 or section 264, setting
aside or cancelling an assessment,
shall not be a pr oceeding for assessment for the pur poses of this
clause.
(i) a pr oceeding for assessment or r eassessment or r ecomputation
r efer r ed to in clause (i) of the pr oviso shall be deemed to have
commenced fr om the date on which a notice under section 148
is issued;
(ii) a pr oceeding for assessment or r eassessment r efer r ed to in
clause (ii) or clause (iii) of the pr oviso shall be deemed to have
S. 245A I.T. ACT, 1961 1.822
90. Chapter XIX-A, consisting of sections 245A to 245M, inser ted by the Taxation Laws
was amended by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978 and Taxation Laws
r ead as under :
(b) case means any pr oceeding under this Act for the assessment or r eassessment of
any per son in r espect of any year or year s, or by way of appeal or r evision in
connection with such assessment or r eassessment, which may be pending befor e
an income-tax author ity on the date on which an application under sub-section (1)
of section 245C is made :
Provided that wher e any appeal or application for r evision has been pr efer r ed after
the expir y of the per iod specified for the filing of such appeal or application for
r evision under this Act and which has not been admitted, such appeal or r evision
shall not be deemed to be a pr oceeding pending within the meaning of this clause;
1.823 CH. XIX-A - SETTLEMENT OF CASES S. 245B
commenced on the date of initiation of the sear ch under section
132 or r equisition under section 132A;
(iii) a pr oceeding for making fr esh assessment r efer r ed to in clause
(iv) of the pr oviso shall be deemed to have commenced fr om the
date on which the or der under section 254 or section 263 or
section 264, setting aside or cancelling an assessment was passed;
(iv) a pr oceeding for assessment for any assessment year , other than
the pr oceedings of assessment or r eassessment r efer r ed to in
clause (i) or clause (ii) or clause (iii) or clause (iv) of the pr oviso,
shall be deemed to have commenced fr om the 1st day of the
assessment year and concluded on the date on which the assess-
ment is made;]
(c) Chair man means the Chair man of the Settlement Commission;
(d) income-tax author ity means an income-tax author ity specified in
section 116;
(e) Member means a Member of the Settlement Commission, and
includes the Chair man and a Vice-Chair man;
(f) Set t lement Commission mea ns t he Income-t a x Set t lement
Commission constituted under section 245B;
(g) Vice-Chair man means a Vice-Chair man of the Settlement Commis-
sion
93
[and includes a Member who is senior amongst the Member s of
a Bench].]
Income-tax Settlement Commission.
245B. (1) The Centr al Gover nment shall constitute a Commission to be called
the Income-tax Settlement Commission
94
[* * *] for the settlement of cases
under this Chapter .
(2) The Settlement Commission shall consist of a Chair man
95
[and as many Vice-
Chair men and other member s as the Centr al Gover nment thinks fit] and shall
function within the Depar tment of the Centr al Gover nment dealing with dir ect
taxes.
(2A)
96
[* * *]
(3) The Chair man
97
[, Vice-Chair man] and other member s of the Settlement
Commission shall be appointed by the Centr al Gover nment fr om amongst
per sons of integr ity and outstanding ability, having special knowledge of, and,
exper ience in, pr oblems r elating to dir ect taxes and business accounts:
94. Wor ds (her eafter in this Chapter r efer r ed to as the Settlement Commission) omitted by
95. Substituted for and two other member s by the Taxation Laws (Amendment & Miscel-
laneous Pr ovisions) Act, 1986, w.e.f. 10-9-1986.
96. Omitted, ibid. Ear lier , sub-section (2A) was inser ted by the Finance Act, 1982, w.e.f.
1-4-1982.
10-9-1986.
Provided that, wher e a member of the Boar d is appointed as the Chair man
98
[, Vice-Chair man] or as a member of the Settlement Commission, he shall cease
to be a member of the Boar d.
99
[* * *]
1
[Jurisdiction and powers of Settlement Commission.
245BA. (1) Subject to the other pr ovisions of this Chapter , the jur isdiction,
power s and author ity of the Settlement Commission may be exer cised
by Benches ther eof.
(2) Subject to the other pr ovisions of this section, a Bench shall be pr esided over
by the Chair man or a Vice-Chair man and shall consist of two other Member s.
(3) The Bench for which the Chair man is the Pr esiding Officer shall be the
pr incipal Bench and the other Benches shall be known as additional Benches.
(4) Notwithstanding anything contained in sub-sections (1) and (2), the Chair man
may author ise the Vice-Chair man or other Member appointed to one Bench to
dischar ge also the functions of the Vice-Chair man or , as the case may be, other
Member of another Bench.
section, and subject to any r ules that may be made in this behalf, when one of the
per sons constituting a Bench (whether such per son be the Pr esiding Officer or
other Member of the Bench) is unable to dischar ge his functions owing to
absence, illness or any other cause or in the event of the occur r ence of any
vacancy either in the office of the Pr esiding Officer or in the office of one or the
other Member s of the Bench, the r emaining two per sons may function as the
Bench and if the Pr esiding Officer of the Bench is not one of the r emaining two
per sons, the senior among the r emaining per sons shall act as the Pr esiding
Officer of the Bench :
Provided that if at any stage of the hear ing of any such case or matter , it appear s
to the Pr esiding Officer that the case or matter is of such a natur e that it ought
to be hear d of by a Bench consisting of thr ee Member s, the case or matter may
be r efer r ed by the Pr esiding Officer of such Bench to the Chair man for tr ansfer
to such Bench as the Chair man may deem fit.
2
[(5A) Notwithstanding anything contained in the for egoing pr ovisions of this
section, the Chair man may, for the disposal of any par ticular case, constitute a
Special Bench consisting of mor e than thr ee Member s.]
(6) Subject to the other pr ovisions of this Chapter , the places at which the
pr incipal Bench and the additional Benches shall or dinar ily sit shall be such as
the Centr al Gover nment may, by notification
3
in the Official Gazette, specify
2
[and the Special Bench shall sit at a place to be fixed by the Chair man.]]
S. 245BA I.T. ACT, 1961 1.824
10-9-1986.
99. Second pr oviso omitted, ibid.
3. For notification specifying Pr incipal Bench, see Taxmanns Master Guide to Income-tax
Act .
4
[Vice-Chairman to act as Chairman or to discharge his functions in certain
circumstances.
245BB. (1) In the event of the occur r ence of any vacancy in the office of the
Chair man by r eason of his death, r esignation or other wise, the Vice-
Chair man or , as the case may be, such one of the Vice-Chair men as the Centr al
Gover nment may, by notification in the Official Gazette, author ise in this behalf,
shall act as the Chair man until the date on which a new Chair man, appointed in
accor dance with the pr ovisions of this Chapter to fill such vacancy, enter s upon
his office.
(2) When the Chair man is unable to dischar ge his functions owing to absence,
illness or any other cause, the Vice-Chair man or , as the case may be, such one
of the Vice-Chair men as the Centr al Gover nment may, by notification in the
Official Gazette, author ise in this behalf, shall dischar ge the functions of the
Chair man until the date on which the Chair man r esumes his duties.]
4
[Power of Chairman to transfer cases from one Bench to another.
245BC. On the application of the assessee or the
5
Commissioner ] and after notice to them, and after hear ing such of them
as he may desir e to be hear d, or on his own motion without such notice, the
Chair man may tr ansfer any case pending befor e one Bench, for disposal, to
another Bench.]
6
[Decision to be by majority.
245BD. If the Member s of a Bench differ in opinion on any point, the point shall
be decided accor ding to the opinion of the major ity, if ther e is a major ity,
but if the Member s ar e equally divided, they shall state the point or points on
which they differ , and make a r efer ence to the Chair man who shall either hear
the point or points himself or r efer the case for hear ing on such point or points
by one or mor e of the other Member s of the Settlement Commission and such
point or points shall be decided accor ding to the opinion of the major ity of the
Member s of the Settlement Commission who have hear d the case, including
those who fir st hear d it.]
Application for settlement of cases.
7
245C.
8
[(1) An assessee may, at any stage of a case r elating to him
9
, make an
application in such for m and in such manner as may be pr escr ibed, and
containing a full and tr ue disclosur e of his income which has not been disclosed
1.825 CH. XIX-A - SETTLEMENT OF CASES S. 245C
1-4-1988.
7. See r ule 44C and For m Nos. 34B and 34BA. Application to Settlement Commission should
be accompanied by a fee of Rs. 500.
9. For the meaning of the expr ession at any stage of a case r elating to him, see Taxmanns
befor e the
10
[Assessing] Officer , the manner in which such income has been
der ived, the additional amount of income-tax payable on such income and such
other par ticular s as may be pr escr ibed, to the Settlement Commission to have the
case settled and any such application shall be disposed of in the manner
her einafter pr ovided :
11
[Provided that no such application shall be made unless
(i) the additional amount of income-tax payable on the income disclosed
in the application exceeds thr ee lakh r upees; and
(ii) such tax and the inter est ther eon, which would have been paid under
the pr ovisions of this Act had the income disclosed in the application
been declar ed in the r etur n of income befor e the Assessing Officer on
the date of application, has been paid on or befor e the date of making
the application and the pr oof of such payment is attached with the
application.]
(1A) For the pur poses of sub-section (1) of this section
12
[***], the additional
amount of income-tax payable in r espect of the income disclosed in an applica-
tion made under sub-section (1) of this section shall be the amount calculated in
accor dance with the pr ovisions of sub-sections (1B) to (1D).
13
[(1B) Wher e the income disclosed in the application r elates to only one pr evious
year ,
S. 245C I.T. ACT, 1961 1.826
1-4-1988.
11. Substituted by the Finance Act, 2007, w.e.f. 1-6-2007. Pr ior to its substitution, the pr oviso,
as substituted by the Finance Act, 1987, w.e.f. 1-6-1987 and later on amended by the
Provided that no such application shall be made unless,
(a) the assessee has fur nished the r etur n of income which he is or was r equir ed to
fur nish under any of the pr ovisions of this Act; and
(b) the additional amount of income-tax payable on the income disclosed in the
application exceeds one hundr ed thousand r upees.
12. Wor ds and sub-sections (2A) to (2D) of section 245D omitted by the Finance Act, 2007,
w.e.f. 1-6-2007.
13. Substituted, ibid. Pr ior to its substitution, sub-section (1B), as substituted by the Finance
(1B) Wher e the income disclosed in the application r elates to only one pr evious year ,
(i) if the applicant has not fur nished a r etur n in r espect of the total income of that year
(whether or not an assessment has been made in r espect of the total income of that
year ), then, except in a case cover ed by clause (iii), tax shall be calculated on the
income disclosed in the application as if such income wer e the total income;
(ii) if the applicant has fur nished a r etur n in r espect of the total income of that year
(whether or not an assessment has been made in pur suance of such r etur n), tax
shall be calculated on the aggr egate of the total income r etur ned and the income
disclosed in the application as if such aggr egate wer e the total income;
(iii) if the pr oceeding pending befor e the income-tax author ity is in the natur e of a
pr oceeding for r eassessment of the applicant under section 147 or by way of appeal
or r evision in connect ion wit h such r eassessment , and t he applicant has not
fur nished a r etur n in r espect of the total income of that year in the cour se of such
pr oceeding for r eassessment, tax shall be calculated on the aggr egate of the total
income as assessed in the ear lier pr oceeding for assessment under section 143 or
section 144 or section 147 and the income disclosed in the application as if such
aggr egate wer e the total income.
(i) if the applicant has not fur nished a r etur n in r espect of the total
income of that year , then, tax shall be calculated on the income
disclosed in the application as if such income wer e the total income;
(ii) if the applicant has fur nished a r etur n in r espect of the total income
of that year , tax shall be calculated on the aggr egate of the total
income r etur ned and the income disclosed in the application as if such
aggr egate wer e the total income.]
14
[(1C) The additional amount of income-tax payable in r espect of the income
disclosed in the application r elating to the pr evious year r efer r ed to in sub-
section (1B) shall be,
(a) in a case r efer r ed to in clause (i) of that sub-section, the amount of tax
calculated under that clause;
(b) in a case r efer r ed to in clause (ii) of that sub-section, the amount of
tax calculated under that clause as r educed by the amount of tax
calculated on the total income r etur ned for that year ;
(c)
15
[***].]
(1D) Wher e the income disclosed in the application r elates to mor e than one
pr evious year , the additional amount of income-tax payable in r espect of the
income disclosed for each of the year s shall fir st be calculated in accor dance
with the pr ovisions of sub-sections (1B) and (1C) and the aggr egate of the amount
so ar r ived at in r espect of each of the year s for which the application has been
made under sub-section (1) shall be the additional amount of income-tax payable
in r espect of the income disclosed in the application.
(1E)
16
[***]
(2) Ever y application made under sub-section (1) shall be accompanied by such
fees as may be pr escr ibed
17
.
(3) An application made under sub-section (1) shall not be allowed to be
withdr awn by the applicant.
18
[(4) An assessee shall, on the date on which he makes an application under
sub-section (1) to the Settlement Commission, also intimate the Assessing Officer
in the pr escr ibed manner of having made such application to the said Commis-
sion.]
1.827 CH. XIX-A - SETTLEMENT OF CASES S. 245C
15. Omitted by the Finance Act, 2007, w.e.f. 1-6-2007. Pr ior to its omission, clause (c) r ead as
under :
(c) in a case r efer r ed to in clause (iii) of that sub-section, the amount of tax calculated
under that clause as r educed by the amount of tax calculated on the total income
assessed in the ear lier pr oceeding for assessment under section 143 or section 144
or section 147.
17. Fee pr escr ibed is Rs. 500.
Procedure on receipt of an application under section 245C.
19
245D.
20
[(1) On r eceipt of an application under section 245C, the Settlement
Commission shall, within seven days fr om the date of r eceipt of the
application, issue a notice to the applicant r equir ing him to explain as to why the
application made by him be allowed to be pr oceeded with, and on hear ing the
applicant, the Settlement Commission shall, within a per iod of four teen days
fr om the date of the application, by an or der in wr iting, r eject the application or
allow the application to be pr oceeded with:
Provided that wher e no or der has been passed within the afor esaid per iod by the
Settlement Commission, the application shall be deemed to have been allowed
to be pr oceeded with.]
(1A)
21
(2) A copy of ever y or der under sub-section (1) shall be sent to the applicant and
to the Commissioner .
22
[(2A) Wher e an application was made under section 245C befor e the 1st day of
June, 2007, but an or der under the pr ovisions of sub-section (1) of this section,
as they stood immediately befor e their amendment by the Finance Act, 2007, has
S. 245D I.T. ACT, 1961 1.828
19. See r ule 44CA.
(1), as amended by the Finance Act, 1995, w.e.f. 1-7-1995, Finance Act, 1979, w.e.f.
1-4-1979, Finance (No. 2) Act, 1991, w.e.f. 27-9-1991 and Finance Act, 2002, w.e.f. 1-6-2002,
r ead as under :
(1) On r eceipt of an application under section 245C, the Settlement Commission shall
call for a r epor t fr om the Commissioner and on the basis of the mater ials contained in
such r epor t and having r egar d to the natur e and cir cumstances of the case or the
complexity of the investigation involved ther ein, the Settlement Commission, shall,
wher e it is possible, by or der , r eject the application or allow the application to be
pr oceeded with within a per iod of one year fr om the end of the month in which such
application was made under section 245C :
Provided that an application shall not be r ejected under this sub-section unless an
oppor tunity has been given to the applicant of being hear d :
Provided further that the Commissioner shall fur nish the r epor t within a per iod of for ty-
five days of the r eceipt of communication fr om the Settlement Commission in case of
all applications made under section 245C on or after the 1st day of July, 1995 and if the
Commissioner fails to fur nish the r epor t within the said per iod, the Settlement Commis-
sion may make the or der without such r epor t.
21. Pr ior to omission, sub-section (1A) was inser ted by the Finance Act, 1979, w.e.f. 1-4-1979
22. Sub-sect ions (2A), (2B), (2C) and (2D) subst it ut ed by t he Finance Act , 2007, w.e.f.
1-6-2007. Pr ior to their substitution, sub-sections (2A), (2B), (2C) and (2D), as amended
by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984, Finance Act, 1985, w.r .e.f.
1-10-1984 and Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988, r ead as under :
(2A) Subject to the pr ovisions of sub-section (2B), the assessee shall, within thir ty-five
days of the r eceipt of a copy of the or der under sub-section (1) allowing the application
to be pr oceeded with, pay the additional amount of income-tax payable on the income
disclosed in the application and shall fur nish pr oof of such payment to the Settlement
Commission.
(Con td. on p. 1.829)
not been made befor e the 1st day of June, 2007, such application shall be deemed
to have been allowed to be pr oceeded with if the additional tax on the income
disclosed in such application and the inter est ther eon is paid on or befor e the 31st
day of July, 2007.
Explan ation .In r espect of the applications r efer r ed to in this sub-section, the
31st day of July, 2007 shall be deemed to be the date of the or der of r ejection or
allowing the application to be pr oceeded with under sub-section (1).
(2B) The Settlement Commission shall,
(i) in r espect of an application which is allowed to be pr oceeded with
under sub-section (1), within thir ty days fr om the date on which the
application was made; or
(ii) in r espect of an application r efer r ed to in sub-section (2A) which is
deemed to have been allowed to be pr oceeded with under that sub-
section, on or befor e the 7th day of August, 2007,
call for a r epor t fr om the Commissioner , and the Commissioner shall fur nish the
r epor t within a per iod of thir ty days of the r eceipt of communication fr om the
Settlement Commission.
(2C) Wher e a r epor t of the Commissioner called for under sub-section (2B) has
been fur nished within the per iod specified ther ein, the Settlement Commission
may, on the basis of the r epor t and within a per iod of fifteen days of the r eceipt
of the r epor t, by an or der in wr iting, declar e the application in question as invalid,
and shall send the copy of such or der to the applicant and the Commissioner :
Provided that an application shall not be declar ed invalid unless an oppor tunity
has been given to the applicant of being hear d:
Provided further that wher e the Commissioner has not fur nished the r epor t
within the afor esaid per iod, the Settlement Commission shall pr oceed fur ther in
the matter without the r epor t of the Commissioner .
1.829 CH. XIX-A - SETTLEMENT OF CASES S. 245D
(2B) If the Settlement Commission is satisfied, on an application made in this behalf by
the assessee, that he is unable for good and sufficient r easons to pay the additional
amount of income-tax r efer r ed to in sub-section (2A) within the time specified in that
sub-section, it may extend the time for payment of the amount which r emains unpaid
or allow payment ther eof by instalments if the assessee fur nishes adequate secur ity for
the payment ther eof.
(2C) Wher e the additional amount of income-tax is not paid within the time specified
under sub-section (2A), then, whether or not the Settlement Commission has extended
the time for payment of the amount which r emains unpaid or has allowed payment
ther eof by instalments under sub-section (2B), the assessee shall be liable to pay simple
inter est at fifteen per cent per annum on the amount r emaining unpaid fr om the date
of expir y of the per iod of thir ty-five days r efer r ed to in sub-section (2A).
(2D) Wher e the additional amount of income-tax r efer r ed to in sub-section (2A) is not
paid by the assessee within the time specified under that sub-section or extended under
sub-section (2B), as the case may be, the Settlement Commission may dir ect that the
amount of income-tax r emaining unpaid, together with any inter est payable ther eon
under sub-section (2C), be r ecover ed and any penalty for default in making payment of
such addit ional amount may be imposed and r ecover ed, in accor dance wit h t he
pr ovisions of Chapt er XVII, by t he Assessing Officer having jur isdict ion over t he
assessee.
S. 245D I.T. ACT, 1961 1.830
(2D) Wher e an application was made under sub-section (1) of section 245C
befor e the 1st day of June, 2007 and an or der under the pr ovisions of sub-section
(1) of this section, as they stood immediately befor e their amendment by the
Finance Act, 2007, allowing the application to have been pr oceeded with, has
been passed befor e the 1st day of June, 2007, but an or der under the pr ovisions
of sub-section (4), as they stood immediately befor e their amendment by the
Finance Act, 2007, was not passed befor e the 1st day of June, 2007, such
application shall not be allowed to be fur ther pr oceeded with unless the
additional tax on the income disclosed in such application and the inter est
ther eon, is, notwithstanding any extension of time alr eady gr anted by the
Settlement Commission, paid on or befor e the 31st day of July, 2007.]
23
[(3)The Settlement Commission, in r espect of
(i) an application which has not been declar ed invalid under sub-section
(2C); or
(ii) an application r efer r ed to in sub-section (2D) which has been allowed
to be fur ther pr oceeded with under that sub-section,
may call for the r ecor ds fr om the Commissioner and after examination of such
r ecor ds, if the Settlement Commission is of the opinion that any fur ther enquir y
or investigation in the matter is necessar y, it may dir ect the Commissioner to
make or cause to be made such fur ther enquir y or investigation and fur nish a
r epor t on the matter s cover ed by the application and any other matter r elating
to the case, and the Commissioner shall fur nish the r epor t within a per iod of
ninety days of the r eceipt of communication fr om the Settlement Commission:
Provided that wher e the Commissioner does not fur nish the r epor t within the
afor esaid per iod, the Settlement Commission may pr oceed to pass an or der
under sub-section (4) without such r epor t.
23. Sub-sections (3), (4) and (4A) substituted by the Finance Act, 2007, w.e.f. 1-6-2007. Pr ior
to their substitution, sub-sections (3), (4) and (4A), as amended by the Finance Act, 2002,
(3) Wher e an application is allowed to be pr oceeded with under sub-section (1), the
Settlement Commission may call for the r elevant r ecor ds fr om the Commissioner and
after examination of such r ecor ds, if the Settlement Commission is of the opinion that
any fur ther enquir y or investigation in the matter is necessar y, it may dir ect the
Commissioner to make or cause to be made such fur ther enquir y or investigation and
fur nish a r epor t on the matter s cover ed by the application and any other matter r elating
to the case.
(4) After examination of the r ecor ds and the r epor t of the Commissioner , r eceived under
sub-section (1), and the r epor t, if any, of the Commissioner r eceived under sub-section
(3), and after giving an oppor tunity to the applicant and to the Commissioner to be hear d,
either in per son or thr ough a r epr esentative duly author ised in this behalf, and after
examining such fur ther evidence as may be placed befor e it or obtained by it, the
Settlement Commission may, in accor dance with the pr ovisions of this Act, pass such
or der as it thinks fit on the matter s cover ed by the application and any other matter
r elating to the case not cover ed by the application, but r efer r ed to in the r epor t of the
Commissioner under sub-section (1) or sub-section (3).
(4A) In ever y application allowed to be pr oceeded with under sub-section (1), the
Settlement Commission shall, wher e it is possible, pass an or der under sub-section (4)
within a per iod of four year s fr om the end of the financial year in which such application
was allowed to be pr oceeded with.
(4) After examination of the r ecor ds and the r epor t of the Commissioner , if any,
r eceived under
(i) sub-section (2B) or sub-section (3), or
(ii) the pr ovisions of sub-section (1) as they stood immediately befor e
their amendment by the Finance Act, 2007,
and after giving an oppor tunity to the applicant and to the Commissioner to be
hear d, either in per son or thr ough a r epr esentative duly author ised in this behalf,
and after examining such fur ther evidence as may be placed befor e it or obtained
by it, the Settlement Commission may, in accor dance with the pr ovisions of this
Act, pass such or der as it thinks fit on the matter s cover ed by the application and
any other matter r elating to the case not cover ed by the application, but r efer r ed
to in the r epor t of the Commissioner .
(4A) The Settlement Commission shall pass an or der under sub-section (4),
(i) in r espect of an application r efer r ed to in sub-section (2A) or sub-
section (2D), on or befor e the 31st day of Mar ch, 2008;
(ii) in r espect of an application made on or after the 1st day of June, 2007,
within twelve months fr om the end of the month in which the
application was made.]
24
[(5) Subject to the pr ovisions of section 245BA, the mater ials br ought on
r ecor d befor e the Settlement Commission shall be consider ed by the Member s
of the concer ned Bench befor e passing any or der under sub-section (4) and, in
r elation to the passing of such or der , the pr ovisions of section 245BD shall
apply.]
(6) Ever y or der passed under sub-section (4) shall pr ovide for the ter ms of
settlement
25
including any demand by way of
26
[tax, penalty or inter est], the
manner in which any sum due under the settlement
25
shall be paid and all other
matter s to make the settlement effective and shall also pr ovide that the settle-
ment shall be void if it is subsequently found by the Settlement Commission that
it has been obtained by fr aud or misr epr esentation of facts.
27
[(6A) Wher e any tax payable in pur suance of an or der under sub-section (4) is
not paid by the assessee within thir ty-five days of the r eceipt of a copy of the
or der by him, then, whether or not the Settlement Commission has extended the
time for payment of such tax or has allowed payment ther eof by instalments,
the assessee shall be liable to pay simple inter est at
28
[on e an d on e-f ourth per cen t
1.831 CH. XIX-A - SETTLEMENT OF CASES S. 245D
24. Inser ted by the Finance Act, 1987, w.e.f. 1-6-1987. Or iginal sub-section (5), as amended by
the Finance Act, 1982, w.e.f. 1-4-1982, was omitted by the Taxation Laws (Amendment &
Miscellaneous Pr ovisions) Act, 1986, w.e.f. 10-9-1986.
25. For the meaning of ter m settle/ settlement, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
26. Substituted for tax or penalty by the Finance Act, 1987, w.e.f. 1-6-1987. Ear lier tax or
penalty was substituted for tax, penalty or inter est by the Taxation Laws (Amendment)
Act, 1984, w.e.f. 1-10-1984.
28. Substituted for fifteen per cent per annum by the Finance Act, 2007, w.e.f. 1-4-2008.
for every m on th or part of a m on th ] on the amount r emaining unpaid fr om the
date of expir y of the per iod of thir ty-five days afor esaid.]
(7) Wher e a settlement becomes void as pr ovided under sub-section (6), the
pr oceedings with r espect to the matter s cover ed by the settlement shall be
deemed to have been r evived fr om the stage at which the application was
allowed to be pr oceeded with by the Settlement Commission and the income-tax
author ity concer ned, may, notwithstanding anything contained in any other
pr ovision of this Act, complete such pr oceedings at any time befor e the expir y of
two year s fr om the end of the financial year in which the settlement became void.
29
[(8) For the r emoval of doubts, it is her eby declar ed that nothing contained in
section 153 shall apply to any or der passed under sub-section (4) or to any or der
of assessment, r eassessment or r ecomputation r equir ed to be made by the
30
[Assessing] Officer in pur suance of any dir ections contained in such or der
passed by the Settlement Commission
31
[and nothing contained in the pr oviso to
sub-section (1) of section 186 shall apply to the cancellation of the r egistr ation of
a fir m r equir ed to be made in pur suance of any such dir ections as afor esaid.]]
32
[Power of Settlement Commission to order provisional attachment to protect
revenue.
245DD. (1) Wher e, dur ing the pendency of any pr oceeding befor e it, the
Settlement Commission is of the opinion that for the pur pose of
pr otecting the inter ests of the r evenue it is necessar y so to do, it may, by or der ,
attach pr ovisionally any pr oper ty belonging to the applicant in the manner
pr ovided in the Second Schedule :
Provided that wher e a pr ovisional attachment made under section 281B is
pending immediately befor e an application is made under section 245C, an or der
under this sub-section shall continue such pr ovisional attachment up to the
per iod up to which an or der made under section 281B would have continued if
such application had not been made :
Provided further that wher e the Settlement Commission passes an or der under
this sub-section after the expir y of the per iod r efer r ed to in the pr eceding pr oviso,
the pr ovisions of sub-section (2) shall apply to such or der as if the said or der had
or iginally been passed by the Settlement Commission.
(2) Ever y pr ovisional attachment made by the Settlement Commission under
sub-section (1) shall cease to have effect after the expir y of a per iod of six months
fr om the date of the or der made under sub-section (1) :
Provided that the Settlement Commission may, for r easons to be r ecor ded in
wr iting, extend the afor esaid per iod by such fur ther per iod or per iods as it thinks
fit
33
[***]].
S. 245DD I.T. ACT, 1961 1.832
1-4-1988.
33. Wor ds , so, however , that the total per iod of extension shall not in any case exceed two
year s omitted by the Finance Act, 2007, w.e.f. 1-6-2008.
Power of Settlement Commission to reopen completed proceedings.
245E. If the Settlement Commission is of the opinion (the r easons for such
opinion to be r ecor ded by it in wr iting) that, for the pr oper disposal of the
case pending befor e it, it is necessar y or expedient to r eopen any pr oceeding
connected with the case but which has been completed
34
[* * *] under this Act by
any income-tax author ity befor e the application under section 245C was made,
it may, with the concur r ence of the applicant, r eopen such pr oceeding and pass
such or der ther eon as it thinks fit, as if the case in r elation to which the application
for settlement had been made by the applicant under that section cover ed such
pr oceeding also :
35
[Provided that no pr oceeding shall be r eopened by the Settlement Commission
under this section if the per iod between the end of the assessment year to which
such a pr oceeding r elates and the date of application for settlement under
section 245C exceeds nine year s :]
36
[Provided further that no pr oceeding shall be r eopened by the Settlement
Commission under this section in a case wher e an application under section 245C
is made on or after the 1st day of June, 2007.]
Powers and procedure of Settlement Commission.
245F. (1) In addition to the power s confer r ed on the Settlement Commission
under this Chapter , it shall have all the power s which ar e vested in an
income-tax author ity under this Act.
(2) Wher e an application made under section 245C has been allowed to be
pr oceeded with under section 245D, the Settlement Commission shall, until an
or der is passed under sub-section (4) of section 245D, have, subject to the
pr ovisions of sub-section (3) of that section, exclusive jur isdiction to exer cise the
power s and per for m the functions of an income-tax author ity under this Act in
r elation to the case :
36
[Provided that wher e an application has been made under section 245C on or
after the 1st day of June, 2007, the Settlement Commission shall have such
exclusive jur isdiction fr om the date on which the application was made:
Provided further that wher e
(i) an application made on or after the 1st day of June, 2007, is r ejected
under sub-section (1) of section 245D; or
(ii) an application is not allowed to be pr oceeded with under sub-section
(2A) of section 245D, or , as the case may be, is declar ed invalid under
sub-section (2C) of that section; or
(iii) an application is not allowed to be fur ther pr oceeded with under sub-
section (2D) of section 245D,
1.833 CH. XIX-A - SETTLEMENT OF CASES S. 245F
34. under the Indian Income-tax Act, 1922 (11 of 1922), or omitted by the Taxation Laws
S. 245H I.T. ACT, 1961 1.834
37. or by way of advance tax omitted by the Finance Act, 1987, w.e.f. 1-6-1987.
38. Omitted, ibid. Or iginal sub-section (5) was ear lier substituted by the Taxation Laws
(Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f. 10-9-1986.
the Taxation Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f. 10-9-1986.
10-9-1986.
41. See r ule 44D.
the Settlement Commission, in r espect of such application shall have such
exclusive jur isdiction upto the date on which the application is r ejected, or , not
allowed to be pr oceeded with, or , declar ed invalid, or , not allowed to be fur ther
pr oceeded with, as the case may be.]
(3) Notwithstanding anything contained in sub-section (2) and in the absence of
any expr ess dir ection to the contr ar y by the Settlement Commission, nothing
contained in this section shall affect the oper ation of any other pr ovision of this
Act r equir ing the applicant to pay tax on the basis of self-assessment
37
[* * *] in
r elation to the matter s befor e the Settlement Commission.
(4) For the r emoval of doubt, it is her eby declar ed that, in the absence of any
expr ess dir ection by the Settlement Commission to the contr ar y, nothing in this
Chapter shall affect the oper ation of the pr ovisions of this Act in so far as they
r elate to any matter s other than those befor e the Settlement Commission.
(5)
38
[* * *]
(6)
39
[* * *]
40
[(7) The Settlement Commission shall, subject to the pr ovisions of this Chapter ,
have power to r egulate its own pr ocedur e and the pr ocedur e of Benches ther eof
in all matter s ar ising out of the exer cise of its power s or of the dischar ge of its
functions, including the places at which the Benches shall hold their sittings.]
Inspection, etc., of reports.
245G.
41
No per son shall be entitled to inspect, or obtain copies of, any r epor ts
made by any income-tax author ity to the Settlement Commission; but the
Settlement Commission may, in its discr etion, fur nish copies ther eof to any such
per son on an application made to it in this behalf and on payment of the
pr escr ibed fee :
Provided that, for the pur pose of enabling any per son whose case is under
consider ation to r ebut any evidence br ought on r ecor d against him in any such
r epor t, the Settlement Commission shall, on an application made in this
behalf, and on payment of the pr escr ibed fee by such per son, fur nish him with
a cer tified copy of any such r epor t or par t ther eof r elevant for the pur pose.
Power of Settlement Commission to grant immunity from prosecution and
penalty.
245H. (1) The Settlement Commission may, if it is satisfied that any per son
who made the application for settlement under section 245C has co-oper -
ated with the Settlement Commission in the pr oceedings befor e it and has made
a full and tr ue disclosur e of his income and the manner in which such income
has been der ived, gr ant to such per son, subject to such conditions as it may think
fit to impose, immunity fr om pr osecution for any offence under this Act or under
the Indian Penal Code (45 of 1860) or under any other Centr al Act for the time
being in for ce and also
42
[(either wholly or in par t)] fr om the imposition of any
penalty under this Act, with r espect to the case cover ed by the settlement :
43
[Provided that no such immunity shall be gr anted by the Settlement Commis-
sion in cases wher e the pr oceedings for the pr osecution for any such offence
have been instituted befor e the date of r eceipt of the application under section
245C :]
44
[Provided further that the Settlement Commission shall not gr ant immunity
fr om pr osecution for any offence under the Indian Penal Code (45 of 1860) or
under any Centr al Act other than this Act and the Wealth-tax Act, 1957 (27 of
1957) to a per son who makes an application under section 245C on or after the
1st day of June, 2007.]
43
[(1A) An immunity gr anted to a per son under sub-section (1) shall stand
withdr awn if such per son fails to pay any sum specified in the or der of settlement
passed under sub-section (4) of section 245D within the time specified in such
or der or within such fur ther time as may be allowed by the Settlement Commis-
sion, or fails to comply with any other condition subject to which the immunity
was gr anted and ther eupon the pr ovisions of this Act shall apply as if such
immunity had not been gr anted.]
(2) An immunity gr anted to a per son under sub-section (1) may, at any time, be
withdr awn by the Settlement Commission, if it is satisfied that such per son
45
[* * *] had, in the cour se of the settlement pr oceedings, concealed any par ticular s
mater ial to the settlement or had given false evidence, and ther eupon such
per son may be tr ied for the offence with r espect to which the immunity was
gr anted or for any other offence of which he appear s to have been guilty in
connection with the settlement and shall also become liable to the imposition of
any penalty under this Act to which such per son would have been liable, had not
such immunity been gr anted.
46
[Abatement of proceeding before Settlement Commission.
245HA. (1) Wher e
(i) an application made under section 245C on or after the 1st day of
June, 2007 has been r ejected under sub-section (1) of section 245D; or
1.835 CH. XIX-A - SETTLEMENT OF CASES S. 245HA
45. has not complied with the conditions subject to which the immunity was gr anted or that
such per son omitted by the Finance Act, 1987, w.e.f. 1-6-1987.
46. Inser ted by the Finance Act, 2007, w.e.f. 1-6-2007. Ear lier section 245HA was inser ted by
the Finance Act, 1987, w.e.f. 1-6-1987 and amended by the Dir ect Tax Laws (Amendment)
Act , 1987, w.e.f. 1-4-1988 a nd la t er on omit t ed by t he Fina nce Act , 2002, w.e.f.
1-6-2002.
(ii) an application made under section 245C has not been allowed to be
pr oceeded with under sub-section (2A) or fur ther pr oceeded with
under sub-section (2D) of section 245D; or
(iii) an application made under section 245C has been declar ed as invalid
under sub-section (2C) of section 245D; or
(iv) in r espect of any other application made under section 245C, an or der
under sub-section (4) of section 245D has not been passed within the
time or per iod specified under sub-section (4A) of section 245D,
the pr oceedings befor e the Settlement Commission shall abate on the specified
date.
Explan ation .For the pur poses of this sub-section, specified date means
(a) in r espect of an application r efer r ed to in clause (i), the day on which
the application was r ejected;
(b) in r espect of an application r efer r ed to in clause (ii), the 31st day of
July, 2007;
(c) in r espect of an application r efer r ed to in clause (iii), the last day of the
month in which the application was declar ed invalid;
(d) in r espect of an application r efer r ed to in clause (iv), on the date on
which the time or per iod specified in sub-section (4A) of section 245D
expir es.
(2) Wher e a pr oceeding befor e the Settlement Commission abates, the Assessing
Officer , or , as the case may be, any other income-tax author ity befor e whom the
pr oceeding at the time of making the application was pending, shall dispose of
the case in accor dance with the pr ovisions of this Act as if no application under
section 245C had been made.
(3) For the pur poses of sub-section (2), the Assessing Officer , or , as the case may
be, other income-tax author ity, shall be entitled to use all the mater ial and other
infor mation pr oduced by the assessee befor e the Settlement Commission or the
r esults of the inquir y held or evidence r ecor ded by the Settlement Commission
in the cour se of the pr oceedings befor e it, as if such mater ial, infor mation, inquir y
and evidence had been pr oduced befor e the Assessing Officer or other income-
tax author ity or held or r ecor ded by him in the cour se of the pr oceedings befor e
him.
(4) For the pur poses of the time-limit under sections 149, 153, 153B, 154, 155,
158BE and 231 and for the pur poses of payment of inter est under section 243 or
244 or , as the case may be, section 244A, for making the assessment or
r eassessment under sub-section (2), the per iod commencing on and fr om the
date of the application to the Settlement Commission under section 245C and
ending with specified date r efer r ed to in sub-section (1) shall be excluded; and
wher e the assessee is a fir m, for the pur poses of the time-limit for cancellation
of r egistr ation of the fir m under sub-section (1) of section 186, the per iod
afor esaid shall, likewise, be excluded.]
S. 245HA I.T. ACT, 1961 1.836
47
[Credit for tax paid in case of abatement of proceedings.
245HAA. Wher e an application made under section 245C on or after the 1st day
of June, 2007, is r ejected under sub-section (1) of section 245D, or any
other application made under section 245C is not allowed to be pr oceeded with
under sub-section (2A) of section 245D or is declar ed invalid under sub-section
(2C) of section 245D or has not been allowed to be fur ther pr oceeded with under
sub-section (2D) of section 245D or an or der under sub-section (4) of section
245D has not been passed within the time or per iod specified under sub-section
(4A) of section 245D, the Assessing Officer shall allow the cr edit for the tax and
inter est paid on or befor e the date of making the application or dur ing the
pendency of the case befor e the Settlement Commission.]
Order of settlement to be conclusive.
245-I. Ever y or der of settlement passed under sub-section (4) of section 245D
shall be conclusive as to the matter s stated ther ein and no matter cover ed
by such or der shall, save as other wise pr ovided in this Chapter , be r eopened in
any pr oceeding under this Act or under any other law for the time being in for ce.
Recovery of sums due under order of settlement.
245J. Any sum specified in an or der of settlement passed under sub-section (4)
of section 245D may, subject to such conditions, if any, as may be specified
ther ein, be r ecover ed, and any penalty for default in making payment of such
sum may be imposed and r ecover ed in accor dance with the pr ovisions of
Chapter XVII, by the
48
[Assessing] Officer having jur isdiction over the per son
who made the application for settlement under section 245C.
49
[Bar on subsequent application for settlement.
245K. (1) Wher e
(i) an or der of settlement passed under sub-section (4) of section 245D
pr ovides for the imposition of a penalty on the per son who made the
application under section 245C for settlement, on the gr ound of
concealment of par ticular s of his income; or
(ii) after the passing of an or der of settlement under the said sub-section
(4) in r elation to a case, such per son is convicted of any offence under
Chapter XXII in r elation to that case; or
1.837 CH. XIX-A - SETTLEMENT OF CASES S. 245K
1-4-1988.
245K, as amended by the Finance Act, 1987, w.e.f. 1-6-1987 and Dir ect Tax Laws
245K. Bar on subsequen t application for settlem en t in certain cases.Wher e,
(i) an or der of settlement passed under sub-section (4) of section 245D pr ovides for the
imposition of a penalty on the per son who made the application under section 245C
for settlement, on the gr ound of concealment of par ticular s of his income; or
(ii) after the passing of an or der of settlement under the said sub-section (4) in r elation
to a case, such per son is convicted of any offence under Chapter XXII in r elation
to that case; or
(iii) the case of such per son is sent back to the Assessing Officer by the Settlement
Commission under section 245HA,
then, he shall not be entitled to apply for settlement under section 245C in r elation to any
other matter .
(iii) the case of such per son was sent back to the Assessing Officer by the
Settlement Commission on or befor e the 1st day of June, 2002,
then, he shall not be entitled to apply for settlement under section 245C in r elation
to any other matter .
(2) Wher e a per son has made an application under section 245C on or after the
1st day of June, 2007 and if such application has been allowed to be pr oceeded
with under sub-section (1) of section 245D, such per son shall not be subsequently
entitled to make an application under section 245C.]
Proceedings before Settlement Commission to be judicial proceedings.
245L. Any pr oceeding under this Chapter befor e the Settlement Commission
shall be deemed to be a judicial pr oceeding within the meaning of sections
193 and 228, and for the pur poses of section 196, of the Indian Penal Code (45 of
1860).
Certain persons who have filed appeals to the Appellate Tribunal entitled to make
applications to the Settlement Commission.
245M.
50
51
[CHAPTER XI X-B
ADVANCE RULINGS
Definitions.
245N. In this Chapter , unless the context other wise r equir es,
52
[(a) advance r uling means
S. 245N I.T. ACT, 1961 1.838
50. Pr ior to its omission, section 245M was inser ted by the Taxation Laws (Amendment) Act,
1975, w.e.f. 1-4-1976 and later amended by the Taxation Laws (Amendment) Act, 1984,
w.e.f. 1-10-1984.
51. Chapter XIX-B, consisting of sections 245N to 245V, inser ted by the Finance Act, 1993,
w.e.f. 1-6-1993.
52. Clauses (a) and (b) substituted by the Finance Act, 2000, w.e.f. 1-6-2000. Pr ior to their
subst it ut ion, clauses (a) and (b), as inser ted by the Finance Act, 1993, w.e.f. 1-6-1993 and
later on substituted by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998, r ead as under :
(a) advance r uling means
(i) a deter mination by the Author ity in r elation to a tr ansaction which has been
under taken or is pr oposed to be under taken by a non-r esident applicant and
such deter mination shall include the deter mination of any question of law or
of fact specified in the application;
(ii) a decision by the Author ity in r elation to an assessment which is pending
befor e any of the Income-tax Author ity or the Tr ibunal in case of an applicant
who is a r esident in India and such decision shall include the decision on
question of law or fact ar ising out of the or der s of assessment in r espect of
which an application has been made by a r esident applicant;
(b) applicant means any per son who
(i) is a non-r esident; or
(ii) is a r esident falling within any such class or categor y of per sons as the Centr al
Gover nment may, by notification in the Official Gazette, specify in this
behalf;
(iii) makes an application under sub-section (1) of section 245Q;
1.839 CH. XIX-B - ADVANCE RULINGS S. 245-O
(i) a deter mination by the Author ity in r elation to a tr ansaction
which has been under taken or is pr oposed to be under taken by
a non-r esident applicant; or
(ii) a deter mination by the Author ity in r elation to
53
[the tax liability
of a non-r esident ar ising out of] a tr ansaction which has been
under taken or is pr oposed to be under taken by a r esident appli-
cant with
54
[such] non-r esident,
and such deter mination shall include the deter mination of any
question of law or of fact specified in the application;
(iii) a deter mination or decision by the Author ity in r espect of an issue
r elating to computation of total income which is pending befor e
any income-tax author ity or the Appellate Tr ibunal and such
deter mination or decision shall include the deter mination or
decision of any question of law or of fact r elating to such
computation of total income specified in the application :
55
[Provided that wher e an advance r uling has been pr onounced,
befor e the date on which the Finance Act, 2003 r eceives the assent of
the Pr esident, by the Author ity in r espect of an application by a
r esident applicant r efer r ed to in sub-clause (ii) of this clause as it stood
immediately befor e such date, such r uling shall be binding on the
per sons specified in section 245S;]
(b) applicant means any per son who
(i) is a non-r esident r efer r ed to in sub-clause (i) of clause (a); or
(ii) is a r esident r efer r ed to in sub-clause (ii) of clause (a); or
(iii) is a r esident falling within any such class or categor y of per sons
as the Centr al Gover nment may, by notification in the Official
Gazette
56
, specify in this behalf; and
(iv) makes an application under sub-section (1) of section 245Q;]
(c) application means an application made to the Author ity under sub-
section (1) of section 245Q;
(d) Author ity means the Author ity for Advance Rulings constituted
under section 245-O;
(e) Chair man means the Chair man of the Author ity;
(f) Member means a Member of the Author ity and includes the
Chair man.
Authority for Advance Rulings.
245-O. (1) The Centr al Gover nment shall constitute an Author ity for giving
advance r ulings, to be known as Author ity for Advance Rulings.
(2) The Author ity shall consist of the following Member s appointed by the Centr al
Gover nment, namely :
54. Substituted for a, ibid.
56. For notified class or categor y of per sons, see Taxmanns Master Guide to Income-tax Act.
S. 245R I.T. ACT, 1961 1.840
(a) a Chair man, who is a r etir ed Judge of the Supr eme Cour t;
(b) an officer of the Indian Revenue Ser vice who is qualified to be a
member of the Centr al Boar d of Dir ect Taxes;
(c) an officer of the Indian Legal Ser vice who is, or is qualified to be, an
Additional Secr etar y to the Gover nment of India.
(3) The salar ies and allowances payable to, and the ter ms and conditions of
ser vice of, the Member s shall be such as may be pr escr ibed.
(4) The Centr al Gover nment shall pr ovide the Author ity with such officer s and
staff as may be necessar y for the efficient exer cise of the power s of the Author ity
under this Act.
(5) The office of the Author ity shall be located in Delhi.
Vacancies, etc., not to invalidate proceedings.
245P. No pr oceeding befor e, or pr onouncement of advance r uling by, the
Author ity shall be questioned or shall be invalid on the gr ound mer ely of
the existence of any vacancy or defect in the constitution of the Author ity.
Application for advance ruling.
245Q. (1) An applicant desir ous of obtaining an advance r uling under this
Chapter may make an application in such for m and in such manner as
may be pr escr ibed
57
, stating the question on which the advance r uling is sought.
(2) The application shall be made in quadr uplicate and be accompanied by a fee
of two thousand five hundr ed r upees.
(3) An applicant may withdr aw an application within thir ty days fr om the date
of the application.
Procedure on receipt of application.
245R. (1) On r eceipt of an application, the Author ity shall cause a copy ther eof
to be for war ded to the Commissioner and, if necessar y, call upon him to
fur nish the r elevant r ecor ds :
Provided that wher e any r ecor ds have been called for by the Author ity in any
case, such r ecor ds shall, as soon as possible, be r etur ned to the Commissioner .
(2) The Author ity may, after examining the application and the r ecor ds called for ,
by or der , either allow or r eject the application :
58
[Provided that the Author ity shall not allow the application wher e the question
r aised in the application,
57. See r ule 44E and For m Nos. 34C to 34E for application for obtaining advance r uling in
quadr uplicat e.
Provided that the Author ity shall not allow the application except in the case of a r esident
applicant wher e the question r aised in the application,
(a) is alr eady pending in the applicants case befor e any income-tax author ity, the
Appellate Tr ibunal or any cour t;
(b) involves deter mination of fair mar ket value of any pr oper ty;
(c) r elates to a tr ansaction which is designed prima facie for the avoidance of income-
ta x :
(i) is alr eady pending befor e any income-tax author ity or Appellate
Tr ibunal [except in the case of a r esident applicant falling in sub-
clause (iii) of clause (b) of section 245N] or any cour t;
(ii) involves deter mination of fair mar ket value of any pr oper ty;
(iii) r elates to a tr ansaction or issue which is designed prim a facie for the
avoidance of income-tax [except in the case of a r esident applicant
falling in sub-clause (iii) of clause (b) of section 245N]:]
Provided further that no application shall be r ejected under this sub-section
unless an oppor tunity has been given to the applicant of being hear d:
Provided also that wher e the application is r ejected, r easons for such r ejection
shall be given in the or der .
(3) A copy of ever y or der made under sub-section (2) shall be sent to the applicant
and to the Commissioner .
(4) Wher e an application is allowed under sub-section (2), the Author ity shall,
after examining such fur ther mater ial as may be placed befor e it by the applicant
or obtained by the Author ity, pr onounce its advance r uling on the question
specified in the application.
(5) On a r equest r eceived fr om the applicant, the Author ity shall, befor e pr o-
nouncing its advance r uling, pr ovide an oppor tunity to the applicant of being
hear d, either in per son or thr ough a duly author ised r epr esentative.
Explan ation .For the pur poses of this sub-section, author ised r epr esentative
shall have the meaning assigned to it in sub-section (2) of section 288, as if the
applicant wer e an assessee.
(6) The Author ity shall pr onounce its advance r uling in wr iting within six months
of the r eceipt of application.
(7) A copy of the advance r uling pr onounced by the Author ity, duly signed by the
Member s and cer tified in the pr escr ibed manner
59
shall be sent to the applicant
and to the Commissioner , as soon as may be, after such pr onouncement.
60
[Appellate authority not to proceed in certain cases.
245RR. No income-tax author ity or the Appellate Tr ibunal shall pr oceed to
decide any issue in r espect to which an application has been made by
an applicant, being a r esident, under sub-section (1) of
61
[section 245Q].]
Applicability of advance ruling.
245S. (1) The advance r uling pr onounced by the Author ity under section 245R
shall be binding only
(a) on the applicant who had sought it;
(b) in r espect of the tr ansaction in r elation to which the r uling had been
sought; and
(c) on the Commissioner , and the income-tax author ities subor dinate to
him, in r espect of the applicant and the said tr ansaction.
1.841 CH. XIX-B - ADVANCE RULINGS S. 245S
59. See r ule 44F for cer t ificat ion of copies of t he advance r ulings pr onounced by t he
Aut hor it y.
61. Substituted for section 245R by the Finance (No. 2) Act, 2004, w.r .e.f. 1-10-1998.
S. 246 I.T. ACT, 1961 1.842
(2) The advance r uling r efer r ed to in sub-section (1) shall be binding as afor esaid
unless ther e is a change in law or facts on the basis of which the advance r uling
has been pr onounced.
Advance ruling to be void in certain circumstances.
245T. (1) Wher e the Author ity finds, on a r epr esentation made to it by the
Commissioner or other wise, that an advance r uling pr onounced by it
under sub-section (6) of section 245R has been obtained by the applicant by fr aud
or misr epr esentation of facts, it may, by or der , declar e such r uling to be void ab
in itio and ther eupon all the pr ovisions of this Act shall apply (after excluding the
per iod beginning with the date of such advance r uling and ending with the date
of or der under this sub-section) to the applicant as if such advance r uling had
never been made.
(2) A copy of the or der made under sub-section (1) shall be sent to the applicant
and the Commissioner .
Powers of the Authority.
245U. (1) The Author ity shall, for the pur pose of exer cising its power s, have all
the power s of a civil cour t under the Code of Civil Pr ocedur e, 1908 (5 of
1908) as ar e r efer r ed to in section 131 of this Act.
(2) The Author ity shall be deemed to be a civil cour t for the pur poses of section
195, but not for the pur poses of Chapter XXVI, of the Code of Cr iminal
Pr ocedur e, 1973 (2 of 1974) and ever y pr oceeding befor e the Author ity shall be
deemed to be a judicial pr oceeding within the meaning of sections 193 and 228,
and for the pur pose of section 196, of the Indian Penal Code (45 of 1860).
Procedure of Authority.
245V. The Author ity shall, subject to the pr ovisions of this Chapter , have power
to r egulate
62
its own pr ocedur e in all matter s ar ising out of the exer cise of
its power s under this Act.]
CHAPTER XX
APPEALS AND REVISION
63
[A.Appeals
64
[***] to th e Deputy Com m ission er (Appeals)
an d Com m ission er (Appeals)
Appealable orders.
246. (1) Subject to the pr ovisions of sub-section (2), any assessee aggr ieved by
any of the following or der s of an Assessing Officer (other than the Deputy
62. See Author ity for Advance Rulings (Pr ocedur e) Rules, 1996.
63. Substituted for the sub-heading and section 246 by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989. Pr ior to its substitution, sub-heading along with section 246 wer e
amended by the Finance Act, 1964, w.e.f. 1-4-1964, Finance Act, 1966, w.e.f. 1-4-1967,
Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, Taxation Laws (Amendment) Act,
1975, w.e.f. 1-4-1976, Finance (No. 2) Act, 1977, w.e.f. 10-7-1978, Finance Act, 1979, w.e.f.
1-6-1979, Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984, Finance Act, 1984, w.e.f.
1-4-1985, Finance Act, 1987, w.e.f. 1-4-1988 and Finance Act, 1988, w.r .e.f. 1-4-1988/
1-6-1987.
64. or applications omitted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
1.843 CH. XX - APPEALS AND REVISION - APPEALS S. 246
Commissioner ) may appeal to the Deputy Commissioner (Appeals)
65
[befor e the
1st day of June, 2000] against such or der
(a) an or der against the assessee, wher e the assessee denies his liability
to be assessed
66
under this Act
67
[, or an intimation under sub-section
(1) or sub-section (1B) of section 143, wher e the assessee objects to the
making of adjustments,] or any or der of assessment under sub-
section (3) of section 143 or section 144, wher e the assessee objects to
the amount of income assessed, or to the amount of tax deter mined,
or to the amount of loss computed, or to the status under which he is
assessed;
(b) an or der of assessment, r eassessment or r ecomputation under
section 147 or section 150;
(c) an or der under section 154 or section 155 having the effect of
enhancing the assessment or r educing a r efund or an or der r efusing
to allow the claim made by the assessee under either of the said
sections;
(d) an or der made under section 163 tr eating the assessee as the agent of
a non-r esident;
(e) an or der under sub-section (2) or sub-section (3) of section 170;
(f) an or der under section 171;
(g) any or der under clause (b) of sub-section (1) or under sub-section (2)
or sub-section (3) or sub-section (5) of section 185
68
[***]
69
[in r espect
of any assessment for the assessment year commencing on or befor e
the 1st day of Apr il, 1992];
(h) an or der cancelling the r egistr ation of a fir m under sub-section (1) or
under sub-section (2) of section 186
70
[***]
71
[in r espect of any assess-
ment for the assessment year commencing on or befor e the 1st day
of Apr il, 1992];
(i) an or der under section 201;
(j) an or der under section 216 in r espect of any assessment for the
assessment year commencing on the 1st day of Apr il, 1988 or any
ear lier assessment year ;
(k) an or der under section 237;
66. For the meaning of the expr ession denies his liability to be assessed, see Taxmanns
68. Wor ds in r espect of any assessment for the assessment year commencing on the 1st day
of Apr il, 1988 or any ear lier assessment year omitted by the Dir ect Tax Laws (Amend-
ment) Act, 1989, w.e.f. 1-4-1989.
70. Wor ds in r espect of any assessment for the assessment year commencing on the 1st day
of Apr il, 1988 or any ear lier assessment year omitted by the Dir ect Tax Laws (Amend-
ment) Act, 1989, w.e.f. 1-4-1989.
(l) an or der imposing a penalty under
(i) section 221, or
(ii) section 271, section 271A, section 271B,
72
[***]
73
[section 272A,
section 272AA or section 272BB];
(iii)
74
[***] section 272, section 272B or section 273, as they stood
immediately befor e the 1st day of Apr il, 1989, in r espect of any
assessment for the assessment year commencing on the 1st day
of Apr il, 1988 or any ear lier assessment year s.
75
[(1A) Notwithstanding anything contained in sub-section (1), ever y appeal filed,
on or after the 1st day of October , 1998 but befor e the 1st day of June, 2000,
befor e the Deputy Commissioner (Appeals) and any matter ar ising out of or
connected with such appeal and which is so pending shall stand tr ansfer r ed to
the Commissioner (Appeals) and the Commissioner (Appeals) may pr oceed with
such appeal or matter fr om the stage at which it was on that day.]
(2) Not wit hst anding anyt hing cont ained in sub-sect ion (1), any assessee
aggr ieved by any of the following or der s (whether made befor e or after the
appointed day) may appeal to the Commissioner (Appeals)
75
[befor e the 1st day
of June, 2000] against such or der
(a)
76
[an intimation or or der specified in sub-section (1) wher e such
intimation is sent or such or der ] is made by the Deputy Commissioner
in exer cise of the power s or functions confer r ed on or assigned to him
under section 120 or section 124;
(b) an or der specified in clauses (a) to (e) (both inclusive) and clauses (i)
to (l) (both inclusive) of sub-section (1)
77
[or an or der under section
104, as it stood immediately befor e the 1st day of Apr il, 1988 in r espect
of any assessment for the assessment year commencing on the 1st
day of Apr il, 1987 or any ear lier assessment year ] made against the
assessee, being a company;
(c) an or der of assessment made after the 30th day of September , 1984,
on the basis of the dir ections issued by the Deputy Commissioner
under section 144A;
(d) an or der made by the Deputy Commissioner under section 154;
78
[(da) an or der of assessment made by an Assessing Officer under clause (c)
of section 158BC, in r espect of sear ch initiated under section 132 or
S. 246 I.T. ACT, 1961 1.844
72. section 271C, section 271D, section 271E, omitted by the Finance Act, 1990, w.e.f.
1-4-1990.
73. Substituted for section 271E or section 272A by the Dir ect Tax Laws (Amendment) Act,
1989, w.e.f. 1-4-1989.
74. Wor ds sub-section (1) of section 271, omitted, ibid.
76. Substituted for an or der specified in sub-section (1) wher e such or der by the Finance Act,
1994, w.e.f. 1-6-1994.
books of account, other documents or any assets r equisitioned under
section 132A, on or after the 1st day of Januar y, 1997;
(db) an or der imposing a penalty under sub-section (2) of section 158BFA;]
(e) an or der imposing a penalty under section 271B
79
[or section 271BB];
79
[(ee) an or der made by a Deputy Commissioner imposing a penalty under
section 271C, section 271D or section 271E;]
(f) an or der made by a Deputy Commissioner or a Deputy Dir ector
imposing a penalty under section 272A;
80
[(ff) an or der made by a Deputy Commissioner imposing a penalty under
section 272AA;]
81
[(g) an or der imposing a penalty under Chapter XXI by the Income-tax
Officer or the Assistant Commissioner wher e such penalty has been
imposed with the pr evious appr oval of the Deputy Commissioner
under sub-section (2) of section 274;]
(h ) an or der made by an Assessing Officer (other than Deputy Commis-
sioner ) under the pr ovisions of this Act in the case of such per son or
classes of per sons as the Boar d may, having r egar d to the natur e of
the cases, the complexities involved and other r elevant consider -
ations, dir ect.
(3) Notwithstanding anything contained in sub-section (1), the Boar d or the
Dir ector Gener al, or the Chief Commissioner or Commissioner if so author ised
by the Boar d, may, by or der in wr iting, tr ansfer any appeal which is pending
befor e a Deputy Commissioner (Appeals) and any matter ar ising out of or
connected with such appeal and which is so pending, to the Commissioner
(Appeals) if the Boar d or , as the case may be, the Dir ector Gener al or Chief
Commissioner or Commissioner (at the r equest of the appellant or other wise) is
satisfied that it is necessar y or expedient so to do having r egar d to the natur e of
the case, the complexities involved and other r elevant consider ations and the
Commissioner (Appeals) may pr oceed with such appeal or matter , fr om the stage
at which it was befor e it was so tr ansfer r ed:
Provided that the appellant may demand that befor e pr oceeding fur ther with the
appeal or matter , the pr evious pr oceeding or any par t ther eof be r e-opened or
that he be r ehear d.
(a) appointed day means the 10th day of July, 1978, being the day
appointed under section 39 of the Finance (No. 2) Act, 1977 (29 of
1977);
(b) status means the categor y under which the assessee is assessed as
individual, Hindu undivided family and so on.]
S. 246A I.T. ACT, 1961 1.846
82. Inser ted by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998. Or iginal section 246A was
inser ted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and later on
omitted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
82
[Appealable orders before Commissioner (Appeals).
246A. (1) Any assessee aggr ieved by any of the following or der s (whether made
befor e or after the appointed day) may appeal to the Commissioner
(Appeals) against
(a) an or der
83
[passed by a Joint Commissioner under clause (ii) of sub-
section (3) of section 115VP or an or der ] against the assessee wher e
the assessee denies his liability to be assessed under this Act or an
intimation under sub-section (1) or sub-section (1B) of section 143,
wher e the assessee objects to the making of adjustments, or any or der
of assessment under sub-section (3) of section 143 or section 144, to
the income assessed, or to the amount of tax deter mined, or to the
amount of loss computed, or to the status under which he is assessed;
84
[(aa) an or der of assessment under sub-section (3) of section 115WE or
section 115WF, wher e the assessee, being an employer objects to the
value of fr inge benefits assessed;
(ab) an or der of assessment or r eassessment under section 115WG;]
(b) an or der of assessment, r eassessment or r ecomputation under
section 147 or section 150;
85
[(ba) an or der of assessment or r eassessment under section 153A;]
(c) an or der made under section 154 or section 155 having the effect of
enhancing the assessment or r educing a r efund or an or der r efusing
to allow the claim made by the assessee under either of the said
sections;
(d) an or der made under section 163 tr eating the assessee as the agent of
a non-r esident;
(e) an or der made under sub-section (2) or sub-section (3) of section 170;
(f) an or der made under section 171;
(g) an or der made under clause (b) of sub-section (1) or under sub-
section (2) or sub-section (3) or sub-section (5) of section 185 in r espect
of an assessment for the assessment year commencing on or befor e
(h ) an or der cancelling the r egistr ation of a fir m under sub-section (1) or
under sub-section (2) of section 186 in r espect of any assessment for
the assessment year commencing on or befor e the 1st day of Apr il,
1992 or any ear lier assessment year ;
86
[(ha) an or der made under section 201;]
87
[(h b) an or der made under sub-section (6A) of section 206C;]
(i) an or der made under section 237;
(j) an or der imposing a penalty under
(A) section 221; or
(B) section 271, section 271A,
88
[section 271AAA,] section 271F,
89
[sec-
tion 271FB,] section 272AA or section 272BB;
(C) section 272, section 272B or section 273, as they stood immedi-
ately befor e the 1st day of Apr il, 1989, in r espect of an assessment
for the assessment year commencing on the 1st day of Apr il, 1988,
or any ear lier assessment year s;
90
[(ja) an or der of imposing or enhancing penalty under sub-section (1A) of
section 275;]
(k) an or der of assessment made by an Assessing Officer under clause (c)
of section 158BC, in r espect of sear ch initiated under section 132 or
books of account, other documents or any assets r equisitioned under
section 132A on or after the 1st day of Januar y, 1997;
(l) an or der imposing a penalty under sub-section (2) of section 158BFA;
(m) an or der imposing a penalty under section 271B or section 271BB;
(n) an or der made by a Deputy Commissioner imposing a penalty under
section 271C
91
[, section 271CA], section 271D or section 271E;
(o) an or der made by a Deputy Commissioner or a Deputy Dir ector
imposing a penalty under section 272A;
(p) an or der made by a Deputy Commissioner imposing a penalty under
section 272AA;
(q) an or der imposing a penalty under Chapter XXI;
(r) an or der made by an Assessing Officer other than a Deputy Commis-
sioner under the pr ovisions of this Act in the case of such per son or
class of per sons, as the Boar d may, having r egar d to the natur e of the
cases, the complexities involved and other r elevant consider ations,
dir ect.
Explan ation .For the pur poses of this sub-section, wher e on or after the 1st day
of October , 1998, the post of Deputy Commissioner has been r edesignated as
Joint Commissioner and the post of Deputy Dir ector has been r edesignated as
Joint Dir ector , the r efer ences in this sub-section for Deputy Commissioner and
Deputy Dir ector shall be substituted by Joint Commissioner and Joint
Dir ector r espectively.
92
[(1A) Ever y appeal filed by an assessee in default against an or der under section
201 on or after the 1st day of October , 1998 but befor e the 1st day of June, 2000
shall be deemed to have been filed under this section.]
93
[(1B) Ever y appeal filed by an assessee in default against an or der under sub-
section (6A) of section 206C on or after the 1st day of Apr il, 2007 but befor e the
1st day of June, 2007 shall be deemed to have been filed under this section.]
1.847 CH. XX - APPEALS AND REVISION - APPEALS S. 246A
(2) Notwithstanding anything contained in sub-section (1) of section 246, ever y
appeal under this Act which is pending immediately befor e the appointed day,
befor e the Deputy Commissioner (Appeals) and any matter ar ising out of or
connected with such appeals and which is so pending shall stand tr ansfer r ed on
that date to the Commissioner (Appeals) and the Commissioner (Appeals) may
pr oceed with such appeal or matter fr om the stage at which it was on that day :
Provided that the appellant may demand that befor e pr oceeding fur ther with the
appeal or matter , the pr evious pr oceeding or any par t ther eof be r eopened or that
he be r e-hear d.
Explan ation .For the pur poses of this section, appointed day means the day
appointed by the Centr al Gover nment by notification
94
in the Official Gazette.]
Appeal by partner.
247.
95
96
[Appeal by person denying liability to deduct tax in certain cases.
248. Wher e under an agr eement or other ar r angement, the tax deductible on
any income, other than inter est, under section 195 is to be bor ne by the
per son by whom the income is payable, and such per son having paid such tax to
the cr edit of the Centr al Gover nment, claims that no tax was r equir ed to be
deducted on such income, he may appeal to the Commissioner (Appeals) for a
declar ation that no tax was deductible on such income.]
Form of appeal and limitation.
249. (1) Ever y appeal under this Chapter shall be in the pr escr ibed for m
97
and
shall be ver ified in the pr escr ibed manner
98
[and shall, in case of an appeal
made to the Commissioner (Appeals) on or after the 1st day of October , 1998,
ir r espective of the date of initiation of the assessment pr oceedings r elating
ther eto be accompanied by a fee of,
(i) wher e the total income of the assessee as computed by the Assessing
Officer in the case to which the appeal r elates is one hundr ed
thousand r upees or less, two hundr ed fifty r upees;
(ii) wher e the total income of the assessee, computed as afor esaid, in the
case to which the appeal r elates is mor e than one hundr ed thousand
S. 249 I.T. ACT, 1961 1.848
94. Notified appointed day is 1-10-1998.
95. Pr ior to omission, section 247 was amended by the Finance (No. 2) Act, 1977, w.e.f.
10-7-1978, the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 and omitted by
the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and later r eintr oduced by
as amended by t he Finance (No. 2) Act , 1977, w.e.f. 10-7-1978, Dir ect Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988 and Finance (No. 2) Act, 1998, w.e.f. 1-10-1998,
r ead as under :
248. Appeal by person den yin g liability to deduct tax.Any per son having in accor dance
with the pr ovisions of sections 195 and 200 deducted and paid tax in r espect of any sum
char geable under this Act, other than inter est, who denies his liability to make such
deduction, may appeal to the Commissioner (Appeals) to be declar ed not liable to make
such deduction.
97. See r ules 45 and 46 and For m No. 35 for for m of appeal to Commissioner (Appeals).
r upees but not mor e than two hundr ed thousand r upees, five hun-
dr ed r upees;
(iii) wher e the total income of the assessee, computed as afor esaid, in the
case to which the appeal r elates is mor e than two hundr ed thousand
r upees, one thousand r upees;]
99
[(iv) wher e the subject matter of an appeal is not cover ed under clauses (i),
(ii) and (iii), two hundr ed fifty r upees.]
(2) The appeal shall be pr esented within thir ty days of the following date, that is
to say,
1
[(a) wher e the appeal is under section 248, the date of payment of the tax,
or ]
(b) wher e the appeal r elates to any assessment or penalty, the date of
ser vice of the notice of demand r elating to the assessment or penalty :
2
[Provided that, wher e an application has been made under section
146 for r eopening an assessment, the per iod fr om the date on which
the application is made to the date on which the or der passed on the
application is ser ved on the assessee shall be excluded, or ]
(c) in any other case, the date on which intimation of the or der sought to
be appealed against is ser ved.
3
[(2A) Notwithstanding anything contained in sub-section (2), wher e an or der has
been made under section 201 on or after the 1st day of October , 1998 but befor e
the 1st day of June, 2000 and the assessee in default has not pr esented any appeal
within the time specified in that sub-section, he may pr esent such appeal befor e
the 1st day of July, 2000.]
(3) The
4
[***]
5
[Commissioner (Appeals)] may admit an appeal after the expir ation
of the said per iod if he is satisfied that the appellant had sufficient cause for not
pr esenting it within that per iod.
6
[(4) No appeal under this Chapter shall be admitted unless at the time of filing
of the appeal,
(a) wher e a r etur n has been filed by the assessee, the assessee has paid
the tax due on the income r etur ned by him; or
(b) wher e no r etur n has been filed by the assessee, the assessee has paid
an amount equal to the amount of advance tax which was payable by
him :
r ead as under :
(a) wher e the appeal r elates to any tax deducted under sub-section (1) of section 195,
the date of payment of the tax, or
4. Wor ds Deputy Commissioner (Appeals) or , as the case may be, the omitted by the
Finance (No. 2) Act, 1998, w.e.f. 1-10-1998. Ear lier Deputy Commissioner (Appeals) was
substituted for Appellate Assistant Commissioner by the Dir ect Tax Laws (Amendment)
Act, 1987, w.e.f. 1-4-1988 and or , as the case may be, the was inser ted by the Finance
(No. 2) Act, 1977, w.e.f. 10-7-1978.
Provided that,
7
[in a case falling under clause (b) and] on an application made by
the appellant in this behalf, the
8
[* * *]
9
[Commissioner (Appeals)] may, for any
good and sufficient r eason to be r ecor ded in wr iting, exempt him fr om the
oper ation of the pr ovisions of
10
[that clause].]
Procedure in appeal.
11
250. (1) The
12
[* * *]
13
[Commissioner (Appeals)] shall fix a day and place for the
hear ing of the appeal, and shall give notice of the same to the appellant and
to the
14
[Assessing] Officer against whose or der the appeal is pr efer r ed.
(2) The following shall have the r ight to be hear d at the hear ing of the appeal
(a) the appellant, either in per son or by an author ised r epr esentative;
(b) the
14
[Assessing] Officer , either in per son or by a r epr esentative.
(3) The
15
[* * *]
16
[Commissioner (Appeals)] shall have the power to adjour n the
hear ing of the appeal fr om time to time.
(4) The
17
[* * *]
18
[Commissioner (Appeals)] may, befor e disposing of any appeal,
make such fur ther inquir y as he thinks fit, or may dir ect the
19
[Assessing] Officer
to make fur ther inquir y and r epor t the r esult of the same to the
17
[* * *]
18
[Commissioner (Appeals)].
S. 250 I.T. ACT, 1961 1.850
Act, 1987, w.e.f. 1-4-1988 and or , as the case may be, thewas inser ted by the Finance
(No. 2) Act, 1977, w.e.f. 10-7-1978.
10. Substituted for this sub-section by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
11. See r ule 46A. Appellate Or der s should be issued within 15 days of last hear ing - See
Income-tax Act.
(No. 2) Act, 1977, w.e.f. 10-7-1978.
1-4-1988.
(No. 2) Act, 1977, w.e.f. 10-7-1978.
(No. 2) Act, 1977, w.e.f. 10-7-1978.
1-4-1988.
(5) The
20
[* * *]
21
[Commissioner (Appeals)] may, at the hear ing of an appeal, allow
the appellant to go into any gr ound of appeal not specified in the gr ounds of
appeal, if the
20
[* * *]
21
[Commissioner (Appeals)] is satisfied that the omission of
that gr ound fr om the for m of appeal was not wilful or unr easonable.
(6) The or der of the
20
[* * *]
21
[Commissioner (Appeals)] disposing of the appeal
shall be in wr iting and shall state the points for deter mination, the decision
ther eon and the r eason for the decision.
22
[(6A) In ever y appeal, the Commissioner (Appeals), wher e it is possible, may hear
and decide such appeal within a per iod of one year fr om the end of the financial
year in which such appeal is filed befor e him under sub-section (1) of section
246A.]
(7) On the disposal of the appeal, the
20
[* * *]
21
[Commissioner (Appeals)] shall
communicate the or der passed by him to the assessee and to the
23
[Chief
Commissioner or Commissioner ].
Powers of the
20
[* * *]
21
[Commissioner (Appeals)].
251. (1) In disposing of an appeal, the
20
[* * *]
21
[Commissioner (Appeals)] shall
have the following power s
(a) in an appeal against an or der of assessment, he may confir m, r educe,
enhance or annul the assessment
24
;
25
[* * *]
25a
[(aa) in an appeal again st th e order of assessm en t in respect of wh ich th e
proceedin g before th e Settlem en t Com m ission abates un der section
245HA, h e m ay, after tak in g in to con sideration all th e m aterial an d
oth er in formation produced by th e assessee before, or th e results of th e
in quiry h eld or eviden ce recorded by, th e Settlem en t Com m ission , in
th e course of th e proceedin g before it an d such oth er m aterial as m ay
be brough t on h is record, con f irm , reduce, en h an ce or an n ul th e
assessmen t;]
(b) in an appeal against an or der imposing a penalty, he may confir m or
cancel such or der or var y it so as either to enhance or to r educe the
penalty;
(c) in any other case, he may pass such or der s in the appeal as he thinks
fit.
(No. 2) Act, 1977, w.e.f. 10-7-1978.
1-4-1988.
24. For the meaning of the expr ession annul the assessment, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
25. The por tion beginning with the wor ds or he may set aside and ending with the wor ds on
the basis of such fr esh assessment; omitted by the Finance Act, 2001, w.e.f. 1-6-2001. Pr ior
to its omission, the quoted por tion, as amended by the Finance (No. 2) Act, 1977, w.e.f.
10-7-1978, the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 and the Finance
(No. 2) Act, 1998, w.e.f. 1-10-1998.
S. 252 I.T. ACT, 1961 1.852
(No. 2) Act, 1977, w.e.f. 10-7-1978.
29. Substituted for Centr al by the Finance (No. 2) Act, 1998, w.e.f. 1-8-1998.
30. Substituted for I, ibid.
(2) The
26
[* * *]
27
[Commissioner (Appeals)] shall not enhance an assessment or a
penalty or r educe the amount of r efund unless the appellant has had a r eason-
able oppor tunity of showing cause against such enhancement or r eduction.
Explan ation .In disposing of an appeal, the
26
[* * *]
27
[Commissioner (Appeals)]
may consider and decide any matter ar ising out of the pr oceedings in which the
or der appealed against was passed, notwithstanding that such matter was not
r aised befor e the
26
[* * *]
27
[Commissioner (Appeals)] by the appellant.
B.Appeals to th e Appellate Tribun al
Appellate Tribunal.
252. (1) The Cent r al Gover nment shall const it ut e an Appellat e Tr ibunal
consisting of as many judicial and accountant member s as it thinks fit to
exer cise the power s and dischar ge the functions confer r ed on the Appellate
Tr ibunal by this Act.
28
[(2) A judicial member shall be a per son who has for at least ten year s held
a judicial office in the ter r itor y of India or who has been a member of the
29
[Indian] Legal Ser vice and has held a post in Gr ade
30
[II] of that Ser vice or any
equivalent or higher post for at least thr ee year s or who has been an advocate
for at least ten year s.
(i) in computing the per iod dur ing which a per son has held judicial office
in the ter r itor y of India, ther e shall be included any per iod, after he has
held any judicial office, dur ing which the per son has been an advo-
cate or has held the office of a member of a Tr ibunal or any post,
under the Union or a State, r equir ing special knowledge of law;
(ii) in computing the per iod dur ing which a per son has been an advocate,
ther e shall be included any per iod dur ing which the per son has held
judicial office or the office of a member of a Tr ibunal or any post,
under the Union or a State, r equir ing special knowledge of law after
he became an advocate.
(2A) An accountant member shall be a per son who has for at least ten year s been
in the pr actice of accountancy as a char ter ed accountant under the Char ter ed
Accountants Act, 1949 (38 of 1949), or as a r egister ed accountant under any law
for mer ly in for ce or par tly as a r egister ed accountant and par tly as a char ter ed
accountant, or who has been a member of the Indian Income-tax Ser vice,
Gr oup A and has held the post of
31
[Additional] Commissioner of Income-tax or
any equivalent or higher post for at least thr ee year s.]
1.853 CH. XX - APPEALS AND REVISION - APPEALS TO TRIBUNAL S. 253
32
[(3) The Centr al Gover nment shall appoint the Senior Vice-Pr esident or one of
the Vice-Pr esidents of the Appellate Tr ibunal to be the Pr esident ther eof.]
33
[(4) The Centr al Gover nment may appoint one or mor e member s of the
Appellate Tr ibunal to be the Vice-Pr esident or , as the case may be, Vice-
Pr esidents ther eof.]
34
[(4A) The Centr al Gover nment may appoint one of the Vice-Pr esidents of the
Appellate Tr ibunal to be the Senior Vice-Pr esident ther eof.]
35
(5)
36
[The Senior Vice-Pr esident or a Vice-Pr esident] shall exer cise such of the
power s and per for m such of the functions of the Pr esident as may be delegated
to him by the Pr esident by a gener al or special or der in wr iting.
37
Appeals to the Appellate Tribunal.
38
253. (1) Any assessee aggr ieved by any of the following or der s may appeal to
the Appellate Tr ibunal against such or der
(a) an or der passed by a
39
[Deputy Commissioner (Appeals)]
40
[befor e the
1st day of October , 1998]
41
[or , as the case may be, a Commissioner
(Appeals)] under
42
[***]
43
[section 154],
44
[***] section 250,
45
[section
271, section 271A or section 272A]; or
46
[(b) an or der passed by an Assessing Officer under clause (c) of section
158BC, in r espect of sear ch initiated under section 132 or books of
account, other documents or any assets r equisitioned under section
(3) The Centr al Gover nment shall or dinar ily appoint a judicial member of the Appellate
Tr ibunal to be the Pr esident ther eof.
35. For Instr uctions and Standing Or der s, r efer Taxmanns Master Guide to Income-tax Act.
36. Substituted for A Vice-Pr esident by the Finance Act, 1984, w.e.f. 1-4-1984.
37. See r ule 47(1) and For m Nos. 36 and 36A for for m of appeal to Appellate Tr ibunal and for m
of cr oss-objections.
38. See also Inst r uct ions issued by t he Income-t ax Appellat e Tr ibunal. For det ails, see
Taxmanns Income-tax Rules/ Master Guide to Income-tax Act.
Act, 1987, w.e.f. 1-4-1988.
42. sub-section (2) of section 131, omitted by the Dir ect Tax Laws (Amendment) Act, 1989,
w.e.f. 1-4-1989.
44. section 246A, omitted by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
Ear lier , it was inser ted by the Dir ect Tax Laws (Amendment) Act, 1987, with effect fr om
the same date.
45. Substituted for or section 271 by the Taxation Laws (Amendment) Act, 1975, w.e.f.
1-4-1976.
46. Subst it ut ed by t he Income-t ax (Amendment ) Act , 1997, w.e.f. 1-1-1997. Pr ior t o it s
substitution, clause (b), as inser ted by the Finance Act, 1995, w.e.f. 1-7-1995, r ead as under :
(b) an or der passed by an Assessing Officer under clause (c) of section 158BC; or
Ear lier clause (b) was amended by the Dir ect Taxes (Amendment) Act, 1964, w.e.f.
6-10-1964, the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976, the Finance (No. 2)
Act, 1977, w.e.f. 10-7-1978 and later on omitted by the Taxation Laws (Amendment) Act,
1984, w.e.f. 1-10-1984.
132A, after the 30th day of June, 1995, but befor e the 1st day of
Januar y, 1997; or ]
47
[(ba) an or der passed by an Assessing Officer under sub-section (1) of
section 115VZC; or ]
(c) an or der passed by a Commissioner
48
[under section 12AA
49
[or under
clause (vi) of sub-section (5) of section 80G] or ] under section 263
50
[or
under section 271]
51
[or under section 272A]
52
[***] or an or der passed
by him under section 154 amending his or der under section 263]
53
[or
an or der passed by a Chief Commissioner or a Dir ector Gener al or a
Dir ector under section 272A.]
(2) The Commissioner may, if he objects to any or der passed by a
54
[Deputy
Commissioner (Appeals)]
55
[befor e the 1st day of October , 1998]
56
[or , as the case
may be, a Commissioner (Appeals)] under
57
[section 154 or ] section 250, dir ect
the
58
[Assessing] Officer to appeal to the Appellate Tr ibunal against the or der .
(3) Ever y appeal under sub-section (1) or sub-section (2) shall be filed within sixty
days of the date on which the or der sought to be appealed against is communi-
cated to the assessee or to the Commissioner , as the case may be :
59
[Provided that in r espect of any appeal under clause (b) of sub-section (1), this
sub-section shall have effect as if for the wor ds sixty days, the wor ds thir ty
days had been substituted.]
(4) The
60
[Assessing] Officer or the assessee, as the case may be, on r eceipt of
notice that an appeal against the or der of the
61
[Deputy Commissioner (Appeals)]
62
[or , as the case may be, the Commissioner (Appeals)] has been pr efer r ed under
sub-section (1) or sub-section (2) by the other par ty, may, notwithstanding that
he may not have appealed against such or der or any par t ther eof; within thir ty
days of the r eceipt of the notice, file a memor andum of cr oss-objections, ver ified
in the pr escr ibed manner , against any par t of the or der
63
of the
64
[Deputy
S. 253 I.T. ACT, 1961 1.854
52. or under section 285A omitted by the Finance Act, 1988, w.e.f. 1-4-1988. Omitted wor ds
wer e ear lier inser ted by the Dir ect Taxes (Amendment) Act, 1964, w.e.f. 6-10-1964.
Act, 1987, w.e.f. 1-4-1988.
1-4-1988.
1-4-1988.
63. For the meaning of the expr ession any par t of the or der , see Taxmanns Dir ect Taxes
Manual, Vol. 3.
Act, 1987, w.e.f. 1-4-1988.
Commissioner (Appeals)]
65
[or , as the case may be, the Commissioner (Appeals)],
and such memor andum shall be disposed of by the Appellate Tr ibunal as if it
wer e an appeal pr esented within the time specified in sub-section (3).
(5) The Appellate Tr ibunal may admit an appeal or per mit the filing of a
memor andum of cr oss-objections after the expir y of the r elevant per iod
r efer r ed to in sub-section (3) or sub-section (4), if it is satisfied that ther e was
sufficient cause for not pr esenting it within that per iod.
66
[(6) An appeal to the Appellate Tr ibunal shall be in the pr escr ibed for m
67
and
shall be ver ified in the pr escr ibed manner and shall, in the case of an appeal
made, on or after the 1st day of October , 1998, ir r espective of the date of initiation
of the assessment pr oceedings r elating ther eto, be accompanied by a fee of,
(a) wher e the total income of the assessee as computed by the Assessing
Officer , in the case to which the appeal r elates, is one hundr ed
thousand r upees or less, five hundr ed r upees,
(b) wher e the total income of the assessee, computed as afor esaid, in the
case to which the appeal r elates is mor e than one hundr ed thousand
r upees but not mor e than two hundr ed thousand r upees, one thou-
sand five hundr ed r upees,
(c) wher e the total income of the assessee, computed as afor esaid, in the
case to which the appeal r elates is mor e than two hundr ed thousand
r upees, one per cent of the assessed income, subject to a maximum
of ten thousand r upees,
68
[(d) wher e the subject matter of an appeal r elates to any matter , other
than those specified in clauses (a), (b) and (c), five hundr ed r upees:]
Provided that no such fee shall be payable in the case of an appeal r efer r ed to in
sub-section (2) or a memor andum of cr oss-objections r efer r ed to in sub-
section (4).
(7) An application for stay of demand shall be accompanied by a fee of five
hundr ed r upees.]
66. Substituted for sub-section (6) by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998. Pr ior to
its substitution, sub-section (6), as amended by the Taxation Laws (Amendment) Act, 1970,
w.e.f. 1-4-1971, the Finance Act, 1981, w.e.f. 1-6-1981 and the Finance Act, 1992, w.e.f.
1-6-1992 and later on substituted by the Finance Act, 1993, w.r .e.f. 1-6-1992, r ead as
under :
(6) An appeal to the Appellate Tr ibunal shall be in the pr escr ibed for m and shall be ver ified
in the pr escr ibed manner and shall, in the case of an appeal made on or after the 1st day
of June, 1992, ir r espective of the date of initiation of the assessment pr oceedings r elating
ther eto, be accompanied by a fee of,
(a) wher e the total income of the assessee as computed by the Assessing Officer in the
case to which the appeal r elates is one lakh r upees or less, two hundr ed and fifty
r u pees;
(b) wher e the total income of the assessee computed as afor esaid in the case to
whichthe appeal r elates is mor e than one lakh r upees, one thousand and five
hundr ed r upees :
Provided that no such fee shall be payable in the case of an appeal r efer r ed to in sub-
section (2) or a memor andum of cr oss-objections r efer r ed to in sub-section (4).
67. See r ule 47 and For m Nos. 36 & 36A.
Orders of Appellate Tribunal.
254. (1) The Appellate Tr ibunal may, after giving both the par ties to the appeal
an oppor tunity of being hear d, pass such or der s ther eon as it thinks fit
69
.
(1A)
70
[***]
(2) The Appellate Tr ibunal may, at any time within four year s fr om the date of the
or der , with a view to r ectifying any mistake appar ent fr om the r ecor d
71
, amend
any or der passed by it under sub-section (1), and shall make such amendment
71
if the mistake is br ought to its notice by the assessee or the
72
[Assessing] Officer :
Provided that an amendment which has the effect of enhancing an assessment
or r educing a r efund or other wise incr easing the liability of the assessee, shall not
be made under this sub-section unless the Appellate Tr ibunal has given notice to
the assessee of its intention to do so and has allowed the assessee a r easonable
oppor tunity of being hear d :
73
[Provided further that any application filed by the assessee in this sub-section
on or after the 1st day of October , 1998, shall be accompanied by a fee of fifty
r upees.]
74
[(2A) In ever y appeal, the Appellate Tr ibunal, wher e it is possible, may hear and
decide such appeal within a per iod of four year s fr om the end of the financial
year in which such appeal is filed under sub-section (1)
75
[or sub-section (2)] of
section 253 :
76
[Provided that the Appellate Tr ibunal may, after consider ing the mer its of the
application made by the assessee, pass an or der of stay in any pr oceedings
S. 254 I.T. ACT, 1961 1.856
69. For the meaning of the expr ession pass such or der s . . . as it thinks fit, see Taxmanns
70. Omitted by the Taxation Laws (Amendment) Act, 1972, w.e.f. 1-1-1973. Or iginal sub-
section was inser ted by the Finance Act, 1964, w.e.f. 1-4-1964. In connection with this
amendment, section 25 of the Taxation Laws (Amendment) Act, 1972 has made the
following independent pr ovision:
Savin gs an d special provision .(1) Notwithstanding the omission of sub-section (1A) of
section 254 of the Income-tax Act, 1961 (43 of 1961), by section 3 of this Act, ever y
r equisition by an appellant for the making of a r efer ence under that sub-section and ever y
r efer ence made under that sub-section befor e such omission shall be dealt with as if the
said section has not been omitted, and, save as afor esaid, no such r efer ence shall be made
after such omission.
71. For the meaning of the ter ms/ expr essions, mistake appar ent fr om the r ecor d and
amendment, see Taxmanns Dir ect Taxes Manual, Vol. 3.
1-4-1988.
76. Substituted by the Finance Act, 2007, w.e.f. 1-6-2007. Pr ior to their substitution, pr ovisos,
Provided that wher e an or der of stay is made in any pr oceedings r elating to an appeal filed
under sub-section (1) of section 253, the Appellate Tr ibunal shall dispose of the appeal
within a per iod of one hundr ed and eighty days fr om the date of such or der :
Provided further that if such appeal is not so disposed of within the per iod specified in the
fir st pr oviso, the stay or der shall stand vacated after the expir y of the said per iod.
r elating to an appeal filed under sub-section (1) of section 253, for a per iod not
exceeding one hundr ed and eighty days fr om the date of such or der and the
Appellate Tr ibunal shall dispose of the appeal within the said per iod of stay
specified in that or der :
Provided further that wher e such appeal is not so disposed of within the said
per iod of stay as specified in the or der of stay, the Appellate Tr ibunal may, on an
application made in this behalf by the assessee and on being satisfied that the
delay in disposing of the appeal is not attr ibutable to the assessee, extend the
per iod of stay, or pass an or der of stay for a fur ther per iod or per iods as it thinks
fit; so, however , that the aggr egate of the per iod or iginally allowed and the per iod
or per iods so extended or allowed shall not, in any case, exceed thr ee hundr ed
and sixty-five days and the Appellate Tr ibunal shall dispose of the appeal within
the per iod or per iods of stay so extended or allowed:
76a
[Provided also th at if such appeal is n ot so disposed of with in th e period allowed
un der th e first proviso or th e period or periods exten ded or allowed un der th e
secon d proviso, wh ich sh all n ot, in an y case, exceed th ree h un dred an d sixty-five
days, th e order of stay sh all stan d vacated after th e expiry of such period or periods,
even if th e delay in disposin g of th e appeal is n ot attributable to th e assessee.]]
(2B) The cost of any appeal to the Appellate Tr ibunal shall be at the discr etion of
that Tr ibunal.]
(3) The Appellate Tr ibunal shall send a copy of any or der s passed under this
section to the assessee and to the
77
[
78
[***] Commissioner ].
(4)
79
[Save as pr ovided in the National Tax Tr ibunal Act, 2005], or der s passed by
the Appellate Tr ibunal on appeal shall be final.
Procedure of Appellate Tribunal.
80
255. (1) The power s and functions of the Appellate Tr ibunal may be exer cised
and dischar ged by Benches constituted by the Pr esident of the Appellate
Tr ibunal fr om among the member s ther eof.
(2) Subject to the pr ovisions contained in sub-section (3), a Bench shall consist of
one judicial member and one accountant member .
(3) The Pr esident or any other member of the Appellate Tr ibunal author ised in
this behalf by the Centr al Gover nment may, sitting singly, dispose of any case
which has been allotted to the Bench of which he is a member and which per tains
76a. Substituted by the Finance Act, 2008, w.e.f. 1-10-2008. Pr ior t o it s subst it ut ion, pr oviso
r ead as under :
Provided also that if such appeal is not so disposed of within the per iod allowed under the
fir st pr oviso or the per iod or per iods extended or allowed under the second pr oviso, the
or der of stay shall stand vacated after the expir y of such per iod or per iods.
1-4-1988.
78. Wor ds Chief Commissioner or wer e omitted by the Finance (No. 2) Act, 1991, w.e.f.
27-9-1991.
79. Substituted for Save as pr ovided in section 256 or section 260A by the National Tax
Tr ibunal Act, 2005, with effect fr om a date yet to be notified. Ear lier the italicised wor ds
wer e inser ted by the Finance Act, 1999, w.e.f. 1-6-1999.
80. For Inst r uct ions and Or der s, see Taxmanns Income-tax Rules and Master Guide to
Income-tax Act.
to an assessee whose total income as computed by the
81
[Assessing] Officer in the
case does not exceed
82
[five hundr ed thousand r upees], and the Pr esident may,
for the disposal of any par ticular case, constitute a Special Bench consisting of
thr ee or mor e member s, one of whom shall necessar ily be a judicial member and
one an accountant member .
(4) If the member s of a Bench differ in opinion on any point, the point shall be
decided accor ding to the opinion of the major ity, if ther e is a major ity, but if the
member s ar e equally divided, they shall state the point or points on which they
differ , and the case shall be r efer r ed by the Pr esident of the Appellate Tr ibunal
for hear ing on such point or points by one or mor e of the other member s of the
Appellate Tr ibunal, and such point or points shall be decided accor ding to the
opinion of the major ity of the member s of the Appellate Tr ibunal who have hear d
the case, including those who fir st hear d it.
83
(5) Subject to the pr ovisions of this Act, the Appellate Tr ibunal shall have power
to r egulate its own pr ocedur e and the pr ocedur e of Benches ther eof in all
matter s ar ising out of the exer cise of its power s or of the dischar ge of its
functions, including the places at which the Benches shall hold their sittings.
(6) The Appellate Tr ibunal shall, for the pur pose of dischar ging its functions, have
all the power s which ar e vested in the income-tax author ities r efer r ed to in
section 131, and any pr oceeding befor e the Appellate Tr ibunal shall be deemed
to be a judicial pr oceeding within the meaning of sections 193 and 228 and for
the pur pose of section 196 of the Indian Penal Code (45 of 1860), and the Appellate
Tr ibunal shall be deemed to be a civil cour t for all the pur poses of section 195 and
Chapter XXXV of the Code of Cr iminal Pr ocedur e, 1898 (5 of 1898)
84
.
85
[***]
Statement of case to the High Court.
256.
86
[Om itted by th e Nation al Tax Tribun al Act, 2005, with effect from a date yet
to be n otified.]
S. 256 I.T. ACT, 1961 1.858
1-4-1988.
82. Substituted for one hundr ed thousand r upees by the Finance (No. 2) Act, 1998, w.e.f.
1-10-1998. Ear lier one hundr ed thousand r upees was substituted for for ty thousand
r upees by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989 and for ty
thousand r upees was substituted for twenty-five thousand r upees by the Taxation Laws
83. For notified Standing Or der , see Taxmanns Income-tax Rules.
84. Now the Code of Cr iminal Pr ocedur e, 1973 (2 of 1974).
85. Wor ds C.Referen ce to High Court omitted by the National Tax Tr ibunal Act, 2005, with
effect fr om a date yet to be notified.
86. Pr ior to its omission, section 256, as amended by the Taxation Laws (Amendment) Act,
1970, w.e.f. 1-4-1971, Finance Act, 1981, w.e.f. 1-6-1981 and Finance (No. 2) Act, 1998, w.e.f.
256. Statem en t of case to th e High Court.(1) The assessee or the Commissioner may,
within sixty days of the date upon which he is ser ved with notice of an or der passed
befor e the 1st day of October , 1998, under section 254, by application in the pr escr ibed
for m*, accompanied wher e the application is made by the assessee by a fee of two hundr ed
r upees, r equir e the Appellate Tr ibunal to r efer to the High Cour t any question of law
(Con td. on p. 1.859)
Statement of case to Supreme Court in certain cases.
257. If, on an application made
87
[against an or der made under section 254
befor e the 1st day of October , 1998,] under section 256 the Appellate
Tr ibunal is of the opinion that, on account of a conflict in the decisions of High
Cour ts in r espect of any par ticular question of law, it is expedient that a r efer ence
should be made dir ect to the Supr eme Cour t, the Appellate Tr ibunal may dr aw
up a statement of the case and r efer it thr ough its Pr esident dir ect to the Supr eme
Court.
Power of High Court or Supreme Court to require statement to be amended.
258.
88
to be n otified.]
Case before High Court to be heard by not less than two judges.
259.
89
to be n otified.]
ar ising out of such or der and, subject to the other pr ovisions contained in this section, the
Appellate Tr ibunal shall, within one hundr ed and twenty days of the r eceipt of such
application, dr aw up a statement of the case and r efer it to the High Cour t :
Provided that the Appellate Tr ibunal may, if it is satisfied that the applicant was pr evented
by sufficient cause fr om pr esent ing t he applicat ion wit hin t he per iod her einbefor e
specified, allow it to be pr esented within a fur ther per iod not exceeding thir ty days.
(2) If, on an application made under sub-section (1), the Appellate Tr ibunal r efuses to state
the case on the gr ound that no question of law ar ises, the assessee or the Commissioner ,
as the case may be, may, within six months fr om the date on which he is ser ved with notice
of such r efusal, apply to the High Cour t, and the High Cour t may, if it is not satisfied with
the cor r ectness of the decision of the Appellate Tr ibunal, r equir e the Appellate Tr ibunal
to state the case and to r efer it, and on r eceipt of any such r equisition, the Appellate
Tr ibunal shall state the case and r efer it accor dingly.
(3) Wher e in the exer cise of its power s under sub-section (2), the Appellate Tr ibunal
r efuses to state a case which it has been r equir ed by the assessee to state, the assessee may,
within thir ty days fr om the date on which he r eceives notice of such r efusal, withdr aw his
application, and, if he does so, the fee paid shall be r efunded.
*See r ule 48 and For m No. 37 for for m of Refer ence to High Cour t.
88. Pr ior to its omission, section 258 r ead as under :
258. Power of High Court or Suprem e Court to require statem en t to be am en ded.If the
High Cour t or the Supr eme Cour t is not satisfied that the statements in a case r efer r ed to
it ar e sufficient to enable it to deter mine the questions r aised ther eby, the Cour t may r efer
the case back to the Appellate Tr ibunal for the pur pose of making such additions ther eto
or alter ations ther ein as it may dir ect in that behalf.
89. Pr ior to its omission, section 259 r ead as under :
259. Case before High Court to be h eard by n ot less th an two judges.(1) When any case
has been r efer r ed to the High Cour t under section 256, it shall be hear d by a Bench of not
less than two Judges of the High Cour t, and shall be decided in accor dance with the
opinion of such judges or of the major ity, if any, of such judges.
(2) Wher e ther e is no such major ity, the judges shall state the point of law upon which they
differ , and the case shall then be hear d upon that point only by one or mor e of the other
judges of the High Cour t, and such point shall be decided accor ding to the opinion of the
major ity of the judges who have hear d the case including those who fir st hear d it.
90
[Effect to the decisions of Supreme Court and of the National Tax Tribunal.
260. (1) The Supr eme Cour t upon hear ing any r efer ence made to it by the
Appellate Tr ibunal under section 257 shall decide the question of law r aised
ther ein, and shall deliver its judgment
91
ther eon containing the gr ounds on which
such decision is founded, and a copy of the judgment shall be sent under the seal
of the Cour t and the signatur e of the Registr ar to the Appellate Tr ibunal which
shall pass such or der s as ar e necessar y to dispose of the case confor ming to such
judgment.
(2) Wher e the National Tax Tr ibunal deliver s a judgment in an appeal filed befor e
it or in any matter tr ansfer r ed to it under the National Tax Tr ibunal Act, 2005,
effect shall be given to the or der of that Tr ibunal by the Assessing Officer on the
basis of cer tified copy of the judgment.
(3) The cost of any r efer ence to the Supr eme Cour t which shall not include the
fee for making the r efer ence shall be at the discr etion of the Cour t.]
92
[CC.Appeals to High Court
93
Appeal to High Court.
260A. (1)
94
An appeal shall lie to the High Cour t fr om ever y or der passed in
appeal
94
by the Appellate Tr ibunal
95
[befor e the date of establishment of
the National Tax Tr ibunal], if the High Cour t is satisfied that the case involves a
substantial question of law.
94
(2)
96
[The Chief Commissioner or the Commissioner or an assessee aggr ieved by
any or der passed by the Appellate Tr ibunal may file an appeal to the High Cour t
and such appeal under this sub-section shall be]
S. 260A I.T. ACT, 1961 1.860
90. Substituted by the National Tax Tr ibunal Act, 2005, with effect fr om a date yet to be
notified. Pr ior to its substitution, section 260, as amended by the Finance (No. 2) Act, 1998,
260. Decision of High Court or Suprem e Court on th e case stated.(1) The High Cour t or
the Supr eme Cour t upon hear ing any such case shall decide the questions of law r aised
ther ein, and shall deliver its judgment ther eon containing the gr ounds on which such
decision is founded, and a copy of the judgment shall be sent under the seal of the Cour t
and the signatur e of the Registr ar to the Appellate Tr ibunal which shall pass such or der s
as ar e necessar y to dispose of the case confor mably to such judgment.
(1A) Wher e the High Cour t deliver s a judgment in an appeal filed befor e it under section
260A, effect shall be given to the or der passed on the appeal by the Assessing Officer on
the basis of a cer tified copy of the judgment.
(2) The costs of any r efer ence to the High Cour t or the Supr eme Cour t which shall not
include the fee for making the r efer ence shall be in the discr etion of the Cour t.
91. For the meaning of the ter m judgment, see Taxmanns Dir ect Taxes Manual, Vol. 3.
92. Sub-heading CC and sections 260A and 260B inser ted by the Finance (No. 2) Act, 1998,
w.e.f. 1-10-1998.
93. For Depar tmental Instr uctions, see Taxmanns Master Guide to Income-tax Act.
94. For the meaning of the expr essions An appeal shall lie to the High Cour t fr om ever y or der
passed in appeal by the Appellate Tr ibunal, ever y or der passed in appeal and substan-
tial question of law, see Taxmanns Dir ect Taxes Manual, Vol. 3.
96. Substituted for An appeal under this sub-section shall be by the Finance Act, 1999,
w.e.f. 1-6-1999.
(a) filed within one hundr ed and twenty days fr om the date on which the
or der appealed against is
97
[r eceived by the assessee or the Chief
Commissioner or Commissioner ];
(b)
98
[***]
(c) in the for m of a memor andum of appeal pr ecisely stating ther ein the
substantial question of law involved.
(3) Wher e the High Cour t is satisfied that a substantial question of law is involved
in any case, it shall for mulate that question.
(4) The appeal shall be hear d only on the question so for mulated, and the
r espondents shall, at the hear ing of the appeal, be allowed to ar gue that the case
does not involve such question :
Provided that nothing in this sub-section shall be deemed to take away or abr idge
the power of the cour t to hear , for r easons to be r ecor ded, the appeal on any other
substantial question of law not for mulated by it, if it is satisfied that the case
involves such question.
(5) The High Cour t shall decide the question of law so for mulated and deliver
such judgment ther eon containing the gr ounds on which such decision is
founded and may awar d such cost as it deems fit.
(6) The High Cour t may deter mine any issue which
(a) has not been deter mined by the Appellate Tr ibunal; or
(b) has been wr ongly deter mined by the Appellate Tr ibunal, by r eason of
a decision on such question of law as is r efer r ed to in sub-section (1).
99
[(7) Save as other wise pr ovided in this Act, the pr ovisions of the Code of Civil
Pr ocedur e, 1908 (5 of 1908), r elating to appeals to the High Cour t shall, as far as
may be, apply in the case of appeals under this section.]
Case before High Court to be heard by not less than two Judges.
260B. (1) When an appeal has been filed befor e the High Cour t under section
260A, it shall be hear d by a bench of not less than two Judges of the High
Cour t, and shall be decided in accor dance with the opinion of such Judges or of
the major ity, if any, of such Judges.
(2) Wher e ther e is no such major ity, the Judges shall state the point of law upon
which they differ and the case shall then be hear d upon that point only by one
or mor e of the other Judges of the High Cour t and such point shall be decided
accor ding to the opinion of the major ity of the Judges who have hear d the case
including those who fir st hear d it.]
1.861 CH. XX - APPEALS AND REVISION - APPEALS TO HC S. 260B
97. Substituted for communicated to the appellant by the Finance Act, 1999, w.e.f. 1-6-1999.
98. Omitted, ibid. Pr ior t o it s omission, clause (b) r ead as under :
(b) accompanied by a fee of ten thousand r upees wher e such appeal is filed by an
assessee;
D.Appeals to th e Suprem e Court
Appeal to Supreme Court.
261. An appeal shall lie to the Supr eme Cour t fr om any judgment of the High
Cour t deliver ed
1
[befor e the establishment of the National Tax Tr ibunal] on
a r efer ence made under section 256
2
[against an or der made under section 254
befor e the 1st day of October , 1998 or an appeal made to High Cour t in r espect
of an or der passed under section 254 on or after that date] in any case which the
High Cour t cer tifies to be a fit one for appeal to the Supr eme Cour t.
Hearing before Supreme Court.
262. (1) The pr ovisions of the Code of Civil Pr ocedur e, 1908 (5 of 1908), r elating
to appeals to the Supr eme Cour t shall, so far as may be, apply in the case
of appeals under section 261 as they apply in the case of appeals fr om decr ees
of a High Cour t :
Provided that nothing in this section shall be deemed to affect the pr ovisions of
sub-section (1) of section 260 or section 265.
(2) The costs of the appeal shall be in the discr etion of the Supr eme Cour t.
(3) Wher e the judgment of the High Cour t is var ied or r ever sed in the appeal,
effect shall be given to the or der of the Supr eme Cour t in the manner pr ovided
in section 260 in the case of a judgment of the High Cour t.
E.Revision by th e Com m ission er
Revision of orders prejudicial to revenue.
263. (1) The Commissioner may call for and examine the r ecor d
3
of any
pr oceeding under this Act, and if he consider s that any or der passed ther ein
by the
4
[Assessing] Officer is er r oneous in so far
3
as it is pr ejudicial to the inter ests
of the r evenue
3
, he may, after giving the assessee an oppor tunity of being hear d
and after making or causing to be made such inquir y as he deems necessar y, pass
such or der ther eon as the cir cumstances of the case justify, including an or der
enhancing or modifying the assessment, or cancelling the assessment
3
and
dir ecting a fr esh assessment.
5
[Explan ation .For the r emoval of doubts, it is her eby declar ed that, for the
pur poses of this sub-section,
(a) an or der passed
6
[on or befor e or after the 1st day of June, 1988] by
the Assessing Officer shall include
S. 263 I.T. ACT, 1961 1.862
3. For the meaning of the ter ms and expr essions r ecor d, insofar as, pr ejudicial to the
inter ests of the r evenue and assessment, see Taxmanns Dir ect Taxes Manual, Vol. 3.
1-4-1988.
was inser ted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984 and amended
(i) an or der of assessment made by the Assistant Commissioner
7
[or Deputy Commissioner ] or the Income-tax Officer on the basis
of the dir ections issued by the
8
[Joint] Commissioner under
section 144A;
(ii) an or der made by the
8
[Joint] Commissioner in exer cise of the
power s or in the per for mance of the functions of an Assessing
Officer confer r ed on, or assigned to, him under the or der s or
dir ections issued by the Boar d or by the Chief Commissioner or
Dir ector Gener al or Commissioner author ised by the Boar d in
this behalf under section 120;
(b) r ecor d
9
[shall include and shall be deemed always to have included]
all r ecor ds r elating to any pr oceeding under this Act available at the
time of examination by the Commissioner ;
(c) wher e any or der r efer r ed to in this sub-section and passed by the
Assessing Officer had been the subject matter of any appeal
10
[filed
on or befor e or after the 1st day of June, 1988], the power s of the
Commissioner under this sub-section shall extend
10
[and shall be
deemed always to have extended] to such matter s as had not been
consider ed and decided in such appeal.]
11
[(2) No or der shall be made under sub-section (1) after the expir y of two year s
fr om the end of the financial year in which the or der sought to be r evised was
passed.]
(3) Notwithstanding anything contained in sub-section (2), an or der in r evision
under this section may be passed at any time in the case of an or der which has
been passed in consequence of, or to give effect to, any finding or dir ection
contained in an or der of the Appellate Tr ibunal,
12
[National Tax Tr ibunal,] the
High Cour t or the Supr eme Cour t.
Explan ation .In computing the per iod of limitation for the pur poses of sub-
section (2), the time taken in giving an oppor tunity to the assessee to be r ehear d
under the pr oviso to section 129 and any per iod dur ing which any pr oceeding
under this section is stayed by an or der or injunction of any cour t shall be
excluded.
Revision of other orders.
13
264. (1) In the case of any or der
14
other than an or der to which section 263
applies passed by an author ity subor dinate to him, the Commissioner
may, either of his own motion or on an application by the assessee for r evision,
call for the r ecor d of any pr oceeding under this Act in which any such or der has
9. Substituted for includes by the Finance Act, 1989, w.r .e.f. 1-6-1988.
13. See also Cir cular No. 367, dated 26-7-1983 and Letter [F. No. 6/ 52/ 68-ITJ], dated 30-7-1970.
14. For the meaning of the ter m or der , see Taxmanns Dir ect Taxes Manual, Vol. 3.
1.863 CH. XX - APPEALS AND REVISION - REVISION BY COMMISSIONER S. 264
been passed and may make such inquir y or cause such inquir y to be made and,
subject to the pr ovisions of this Act, may pass such or der ther eon, not being an
or der pr ejudicial to the assessee, as he thinks fit.
(2) The Commissioner shall not of his own motion r evise any or der under this
section if the or der has been made mor e than one year pr eviously.
(3) In the case of an application for r evision under this section by the assessee,
the application must be made within one year fr om the date on which the or der
in question was communicated to him or the date on which he other wise came
to know of it, whichever is ear lier :
Provided that the Commissioner may, if he is satisfied that the assessee was
pr evented by sufficient cause
15
fr om making the application within that per iod,
admit an application made after the expir y of that per iod.
(4) The Commissioner shall not r evise any or der under this section in the
following cases
(a) wher e an appeal against the or der lies to the
16
(Appeals)]
17
[or to the Commissioner (Appeals)] or to the Appellate
Tr ibunal but has not been made and the time within which such
appeal may be made has not expir ed, or , in the case of an appeal
18
[to
the Commissioner (Appeals) or ] to the Appellate Tr ibunal, the assessee
has not waived his r ight of appeal; or
(b) wher e the or der is pending on an appeal befor e the
19
[Deputy Com-
missioner (Appeals)]; or
(c) wher e the or der
20
has been made the subject of an appeal
18
[to the
Commissioner (Appeals) or ] to the Appellate Tr ibunal.
(5) Ever y application by an assessee for r evision under this section shall be
accompanied by a fee of
21
[five hundr ed] r upees.
22
[(6) On ever y application by an assessee for r evision under this sub-section,
made on or after the 1st day of October , 1998, an or der shall be passed within one
year fr om the end of the financial year in which such application is made by the
assessee for r evision.
Explan ation .In computing the per iod of limitation for the pur poses of this sub-
section, the time taken in giving an oppor tunity to the assessee to be r e-hear d
under the pr oviso to section 129 and any per iod dur ing which any pr oceeding
under this section is stayed by an or der or injunction of any cour t shall be
excluded.
15. For the meaning of the expr ession sufficient cause, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
Act, 1987, w.e.f. 1-4-1988.
Act, 1987, w.e.f. 1-4-1988.
20. For the meaning of the ter ms and expr essions or der and subject to an appeal, see
S. 264 I.T. ACT, 1961 1.864
(7) Notwithstanding anything contained in sub-section (6), an or der in r evision
under sub-section (6) may be passed at any time in consequence of or to give
effect to any finding or dir ection contained in an or der of the Appellate Tr ibunal,
23
[National Tax Tr ibunal,] the High Cour t or the Supr eme Cour t.]
Explan ation 1.An or der by the Commissioner declining to inter fer e shall, for
the pur poses of this section, be deemed not to be an or der pr ejudicial to the
assessee.
Explan ation 2.For the pur poses of this section, the
24
(Appeals)] shall be deemed to be an author ity subor dinate to the Commissioner .
F.Gen eral
Tax to be paid notwithstanding reference, etc.
265. Notwithstanding that a r efer ence has been made to the High Cour t or the
Supr eme Cour t or an appeal has been pr efer r ed to the Supr eme Cour t, tax
shall be payable in accor dance with the assessment made in the case.
Execution for costs awarded by Supreme Court.
266. The High Cour t may, on petition made for the execution of the or der of the
Supr eme Cour t in r espect of any costs awar ded ther eby, tr ansmit the or der
for execution to any cour t subor dinate to the High Cour t.
25
[Amendment of assessment on appeal.
267. Wher e as a r esult of an appeal under section 246
26
[or section 246A] or
section 253, any change is made in the assessment of a body of individuals
or an association of per sons or a new assessment of a body of individuals or an
association of per sons is or der ed to be made, the
27
[* * *] Commissioner (Appeals)
or the Appellate Tr ibunal, as the case may be, shall pass an or der author ising the
Assessing Officer either to amend the assessment made on any member of the
body or association or make a fr esh assessment on any member of the body or
association.]
Exclusion of time taken for copy
28
.
268. In computing the per iod of limitation pr escr ibed for an appeal
29
[or an
application] under this Act, the day on which the or der complained of was
ser ved and, if the assessee was not fur nished with a copy of the or der when the
notice of the or der was ser ved upon him, the time r equisite for obtaining a copy
of such or der , shall be excluded.
1.865 CH. XX - APPEALS AND REVISION - GENERAL S. 268
Act, 1987, w.e.f. 1-4-1988.
was amended by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978, the Dir ect Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988/ 1-4-1989 and the Dir ect Tax Laws (Amendment)
Act, 1989, w.e.f. 1-4-1989.
w.e.f. 1-10-1998.
tax Act.
29. Inser ted by the Finance Act, 1990, w.e.f. 1-4-1990. Ear lier these wor ds wer e omitted by the
29a
[Filing of appeal or application for reference by income-tax authority.
268A. (1) Th e Board m ay, from tim e to tim e, issue orders, in struction s or
direction s to oth er in com e-tax auth orities, fixin g such m on etary lim its as
it m ay deem fit, for th e purpose of regulatin g filin g of appeal or application for
referen ce by an y in com e-tax auth ority un der th e provision s of th is Ch apter.
(2) Wh ere, in pursuan ce of th e orders, in struction s or direction s issued un der sub-
section (1), an in com e-tax auth ority h as n ot filed an y appeal or application for
ref eren ce on an y issue in th e case of an assessee f or an y assessm en t year, it sh all
n ot preclude such auth ority from filin g an appeal or application for referen ce on
th e sam e issue in th e case of
(a) th e sam e assessee f or an y oth er assessm en t year; or
(b) an y oth er assessee f or th e sam e or an y oth er assessm en t year.
(3) Notwith stan din g th at n o appeal or application for referen ce h as been filed by
an in com e-tax auth ority pursuan t to th e orders or in struction s or direction s
issued un der sub-section (1), it sh all n ot be lawful for an assessee, bein g a party
in an y appeal or referen ce, to con ten d th at th e in com e-tax auth ority h as acqui-
esced in th e decision on th e disputed issue by n ot filin g an appeal or application
f or ref eren ce in an y case.
(4) Th e Appellate Tribun al or Court, h earin g such appeal or referen ce, sh all h ave
regard to th e orders, in struction s or direction s issued un der sub-section (1) an d
th e circumstan ces un der wh ich such appeal or application for referen ce was filed
or n ot filed in respect of an y case.
(5) Every order, in struction or direction wh ich h as been issued by th e Board fixin g
m on etary lim its for filin g an appeal or application for referen ce sh all be deem ed
to h ave been issued un der sub-section (1) an d th e provision s of sub-section s (2),
(3) an d (4) sh all apply accordin gly.]
Definition of High Court.
269. In this Chapter ,
High Cour t means
(i) in r elation to any State, the High Cour t for that State ;
30
[(ii) in r elation to the Union ter r itor y of Delhi, the High Cour t of Delhi ;
(iia)
31
[* * *]]
(iii)
32
[* * *]
(iv) in r elation to the Union ter r itor y of the Andaman and Nicobar Islands,
the High Cour t at Calcutta ;
(v) in r elation to the Union ter r itor y of
33
[Lakshadweep], the High Cour t
of Ker ala ;
S. 269 I.T. ACT, 1961 1.866
30. Substituted for clause (ii) by the Punjab Reor ganisation and Delhi High Cour t (Adaptation
of Laws on Union Subjects) Or der , 1968, w.r .e.f. 1-11-1966.
31. Omitted by the State of Himachal Pr adesh (Adaptation of Laws on Union Subjects) Or der ,
1973, w.r .e.f. 25-1-1971.
32. Clause (iii) omitted by the Finance Act, 1994, w.e.f. 1-4-1995. Pr ior to omission, clause (iii)
was substituted by the Nor th-Easter n Ar eas (Reor ganisation) (Adaptation of Laws on
Union Subjects) Or der , 1974, w.r .e.f. 21-1-1972.
33. Substituted for the Laccadive, Minicoy and Amindivi Islands by the Laccadive, Minicoy
and Amindivi Islands (Alter ation of Name) Adaptation of Laws Or der , 1974, w.r .e.f.
1-11-1973.
34
[(va) in r elation to the Union ter r itor y of Chandigar h, the High Cour t of
Punjab and Har yana ;]
35
[(vi) in r elation to the Union ter r itor ies of Dadr a and Nagar Haveli and
36
[* * *] Daman and Diu, the High Cour t at Bombay ; and
(vii) in r elation to the Union ter r itor y of Pondicher r y, the High Cour t at
Madr as.]
37
[CHAPTER XX-A
ACQUISITION OF IMMOVABLE PROPERTIES IN CERTAIN CASES OF
TRANSFER TO COUNTERACT EVASION OF TAX
Definitions.
269A. In this Chapter , unless the context other wise r equir es,
(a)
38
[appar ent consider ation,
(1) in r elat ion t o any immovable pr oper t y t r ansfer r ed, being
immovable pr oper ty of the natur e r efer r ed to in sub-clause (i) of
clause (e), means,]
(i) if the tr ansfer is by way of sale, the consider ation for such
tr ansfer as specified in the instr ument of tr ansfer ;
(ii) if the tr ansfer is by way of exchange,
(A) in a case wher e the consider ation for the tr ansfer
consists of a thing or things only, the pr ice that such
thing or things would or dinar ily fetch on sale in the open
mar ket on the date of execution of the instr ument of
tr ansfer ;
(B) in a case wher e the consider ation for the tr ansfer
consists of a thing or things and a sum of money, the
aggr egate of the pr ice that such thing or things would
or dinar ily fetch on sale in the open mar ket on the date
of execution of the instr ument of tr ansfer and such
sum;
39
[(iii) if the tr ansfer is by way of lease,
consists of pr emium only, the amount of pr emium as
specified in the instr ument of tr ansfer ;
consists of r ent only, the aggr egate of the moneys (if
any) payable by way of r ent and the amounts for the
1.867 CH. XXA - ACQUISITION OF IMMOVABLE PROPERTIES S. 269A
34. Inser ted by the Punjab Reor ganisation and Delhi High Cour t (Adaptation of Laws on
Union Subjects) Or der , 1968, w.r .e.f. 1-11-1966.
1-4-1963.
36. Wor d Goa, omitted by the Finance Act, 1994, w.e.f. 1-4-1995.
37. Chapt er XX-A, consist ing of sect ions 269A t o 269S, inser t ed by t he Taxat ion Laws
(Amendment) Act, 1972, w.e.f. 15-11-1972 and ceased to oper ate in r espect of tr ansfer of
immovable pr oper ty made after 30-9-1986.
38. Substituted for appar ent consider ation, in r elation to any immovable pr oper ty tr ans-
fer r ed, means, by the Income-tax (Amendment) Act, 1981, w.e.f. 1-7-1982.
ser vice or things for ming par t of or constituting the
r ent, as specified in the instr ument of tr ansfer ;
(C) in a case wher e the consider ation for the tr ansfer
consists of pr emium and r ent, the aggr egate of the
amount of the pr emium, the moneys (if any) payable by
way of r ent and the amounts for the ser vice or things
for ming par t of or constituting the r ent, as specified in
the instr ument of tr ansfer ,
and wher e the whole or any par t of the consider ation for such
tr ansfer is payable on any date or dates falling after the date of
such tr ansfer , the value of the consider ation payable after such
date shall be deemed to be the discounted value of such consi-
der ation, as on the date of such tr ansfer , deter mined by adopting
the r ate of inter est at eight per cent per annum ;
(2) in r elation to any immovable pr oper ty tr ansfer r ed, being immov-
able pr oper ty of the natur e r efer r ed to in sub-clause (ii) of clause
(e), means,
(i) in a case wher e the consider ation for the tr ansfer consists of
a sum of money only, such sum ;
(ii) in a case wher e the consider ation for the tr ansfer consists of
a thing or things only, the pr ice that such thing or things
would or dinar ily fetch on sale in the open mar ket on the date
of the tr ansfer ;
(iii) in a case wher e the consider ation for the tr ansfer consists of
a thing or things and a sum of money, the aggr egate of the
pr ice that such thing or things would or dinar ily fetch on sale
in the open mar ket on the date of the tr ansfer and such sum,
such tr ansfer , the value of the consider ation payable after such
dat e shall be deemed t o be t he discount ed value of such
consider ation, as on the date of such tr ansfer , deter mined by
adopting the r ate of inter est at eight per cent per annum ;]
(b) competent author ity means
40
[a
41
[Joint] Commissioner ] author ised
by the Centr al Gover nment under section 269B to per for m the
functions of a competent author ity under this Chapter ;
(c) cour t means a pr incipal civil cour t of or iginal jur isdiction unless the
Centr al Gover nment has appointed (as it is her eby author ised to do)
any special judicial officer within any specified local limits to per for m
the functions of the cour t under this Chapter ;
42
[(d) fair mar ket value,
(i) in r elation to any immovable pr oper ty tr ansfer r ed by way of sale
or exchange, being immovable pr oper ty of the natur e r efer r ed to
S. 269A I.T. ACT, 1961 1.868
40. Substituted for an Assistant Commissioner of Income-tax by the Dir ect Tax Laws
in sub-clause (i) of clause (e), means the pr ice that the immovable
pr oper ty would or dinar ily fetch on sale in the open mar ket on the
date of execution of the instr ument of tr ansfer of such pr oper ty;
(ii) in r elation to any immovable pr oper ty tr ansfer r ed by way of
lease, being immovable pr oper ty of the natur e r efer r ed to in
sub-clause (i) of clause (e), means t he pr emium t hat such
tr ansfer would or dinar ily fetch in the open mar ket on the date of
execution of the instr ument of tr ansfer of such pr oper ty, if the
consider ation for such tr ansfer had been by way of pr emium
only;
(iii) in r elation to any immovable pr oper ty tr ansfer r ed, being immov-
able pr oper ty of the natur e r efer r ed to in sub-clause (ii) of clause
(e), means the consider ation in the for m of money that such
tr ansfer would or dinar ily fetch in the open mar ket on the date of
the tr ansfer , if such tr ansfer had been made only for consider -
ation in money ;]
(e)
43
[immovable pr oper ty means,
(i) any land or any building] or par t of a building, and includes,wher e
any land or any building or part of a building is transferred together
with any machiner y, plant, fur nitur e, fittings or other things, such
machiner y, plant, fur nitur e, fittings or other things also.
Explan ation .For the pur poses of this
44
[sub-clause], land, build-
ing, par t of a building, machiner y, plant, fur nitur e, fittings and
other things include any r ights ther ein ;
45
[(ii) any r ights of the natur e r efer r ed to in clause (b) of sub-section (1)
of section 269AB ;]
46
[(f) instr ument of tr ansfer means the instr ument of tr ansfer r egister ed
under the Registr ation Act, 1908 (16 of 1908), or , as the case may be,
the statement r egister ed under section 269AB with the competent
author ity ;]
(g) per son inter ested, in r elation to any immovable pr oper ty, includes
all per sons claiming, or entitled to claim, an inter est in the compensa-
tion payable on account of the acquisition of that pr oper ty under this
Chapter ;
46
[(h ) tr ansfer ,
(i) in r elation to any immovable pr oper ty r efer r ed to in sub-clause
(i) of clause (e), means tr ansfer of such pr oper ty by way of sale or
exchange or lease for a ter m of not less than twelve year s, and
includes allowing the possession of such pr oper ty to be taken or
r etained in par t per for mance of a contr act of the natur e r efer r ed
to in section 53A
47
of the Tr ansfer of Pr oper ty Act, 1882 (4 of
1882).
1.869 CH. XXA - ACQUISITION OF IMMOVABLE PROPERTIES S. 269A
43. Substituted for immovable pr oper ty means any land or any building by the Income-
44. Substituted for clause, ibid.
Explan ation .For the pur poses of this sub-clause, a lease which
pr ovides for the extension of the ter m ther eof by a fur ther ter m
or ter ms shall be deemed to be a lease for a ter m of not less than
twelve year s if the aggr egate of the ter m for which such lease has
been gr anted and the fur ther ter m or ter ms for which it can be so
extended is not less than twelve year s ;
(ii) in r elation to any immovable pr oper ty of the natur e r efer r ed to
in sub-clause (ii) of clause (e), means the doing of anything
(whether by way of tr ansfer of shar es in a co-oper ative society or
company or by way of any agr eement or ar r angement or in any
other manner whatsoever ) which has the effect of tr ansfer r ing,
or enabling the enjoyment of, such pr oper ty.]
48
[Registration of certain transactions.
269AB. (1) The following tr ansactions, that is to say,
(a) ever y tr ansaction involving the allowing of the possession of any
immovable pr oper ty to be taken or r etained in par t per for mance of
a contr act of the natur e r efer r ed to in section 53A
49
of the Tr ansfer of
Pr oper ty Act, 1882 (4 of 1882), and
(b) ever y tr ansaction (whether by way of becoming a member of, or
acquir ing shar es in, a co-oper ative society, company or other associ-
ation of per sons or by way of any agr eement or any ar r angement of
whatever natur e) wher eby a per son acquir es any r ights in or with
r espect to any building or par t of a building (whether or not including
any machiner y, plant, fur nitur e, fittings or other things ther ein) which
has been constr ucted or which is to be constr ucted [not being a
tr ansaction by way of sale, exchange or lease of such building or par t
of a building which is r equir ed to be r egister ed under the Registr ation
Act, 1908 (16 of 1908)],
shall be r educed to wr iting in the for m of a statement by each of the par ties to
such tr ansaction or by any of the par ties to such tr ansaction acting on behalf of
himself and on behalf of the other par ties.
50
(2) Ever y statement in r espect of a tr ansaction r efer r ed to in sub-section (1)
shall
(a) be in the pr escr ibed for m ;
(b) set for th such par ticular s as may be pr escr ibed ; and
(c) be ver ified in the pr escr ibed manner ,
and r egister ed with the competent author ity, in such manner and within such
time as may be pr escr ibed, by each of the par ties to such tr ansaction or by any
of the par ties to such tr ansaction acting on behalf of himself and on behalf of the
other par ties.]
50. See r ule 48DD and For m No. 37EE.
S. 269AB I.T. ACT, 1961 1.870
51
Competent authority.
269B.
52
(1) The Centr al Gover nment may, by gener al or special or der published
in the Official Gazette,
(a) author ise as many
53
[
54
[Joint ] Commissioner s], as it thinks fit, to
per for m the functions of a competent author ity under this Chapter ;
and
(b) define the local limits within which the competent author ities shall
per for m their functions under this Chapter .
(2) In r espect of any function to be per for med by a competent author ity under
any pr ovision of this Chapter in r elation to any immovable pr oper ty r efer r ed to
in section 269C, the competent author ity r efer r ed to ther ein shall,
(a) in a case wher e such pr oper ty is situate within the local limits of the
jur isdiction of only one competent author ity, be such competent
author ity ;
(b) in a case wher e such pr oper ty is situate within the local limits of the
jur isdiction of two or mor e competent author ities, be the competent
author ity empower ed to per for m such functions in r elation to such
pr oper ty in accor dance with r ules made in this behalf by the Boar d
under section 295.
55
[Explan ation .For the pur poses of this sub-section, immovable pr oper ty, being
r ights of the natur e r efer r ed to in clause (b) of sub-section (1) of section 269AB
in, or with r espect to, any building or par t of a building which has been
constr ucted or which is to be constr ucted shall be deemed to be situate at the
place wher e the building has been constr ucted or is to be constr ucted.]
(3) No per son shall be entitled to call in question the jur isdiction of a competent
author ity in r espect of any immovable pr oper ty after the expir y of thir ty days
fr om the date on which such competent author ity initiates pr oceedings under
section 269D for the acquisition of such pr oper ty.
(4) Subject to the pr ovisions of sub-section (3), wher e the jur isdiction of a
competent author ity is questioned, the competent author ity shall, if satisfied
with the cor r ectness of the claim, by or der in wr iting, deter mine the question
accor dingly and if he is not so satisfied, he shall r efer the question to the Boar d
and the Boar d shall, by or der in wr iting, deter mine the question.
Immovable property in respect of which proceedings for acquisition may be
taken.
56
269C. (1) Wher e the competent author ity has r eason to believe that any
immovable pr oper ty of a fair mar ket value exceeding
57
[one hundr ed]
1.871 CH. XX-A - ACQUISITION OF IMMOVABLE PROPERTIES S. 269C
51. See r ule 48D.
52. For aut hor isat ion of Deput y Commissioner of Income-t ax t o per for m funct ions of
competent author ity under Chapter XXA, see Taxmanns Dir ect Taxes Cir cular s.
53. Substituted for Assistant Commissioner s of Income-tax by the Dir ect Tax Laws (Amend-
ment) Act, 1989, w.r .e.f. 1-4-1988.
56. See also Cir cular No. 455, dated 16-5-1986.
thousand r upees has been tr ansfer r ed by a per son (her eafter in this Chapter
r efer r ed to as the tr ansfer or ) to another per son (her eafter in this Chapter
r efer r ed to as the tr ansfer ee) for an appar ent consider ation which is less than the
fair mar ket value of the pr oper ty and that the consider ation for such tr ansfer as
agr eed to between the par ties has not been tr uly stated in the instr ument of
tr ansfer with the object of
(a) facilitating the r eduction or evasion of the liability of the tr ansfer or
to pay tax under this Act in r espect of any income ar ising fr om the
tr ansfer ; or
(b) facilitating the concealment of any income or any moneys or other
assets which have not been or which ought to be disclosed by the
tr ansfer ee for the pur poses of the Indian Income-tax Act, 1922 (11 of
1922), or this Act or the Wealth-tax Act, 1957 (27 of 1957),
the competent author ity may, subject to the pr ovisions of this Chapter , initiate
pr oceedings for the acquisition of such pr oper ty under this Chapter :
Provided that befor e initiating such pr oceedings, the competent author ity shall
r ecor d his r easons for doing so :
Provided further that no such pr oceedings shall be initiated unless the competent
author ity has r eason to believe that the fair mar ket value of the pr oper ty exceeds
the appar ent consider ation ther efor by mor e than fifteen per cent of such
appar ent consider ation.
(2) In any pr oceedings under t his Chapt er in r espect of any immovable
pr oper ty,
(a) wher e the fair mar ket value of such pr oper ty exceeds the appar ent
consider ation ther efor by mor e than twenty-five per cent of such
appar ent consider ation, it shall be conclusive pr oof that the consider -
ation for such tr ansfer as agr eed to between the par ties has not been
tr uly stated in the instr ument of tr ansfer ;
(b) wher e the pr oper ty has been tr ansfer r ed for an appar ent consider -
ation which is less than its fair mar ket value, it shall be pr esumed,
unless the contr ar y is pr oved, that the consider ation for such tr ansfer
as agr eed to between the par ties has not been tr uly stated in the
instr ument of tr ansfer with such object as is r efer r ed to in clause (a)
or clause (b) of sub-section (1).
58
Preliminary notice.
269D. (1) The competent author ity shall initiate pr oceedings for the acquisi-
tion, under this Chapter , of any immovable pr oper ty r efer r ed to in section
269C by notice to that effect published in the Official Gazette :
Provided that no such pr oceedings shall be initiated in r espect of any immovable
pr oper ty after the expir ation of a per iod of
59
[nine] months fr om the end of the
month in which the instr ument of tr ansfer in r espect of such pr oper ty is
S. 269D I.T. ACT, 1961 1.872
58. See r ule 48E.
59. Substituted for six by the Income-tax (Amendment) Act, 1973, w.r .e.f. 15-11-1972.
r egister ed under the Registr ation Act, 1908 (16 of 1908),
60
[or , as the case may be,
section 269AB] :
Provided further that
(a) in a case wher e it is deter mined under sub-section (4) of section 269B
by the competent author ity who has initiated pr oceedings for the
acquisition of any immovable pr oper ty under this Chapter or by the
Boar d that such competent author ity has no jur isdiction to initiate
such pr oceedings, the competent author ity having jur isdiction may
initiate such pr oceedings within
(i) the per iod of
61
[nine] months specified in the for egoing pr oviso ;
or
(ii) a per iod of thir ty days fr om the date of such deter mination,
whichever per iod expir es later ;
(b) in a case wher e pr oceedings for the acquisition of any immovable
pr oper ty under this Chapter could not be initiated dur ing any per iod
of time by r eason of any injunction or or der of any cour t pr ohibiting
the initiation of such pr oceedings or pr eventing the examination of
documents or other mater ials r equir ed to be examined for the
purpose of determining whether such proceedings should beinitiated,
the time of the continuance of the injunction or or der , the day on
which it was issued or made and the day on which it was withdr awn
shall be excluded in computing the per iod dur ing which such pr o-
ceedings may be initiated under this sub-section.
(2) The competent author ity shall
(a) cause a notice under sub-section (1) in r espect of any immovable
pr oper ty to be ser ved on the tr ansfer or , the tr ansfer ee, the per son in
occupation of the pr oper ty, if the tr ansfer ee is not in occupation
ther eof, and on ever y per son whom the competent author ity knows
to be inter ested in the pr oper ty ;
(b) cause such notice to be published
(i) in his office by affixing a copy ther eof to a conspicuous place ;
(ii) in the locality in which the immovable pr oper ty to which it r elates
is situate, by affixing a copy ther eof to a conspicuous par t of the
pr oper ty and also by making known in such manner as may be
pr escr ibed the substance of such notice at convenient places in
the said locality.
62
[Explan ation .The pr ovisions of the Explan ation to sub-section (2) of section
269B shall apply for the pur poses of this sub-section as they apply for the
pur poses of that sub-section.]
1.873 CH. XX-A - ACQUISITION OF IMMOVABLE PROPERTIES S. 269D
61. Substituted for six by the Income-tax (Amendment) Act, 1973, w.r .e.f. 15-11-1972.
Objections.
269E. (1) Objections against the acquisition of the immovable pr oper ty in
r espect of which a notice has been published in the Official Gazette under
sub-section (1) of section 269D may be made
(a) by the tr ansfer or or the tr ansfer ee or any other per son r efer r ed to in
clause (a) of sub-section (2) of that section, within a per iod of for ty-five
days fr om the date of such publication or a per iod of thir ty days fr om
the date of ser vice of notice on such per son under the said clause,
whichever per iod expir es later ;
(b) by any other per son inter ested in such immovable pr oper ty, within
for ty-five days fr om the date of such publication.
(2) Ever y objection under sub-section (1) shall be made to the competent
author ity in wr iting.
(3) For the r emoval of doubts, it is her eby declar ed that objection may be made
under sub-section (1) that the pr ovisions of clause (a) of sub-section (2) of
section 269C do not apply in r elation to any immovable pr oper ty on the gr ound
that the fair mar ket value of such pr oper ty does not exceed the appar ent
consider ation ther efor by mor e than twenty-five per cent of such appar ent
consider ation.
Hearing of objections.
269F. (1) The competent author ity shall fix a day and place for the hear ing of
the objections made under section 269E against the acquisition under this
Chapter of any immovable pr oper ty, and shall give notice of the same to ever y
per son who has made such objection :
Provided that such notice shall also be given to the tr ansfer ee of such pr oper ty
even if he has not made any such objection.
(2) Ever y per son to whom a notice is given under sub-section (1) shall have the
r ight to be hear d at the hear ing of the objections.
(3) The competent author ity shall have the power to adjour n the hear ing of the
objections fr om time to time.
(4) The competent author ity may, befor e disposing of the objections, make such
fur ther inquir y as he thinks fit.
(5) The decision of the competent author ity in r espect of the objections hear d
shall be in wr iting and shall state the r easons for the decision with r espect to each
objection.
(6) If after hear ing the objections, if any, and after taking into account all the
r elevant mater ial on r ecor d, the competent author ity is satisfied that,
(a) the immovable pr oper ty to which the pr oceedings r elate is of a fair
mar ket value exceeding
63
[one hundr ed] thousand r upees ;
(b) the fair mar ket value of such pr oper ty exceeds the appar ent consi-
der ation ther efor by mor e than fifteen per cent of such appar ent
consider ation ; and
S. 269F I.T. ACT, 1961 1.874
(c) the consider ation for such tr ansfer as agr eed to between the par ties
has not been tr uly stated in the instr ument of tr ansfer with such
object as is r efer r ed to in clause (a) or clause (b) of sub-section (1) of
section 269C,
he may, after obtaining the appr oval of the Commissioner , make an or der for the
acquisition of the pr oper ty under this Chapter .
Explan ation .In this sub-section, Commissioner , in r elation to a competent
author ity, means such Commissioner as the Boar d may, by gener al or special
or der in wr iting, specify in this behalf.
(7) If the competent author ity is not satisfied as pr ovided in sub-section (6), he
shall, by or der in wr iting, declar e that the pr oper ty will not be acquir ed under this
Chapter .
(8) The competent author ity shall ser ve a copy of his or der under sub-section (6)
or sub-section (7), as the case may be, on the tr ansfer or , the tr ansfer ee and on
ever y per son who has made objections against such acquisition under section
269E.
(9) In any pr oceedings under this Chapter in r espect of any immovable pr oper ty,
no objection shall be enter tained on the gr ound that although the appar ent
consider ation for the pr oper ty is less than the fair mar ket value of the
pr oper ty on the date of the execution of the instr ument of tr ansfer
64
[or wher e
such pr oper ty is of the natur e r efer r ed to in sub-clause (ii) of clause (e) of section
269A on the date of the tr ansfer ], the consider ation as agr eed to between the
par ties has been tr uly stated in the instr ument of tr ansfer because such
consider ation was agr eed to having r egar d to the pr ice that such pr oper ty would
have or dinar ily fetched
65
[on such tr ansfer in the open mar ket on the date of the
conclusion of the agr eement to tr ansfer the pr oper ty], except wher e such
agr eement has been r egister ed under the Registr ation Act, 1908 (16 of 1908).
Appeal against order for acquisition.
66
269G. (1) An appeal may be pr efer r ed to the Appellate Tr ibunal against the
or der for the acquisition of any immovable pr oper ty made by the
competent author ity under section 269F,
(a) by the tr ansfer or or the tr ansfer ee or any other per son r efer r ed to in
sub-section (8) of that section, within a per iod of for ty-five days fr om
the date of such or der or a per iod of thir ty days fr om the date of
ser vice of a copy of the or der on such per son under the said sub-
section, whichever per iod expir es later ;
(b) by any other per son inter ested in such immovable pr oper ty, within
for ty-five days fr om the date of such or der :
Provided that the Appellate Tr ibunal may, on an application made in this behalf
befor e the expir y of the said per iod of for ty-five days or , as the case may be, thir ty
1.875 CH. XX-A - ACQUISITION OF IMMOVABLE PROPERTIES S. 269G
65. Substituted for on sale in the open mar ket on the date of the conclusion of the agr eement
to sell the pr oper ty, ibid.
66. For notification laying down pr ocedur e to be followed by the Tr ibunal, see Taxmanns
Dir ect Taxes Cir cular s.
days, per mit, by or der , the appeal to be pr esented within such fur ther per iod as
may be specified ther ein if the applicant satisfies the Appellate Tr ibunal that he
has sufficient cause for not being able to pr esent the appeal within the said per iod
of for ty-five days or , as the case may be, thir ty days.
67
(2) Ever y appeal under this section shall be in the pr escr ibed for m and shall be
ver ified in the pr escr ibed manner and shall be accompanied by a fee of
68
[two
hundr ed] r upees.
(3) The Appellate Tr ibunal shall fix a day and place for the hear ing of the appeal
and shall give notice of the same to the appellant and to the competent author ity.
(4) The Appellate Tr ibunal may, after giving the appellant and the competent
author ity an oppor tunity of being hear d, pass such or der s ther eon as it thinks fit.
(5) The Appellate Tr ibunal may, at any time within thir ty days fr om the date of
the or der , with a view to r ectifying any mistake appar ent fr om the r ecor d,
amend any or der passed by it under sub-section (4) and shall make such
amendment if the mistake is br ought to its notice by the appellant or the
competent author ity:
Provided that if any such amendment is likely to affect any per son pr ejudicially,
it shall not be made without giving to such per son a r easonable oppor tunity of
being hear d.
(6) The Appellate Tr ibunal shall send a copy of any or der s passed under this
section to the appellant and to the Commissioner .
(7) Save as pr ovided in section 269H, or der s passed by the Appellate Tr ibunal on
appeal shall be final.
(8) Ever y appeal under this section shall be disposed of as expeditiously as
possible and endeavour shall be made to dispose of ever y such appeal within
ninety days fr om the date on which it is pr esented.
(9) The pr ovisions of section 255 (except sub-section (3) ther eof) shall, so far as
may be, apply in r elation to the power s, functions and pr oceedings of the
Appellate Tr ibunal under this section as they apply in r elation to the power s,
functions and pr oceedings of the Appellate Tr ibunal under Chapter XX.
Appeal to High Court.
269H. (1) The Commissioner or any per son aggr ieved by any or der of the
Appellate Tr ibunal under section 269G may, within sixty days of the date
on which he is ser ved with notice of such or der under that section, pr efer an
appeal against such or der to the High Cour t on any question of law :
Provided that the High Cour t may, on an application made in this behalf befor e
the expir y of the said per iod of sixty days, per mit, by or der , the appeal to be
pr esented within such fur ther per iod as may be specified ther ein, if the applicant
satisfies the High Cour t that he has sufficient cause for not being able to pr esent
the appeal within the said per iod of sixty days.
S. 269H I.T. ACT, 1961 1.876
67. See r ule 48F and For m No. 37F.
68. Substituted for one hundr ed and twenty-five by the Finance Act, 1981, w.e.f. 1-6-1981.
(2) An appeal under sub-section (1) shall be hear d by a Bench of not less than two
Judges of the High Cour t and the pr ovisions of section 259 shall apply in r elation
to any such appeal as they apply in r elation to a case r efer r ed to the High Cour t
under section 256.
(3) The costs of the appeal shall be in the discr etion of the High Cour t.
Vesting of property in Central Government.
269-I. (1) As soon as may be after the or der for acquisition of any immovable
pr oper ty made under sub-section (6) of section 269F becomes final, the
competent author ity may, by notice in wr iting, or der any per son who may be in
possession of the immovable pr oper ty to sur r ender or deliver possession ther eof
to the competent author ity or any other per son duly author ised in wr iting by the
competent author ity in this behalf, within thir ty days of the date of the ser vice
of the notice.
Explan ation .For the pur poses of this sub-section, an or der for the acquisition of
any immovable pr oper ty (her eafter in this Explan ation r efer r ed to as the or der
for acquisition) made under sub-section (6) of section 269F becomes final,
(a) in a case wher e the or der for acquisition is not made the subject of an
appeal to the Appellate Tr ibunal under section 269G, upon the expir y
of the per iod dur ing which such appeal may be pr esented under that
section ;
(b) in a case wher e the or der for acquisition is made the subject of an
appeal to the Appellate Tr ibunal under section 269G,
(i) if the or der for acquisition is confir med by the Appellate Tr ibunal
and the or der of the Appellate Tr ibunal is not made the subject of
an appeal to the High Cour t under section 269H, upon the expir y
of the per iod dur ing which such appeal may be pr esented under
that section to the High Cour t ;
(ii) if the or der of the Appellate Tr ibunal is made the subject of an
appeal to the High Cour t under section 269H, upon the confir -
mation of the or der for acquisition by the High Cour t.
(2) If any per son r efuses or fails to comply with the notice under sub-section (1),
the competent author ity or other per son duly author ised by the competent
author ity under that sub-section may take possession of the immovable pr oper ty
and may, for that pur pose, use such for ce as may be necessar y.
(3) Notwithstanding anything contained in sub-section (2), the competent
author ity may, for the pur pose of taking possession of any pr oper ty r efer r ed to
in sub-section (1), r equisition the ser vices of any police officer to assist him and
it shall be the duty of such officer to comply with such r equisition.
(4) When the possession of the immovable pr oper ty is sur r ender ed or deliver ed
under sub-section (1) to the competent author ity or a per son duly author ised by
him in that behalf or , as the case may be, when the possession ther eof is taken
under sub-section (2) or sub-section (3) by such author ity or per son, the pr oper ty
shall vest absolutely in the Centr al Gover nment fr ee fr om all encumbr ances :
Provided that nothing in this sub-section shall oper ate to dischar ge the tr ans-
fer ee or any other per son (not being the Centr al Gover nment) fr om liability in
1.877 CH. XX-A - ACQUISITION OF IMMOVABLE PROPERTIES S. 269-I
r espect of such encumbr ances and, notwithstanding anything contained in any
other law, such liability may be enfor ced against the tr ansfer ee or such other
per son by a suit for damages.
69
[(5) Notwithstanding anything contained in sub-section (4) or any other law or
any instr ument or any agr eement for the time being in for ce, wher e an or der for
acquisition of any immovable pr oper ty, being r ights of the natur e r efer r ed to in
clause (b) of sub-section (1) of section 269AB, in or with r espect to any building
or par t of a building which has been constr ucted or which is to be constr ucted,
has become final, then, such or der shall, by its own for ce, have the effect of
(a) vesting such r ights in the Centr al Gover nment, and
(b) placing the Centr al Gover nment in the same position in r elation to
such r ights as the per son in whom such r ights would have continued
to vest if such or der had not become final,
and the competent author ity may issue such dir ections as he may deem fit to any
per son concer ned for taking the necessar y steps for compliance with the
pr ovisions of clauses (a) and (b).
(6) In the case of any immovable pr oper ty, being r ights of the natur e r efer r ed to
in clause (b) of sub-section (1) of section 269AB, in or with r espect to any building
or par t of a building, the pr ovisions of sub-sections (1), (2) and (3) shall have effect
as if the r efer ences to immovable pr oper ty ther ein wer e a r efer ence to such
building or , as the case may be, par t of such building.]
Compensation.
269J. (1) Wher e any immovable pr oper ty is acquir ed under this Chapter , the
Centr al Gover nment shall pay for such acquisition compensation which
shall be a sum equal to the aggr egate of the amount of the appar ent consider ation
for its tr ansfer and fifteen per cent of the said amount :
70
[Provided that in a case wher e, under the agr eement between the par ties
concer ned, the whole or any par t of the consider ation for the tr ansfer of such
immovable pr oper ty is payable on any date or dates falling after the date on
which such pr oper ty is acquir ed, the compensation payable by the Centr al
Gover nment shall be the aggr egate of the following amounts, namely :
(i) an amount equal to fifteen per cent of the appar ent consider ation ;
(ii) the amount, if any, that has become payable in accor dance with such
agr eement on or befor e the date on which such pr oper ty is acquir ed
under this Chapter ; and
(iii) the amount payable after the date on which such pr oper ty is acquir ed
under this Chapter .]
(a) wher e, after the tr ansfer to the tr ansfer ee of the pr oper ty r efer r ed to
in that sub-section but befor e the vesting of the pr oper ty in the Centr al
Gover nment, the pr oper ty has been damaged (other wise than as a
S. 269J I.T. ACT, 1961 1.878
r esult of nor mal wear and tear ), the compensation payable under that
sub-section shall be r educed by such amount as the competent
author ity and the per sons entitled to the compensation may agr ee
within fifteen days of the vesting of the pr oper ty in the Centr al
Gover nment or in default of such agr eement as the cour t may, on a
r efer ence made to it in this behalf by the competent author ity or by
any per son duly author ised for the pur pose by the competent autho-
r ity, deter mine to be the amount that may have to be expended for
r estor ing the pr oper ty to the condition in which it was at the time of
such tr ansfer ;
(b) wher e, after the tr ansfer of such pr oper ty to the tr ansfer ee but befor e
the date of publication in the Official Gazette of the notice in r espect
of such pr oper ty under sub-section (1) of section 269D, any impr ove-
ments have been made to the pr oper ty, whether by way of addition
or alter ation or in any other manner , the compensation payable in
r espect of such pr oper ty under sub-section (1) shall be incr eased by
such amount as the competent author ity and the per sons entitled to
the compensation may agr ee within fifteen days of the vesting of the
pr oper ty in the Centr al Gover nment or in default of such agr eement
as the cour t may, on a r efer ence made to it in this behalf by the
competent author ity or by any per son duly author ised for the
pur pose by the competent author ity, deter mine to be the amount
spent for making such impr ovements.
(3) Ever y r efer ence under clause (a) or clause (b) of sub-section (2) shall be made
within thir ty days of the date on which the immovable pr oper ty to which it
r elates becomes vested in the Centr al Gover nment or within such fur ther per iod
as the cour t may, on an application made in this behalf befor e the expir y of the
said per iod and on being satisfied that ther e is sufficient cause for doing so, allow
and such r efer ence shall state clear ly the compensation payable under sub-
section (1) in r espect of the immovable pr oper ty and the amount by which,
accor ding to the estimate of the competent author ity, such compensation shall
be r educed under clause (a) or , as the case may be, incr eased under clause (b),
of sub-section (2).
(4) The amount by which the compensation payable under sub-section (1) in
r espect of any immovable pr oper ty acquir ed under this Chapter falls shor t of the
amount which would have been payable as compensation if that pr oper ty had
been acquir ed under the Land Acquisition Act, 1894 (1 of 1894), after the issue
of a pr eliminar y notice under section 4 of that Act on the date of publication in
the Official Gazette of the notice in r espect of the pr oper ty under sub-section (1)
of section 269D, shall be deemed to have been r ealised by the Centr al Gover n-
ment as a penalty fr om the tr ansfer ee for being a par ty to a tr ansfer with such
object as is r efer r ed to in clause (a) or clause (b) of sub-section (1) of section 269C,
and no penalty shall be levied for any assessment year on the tr ansfer ee
(a) under clause (iii) of sub-section (1) of section 271, for concealing the
par ticular s or fur nishing inaccur ate par ticular s of so much of his
income as is utilised by him for paying to the tr ansfer or , by way of
1.879 CH. XX-A - ACQUISITION OF IMMOVABLE PROPERTIES S. 269J
consider ation for the pr oper ty, any amount in excess of the appar ent
consider ation for the pr oper ty, notwithstanding that such amount is
included in the income of the tr ansfer ee ;
(b) under clause (iii) of sub-section (1) of section 18 of the Wealth-tax Act,
1957 (27 of 1957), for concealing the par ticular s or fur nishing inaccu-
r ate par ticular s of so much of his assets as ar e utilised by him for
paying to the tr ansfer or , by way of consider ation for the pr oper ty, any
amount in excess of the appar ent consider ation for the pr oper ty,
notwithstanding that such assets ar e included in the net wealth of the
tr ansfer ee.
Payment or deposit of compensation.
269K. (1) The amount of compensat ion payable in accor dance wit h t he
pr ovisions of section 269J for the acquisition of any immovable pr oper ty
shall be tender ed to the per son or per sons entitled ther eto, as soon as may be,
after the pr oper ty becomes vested in the Centr al Gover nment under sub-section
(4) of section 269-I :
71
[Provided that in a case falling under the pr oviso to sub-section (1) of section
269J, the amounts r efer r ed to in clause (i) and clause (ii) of that pr oviso shall be
tender ed to the per son or per sons entitled ther eto, as soon as may be, after the
pr oper ty becomes vested in the Centr al Gover nment under section 269-I, and the
amount r efer r ed to in clause (iii) of the said pr oviso shall be tender ed on the date
on which it would be payable in accor dance with the agr eement between the
par ties concer ned, and wher e such amount is payable in instalments on differ ent
dates, then in such instalments on those dates :]
Provided
72
[further] that in any case wher e a r efer ence is or has to be made under
sub-section (2) of section 269J to the cour t for the deter mination of the amount
by which the compensation payable under sub-section (1) of that section shall be
r educed or incr eased, the amount of such compensation as r educed or incr eased
by the amount estimated in that behalf by the competent author ity for the
pur poses of such r efer ence shall be tender ed as afor esaid.
(2) Notwithstanding anything contained in sub-section (1), if any dispute ar ises
as to the appor tionment of the compensation amongst per sons claiming to be
entitled ther eto, the Centr al Gover nment shall deposit in the cour t the compen-
sation r equir ed to be tender ed under sub-section (1) and r efer such dispute for
the decision of the cour t and the decision of the cour t ther eon shall be final.
(3) Notwithstanding anything contained in sub-section (1), if the per sons entitled
to compensation do not consent to r eceive it, or if ther e is no per son competent
to alienate the immovable pr oper ty, or if ther e is any dispute as to the title to
r eceive the compensation, the Centr al Gover nment shall deposit in the cour t the
compensation r equir ed to be tender ed under sub-section (1) and r efer the matter
for the decision of the cour t :
Provided that nothing her ein contained shall affect the liability of any per son
who may r eceive the whole or any par t of the compensation for any immovable
S. 269K I.T. ACT, 1961 1.880
pr oper ty acquir ed under this Chapter to pay the same to the per son lawfully
entitled ther eto.
(4) If the Centr al Gover nment fails to tender under sub-section (1) or deposit
under sub-section (2) or sub-section (3) the whole or any par t of the compensa-
tion r equir ed to be tender ed or deposited ther eunder within thir ty days of the
date on which the immovable pr oper ty to which the compensation r elates
becomes vested in the Centr al Gover nment under sub-section (4) of section
269-I, the Centr al Gover nment shall be liable to pay simple inter est at the r ate of
73
[fifteen] per cent per annum r eckoned fr om the day immediately following the
date of expir y of the said per iod up to the date on which it so tender s or deposits
such compensation or , as the case may be, such par t of the compensation.
(5) Wher e any amount of compensation (including inter est, if any, ther eon) has
been deposited in the cour t under this section, the cour t may, either of its own
motion or on an application made by or on behalf of any par ty inter ested or
claiming to be inter ested in such amount, or der the same to be invested in such
Gover nment or other secur ities as it may think pr oper , and may dir ect the
inter est or other pr oceeds of any such investment to be accumulated and paid
in such manner as will, in its opinion, give the par ties inter ested ther ein the same
benefit ther efr om as they might have had fr om the immovable pr oper ty in
r espect wher eof such amount has been deposited or as near ther eto as may be.
Assistance by Valuation Officers.
269L. (1) The competent author ity may,
(a) for the pur pose of initiating pr oceedings for the acquisition of any
immovable pr oper ty under section 269C or for the pur pose of making
an or der under section 269F in r espect of any immovable pr oper ty,
r equir e a Valuation Officer to deter mine the fair mar ket value of such
pr oper ty and r epor t the same to him;
(b) for the pur pose of estimating the amount by which the compensation
payable under sub-section (1) of section 269J in r espect of any
immovable pr oper ty may be r educed or , as the case may be, in-
cr eased under clause (a) or clause (b) of sub-section (2) of that section,
r equir e the Valuation Officer to make such estimate and r epor t the
same to him.
(2) The Valuation Officer to whom a r efer ence is made under clause (a) or
clause (b) of sub-section (1) shall, for the pur pose of dealing with such r efer ence,
have all the power s that he has under section 38A of the Wealth-tax Act, 1957 (27
of 1957).
(3) If in an appeal under section 269G against the or der for acquisition of any
immovable pr oper ty, the fair mar ket value of such pr oper ty is in dispute, the
Appellate Tr ibunal shall, on a r equest being made in this behalf by the competent
author ity, give an oppor tunity of being hear d to any Valuation Officer nominat-
ed for the pur pose by the competent author ity.
Explan ation .In this section, Valuation Officer has the same meaning as in
clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).
1.881 CH. XX-A - ACQUISITION OF IMMOVABLE PROPERTIES S. 269L
Powers of competent authority.
269M. The competent author ity shall have, for the pur poses of this Chapter , all
the power s that a Commissioner has, for the pur poses of this Act, under
section 131.
Rectification of mistakes.
269N. With a view to r ectifying any mistake appar ent fr om the r ecor d, the
competent author ity may amend any or der made by him under this
Chapter at any time befor e the time for pr esenting an appeal against such or der
has expir ed, either on his own motion or on the mistake being br ought to his
notice by any per son affected by the or der :
being hear d.
Appearance by authorised representative or registered valuer.
269-O. Any per son who is entitled or r equir ed to attend befor e a competent
author ity or the Appellate Tr ibunal in any pr oceeding under this Chap-
ter , other wise than when r equir ed to attend per sonally for examination on oath
or affir mation, may attend
(a) by an author ised r epr esentative in connection with any matter ;
(b) by a r egister ed valuer in connection with any matter r elating to the
valuation of any immovable pr oper ty for the pur poses of this Chapter
or the estimation of the amount by which the compensation payable
under sub-section (1) of section 269J for the acquisition of any
immovable pr oper t y may be r educed or , as t he case may be,
incr eased in accor dance with the pr ovisions of clause (a) or clause (b)
of sub-section (2) of that section.
(i) author ised r epr esentative has the same meaning as in section 288 ;
74
(ii) r egister ed valuer has the same meaning as in clause (oaa) of section
2 of the Wealth-tax Act, 1957 (27 of 1957).
Statement to be furnished in respect of transfers of immovable property.
269P.
75
(1) Notwithstanding anything contained in any other law for the time
being in for ce, no r egister ing officer appointed under the Registr ation Act,
1908 (16 of 1908), shall r egister any document which pur por ts to tr ansfer any
immovable pr oper ty belonging to any per son unless a statement in duplicate in
r espect of such tr ansfer , in the pr escr ibed for m and ver ified in the pr escr ibed
manner and setting for th such par ticular s as may be pr escr ibed, is fur nished to
him along with the instr ument of tr ansfer :
S. 269P I.T. ACT, 1961 1.882
74. Expr ession r egister ed valuer has been defined in section 2(oaa) of the Wealth-tax Act,
1957 as under :
(oaa) r egister ed valuer means a per son r egister ed as a valuer under section 34AB;
75. See r ule 48G and For m No. 37G.
76
[Provided that the pr ovisions of this sub-section shall not apply in r elation to any
document which pur por ts to tr ansfer any immovable pr oper ty for an appar ent
consider ation not exceeding
77
[fifty] thousand r upees.
Explan ation .For the pur poses of this pr oviso, appar ent consider ation shall
have the meaning assigned to it in clause (a) of section 269A subject to the
modifications that for the expr essions immovable pr oper ty tr ansfer r ed and
instr ument of tr ansfer occur r ing in that clause, the expr essions immovable
pr oper ty pur por ted to be tr ansfer r ed and document pur por ting to tr ansfer
such immovable pr oper ty shall, r espectively, be substituted.]
(2) The r egister ing officer shall, at the end of ever y for tnight, for war d to the
competent author ity,
(a) one set of the statements r eceived by him under sub-section (1) dur ing
the for tnight ; and
(b)
78
a r etur n in the pr escr ibed for m and ver ified in the pr escr ibed
manner and setting for th such par ticular s as may be pr escr ibed in
r espect of documents of the natur e r efer r ed to in sub-section (1)
which have been r egister ed by him dur ing the for tnight.
Chapter not to apply to transfers to relatives.
269Q. The pr ovisions of this Chapter shall not apply to or in r elation to any
tr ansfer of immovable pr oper ty made by a per son to his r elative on
account of natur al love and affection for a consider ation which is less than its
fair mar ket value if a r ecital to that effect is made in the instr ument of tr ansfer .
Properties liable for acquisition under this Chapter not to be acquired under other
laws.
269R. Notwithstanding anything contained in the Land Acquisition Act, 1894
(1 of 1894), or any cor r esponding law for the time being in for ce, no
immovable pr oper ty r efer r ed to in section 269C shall be acquir ed for any
pur pose of the Union under that Act or such law unless the time for initiation of
pr oceedings for the acquisition of such pr oper ty under this Chapter has expir ed
without such pr oceedings having been initiated or unless the competent autho-
r ity has declar ed that such pr oper ty will not be acquir ed under this Chapter .
79
[Chapter not to apply where transfer of immovable property made after a
certain date.
269RR. The pr ovisions of this Chapter shall not apply to or in r elation to the
tr ansfer of any immovable pr oper ty made after the 30th day of
September , 1986.]
Chapter not to extend to State of Jammu and Kashmir.
269S. The pr ovisions of this Chapter shall not extend to the State of Jammu
and Kashmir .]
1.883 CH. XX-A - ACQUISITION OF IMMOVABLE PROPERTIES S. 269S
78. See r ule 48H and For m No. 37H.
80
[CHAPTER XX-B
REQUIREMENT AS TO MODE OF
81
[ACCEPTANCE, PAYMENT OR]
REPAYMENT IN CERTAIN CASES TO COUNTERACT
EVASION OF TAX
81
[Mode of taking or accepting certain loans and deposits.
82
269SS. No per son shall, after the 30th day of June, 1984, take or accept fr om
any other per son (her eafter in this section r efer r ed to as the depositor ),
any loan or deposit other wise than by an account payee cheque or account payee
bank dr aft if,
(a) the amount of such loan or deposit or the aggr egate amount of such
loan and deposit ; or
(b) on the date of taking or accepting such loan or deposit, any loan or
deposit taken or accepted ear lier by such per son fr om the depositor
is r emaining unpaid (whether r epayment has fallen due or not), the
amount or the aggr egate amount r emaining unpaid ; or
(c) the amount or the aggr egate amount r efer r ed to in clause (a) together
with the amount or the aggr egate amount r efer r ed to in clause (b),
is
83
[twenty] thousand r upees or mor e :
Provided that the pr ovisions of this section shall not apply to any loan or deposit
taken or accepted fr om, or any loan or deposit taken or accepted by,
(a) Gover nment ;
(b) any banking company, post office savings bank or co-oper ative bank;
(c) any cor por ation established by a Centr al, State or Pr ovincial Act ;
(d) any Gover nment company
84
nies Act, 1956 (1 of 1956) ;
(e) such other institution, association or body or class of institutions,
associations or bodies which the Centr al Gover nment may, for
r easons to be r ecor ded in wr iting, notify
85
in this behalf in the Official
Gazette :
86
[Provided further that the pr ovisions of this section shall not apply to any loan
or deposit wher e the per son fr om whom the loan or deposit is taken or accepted
and the per son by whom the loan or deposit is taken or accepted ar e both having
agr icultur al income and neither of them has any income char geable to tax under
this Act.]
S. 269SS I.T. ACT, 1961 1.884
80. Chapt er XX-B inser t ed by t he Income-t ax (Second Amendment ) Act , 1981, w.e.f.
11-7-1981.
Income-tax Act.
83. Substituted for ten by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
85. For notification specifying institution, see Taxmanns Master Guide to Income-tax Act.
87
[(i) banking company means a company to which the Banking Regula-
tion Act, 1949 (10 of 1949), applies and includes any bank or banking
institution r efer r ed to in section 51 of that Act ;]
(ii) co-oper ative bank shall have the meaning assigned to it in Par t V of
the Banking Regulation Act, 1949 (10 of 1949) ;
(iii) loan or deposit means loan or deposit of money.]
88
[Mode of repayment of certain loans or deposits
89
.
269T. No br anch of a banking company or a co-oper ative bank and no other
company or co-oper ative society and no fir m or other per son shall r epay
any loan or deposit made with it other wise than by an account payee cheque or
account payee bank dr aft dr awn in the name of the per son who has made the
loan or deposit if
(a) the amount of the loan or deposit together with the inter est, if any,
payable ther eon, or
(b) the aggr egate amount of the loans or deposits held by such per son
with the br anch of the banking company or co-oper ative bank or , as
the case may be, the other company or co-oper ative society or the
fir m, or other per son either in his own name or jointly with any other
per son on the date of such r epayment together with the inter est, if
any, payable on such loans or deposits,
is twenty thousand r upees or mor e:
Provided that wher e the r epayment is by a br anch of a banking company or co-
oper ative bank, such r epayment may also be made by cr editing the amount of
such loan or deposit to the savings bank account or the cur r ent account (if any)
with such br anch of the per son to whom such loan or deposit has to be r epaid :
90
[Provided further that nothing contained in this section shall apply to r epay-
ment of any loan or deposit taken or accepted fr om
(i) Gover nment;
(ii) any banking company, post office savings bank or co-oper ative bank;
(iii) any cor por ation established by a Centr al, State or Pr ovincial Act;
(iv) any Gover nment company
91
nies Act, 1956 (1 of 1956);
1.885 CH. XX-B - REQUIREMENT AS TO MODE OF ACCEPTANCE, ETC. S. 269T
87. Substituted by the Finance Act, 1985, w.e.f. 1-4-1986. See also Appendix for meaning of
banking company.
88. Substituted by the Finance Act, 2002, w.e.f. 1-6-2002. Pr ior to its substitution, section 269T
was inser ted by the Income-tax (Second Amendment) Act, 1981, w.e.f. 11-7-1981 and later
on amended by the Finance Act, 1984, w.e.f. 1-4-1984, Finance Act, 1985, w.e.f. 1-4-1986 and
89. For the meaning of the ter m deposit, see Taxmanns Dir ect Taxes Manual, Vol. 3. See also
Cir cular No. 479, dated 16-1-1987, Cir cular No. 522, dated 18-8-1988 and Cir cular No. 556,
(v) such other institution, association or body or class of institutions,
associations or bodies which the Centr al Gover nment may, for
r easons to be r ecor ded in wr iting, notify in this behalf in the Official
Gazette.]
(i) banking company shall have the meaning assigned to it in clause (i)
of the Explan ation to section 269SS;
(ii) co-oper ative bank shall have the meaning assigned to it in Par t V of
the Banking Regulation Act, 1949 (10 of 1949);
(iii) loan or deposit means any loan or deposit of money which is
r epayable after notice or r epayable after a per iod and, in the case of
a per son other than a company, includes loan or deposit of any
natur e.]
92
[Mode of repayment of Special Bearer Bonds, 1991.
269TT. Notwithstanding anything contained in any other law for the time being
in for ce, the amount payable on r edemption of Special Bear er Bonds,
1991, shall be paid only by an account payee cheque or account payee bank
dr aft dr awn in the name of the per son to whom such payment is to be made.]
93
[CHAPTER XX-C
PURCHASE BY CENTRAL GOVERNMENT OF IMMOVABLE
PROPERTIES IN CERTAIN CASES OF TRANSFER
Commencement of Chapter.
269U. The pr ovisions of this Chapter shall come into for ce on such date as the
94
in the Official Gazette, appoint,
and differ ent dates may be appointed for differ ent ar eas.
Definitions.
269UA. In this Chapter , unless the context other wise r equir es,
(a) agr eement for tr ansfer means an agr eement, whether r egister ed
under the Registr ation Act, 1908 (16 of 1908) or not, for the tr ansfer
of any immovable pr oper ty ;
(b) appar ent consider ation,
(1) in r elation to any immovable pr oper ty in r espect of which an
agr eement for tr ansfer is made, being immovable pr oper ty of the
natur e r efer r ed to in sub-clause (i) of clause (d), means,
(i) if the immovable pr oper ty is to be tr ansfer r ed by way of sale,
the consider ation for such tr ansfer as specified in the agr ee-
ment for tr ansfer ;
S. 269UA I.T. ACT, 1961 1.886
93. Chapter XX-C, consisting of sections 269U to 269UO, inser ted by the Finance Act, 1986,
w.e.f. 1-10-1986, vide Notification No. SO 480(E), dated 7-8-1986.
94. For specified ar eas to which the pr ovisions of this Chapter would apply, see foot not e 3
on p. 1.890 post.
1.887 CH. XX-C - PURCHASE OF IMMOVABLE PROPERTIES S. 269UA
(ii) if the immovable pr oper ty is to be tr ansfer r ed by way of
exchange,
consists of a thing
95
or things only, the pr ice that such
thing or things would or dinar ily fetch on sale in the
open mar ket on the date on which the agr eement for
tr ansfer is made ;
(B) in a case where the consideration for the transfer consists
of a thing or things and a sum of money, the aggr egate
of the pr ice that such thing or things would or dinar ily
fetch on sale in the open mar ket on the date on which
the agr eement for tr ansfer is made, and such sum ;
(iii) if the immovable pr oper ty is to be tr ansfer r ed by way of
lease,
consists of pr emium only, the amount of pr emium as
specified in the agr eement for tr ansfer ;
consists of r ent only, the aggr egate of the moneys (if
any) payable by way of r ent and the amounts for the
ser vice or things for ming par t of or constituting the
r ent, as specified in the agr eement for tr ansfer ;
(C) in a case wher e the consider ation for the tr ansfer
consists of pr emium and r ent, the aggr egate of the
amount of the pr emium, the moneys (if any) payable by
way of r ent and the amounts for the ser vice or things
for ming par t of or constituting the r ent, as specified in
the agr eement for tr ansfer ,
such agr eement for tr ansfer , the value of the consider ation
payable after such date shall be deemed to be the discounted
value
96
of such consider ation, as on the date of such agr eement
for tr ansfer , deter mined by adopting such r ate of inter est as may
be pr escr ibed in this behalf ;
(2) in r elation to any immovable pr oper ty in r espect of which an
agr eement for tr ansfer is made, being immovable pr oper ty of the
natur e r efer r ed to in sub-clause (ii) of clause (d), means,
(i) in a case wher e the consider ation for the tr ansfer consists of
a sum of money only, such sum ;
(ii) in a case wher e the consider ation for the tr ansfer consists of
a thing or things only, the pr ice that such thing or things
95. For the meaning of the ter m thing, see Taxmanns Dir ect Taxes Manual, Vol. 3.
96. Rate of inter est for deter mination of discounted value is 8 per cent per annum vide r ule
48-I.
would or dinar ily fetch on sale in the open mar ket on the date
on which the agr eement for tr ansfer is made ;
(iii) in a case wher e the consider ation for the tr ansfer consists of
a thing or things and a sum of money, the aggr egate of the
pr ice that such thing or things would or dinar ily fetch on sale
in the open mar ket on the date on which the agr eement for
tr ansfer is made, and such sum,
such agr eement for tr ansfer , the value of the consider ation
payable after such date shall be deemed to be the discounted
value
96a
of such consider ation, as on the date of such agr eement
for tr ansfer , deter mined by adopting such r ate of inter est as may
be pr escr ibed in this behalf ;
97
(c) appr opr iate author ity means an author ity constituted under section
269UB to per for m the functions of an appr opr iate author ity under
this Chapter ;
(d) immovable pr oper ty means
(i) any land or any building or par t of a building, and includes, wher e
any land or any building or par t of a building is to be tr ansfer r ed
together with any machiner y, plant, fur nitur e, fittings or other
things, such machiner y, plant, fur nitur e, fittings or other things
also.
Explan ation .For the pur poses of this sub-clause, land, build-
ing, par t of a building, machiner y, plant, fur nitur e, fittings and
other things include any r ights ther ein ;
(ii) any r ights in or with r espect to any land or any building or a par t
of a building (whether or not including any machiner y, plant,
fur nitur e, fittings or other things ther ein) which has been con-
str ucted or which is to be constr ucted, accr uing or ar ising fr om
any tr ansaction (whether by way of becoming a member of, or
acquir ing shar es in, a co-oper ative society, company or other
association of per sons or by way of any agr eement or any
ar r angement of whatever natur e), not being a tr ansaction by way
of sale, exchange or lease of such land, building or par t of a
building ;
(e) per son inter ested
98
, in r elation to any immovable pr oper ty, includes
all per sons claiming, or entitled to claim, an inter est in the consider -
ation payable on account of the vesting of that pr oper ty in the Centr al
Gover nment under this Chapter ;
(f) tr ansfer
98
,
S. 269UA I.T. ACT, 1961 1.888
96a. Rate of inter est for deter mination of discounted value is 8 per cent per annum vide r ule
48-I.
97. See r ule 48J.
98. For t he meaning of t he t er ms/ expr essions per son int er est ed and t r ansfer , see
(i) in r elation to any immovable pr oper ty r efer r ed to in sub-clause
(i) of clause (d), means tr ansfer of such pr oper ty by way of sale or
exchange or lease for a ter m of not less than twelve year s, and
includes allowing the possession of such pr oper ty to be taken or
r etained in par t per for mance of a contr act of the natur e r efer r ed
to in section 53A
99
of the Tr ansfer of Pr oper ty Act, 1882 (4 of 1882).
Explan ation .For the pur poses of this sub-clause, a lease which
pr ovides for the extension of the ter m ther eof by a fur ther ter m
or ter ms shall be deemed to be a lease for a ter m of not less than
twelve year s, if the aggr egate of the ter m for which such lease is
to be gr anted and the fur ther ter m or ter ms for which it can be
so extended is not less than twelve year s ;
(ii) in r elation to any immovable pr oper ty of the natur e r efer r ed to
in sub-clause (ii) of clause (d), means the doing of anything
(whether by way of admitting as a member of or by way of
tr ansfer of shar es in a co-oper ative society or company or other
association of per sons or by way of any agr eement or ar r ange-
ment or in any other manner whatsoever ) which has the effect of
tr ansfer r ing, or enabling the enjoyment of, such pr oper ty.
Appropriate authority.
269UB. (1) The Centr al Gover nment may, by or der , publish in the Official
Gazette,
(a) constitute as many appr opr iate author ities, as it thinks fit, to per for m
the functions of an appr opr iate author ity under this Chapter ; and
(b) define the local limits within which the appr opr iate author ities shall
per for m their functions under this Chapter .
(2) An appr opr iate author ity shall consist of thr ee per sons, two of whom shall be
member s of the Indian Income-tax Ser vice, Gr oup A, holding the post of
Commissioner of Income-tax or any equivalent or higher post, and one shall be
a member of the Centr al Engineer ing Ser vice, Gr oup A, holding the post of Chief
Engineer or any equivalent or higher post.
(3) In r espect of any function to be per for med by an appr opr iate author ity under
any pr ovision of this Chapter in r elation to any immovable pr oper ty r efer r ed to
in section 269UC, the appr opr iate author ity r efer r ed to ther ein shall,
(a) in a case wher e such pr oper ty is situate within the local limits of the
jur isdiction of only one appr opr iate author ity, be such appr opr iate
author ity ;
(b) in a case wher e such pr oper ty is situate within the local limits of the
jur isdiction of two or mor e appr opr iate author ities, be the appr opr i-
ate author ity empower ed to per for m such functions in r elation to
such pr oper ty in accor dance with the r ules
1
made in this behalf by the
Boar d under section 295.
1.889 CH. XX-C - PURCHASE OF IMMOVABLE PROPERTIES S. 269UB
1. See r ule 48J.
Explan ation .For the pur poses of this sub-section, immovable pr oper ty being
r ights of the natur e r efer r ed to in sub-clause (ii) of clause (d) of section 269UA
in, or with r espect to, any land or any building or par t of a building which has been
constr ucted or which is to be constr ucted shall be deemed to be situate at the
place wher e the land is situate or , as the case may be, wher e the building has been
constr ucted or is to be constr ucted.
Restrictions on transfer of immovable property.
269UC. (1) Notwithstanding anything contained in the Tr ansfer of Pr oper ty
Act, 1882 (4 of 1882), or in any other law for the time being in for ce,
2
[no
tr ansfer of any immovable pr oper ty in such ar ea and of such value exceeding
five lakh r upees, as may be pr escr ibed
3
], shall be effected except after an
agr eement for t r ansfer is ent er ed int o bet ween t he per son who int ends
tr ansfer r ing the immovable pr oper ty (her einafter r efer r ed to as the tr ansfer or )
and the per son to whom it is pr oposed to be tr ansfer r ed (her einafter r efer r ed to
as the tr ansfer ee) in accor dance with the pr ovisions of sub-section (2) at least
4
[four ] months befor e the intended date of tr ansfer .
(2) The agr eement r efer r ed to in sub-section (1) shall be r educed to wr iting in
the for m of a statement by each of the par ties to such tr ansfer or by any of the
par ties to such tr ansfer acting on behalf of himself and on behalf of the other
par ties.
5
(3) Ever y statement r efer r ed to in sub-section (2) shall,
S. 269UC I.T. ACT, 1961 1.890
2. Substituted for no tr ansfer of any immovable pr oper ty of such value exceeding five lakh
r upees as may be pr escr ibed by the Finance Act, 1995, w.e.f. 1-7-1995.
3. Rule 48K pr ovides t hat t he value of any immovable pr oper t y for t he pur poses of
section 269UC(1) shall be, wher e the agr eement for tr ansfer pr escr ibed under the said
sub-sect ion
(a) is enter ed into on or befor e 31-7-1995, the appar ent consider ation of that pr oper ty
exceeding Rs. 10 lakhs ;
(b) is enter ed into after 31-7-1995, the appar ent consider ation of the pr oper ty exceed-
ing the amounts given in Table :
Area with in wh ich th e appropriate auth orities Value of an y immov-
sh all perform th eir fun ction able property exceeds
Ar ea compr ised in Gr eater Bombay Rs. 75 lakhs
Ar ea compr ised in Union Ter r itor y of Delhi Rs. 50 lakhs
Ar eas compr ised in
Calcutta Metr opolitan Ar ea and Madr as Metr opolitan Rs. 25 lakhs
Ar ea
Bangalor e Metr opolitan Region, Ahmedabad Ur ban Rs. 25 lakhs
Development Ar ea and City of Ahmedabad
City of Pune Rs. 25 lakhs
Other notified ar eas (Chandigar h, Jaipur , Tr ivandr um, Rs. 20 lakhs
Coch in , Na gpu r , Pa t n a , Bh opa l, In d or e, Cu t t a ck,
Bh u b a n e s h wa r , Hyd e r a b a d , Ka n pu r , Lu c kn ow,
Coimba t or e, Ma du r a i, Su r a t , Gu r ga on, Fa r ida ba d,
Bar oda, Ghaziabad and Noida)
4. Substituted for thr ee by the Finance Act, 1993, w.e.f. 1-6-1993.
5. See r ule 48L and For m No. 37-I for for m of statement to be fur nished to the appr opr iate
author ity. The statement shall be fur nished in duplicate, befor e expir y of 15 days fr om the
date on which agr eement for tr ansfer is enter ed into.
(i) be in the pr escr ibed for m ;
(ii) set for th such par ticular s as may be pr escr ibed ; and
(iii) be ver ified in the pr escr ibed manner ,
and shall be fur nished to the appr opr iate author ity in such manner and within
such time as may be pr escr ibed, by each of the par ties to such tr ansaction or by
any of the par ties to such tr ansaction acting on behalf of himself and on behalf
of the other par ties.
6
[(4) Wher e it is found that the statement r efer r ed to in sub-section (2) is defective,
the appr opr iate author ity may intimate the defect to the par ties concer ned and
give them an oppor tunity to r ectify the defect within a per iod of fifteen days fr om
the date of such intimation or within such fur ther per iod which, on an application
made in this behalf, the appr opr iate author ity may, in its discr etion, allow and if
the defect is not r ectified within the said per iod of fifteen days, or as the case may
be, the fur ther per iod so allowed, then, notwithstanding anything contained in
any other pr ovision of this Chapter , the statement shall be deemed never to have
been fur nished.]
Order by appropriate authority for purchase by Central Government of immov-
able property.
269UD. (1)
7
[Subject to the pr ovisions of sub-sections (1A) and (1B), the
appr opr iate author ity], after the r eceipt of the statement under sub-
section (3) of section 269UC in r espect of any immovable pr oper ty, may,
notwithstanding anything contained in any other law or any instr ument or any
agr eement for the time being in for ce,
8
[* * *] make an or der for the pur chase by
the Centr al Gover nment of such immovable pr oper ty at an amount equal to the
amount of appar ent consider ation :
Provided that no such or der shall be made in r espect of any immovable pr oper ty
after the expir ation of a per iod of two months fr om the end of the month in which
the statement r efer r ed to in section 269UC in r espect of such pr oper ty is r eceived
by the appr opr iate author ity :
9
[Provided further that wher e the statement r efer r ed to in section 269UC in
r espect of any immovable pr oper ty is r eceived by the appr opr iate author ity on
or after the 1st day of June, 1993, the pr ovisions of the fir st pr oviso shall have
effect as if for the wor ds two months, the wor ds thr ee months had been
substituted :]
10
[Provided also that the per iod of limitation r efer r ed to in the second pr oviso
shall be r eckoned, wher e any defect as r efer r ed to in sub-section (4) of section
269UC has been intimated, with r efer ence to the date of r eceipt of the r ectified
statement by the appr opr iate author ity :]
1.891 CH. XX-C - PURCHASE OF IMMOVABLE PROPERTIES S. 269UD
7. Substituted for The appr opr iate author ity by the Finance Act, 1993, w.r .e.f. 17-11-1992.
8. Wor ds and for r easons to be r ecor ded in wr iting, omitted, ibid.
Provided
11
[also] that in a case wher e the statement r efer r ed to in section 269UC
in r espect of the immovable pr oper ty concer ned is given to an appr opr iate
author ity, other than the appr opr iate author ity having jur isdiction in accor dance
with the pr ovisions of section 269UB to make the or der r efer r ed to in this sub-
section in r elation to the immovable pr oper ty concer ned, the per iod of limitation
r efer r ed to in
12
[the fir st and second pr ovisos] shall be r eckoned with r efer ence
to the date of r eceipt of the statement by the appr opr iate author ity having
jur isdiction to make the or der under this sub-section :
13
[Provided also that the per iod of limitation r efer r ed to in the second pr oviso
shall be r eckoned, wher e any stay has been gr anted by any cour t against the
passing of an or der for the pur chase of the immovable pr oper ty under this
Chapter , with r efer ence to the date of vacation of the said stay.]
14
[(1A) Befor e making an or der under sub-section (1), the appr opr iate author ity
shall give a r easonable oppor tunity of being hear d to the tr ansfer or , the per son
in occupation of the immovable pr oper ty if the tr ansfer or is not in occupation of
the pr oper ty, the tr ansfer ee and to ever y other per son whom the appr opr iate
author ity knows to be inter ested
15
in the pr oper ty.
(1B) Ever y or der made by the appr opr iate author ity under sub-section (1) shall
specify the gr ounds on which it is made.]
(2) The appr opr iate author ity shall cause a copy of its or der under sub-section
(1) in r espect of any immovable pr oper ty to be ser ved on the tr ansfer or , the
per son in occupation of the immovable pr oper ty if the tr ansfer or is not in
occupation ther eof, the tr ansfer ee, and on ever y other per son whom the
appr opr iate author ity knows to be inter ested in the pr oper ty.
Vesting of property in Central Government.
269UE. (1) Wher e an or der under sub-section (1) of section 269UD is made by
the appr opr iate author ity in r espect of an immovable pr oper ty r efer r ed
to in sub-clause (i) of clause (d) of section 269UA, such pr oper ty shall, on the date
of such or der , vest in the Centr al Gover nment
16
[in ter ms of the agr eement for
tr ansfer
17
r efer r ed to in sub-section (1) of section 269UC] :
18
[Provided that wher e the appr opr iate author ity, after giving an oppor tunity of
being hear d to the tr ansfer or , the tr ansfer ee or other per sons inter ested in the
said pr oper ty, under sub-section (1A) of section 269UD, is of the opinion that any
encumbr ance on the pr oper ty or leasehold inter est specified in the afor esaid
agr eement for tr ansfer is so specified with a view to defeat the pr ovisions of this
S. 269UE I.T. ACT, 1961 1.892
11. Substituted for fur ther by the Finance Act, 1993, w.e.f. 1-6-1993.
12. Substituted for the pr eceding pr oviso, ibid.
15. For the meaning of the expr ession per son . . . inter ested, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
16. Substituted for fr ee fr om all encumbr ances by the Finance Act, 1993, w.r .e.f. 17-11-1992.
17. For the meaning of the expr ession in ter ms of the agr eement for tr ansfer , see Taxmanns
Chapter , it may, by or der , declar e such encumbr ance or leasehold inter est to be
void and ther eupon the afor esaid pr oper ty shall vest in the Centr al Gover nment
fr ee fr om such encumbr ance or leasehold inter est.]
(2) The tr ansfer or or any other per son who may be in possession of the
immovable pr oper ty in r espect of which an or der under sub-section (1) of section
269UD is made, shall sur r ender or deliver possession ther eof to the appr opr iate
author ity or any other per son duly author ised by the appr opr iate author ity in this
behalf within fifteen days of the ser vice of such or der on him :
18a
[Provided that the pr ovisions of this sub-section and sub-sections (3) and (4)
shall not apply wher e the per son in possession of the immovable pr oper ty, in
r espect of which an or der under sub-section (1) of section 269UD is made, is a
bon a fide holder of any encumbr ance on such pr oper ty or a bon a fide lessee of
such pr oper ty, if the said encumbr ance or lease has not been declar ed void under
the pr oviso to sub-section (1) and such per son is eligible to continue in possession
of such pr oper ty even after the tr ansfer in ter ms of the afor esaid agr eement for
tr ansfer .]
(3) If any per son r efuses or fails to comply with the pr ovisions of sub-section (2),
the appr opr iate author ity or other per son duly author ised by it under that sub-
section may take possession of the immovable pr oper ty and may, for that
pur pose, use such for ce as may be necessar y.
(4) Notwithstanding anything contained in sub-section (2), the appr opr iate
author ity may, for the pur pose of taking possession of any pr oper ty r efer r ed to
in sub-section (1), r equisition the ser vices of any police officer to assist him and
it shall be the duty of such officer to comply with such r equisition.
(5) For the r emoval of doubts, it is her eby declar ed that nothing in this section
shall oper ate to dischar ge the tr ansfer or or any other per son (not being the
Centr al Gover nment) fr om liability in r espect of any encumbr ances on the
pr oper ty and, notwithstanding anything contained in any other law for the time
being in for ce, such liability may be enfor ced against the tr ansfer or or such other
person.
(6) Wher e an or der under sub-section (1) of section 269UD is made in r espect of
an immovable pr oper ty, being r ights of the natur e r efer r ed to in sub-clause (ii)
of clause (d) of section 269UA, such or der shall have the effect of
(a) vesting such r ight in the Centr al Gover nment ; and
(b) placing the Centr al Gover nment in the same position in r elation to
such r ights as the per son in whom such a r ight would have continued
to vest if such or der had not been made.
(7) Wher e any r ights in r espect of any immovable pr oper ty, being r ights in, or
with r espect to, any land or any building or par t of a building which has been
constr ucted or which is to be constr ucted, have been vested in the Centr al
Gover nment under sub-section (6), the pr ovisions of sub-sections (1), (2), (3) and
(4) shall, so far as may be, have effect as if the r efer ences to immovable pr oper ty
ther ein wer e r efer ences to such land or building or par t ther eof, as the case may
be.
1.893 CH. XX-C - PURCHASE OF IMMOVABLE PROPERTIES S. 269UE
Consideration for purchase of immovable property by Central Government.
269UF. (1) Wher e an or der for the pur chase of any immovable pr oper ty by the
Centr al Gover nment is made under sub-section (1) of section 269UD, the
Centr al Gover nment shall pay, by way of consider ation for such pur chase, an
amount equal to the amount of the appar ent consider ation.
(2) Notwithstanding anything contained in sub-section (1), wher e, after the
agr eement for the tr ansfer of the immovable pr oper ty r efer r ed to in that sub-
section has been made but befor e the pr oper ty vests in the Centr al Gover nment
under section 269UE, the pr oper ty has been damaged (other wise than as a r esult
of nor mal wear and tear ), the amount of the consider ation payable under that
sub-section shall be r educed by such sum as the appr opr iate author ity, for
r easons to be r ecor ded in wr iting, may by or der deter mine.
Payment or deposit of consideration.
269UG. (1) The amount of consider ation payable in accor dance with the
pr ovisions of section 269UF shall be tender ed to the per son or per sons
entitled ther eto, within a per iod of one month fr om the end of the month in which
the immovable pr oper ty concer ned becomes vested in the Centr al Gover nment
under sub-section (1), or , as the case may be, sub-section (6), of section 269UE :
Provided that if any liability for any tax or any other sum r emaining payable
under this Act, the Wealth-tax Act, 1957 (27 of 1957), the Gift-tax Act, 1958 (18 of
1958), the Estate Duty Act, 1953 (34 of 1953), or the Companies (Pr ofits) Sur tax
Act, 1964 (7 of 1964), by any per son entitled to the consider ation payable under
section 269UF, the appr opr iate author ity may, in lieu of the payment of the
amount of consider ation, set off the amount of consider ation or any par t ther eof
against such liability or sum, after giving an intimation in this behalf to the per son
entitled to the consider ation.
(2) Notwithstanding anything contained in sub-section (1), if any dispute ar ises
as to the appor tionment of the amount of consider ation amongst per sons
claiming to be entitled ther eto, the Centr al Gover nment shall deposit with the
appr opr iate author ity the amount of consider ation r equir ed to be tender ed
under sub-section (1) within the per iod specified ther ein.
(3) Notwithstanding anything contained in sub-section (1), if the per son entitled
to the amount of consider ation does not consent to r eceive it, or if ther e is any
dispute
19
as to the title
19
to r eceive the amount of consider ation, the Centr al
Gover nment shall deposit wit h t he appr opr iat e aut hor it y t he amount of
consider ation r equir ed to be tender ed under sub-section (1) within the per iod
specified ther ein :
Provided that nothing her ein contained shall affect the liability of any per son
who may r eceive the whole or any par t of the amount of consider ation for any
immovable pr oper ty vested in the Centr al Gover nment under this Chapter to pay
the same to the per son lawfully entitled ther eto.
(4) Wher e any amount of consider ation has been deposited with the appr opr iate
author ity under this section, the appr opr iate author ity may, either of its own
S. 269UG I.T. ACT, 1961 1.894
19. For the meaning of the ter ms dispute and title, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
motion or on an application made by or on behalf of any per son inter ested or
claiming to be inter ested in such amount, or der the same to be invested in such
Gover nment or other secur ities as it may think pr oper , and may dir ect the
inter est or other pr oceeds of any such investment to be accumulated and paid
in such manner as will, in its opinion, give the par ties inter ested ther ein the same
benefits ther efr om as they might have had fr om the immovable pr oper ty in
r espect wher eof such amount has been deposited or as near ther eto as may be.
Re-vesting of property in the transferor on failure of payment or deposit of
consideration.
269UH. (1) If the Centr al Gover nment fails to tender under sub-section (1) of
section 269UG or deposit under sub-section (2) or sub-section (3) of the
said section, the whole or any par t of the amount of consider ation r equir ed to be
tender ed or deposited ther eunder within the per iod specified ther ein in r espect
of any immovable pr oper ty which has vested in the Centr al Gover nment under
sub-section (1) or , as the case may be, sub-section (6) of section 269UE, the or der
to pur chase the immovable pr oper ty by the Centr al Gover nment made under
sub-section (1) of section 269UD shall stand abr ogated and the immovable
pr oper ty shall stand r e-vested in the tr ansfer or after the expir y of the afor esaid
per iod :
Provided that wher e any dispute r efer r ed to in sub-section (2) or sub-section (3)
of section 269UG is pending in any cour t for decision, the time taken by the cour t
to pass a final or der under the said sub-sections shall be excluded in computing
the said per iod.
(2) Wher e an or der made under sub-section (1) of section 269UD is abr ogated
and the immovable pr oper ty r e-vested in the tr ansfer or under sub-section (1), the
appr opr iate author ity shall make, as soon as may be, a declar ation in wr iting to
this effect and shall
(a) deliver a copy of the declar ation to the per sons mentioned in sub-
section (2) of section 269UD ; and
(b) deliver or cause t o be deliver ed possession of t he immovable
pr oper ty back to the tr ansfer or , or , as the case may be, to such other
per son as was in possession of the pr oper ty at the time of its vesting
in the Centr al Gover nment under section 269UE.
Powers of the appropriate authority.
269UI. The appr opr iate author ity shall have, for the pur poses of this Chapter ,
all the power s that a
20
[Chief Commissioner or Commissioner ] of
Income-tax has for the pur poses of this Act under section 131.
Rectification of mistakes.
269UJ. With a view to r ectifying any mistake appar ent fr om the r ecor d, the
appr opr iate author ity may amend any or der made by it under this
Chapter , either on its own motion or on the mistake being br ought to its notice
by any per son affected by the or der :
1.895 CH. XX-C - PURCHASE OF IMMOVABLE PROPERTIES S. 269UJ
1-4-1988.
being hear d :
Provided further that no amendment shall be made under this section after the
expir y of six months fr om the end of the month in which the or der sought to be
amended was made.
Restrictions on revocation or alteration of certain agreements for the transfer of
immovable property or on transfer of certain immovable property.
269UK. (1) Notwithstanding anything contained in any other law for the time
being in for ce, no per son shall r evoke or alter an agr eement for the
tr ansfer of an immovable pr oper ty or tr ansfer such pr oper ty in r espect of which
a statement has been fur nished under section 269UC unless,
(a) the appr opr iate author ity has not made an or der for the pur chase of
the immovable pr oper ty by the Centr al Gover nment under section
269UD and the per iod specified for the making of such or der has
expir ed ; or
(b) in a case wher e an or der for the pur chase of the immovable pr oper ty
by the Centr al Gover nment has been made under sub-section (1) of
section 269UD, the or der stands abr ogated under sub-section (1) of
section 269UH.
(2) Any tr ansfer of any immovable pr oper ty made in contr avention of the
pr ovisions of sub-section (1) shall be void.
Restrictions on registration, etc., of documents in respect of transfer of immov-
able property.
269UL. (1) Notwithstanding anything contained in any other law for the time
being in for ce, no r egister ing officer appointed under the Registr ation
Act, 1908 (16 of 1908), shall r egister any document which pur por ts to tr ansfer
immovable pr oper ty exceeding the value pr escr ibed under section 269UC unless
a cer tificate fr om the appr opr iate author ity that it has no objection to the tr ansfer
of such pr oper ty for an amount equal to the appar ent consider ation ther efor as
stated in the agr eement for tr ansfer of the immovable pr oper ty in r espect of
which it has r eceived a statement under sub-section (3) of section 269UC, is
fur nished along with such document.
(2) Notwithstanding anything contained in any other law for the time being in
for ce, no per son shall do anything or omit to do anything which will have the
effect of tr ansfer of any immovable pr oper ty unless the appr opr iate author ity
cer tifies that it has no objection to the tr ansfer of such pr oper ty for an amount
equal to the appar ent consider ation ther efor as stated in the agr eement for
tr ansfer of the immovable pr oper ty in r espect of which it has r eceived a
statement under sub-section (3) of section 269UC.
(3) In a case wher e the appr opr iate author ity does not make an or der under sub-
section (1) of section 269UD for the pur chase by the Centr al Gover nment of an
immovable pr oper t y, or wher e t he or der made under sub-sect ion (1) of
section 269UD stands abr ogated under sub-section (1) of section 269UH, the
S. 269UL I.T. ACT, 1961 1.896
appr opr iate author ity shall issue a cer tificate of no objection r efer r ed to in
sub-section (1) or , as the case may be, sub-section (2) and deliver copies ther eof
to the tr ansfer or and the tr ansfer ee.
Immunity to transferor against claims of transferee for transfer.
269UM. Notwithstanding anything contained in any other law or in any
instr ument or any agr eement for the time being in for ce, when an or der
for the pur chase of any immovable pr oper ty by the Centr al Gover nment is made
under this Chapter , no claim by the tr ansfer ee shall lie against the tr ansfer or by
r eason of such tr ansfer being not in accor dance with the agr eement for the
tr ansfer of the immovable pr oper ty enter ed into between the tr ansfer or and
tr ansfer ee :
Provided that nothing contained in this section shall apply if the or der for the
pur chase of the immovable pr oper ty by the Centr al Gover nment is abr ogated
under sub-section (1) of section 269UH.
Order of appropriate authority to be final and conclusive.
269UN. Save as other wise pr ovided in this Chapter , any or der made under
sub-section (1) of section 269UD or any or der made under sub-section
(2) of section 269UF shall be final and conclusive and shall not be called in
question in any pr oceeding under this Act or under any other law for the time
being in for ce.
Chapter not to apply to certain transfers.
269UO. The pr ovisions of this Chapter shall not apply to or in r elation to any
immovable pr oper ty wher e the agr eement for tr ansfer of such pr oper -
ty is made by a per son to his r elative on account of natur al love and affection,
if a r ecital to that effect is made in the agr eement for tr ansfer .]
21
[Chapter not to apply where transfer of immovable property effected after
certain date.
269UP. The pr ovisions of this Chapter shall not apply to, or in r elation to, the
tr ansfer of any immovable pr oper ty effected on or after the 1st day of
July, 2002.]
CHAPTER XXI
PENALTIES IMPOSABLE
Failure to furnish information regarding securities, etc.
270.
22
1.897 CH. XXI - PENALTIES IMPOSABLE S. 270
22. Ear lier , section 270 was amended by the Taxation Laws (Amendment & Miscellaneous
23
[Failure to furnish returns, comply with notices, concealment of income, etc.
24
271. (1) If the
25
26
[***]
27
28
[or the Commissioner ] in the cour se of any pr oceedings under this Act,
is satisfied that any per son
(a)
29
[* * *]
(b) has
30
[* * *] failed to comply with a notice
31
[under sub-section (2) of
section 115WD or under sub-section (2) of section 115WE or ] under
sub-section (1) of section 142 or sub-section (2) of section 143
32
[or
fails to comply with a dir ection issued under sub-section (2A) of
section 142], or
(c) has concealed the par ticular s of his income or
33
[* * *] fur nished
inaccur ate par ticular s of
34
[such income, or ]
35
36
[(d) has concealed the par ticular s of the fr inge benefits or fur nished
inaccur ate par ticular s of such fr inge benefits,]
he may dir ect that such per son shall pay by way of penalty,
(i)
37
[* * *]
38
[(ii) in the cases r efer r ed to in clause (b),
39
[in addition to tax, if any, payable]
by him,
40
[a sum of ten thousand r upees] for each such failur e ;]
S. 271 I.T. ACT, 1961 1.898
23. Restor ed to its or iginal ver sion by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
24. See also r elevant extr acts of Minutes of 10th Meeting of DTAC held on 23-12-1967 and
Cir cular No. 17D of 1965. For details, see Taxmanns Master Guide to Income-tax Act.
1-4-1988.
w.e.f. 1-10-1998. Ear lier , Deputy Commissioner (Appeals) was substituted for Appellate
Assistant Commissioner by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988
and or the was inser ted by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978.
omission, clause (a) was amended by the Finance Act, 1963, w.e.f. 28-4-1963 and Taxation
Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f. 10-9-1986.
30. Wor ds without r easonable cause omitted by the Taxation Laws (Amendment & Miscel-
33. Wor d deliber ately omitted by the Finance Act, 1964, w.e.f. 1-4-1964.
34. Substituted for such income, by the Finance Act, 2005, w.e.f. 1-4-2006.
35. For the meaning of the expr essions his income and has concealed . . . of such income,
omission, clause (i) was substituted by the Dir ect Taxes (Amendment) Act, 1974, w.r .e.f.
1-4-1962 and the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
39. Substituted for in addition to any tax payable by the Finance Act, 2002, w.e.f. 1-4-2003.
40. Substituted for a sum which shall not be less than one thousand r upees but which may
extend to twenty-five thousand r upees by the Finance Act, 2001, w.e.f. 1-6-2001.
41
[(iii) in the cases r efer r ed to in clause (c)
42
[or clause (d)],
43
[in addition to
tax, if any, payable] by him, a sum which shall not be less than, but
which shall not exceed
44
[thr ee times], the amount of tax sought to
be evaded by r eason of the concealment of par ticular s of his income
45
[or fr inge benefits] or the fur nishing of inaccur ate par ticular s of
such income
45
[or fr inge benefits].
46
[* * *]
47
[Explan ation 1.Wher e in r espect of any facts mater ial to the computation of
the total income of any per son under this Act,
(A) such per son fails to offer an explanation or offer s an explana-
t ion which is fou nd by t he
48
[Assessing] Officer or t he
49
[***]
50
51
[or the Commissioner ] to be false, or
(B) such per son offer s an explanation which he is not able to substantiate
52
[and fails to pr ove that such explanation is bon a fide and that all the
facts r elating to the same and mater ial to the computation of his total
income have been disclosed by him],
then, the amount added or disallowed in computing the total income of such
per son as a r esult ther eof shall, for the pur poses of clause (c) of this sub-section,
be deemed to r epr esent the income in r espect of which par ticular s have been
concealed.
53
[* * *]
Explan ation 2.Wher e the sour ce of any r eceipt, deposit, outgoing or invest-
ment in any assessment year is claimed by any per son to be an amount which had
been added in computing the income or deducted in computing the loss in the
assessment of such per son for any ear lier assessment year or year s but in r espect
of which no penalty under clause (iii) of this sub-section had been levied, that par t
of the amount so added or deducted in such ear lier assessment year immediately
41. Substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. Or iginal clause
(iii) was substituted by the Finance Act, 1968, w.e.f. 1-4-1968.
43. Substituted for in addition to any tax payable by the Finance Act, 2002, w.e.f. 1-4-2003.
44. Substituted for twice by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
47. Substituted for Explan ation by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
Or iginal Explan ation was inser ted by the Finance Act, 1964, w.e.f. 1-4-1964.
1-4-1988.
w.e.f. 1-10-1998. Ear lier , Deputy Commissioner (Appeals) was substituted for Appellate
10-9-1986.
53. Pr oviso omitted, ibid.
pr eceding the year in which the r eceipt, deposit, outgoing or investment appear s
(such ear lier assessment year her eafter in this Explan ation r efer r ed to as the fir st
pr eceding year ) which is sufficient to cover the amount r epr esented by such
r eceipt, deposit or outgoing or value of such investment (such amount or value
her eafter in this Explan ation r efer r ed to as the utilised amount) shall be tr eated
as the income of the assessee, par ticular s of which had been concealed or
inaccur ate par ticular s of which had been fur nished for the fir st pr eceding year ;
and wher e the amount so added or deducted in the fir st pr eceding year is not
sufficient to cover the utilised amount, that par t of the amount so added or
deducted in the year immediately pr eceding the fir st pr eceding year which is
sufficient to cover such par t of the utilised amount as is not so cover ed shall be
tr eated to be the income of the assessee, par ticular s of which had been concealed
or inaccur ate par ticular s of which had been fur nished for the year immediately
pr eceding the fir st pr eceding year and so on, until the entir e utilised amount is
cover ed by the amounts so added or deducted in such ear lier assessment year s.
54
[Explan ation 3.Wher e any per son
55
[***] fails, without r easonable cause, to
fur nish within the per iod specified in sub-section (1) of section 153 a r etur n of his
income which he is r equir ed to fur nish under section 139 in r espect of any
assessment year commencing on or after the 1st day of Apr il, 1989, and until the
expir y of the per iod afor esaid, no notice has been issued to him under clause (i)
of sub-section (1) of section 142 or section 148 and the Assessing Officer or the
56
[***] Commissioner (Appeals) is satisfied that in r espect of such assessment year
such per son has taxable income, then, such per son shall, for the pur poses of
clause (c) of this sub-section, be deemed to have concealed the par ticular s of his
income in r espect of such assessment year , notwithstanding that such per son
fur nishes a r etur n of his income at any time after the expir y of the per iod
afor esaid in pur suance of a notice under section 148.]
Explan ation 4.For the pur poses of clause (iii) of this sub-section, the expr ession
the amount of tax sought to be evaded,
57
[(a) in any case wher e the amount of income in r espect of which par ticu-
lar s have been concealed or inaccur ate par ticular s have been
fur nished has the effect of r educing the loss declar ed in the r etur n or
conver ting that loss into income, means the tax that would have been
char geable on the income in r espect of which par ticular s have been
S. 271 I.T. ACT, 1961 1.900
substitution, Explan ation 3 was amended by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978.
55. Wor ds who has not pr eviously been assessed under this Act, omitted by the Finance Act,
2002, w.e.f. 1-4-2003.
w.e.f. 1-10-1998.
r ead as under :
(a) in any case wher e the amount of income in r espect of which par ticular s have been
concealed or inaccur ate par ticular s have been fur nished exceeds the total income
assessed, means the tax that would have been char geable on the income in r espect
of which par ticular s have been concealed or inaccur ate par ticular s have been
fur nished had such income been the total income ;
concealed or inaccur ate par ticular s have been fur nished had such
income been the total income;]
(b) in any case to which Explan ation 3 applies, means the tax on the total
income assessed
58
[as r educed by the amount of advance tax, tax
deducted at sour ce, tax collected at sour ce and self-assessment tax
paid befor e the issue of notice under section 148];
(c) in any other case, means the differ ence between the tax on the total
income assessed and the tax that would have been char geable had
such total income been r educed by the amount of income in r espect
of which par ticular s have been concealed or inaccur ate par ticular s
have been fur nished.]
59
[Explan ation 5.Wher e in the cour se of a
60
[sear ch initiated under section 132
befor e the 1st day of June, 2007], the assessee is found to be the owner of any
money, bullion, jeweller y or other valuable ar ticle or thing (her eafter in this
Explan ation r efer r ed to as assets) and the assessee claims that such assets have
been acquir ed by him by utilising (wholly or in par t) his income,
(a) for any pr evious year which has ended befor e the date of the sear ch,
but the r etur n of income for such year has not been fur nished befor e
the said date or , wher e such r etur n has been fur nished befor e the said
date, such income has not been declar ed ther ein ; or
(b) for any pr evious year which is to end on or after the date of the sear ch,
then, notwithstanding that such income is declar ed by him in any r etur n of
income fur nished on or after the date of the sear ch, he shall, for the pur poses of
imposition of a penalty under clause (c) of sub-section (1) of this section, be
deemed to have concealed the par ticular s of his income or fur nished inaccur ate
par ticular s of such income,
61
[unless,
(1) such income is, or the tr ansactions r esulting in such income ar e
r ecor ded,
(i) in a case falling under clause (a), befor e the date of the sear ch ;
and
(ii) in a case falling under clause (b), on or befor e such date,
in the books of account, if any, maintained by him for any sour ce of
income or such income is other wise disclosed to the
62
[Chief Commis-
sioner or Commissioner ] befor e the said date ; or
(2) he, in the cour se of the sear ch, makes a statement under sub-section
(4) of section 132 that any money, bullion, jeweller y or other valuable
ar ticle or thing found in his possession or under his contr ol, has been
acquir ed out of his income which has not been disclosed so far in
his r etur n of income to be fur nished befor e the expir y of time
60. Substituted for sear ch under section 132 by the Finance Act, 2007, w.e.f. 1-6-2007.
w.e.f. 10-9-1986.
1-4-1988.
specified in
63
[* * *] sub-section (1) of section 139, and also specifies in
the statement the manner in which such income has been der ived and
pays the tax, together with inter est, if any, in r espect of such income.]
64
[Explan ation 5A.Wher e in the cour se of a sear ch initiated under section 132
on or after the 1st day of June, 2007, the assessee is found to be the owner of,
(i) any money, bullion, jeweller y or other valuable ar ticle or thing
(her einaft er in t his Explan ation r efer r ed t o as asset s) and t he
assessee claims that such assets have been acquir ed by him by
utilizing (wholly or in par t) his income for any pr evious year ; or
(ii) any income based on any entr y in any books of account or other
documents or tr ansactions and he claims that such entr y in the books
of account or other documents or tr ansactions r epr esents his income
(wholly or in par t) for any pr evious year ,
which has ended befor e the date of the sear ch and the due date for filing the
r etur n of income for such year has expir ed and the assessee has not filed the
r etur n, then, notwithstanding that such income is declar ed by him in any r etur n
of income fur nished on or after the date of the sear ch, he shall, for the pur poses
of imposition of a penalty under clause (c) of sub-section (1) of this section, be
deemed to have concealed the par ticular s of his income or fur nished inaccur ate
par ticular s of such income.]
65
[Explan ation 6.Wher e any adjustment is made in the income or loss declar ed
in the r etur n under the pr oviso to clause (a) of sub-section (1) of section 143 and
additional tax char ged under that section, the pr ovisions of this sub-section shall
not apply in r elation to the adjustment so made.]
66
[Explan ation 7.Wher e in the case of an assessee who has enter ed into an
inter national tr ansaction defined in section 92B, any amount is added or
disallowed in computing the total income under sub-section (4) of section 92C,
then, the amount so added or disallowed shall, for the pur poses of clause (c) of
this sub-section, be deemed to r epr esent the income in r espect of which
par ticular s have been concealed or inaccur ate par ticular s have been fur nished,
unless the assessee pr oves to the satisfaction of the Assessing Officer or the
Commissioner (Appeals)
67
[or the Commissioner ] that the pr ice char ged or paid
in such tr ansaction was computed in accor dance with the pr ovisions contained
in section 92C and in the manner pr escr ibed under that section, in good faith and
with due diligence.]
68
[(1A) Wher e any penalty is imposable by vir tue of Explan ation 2 to sub-
section (1), pr oceedings for the imposition of such penalty may be initiated
notwithstanding that any pr oceedings under this Act in the cour se of which such
penalty pr oceedings could have been initiated under sub-section (1) have been
completed.]
S. 271 I.T. ACT, 1961 1.902
63. Wor ds clause (a) or clause (b) of omitted by the Dir ect Tax Laws (Amendment) Act, 1989,
w.e.f. 1-4-1989.
68a
[(1B) Wh ere an y am oun t is added or disallowed in com putin g th e total in com e
or loss of an assessee in an y order of assessm en t or reassessm en t an d th e said
order con tain s a direction for in itiation of pen alty proceedin gs un der clause (c)
of sub-section (1), such an order of assessm en t or reassessm en t sh all be deem ed
to con stitute satisfaction of th e Assessin g Officer for in itiation of th e pen alty
proceedin gs un der th e said clause (c).]
(2) When the per son liable to penalty is a r egister ed fir m or an unr egister ed fir m
which has been assessed under clause (b) of section 183
68b
, then notwithstanding
anything contained in the other pr ovisions of this Act, the penalty imposable
under sub-section (1) shall be the same amount as would be imposable on that
fir m if that fir m wer e an unr egister ed fir m.
(3)
69
(4) If the
70
71
[***]
72
[Commissioner (Appeals)] in the
cour se of any pr oceedings under this Act, is satisfied that the pr ofits of a
r egister ed fir m have been distr ibuted other wise than in accor dance with the
shar es of the par tner s as shown in the instr ument of par tner ship on the basis of
which the fir m has been r egister ed under this Act, and that any par tner has
ther eby r etur ned his income below its r eal amount, he may dir ect that such
par tner shall, in addition to the tax, if any, payable by him, pay by way of penalty
a sum not exceeding one and a half times the amount of tax which has been
avoided, or would have been avoided if the income r etur ned by such par tner had
been accepted as his cor r ect income; and no r efund or other adjustment shall be
claimable by any other par tner by r eason of such dir ection.]
(4A) and (4B) [Om itted by th e Taxation Laws (Am en dm en t) Act, 1975, w.e.f.
1-10-1975. Origin al sub-section s (4A) an d (4B) were in serted by th e In com e-tax
(Am en dm en t) Act, 1965, w.e.f. 12-3-1965. Later on sub-section (4A) was substi-
tuted by th e Taxation Laws (Am en dm en t) Act, 1970, w.e.f. 1-4-1971.]
73
amendment by the Dir ect Tax Laws (Amendment) Act, 1989 shall apply to and
in r elation to any assessment for the assessment year commencing on the 1st day
of Apr il, 1988, or any ear lier assessment year and r efer ences in this section to
the other pr ovisions of this Act shall be constr ued as r efer ences to those
year .]
74
[(6) Any r efer ence in this section to the income shall be constr ued as a r efer ence
to the income or fr inge benefits, as the case may be, and the pr ovisions of this
68b. Section 183 has now been omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
69. Pr ior to its omission, sub-section (3) was amended by the Taxation Laws (Amendment)
Act, 1975, w.e.f. 1-4-1976.
1-4-1988.
section shall, as far as may be, apply in r elation to any assessment in r espect of
fr inge benefits also.]
75
[Failure to keep, maintain or retain books of account, documents, etc.
271A. Without pr ejudice to the pr ovisions of section 271, if any per son
76
[***]
fails t o keep and maint ain any such books of account and ot her
documents as r equir ed by section 44AA or the r ules made ther eunder , in r espect
of any pr evious year or to r etain such books of account and other documents for
the per iod specified in the said r ules, the
77
78
[***]
79
[Commissioner (Appeals)] may dir ect that such per son shall pay, by way of
penalty,
80
[a sum of twenty-five thousand r upees].
81
[Penalty for failure to keep and maintain information and document in respect
of international transaction.
271AA. Without pr ejudice to the pr ovisions of section 271, if any per son fails to
keep and maintain any such infor mation and document as r equir ed by
sub-section (1) or sub-section (2) of section 92D, the Assessing Officer or
Commissioner (Appeals) may dir ect that such per son shall pay, by way of penalty,
a sum equal to two per cent of the value of each inter national tr ansaction enter ed
into by such per son.]
82
[Penalty where search has been initiated.
271AAA. (1) The Assessing Officer may, notwithstanding anything contained in
any other pr ovisions of this Act, dir ect that, in a case wher e sear ch has
been initiated under section 132 on or after the 1st day of June, 2007, the assessee
shall pay by way of penalty, in addition to tax, if any, payable by him, a sum
computed at the r ate of ten per cent of the undisclosed income of the specified
pr evious year .
(2) Nothing contained in sub-section (1) shall apply if the assessee,
(i) in the cour se of the sear ch, in a statement under sub-section (4) of
section 132, admits the undisclosed income and specifies the manner
in which such income has been der ived;
S. 271AAA I.T. ACT, 1961 1.904
76. Wor ds , without r easonable cause, omitted by the Taxation Laws (Amendment &
1-4-1988.
80. Substituted for a sum which shall not be less than two thousand r upees but which may
extend to one hundr ed thousand r upees by the Finance Act, 2001, w.e.f. 1-6-2001. Ear lier ,
the quoted wor ds wer e substituted for a sum which shall not be less than ten per cent but
which shall not exceed fifty per cent of the amount of the tax, if any, which would have
been avoided if the income r etur ned by such per son had been accepted as the cor r ect
income by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
(ii) substantiates the manner in which the undisclosed income was
der ived; and
(iii) pays the tax, together with inter est, if any, in r espect of the undis-
closed income.
(3) No penalty under the pr ovisions of clause (c) of sub-section (1) of section 271
shall be imposed upon the assessee in r espect of the undisclosed income r efer r ed
to in sub-section (1).
(4) The pr ovisions of sections 274 and 275 shall, so far as may be, apply in r elation
to the penalty r efer r ed to in this section.
(a) undisclosed income means
(i) any income of the specified pr evious year r epr esented, either
wholly or par tly, by any money, bullion, jeweller y or other
valuable ar ticle or thing or any entr y in the books of account or
other documents or tr ansactions found in the cour se of a sear ch
under section 132, which has
(A) not been r ecor ded on or befor e the date of sear ch in the books
of account or other documents maintained in the nor mal
cour se r elating to such pr evious year ; or
(B) other wise not been disclosed to the Chief Commissioner or
Commissioner befor e the date of the sear ch; or
(ii) any income of the specified pr evious year r epr esented, either
wholly or par tly, by any entr y in r espect of an expense r ecor ded
in the books of account or other documents maintained in the
nor mal cour se r elating to the specified pr evious year which is
found to be false and would not have been found to be so had the
sear ch not been conducted;
(b) specified pr evious year means the pr evious year
(i) which has ended befor e the date of sear ch, but the date of filing
the r etur n of income under sub-section (1) of section 139 for such
year has not expir ed befor e the date of sear ch and the assessee
has not fur nished the r etur n of income for the pr evious year
befor e the said date; or
(ii) in which sear ch was conducted.]
83
[Failure to get accounts audited.
271B. If any per son fails
84
[***] to get his accounts audited in r espect of any
pr evious year or year s r elevant to an assessment year or
85
[fur nish a
1.905 CH. XXI - PENALTIES IMPOSABLE S. 271B
85. Substituted for obtain a r epor t of such audit as r equir ed under section 44AB or fur nish
the said r epor t along with the r etur n of his income filed under sub-section (1) of section
139, or along with the r etur n of income fur nished in r esponse to a notice under clause (i)
of sub-section (1) of section 142 by the Finance Act, 1995, w.e.f. 1-7-1995. Ear lier cer tain
wor ds wer e inser ted in the quoted por tion by the Finance Act, 1988, w.e.f. 1-4-1989.
S. 271CA I.T. ACT, 1961 1.906
r epor t of such audit as r equir ed under section 44AB], the
86
[Assessing] Officer
may dir ect that such per son shall pay, by way of penalty, a sum equal to one-half
per cent of the total sales, tur nover or gr oss r eceipts, as the case may be, in
business, or of the gr oss r eceipts in pr ofession, in such pr evious year or year s or
a sum of one hundr ed thousand r upees, whichever is less.]
87
[Penalty for failure to furnish report under section 92E.
271BA. If any per son fails to fur nish a r epor t fr om an accountant as r equir ed by
section 92E, the Assessing Officer may dir ect that such per son shall pay,
by way of penalty, a sum of one hundr ed thousand r upees.]
88
[Failure to subscribe to the eligible issue of capital.
271BB. Whoever fails to subscr ibe any amount of subscr iption to the units
issued under any scheme r efer r ed to in sub-section (1) of section 88A
89
to the eligible issue of capital under that sub-section within the per iod of six
months specified ther ein, may be dir ected by the
90
[Joint] Commissioner to pay,
by way of penalty, a sum equal to twenty per cent of such amount.]
91
[Penalty for failure to deduct tax at source.
271C.
92
[(1) If any per son fails to
(a) deduct the whole or any par t of the tax as r equir ed by or under the
pr ovisions of Chapter XVII-B; or
(b) pay the whole or any par t of the tax as r equir ed by or under
(i) sub-section (2) of section 115-O; or
(ii) the second pr oviso to section 194B,
then, such per son shall be liable to pay, by way of penalty, a sum equal to the
amount of tax which such per son failed to deduct or pay as afor esaid.]
93
[(2) Any penalty imposable under sub-section (1) shall be imposed by the
94
[Joint] Commissioner .]
95
[Penalty for failure to collect tax at source.
271CA. (1) If any per son fails to collect the whole or any par t of the tax as
r equir ed by or under the pr ovisions of Chapter XVII-BB, then, such
1-4-1988.
89. Section 88A has now been omitted by the Finance (No. 2) Act, 1996, w.r .e.f. 1-4-1994.
(1), as inser ted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and
amended by the Finance Act, 1990, w.e.f. 1-4-1990, r ead as under :
(1) If any per son fails to deduct the whole or any par t of the tax as r equir ed by or under
the pr ovisions of Chapter XVII-B, he shall be liable to pay, by way of penalty, a sum equal
to the amount of the tax which he failed to deduct as afor esaid.
per son shall be liable to pay, by way of penalty, a sum equal to the amount of tax
which such per son failed to collect as afor esaid.
(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint
Commissioner .]
96
[Penalty for failure to comply with the provisions of section 269SS.
271D.
97
[(1)] If a per son takes or accepts any loan or deposit in contr avention
of the pr ovisions of section 269SS, he shall be liable to pay, by way of
penalty, a sum equal to the amount of the loan or deposit so taken or accepted.]
98
99
1
[Penalty for failure to comply with the provisions of section 269T.
271E.
2
[(1)] If a per son r epays any
3
[loan or ] deposit r efer r ed to in section 269T
other wise than in accor dance with the pr ovisions of that section, he shall
be liable to pay, by way of penalty, a sum equal to the amount of the
3
[loan or ]
deposit so r epaid.]
4
5
[Joint]
Commissioner .]
6
[Penalty for failure to furnish return of income.
271F. If a per son who is r equir ed to fur nish a r etur n of his income, as r equir ed
under sub-section (1) of section 139 or by the pr ovisos to that sub-section,
fails to fur nish such r etur n befor e the end of the r elevant assessment year , the
Assessing Officer may dir ect that such per son shall pay, by way of penalty, a sum
of five thousand r upees.]
7
[Penalty for failure to furnish annual information return.
271FA. If a per son who is r equir ed to fur nish an annual infor mation r etur n, as
r equir ed under sub-section (1) of section 285BA, fails to fur nish such
1.907 CH. XXI - PENALTIES IMPOSABLE S. 271FA
97. Number ed as sub-section (1) by the Finance Act, 1990, w.e.f. 1-4-1990.
2. Number ed as sub-section (1) by the Finance Act, 1990, w.e.f. 1-4-1990.
6. Substituted by the Finance Act, 2002, w.e.f. 1-6-2002. Pr ior to its substitution, section 271F,
as inser ted by the Finance Act, 1997, w.e.f. 1-4-1997, substituted by the Finance (No. 2) Act,
1998, w.e.f. 1-4-1999 and later on amended by the Finance Act, 2001, w.e.f. 1-6-2001, r ead
as under :
271F. Pen alty for failure to furn ish return of in com e.If a per son who is r equir ed to
fur nish a r etur n of his income, as r equir ed under sub-section (1) of section 139, fails to
fur nish such r etur n befor e the end of the r elevant assessment year , he shall be liable to
pay, by way of penalty, a sum of five thousand r upees :
Provided that a per son who is r equir ed to fur nish a r etur n of his income, as r equir ed by
the pr oviso to sub-section (1) of section 139, fails to fur nish such r etur n on or befor e the
due date, he shall be liable to pay, by way of penalty, a sum of five thousand r upees.
r etur n within the time pr escr ibed under that sub-section, the income-tax author -
ity pr escr ibed under the said sub-section may dir ect that such per son shall pay,
by way of penalty, a sum of one hundr ed r upees for ever y day dur ing which the
failur e continues.]
8
[Penalty for failure to furnish return of fringe benefits.
271FB. If an employer , who is r equir ed to fur nish a r etur n of fr inge benefits, as
r equir ed under sub-section (1) of section 115WD, fails to fur nish such
r etur n within the time pr escr ibed under that sub-section, the Assessing Officer
may dir ect that such employer shall pay, by way of penalty, a sum of one hundr ed
r upees for ever y day dur ing which the failur e continues.]
9
[Penalty for failure to furnish information or document under section 92D.
271G. If any per son who has enter ed into an inter national tr ansaction fails to
fur nish any such infor mation or document as r equir ed by sub-section (3)
of section 92D, the Assessing Officer or the Commissioner (Appeals) may dir ect
that such per son shall pay, by way of penalty, a sum equal to two per cent of the
value of the inter national tr ansaction for each such failur e.]
Failure to give notice of discontinuance.
10
[Penalty for failure to answer questions, sign statements, furnish information,
returns or statements, allow inspections, etc.
272A. (1) If any per son,
(a) being legally bound to state the tr uth of any matter touching the
subject of his assessment, r efuses to answer any question put to him
by an income-tax author ity in the exer cise of its power s under this
Act; or
(b) r efuses to sign any statement made by him in the cour se of any
pr oceedings under this Act, which an income-tax author ity may
legally r equir e him to sign; or
(c) to whom a summons is issued under sub-section (1) of section 131
either to attend to give evidence or pr oduce books of account or other
documents at a cer tain place and time omits to attend or pr oduce
books of account or documents at the place or time,
(d)
11
[***]
he shall pay, by way of penalty,
12
[a sum of ten thousand r upees] for each such
default or failur e.
S. 272A I.T. ACT, 1961 1.908
substitution, section 272A was inser ted by the Taxation Laws (Amendment) Act, 1975,
w.e.f. 1-4-1976 and later on amended by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978,
Finance Act, 1982, w.e.f. 1-6-1982, Taxation Laws (Amendment & Miscellaneous Pr ovi-
sions) Act, 1986, w.e.f. 10-9-1986 and the Finance Act, 1987, w.e.f. 1-6-1987.
11. Omitted by the Finance Act, 2002, w.e.f. 1-6-2002. Pr ior to its omission, clause (d) r ead as
under :
(d) fails to comply with the pr ovisions of section 139A,
12. Substituted for a sum which shall not be less than five hundr ed r upees but which may
extend to ten thousand r upees by the Finance Act, 2001, w.e.f. 1-6-2001.
(2) If any per son fails
(a) to comply with a notice issued under sub-section (6) of section 94; or
(b) to give the notice of discontinuance of his business or pr ofession as
r equir ed by sub-section (3) of section 176; or
(c) to fur nish in due time any of the r etur ns, statements or par ticular s
mentioned in section 133 or section 206
13
[***]
14
[or section 206C] or
section 285B; or
(d) to allow inspection of any r egister r efer r ed to in section 134 or of any
entr y in such r egister or to allow copies of such r egister or of any entr y
ther ein to be taken; or
15
[(e) to fur nish the r etur n of income which he is r equir ed to fur nish under
sub-section (4A) or sub-section (4C) of section 139 or to fur nish it
within the time allowed and in the manner r equir ed under those sub-
sections; or ]
(f) to deliver or cause to be deliver ed in due time a copy of the declar ation
mentioned in section 197A; or
(g) to fur nish a cer tificate as r equir ed by section 203
16
[or section 206C];
or
(h) to deduct and pay tax as r equir ed by sub-section (2) of section 226;
17
[(i) to fur nish a statement as r equir ed by sub-section (2C) of section 192;]
18
[(j) to deliver or cause to be deliver ed in due time a copy of the declar ation
r efer r ed to in sub-section (1A) of section 206C;]
19
[(k) to deliver or cause to be deliver ed a copy of the statement within the
time specified in sub-section (3) of section 200 or the pr oviso to sub-
section (3) of section 206C;]
20
[(l) to deliver or cause to be deliver ed the quar ter ly r etur n within the time
specified in sub-section (1) of section 206A,]
he shall pay, by way of penalty, a sum
21
[of one hundr ed r upees] for ever y day
dur ing which the failur e continues:
22
[Provided that the amount of penalty for failur es in r elation to
23
[a declar ation
mentioned in section 197A, a cer tificate as r equir ed by section 203 and ] r etur ns
1.909 CH. XXI - PENALTIES IMPOSABLE S. 272A
13. Wor ds or section 206A or section 206B omitted by the Finance (No. 2) Act, 1996, w.e.f.
1-10-1996.
15. Substituted by the Finance Act, 2002, w.e.f. 1-4-2003. Pr ior to its substitution, clause (e)
r ead as under :
(e) to fur nish the r etur n of income which he is r equir ed to fur nish under sub-section
(4A) of section 139 or to fur nish it within the time allowed and in the manner
r equir ed under that sub-section; or
21. Substituted for which shall not be less than one hundr ed r upees, but which may extend
to two hundr ed r upees, by the Finance Act, 1999, w.e.f. 1-6-1999.
S. 272AA I.T. ACT, 1961 1.910
under sections 206 and 206C
24
[and statements under sub-section (3) of section
200 or the pr oviso to sub-section (3) of section 206C] shall not exceed the amount
of tax deductible or collectible
25
, as the case may be.]
(3) Any penalty imposable under sub-section (1) or sub-section (2) shall be
imposed
(a) in a case wher e the contr avention, failur e or default in r espect
of which such penalty is imposable occur s in the cour se of any
pr oceeding befor e an income-tax author ity not lower in r ank than a
24
[Joint] Dir ector or a
26
[Joint] Commissioner , by such income-tax
author ity;
(b) in a case falling under clause (f) of sub-section (2), by the Chief
Commissioner or Commissioner ; and
(c) in any other case, by the
27
[Joint] Dir ector or the
27
[Joint] Commis-
sioner .
(4) No or der under this section shall be passed by any income-tax author ity
r efer r ed to in sub-section (3) unless the per son on whom the penalty is pr oposed
to be imposed is given an oppor tunity of being hear d in the matter by such
author ity.
Explan ation .In t his sect ion, income-t ax aut hor it y includes a Dir ect or
Gener al, Dir ector ,
27
[Joint] Dir ector and an Assistant Dir ector
28
[or Deputy
Dir ector ] while exer cising the power s vested in a cour t under the Code of Civil
Pr ocedur e, 1908 (5 of 1908), when tr ying a suit in r espect of the matter s specified
in sub-section (1) of section 131.]
29
[Penalty for failure to comply with the provisions of section 133B.
272AA. (1) If a per son
30
[***] fails to comply with the pr ovisions of section
133B, he shall, on an or der passed by the
31
32
[Assistant Dir ector ]
33
[or Deputy Dir ector ] or the
34
[Assessing] Officer , as the
case may be, pay, by way of penalty, a sum which may extend to one thousand
r upees.
(2) No or der under sub-section (1) shall be passed unless the per son on whom the
penalty is pr oposed to be imposed is given an oppor tunity of being hear d in the
matter .
25. For the meaning of the expr ession deductible or collectible, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
Act, 1987, w.e.f. 1-4-1988.
1-4-1988.
35
[Penalty for failure to comply with the provisions of section 139A.
272B. (1) If a per son fails to comply with the pr ovisions of section 139A, the
Assessing Officer may dir ect that such per son shall pay, by way of
penalty, a sum of ten thousand r upees.
(2) If a per son who is r equir ed to quote his per manent account number in any
document r efer r ed to in clause (c) of sub-section (5) of section 139A, or to
intimate such number as r equir ed by sub-section (5A)
36
[or sub-section (5C)] of
that section, quotes or intimates a number which is false, and which he either
knows or believes to be false or does not believe to be tr ue, the Assessing Officer
may dir ect that such per son shall pay, by way of penalty, a sum of ten thousand
r upees.
(3) No or der under sub-section (1) or sub-section (2) shall be passed unless the
per son, on whom the penalty is pr oposed to be imposed, is given an oppor tunity
of being hear d in the matter .]
37
[Penalty for failure to comply with the provisions of section 203A.
272BB. (1) If a per son fails to comply with the pr ovisions of section 203A, he
shall, on an or der passed by the
38
[Assessing] Officer , pay, by way of
penalty,
39
[a sum of ten thousand r upees].
40
[(1A) If a per son who is r equir ed to quote his tax deduction account number
or , as the case may be, tax collection account number or tax deduction and
collection account number in the challans or cer tificates or statements or other
documents r efer r ed to in sub-section (2) of section 203A, quotes a number which
is false, and which he either knows or believes to be false or does not believe to
be tr ue, the Assessing Officer may dir ect that such per son shall pay, by way of
penalty, a sum of ten thousand r upees.]
(2) No or der under sub-section (1)
40
[or sub-section (1A)] shall be passed unless
the per son on whom the penalty is pr oposed to be imposed is given an oppor tu-
nity of being hear d in the matter .]
41
[Penalty for failure to comply with the provisions of section 206CA.
272BBB. (1) If a per son fails to comply
42
[befor e the 1st day of October ,
2004] with the pr ovisions of section 206CA, he shall, on an or der
passed by the Assessing Officer , pay, by way of penalty, a sum of ten thousand
r upees.
(2) No or der under sub-section (1) shall be passed unless the per son on whom the
penalty is pr oposed to be imposed, is given an oppor tunity of being hear d in the
matter .]
1.911 CH. XXI - PENALTIES IMPOSABLE S. 272BBB
35. Inser ted by the Finance Act, 2002, w.e.f. 1-6-2002. Ear lier section 272B was inser ted by the
Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976, fur ther amended by the Taxation
Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f. 10-9-1986 and later on
omitted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
1-4-1988.
39. Substituted for a sum which may extend to five thousand r upees by the Finance Act,
2001, w.e.f. 1-6-2001.
43
[False estimate of, or failure to pay, advance tax.
273.
44
[(1) If the
45
[Assessing] Officer , in the cour se of any pr oceedings in
connection with the r egular assessment
46
for any assessment year , is
satisfied that any assessee
(a) has fur nished under clause (a) of sub-section (1) of section 209A a
statement of the advance tax payable by him which he knew or had
r eason to believe to be untr ue, or
(b) has
47
[***] failed to fur nish a statement of the advance tax payable by
him in accor dance with the pr ovisions of clause (a) of sub-section (1)
of section 209A,
he may dir ect that such per son shall, in addition to the amount of tax, if any,
payable by him, pay by way of penalty a sum
(i) which, in the case r efer r ed to in clause (a), shall not be less than ten
per cent but shall not exceed one and a half times the amount by
which the tax actually paid dur ing the financial year immediately
pr eceding the assessment year under the pr ovisions of Chapter
XVII-C falls shor t of
(1) seventy-five per cent of the assessed tax as defined in sub-section
(5) of section 215, or
(2) the amount which would have been payable by way of advance
tax if the assessee had fur nished a cor r ect and complete state-
ment in accor dance with the pr ovisions of clause (a) of sub-
section (1) of section 209A,
whichever is less;
(ii) which, in the case r efer r ed to in clause (b), shall not be less than
ten per cent but shall not exceed one and a half times of seventy-five
per cent of the assessed tax as defined in sub-section (5) of section
215]:
48
[Provided that in the case of an assessee, being a company, the pr ovisions of this
sub-section shall have effect as if for the wor ds seventy-five per cent, at both
the places wher e they occur , the wor ds eighty-thr ee and one-thir d per cent had
been substituted.]
49
[(2)] If the
50
[Assessing] Officer , in the cour se of any pr oceedings in connection
with the r egular assessment for the assessment year commencing on the 1st
day of Apr il, 1970, or any subsequent assessment year , is satisfied that any
assessee
S. 273 I.T. ACT, 1961 1.912
1-4-1988.
46. For the meaning of the ter m r egular assessment, see Taxmanns Dir ect Taxes Manual,
Vol. 3.
1-4-1988.
51
[(a) has fur nished under sub-section (1) or sub-section (2) or sub-section
(3) or sub-section (5) of section 209A, or under sub-section (1) or sub-
section (2) of section 212, an estimate of the advance tax payable by
him which he knew or had r eason to believe to be untr ue, or ]
52
[(aa) has fur nished
53
[under sub-section (4) of section 209A or ] under sub-
section (3A) of section 212 an estimate of the advance tax payable by
him which he knew or had r eason to believe to be untr ue, or ]
(b) has
54
[***] failed to fur nish an estimate of the advance tax payable by
him in accor dance with the pr ovisions of
55
[clause (b) of sub-section
(1) of section 209A], or
(c) has
56
[***] failed to fur nish an estimate of the advance tax payable by
him in accor dance with the pr ovisions of
57
[sub-section (4) of section
209A or ] sub-section (3A) of section 212,
he may dir ect that such per son shall, in addition to the amount of tax, if any,
payable by him, pay by way of penalty a sum
(i) which, in the case r efer r ed to in clause (a), shall not be less than ten
XVII-C falls shor t of
(1) seventy-five per cent of the assessed tax as defined in sub-section
(5) of section 215, or
58
[(2) wher e a statement under clause (a) of sub-section (1) of section
209A was fur nished by the assessee or wher e a notice under
section 210 was issued to the assessee, the amount payable under
such statement or , as the case may be, such notice,]
whichever is less;
59
[(ia) which, in the case r efer r ed to in clause (aa), shall not be less than ten
XVII-C falls shor t of seventy-five per cent of the assessed tax as
defined in sub-section (5) of section 215;]
(ii) which, in the case r efer r ed to in clause (b), shall not be less than ten
per cent but shall not exceed one and a half times of seventy-five per
51. Substituted by the Finance Act, 1978, w.e.f. 1-6-1978. Ear lier , clause (a) was amended by
55. Substituted for sub-section (3) of section 212 by the Finance Act, 1978, w.e.f. 1-6-1978.
S. 273 I.T. ACT, 1961 1.914
cent of the assessed tax as defined in sub-section (5) of section 215;
and
60
[(iii) which, in the case r efer r ed to in clause (c), shall not be less than ten
which
(a) wher e the assessee has sent a statement under clause (a), or an
estimate under clause (b) of sub-section (1) of section 209A, or an
estimate in lieu of a statement under sub-section (2) of that
section, the tax payable in accor dance with such statement or
estimate; or
(b) wher e the assessee was r equir ed to pay advance tax in accor -
dance with the notice issued to him under section 210, the tax
payable under such notice,
falls shor t of seventy-five per cent of the assessed tax as defined in
sub-section (5) of section 215:]]
61
[Provided that in the case of an assessee, being a company, the pr ovisions of
this sub-section shall have effect as if for the wor ds seventy-five per cent,
wher ever they occur , the wor ds eighty-thr ee and one-thir d per cent had been
substituted.]
62
[Explan ation
63
[1].For the pur poses of clause (ia), the amount paid by the
assessee on or befor e the date extended by the
64
Commissioner ] under the
65
[fir st]
66
[pr oviso to sub-section (4) of section 209A or ,
as the case may be,]
65
[fir st] pr oviso to sub-section (3A) of section 212 shall,
wher e the date so extended falls beyond the financial year immediately
pr eceding the assessment year , also be r egar ded as tax actually paid dur ing that
financial year .]
67
[Explan ation 2.When the per son liable to penalty is a r egister ed fir m or an
unr egister ed fir m which has been assessed under clause (b) of section 183, then,
notwithstanding anything contained in the other pr ovisions of this Act, the
penalty imposable under this section shall be the same amount as would be
imposable on that fir m if that fir m wer e an unr egister ed fir m.]
68
[(3) The pr ovisions of this section shall apply to and in r elation to any assessment
for the assessment year commencing on the 1st day of Apr il, 1988, or any ear lier
assessment year , and r efer ences in this section to the other pr ovisions of this Act
shall be constr ued as r efer ences to those pr ovisions as for the time being in for ce
and applicable to the r elevant assessment year .]
63. Number ed as Explan ation 1 by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
1-4-1988.
69
[Power to reduce or waive penalty, etc., in certain cases.
70
273A. (1) Not wit hst anding anyt hing cont ained in t his Act , t he
71
[
72
[***]
Commissioner ] may, in his discr etion, whether on his own motion or
other wise,
(i)
73
[***]
(ii) r educe or waive the amount of penalty imposed or imposable on a
per son under clause (iii) of sub-section (1) of section 271; *[or ]
(iii)
74
[***]
if he is satisfied that such per son
(a)
74
[***]
(b) in the case r efer r ed to in clause (ii), has, pr ior to the detection
75
by the
76
[Assessing] Officer , of the concealment of par ticular s of income or
of the inaccur acy of par ticular s fur nished in r espect of such income,
voluntar ily
77
and in good faith,
77
made full and tr ue disclosur e
77
of
such par ticular s,
(c)
78
[***]
and also has,
79
[in the case r efer r ed to in clause (b)], co-oper ated
77
in any enquir y
r elating to the assessment of his income and has either paid or made satisfactor y
ar r angements for the payment of any tax or inter est payable in consequence of
an or der passed under this Act in r espect of the r elevant assessment year .
Explan ation
80
[***].For the pur poses of this sub-section, a per son shall be
deemed to have made full and tr ue disclosur e of his income or of the par ticular s
r elating ther eto in any case wher e the excess of income assessed over the
income r etur ned is of such a natur e as not to attr act the pr ovisions of clause (c)
of sub-section (1) of section 271.
80
[***]
(a)
81
[***]
1.915 CH. XXI - PENALTIES IMPOSABLE S. 273A
70. See also Instr uction No. 1417, dated 29-9-1981 and Cir cular No. 784, dated 22-11-1999. For
1-4-1988.
72. Wor ds Chief Commissioner or omitted by the Finance Act, 1993, w.e.f. 1-6-1993.
74. Omitted, ibid.
75. For the meaning of the ter m detection, see Taxmanns Dir ect Taxes Manual, Vol. 3.
1-4-1988.
77. For the meaning of the ter ms/ expr essions voluntar ily, good faith, disclosur e and co-
oper ated, see Taxmanns Dir ect Taxes Manual, Vol. 3.
79. Substituted for in all the cases r efer r ed to in clauses (a), (b) and (c), ibid.
80. 1 and Explan ation 2, as inser ted by the Taxation Laws (Amendment) Act, 1984, w.e.f.
1-10-1984, omitted by the Finance Act, 1985, w.e.f. 24-5-1985.
omission, clause (a) was amended by the Taxation Laws (Amendment) Act, 1984, w.e.f.
1-10-1984.
*Should be deleted.
(b) if in a case falling under clause (c) of sub-section (1) of section 271, the
amount of income in r espect of which the penalty is imposed or
imposable for the r elevant assessment year , or , wher e such disclosur e
r elates to mor e than one assessment year , the aggr egate amount of
such income for those year s, exceeds a sum of five hundr ed thousand
r upees,
no or der r educing or waiving the penalty under sub-section (1) shall be made by
82
[the Commissioner except with the pr evious appr oval of the Chief Commis-
sioner or Dir ector Gener al, as the case may be].
(3) Wher e an or der has been made under sub-section (1) in favour of any per son,
whether such or der r elates to one or mor e assessment year s, he shall not be
entitled to any r elief under this section in r elation to any other assessment year
at any time after the making of such or der :
83
[Provided that wher e an or der has been made in favour of any per son under
sub-section (1) on or befor e the 24th day of July, 1991, such per son shall be
entitled to fur ther r elief only once in r elation to other assessment year or year s
if he makes an application to the income-tax author ity r efer r ed to in sub-section
(4) at any time befor e the 1st day of Apr il, 1992.]
(4) Without pr ejudice to the power s confer r ed on him by any other pr ovision of
this Act, the
84
[
85
[***] Commissioner ] may, on an application made in this behalf
by an assessee, and after r ecor ding his r easons for so doing, r educe or waive the
amount of any penalty payable by the assessee under this Act or stay or
compound any pr oceeding for the r ecover y of any such amount, if he is satisfied
that
(i) to do other wise would cause genuine har dship to the assessee, having
r egar d to the cir cumstances of the case; and
(ii) the assessee has co-oper ated in any inquir y r elating to the assessment
or any pr oceeding for the r ecover y of any amount due fr om him:
86
[Provided that wher e the amount of any penalty payable under this Act or ,
wher e such application r elates to mor e than one penalty, the aggr egate amount
of such penalties exceeds one hundr ed thousand r upees, no or der r educing or
waiving the amount or compounding any pr oceeding for its r ecover y under this
sub-section shall be made by
87
[the Commissioner except with the pr evious
appr oval of the Chief Commissioner or Dir ector Gener al, as the case may be].
S. 273A I.T. ACT, 1961 1.916
82. Substituted for the Chief Commissioner or Commissioner except with the pr evious
appr oval of the Boar d by the Finance Act, 1993, w.e.f. 1-6-1993. Ear lier , the wor ds Chief
Commissioner or Commissioner wer e substituted for Commissioner by the Dir ect Tax
1-4-1988.
85. Wor ds Chief Commissioner or omitted by the Finance Act, 1993, w.e.f. 1-6-1993.
87. Substituted for the Chief Commissioner or Commissioner except with the pr evious
appr oval of the Boar d by the Finance Act, 1993, w.e.f. 1-6-1993. Ear lier , the wor ds Chief
Commissioner or Commissioner wer e substituted for Commissioner by the Dir ect Tax
(5) Ever y or der made under this section shall be final and shall not be called into
question by any cour t or any other author ity.]
88
[(6) The pr ovisions of this section
89
[as they stood immediately befor e their
amendment by the Dir ect Tax Laws (Amendment) Act, 1989] shall apply to and
in r elation to any assessment for the assessment year commencing on the 1st day
of Apr il, 1988, or any ear lier assessment year , and r efer ences in this section to the
other pr ovisions of this Act shall be constr ued as r efer ences to those pr ovisions
as for the time being in for ce and applicable to the r elevant assessment year .]
90
[(7) Notwithstanding anything contained in sub-section (6), the pr ovisions of
sub-section (1), sub-section (2), or , as the case may be, sub-section (4) [as they
stood immediately befor e their amendment by the Dir ect Tax Laws (Amend-
ment) Act, 1989 (3 of 1989)], shall apply in the case of r eduction or waiver of
penalty or inter est in r elation to any assessment for the assessment year
commencing on the 1st day of Apr il, 1988 or any ear lier assessment year , with
the modifications that the power under the said sub-section (1) shall be exer cis-
able only by the Commissioner and instead of the pr evious appr oval of the Boar d,
the Commissioner shall obtain the pr evious appr oval of the Chief Commissioner
or Dir ector Gener al, as the case may be, while dealing with such case.]
90a
[Power of Commissioner to grant immunity from penalty.
273AA. (1) A person m ay m ak e an application to th e Com m ission er for gran tin g
im m un ity from pen alty, if
(a) h e h as m ade an application for settlem en t un der section 245C an d th e
proceedin gs for settlem en t h ave abated un der section 245HA; an d
(b) th e pen alty proceedin gs h ave been in itiated un der th is Act.
(2) Th e application to th e Com m ission er un der sub-section (1) sh all n ot be m ade
after th e im position of pen alty after abatem en t.
(3) Th e Com m ission er m ay, subject to such con dition s as h e m ay th in k fit to
im pose, gran t to th e person im m un ity from th e im position of an y pen alty un der
th is Act, if h e is satisfied th at th e person h as, after th e abatemen t, co-operated with
th e in com e-tax auth ority in th e proceedin gs before h im an d h as m ade a full an d
true disclosure of h is in com e an d th e m an n er in wh ich such in com e h as been
derived.
(4) Th e im m un ity gran ted to a person un der sub-section (3) sh all stan d with -
drawn , if such person fails to com ply with an y con dition subject to wh ich th e
im m un ity was gran ted an d th ereupon th e provision s of th is Act sh all apply as if
such im m un ity h ad n ot been gran ted.
(5) Th e im m un ity gran ted to a person un der sub-section (3) m ay, at an y tim e, be
with drawn by th e Com m ission er, if h e is satisfied th at such person h ad, in th e
course of an y proceedin gs, after abatem en t, con cealed an y particulars m aterial to
th e assessm en t f rom th e in com e-tax auth ority or h ad given f alse eviden ce, an d
th ereupon such person sh all becom e liable to th e im position of an y pen alty un der
th is Act to wh ich such person would h ave been liable, h ad n ot such im m un ity
been gran ted.]
1.917 CH. XXI - PENALTIES IMPOSABLE S. 273AA
91
[Penalty not to be imposed in certain cases.
273B. Notwithstanding anything contained in the pr ovisions of
92
[clause (b) of
sub-section (1) of]
93
[section 271, section 271A,
94
[section 271AA,] section
271B
95
[, section 271BA],
96
[section 271BB,] section 271C,
97
[section 271CA, ]
section 271D, section 271E,
98
[section 271F,
99
[section 271FA,]
1
[section 271FB,]
2
[section 271G,]] clause (c) or clause (d) of sub-section (1) or sub-section (2) of
section 272A, sub-section (1) of section 272AA] or
3
[section 272B or ]
4
[sub-section
(1)
5
[or sub-section (1A)] of section 272BB or ]
6
[sub-section (1) of section 272BBB
or ] clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of
section 273, no penalty shall be imposable on the per son or the assessee, as the
case may be, for any failur e r efer r ed to in the said pr ovisions if he pr oves that
ther e was r easonable cause
7
for the said failur e.]
Procedure.
274. (1) No or der imposing a penalty under this Chapter shall be made unless
the assessee has been hear d, or has been given a r easonable oppor tunity of
being hear d.
8
[(2) No or der imposing a penalty under this Chapter shall be made
(a) by the Income-tax Officer , wher e the penalty exceeds ten thousand
r upees;
(b) by the Assistant Commissioner
9
[or Deputy Commissioner ], wher e the
penalty exceeds twenty thousand r upees,
except with the pr ior appr oval of the
10
S. 274 I.T. ACT, 1961 1.918
10-9-1986.
93. Substituted for section 270, clause (a) or clause (b) of sub-section (1) of section 271,
section 271A, section 271B, sub-section (2) of section 272A, sub-section (1) of section
272AA, sub-section (1) of section 272B by the Dir ect Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989.
7. For the meaning of expr ession r easonable cause, see Taxmanns Dir ect Taxes Manual,
Vol 3.
8. Inser ted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Or iginal sub-
section (2) which was amended by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971, was omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1975.
11
[(3) An income-tax author ity on making an or der under this Chapter imposing
a penalty, unless he is himself the Assessing Officer , shall for thwith send a copy
of such or der to the Assessing Officer .]
12
[Bar of limitation for imposing penalties.
275.
13
[(1)] No or der imposing a penalty under this Chapter shall be passed
14
[(a) in a case wher e the r elevant assessment or other or der is the subject-
matter of an appeal to the
15
[***] Commissioner (Appeals) under
section 246
16
[or section 246A] or an appeal to the Appellate Tr ibunal
under section 253, after the expir y of the financial year in which the
pr oceedings, in the cour se of which action for the imposition of
penalty has been initiated, ar e completed
16a
, or six months fr om the
end of the month in which the or der of the
17
[***] Commissioner
(Appeals) or , as the case may be, the Appellate Tr ibunal is r eceived by
the Chief Commissioner or Commissioner , whichever per iod expir es
later :
18
[Provided that in a case wher e the r elevant assessment or other
or der is t he subject -mat t er of an appeal t o t he Commissioner
(Appeals) under section 246 or section 246A, and the Commissioner
(Appeals) passes the or der on or after the 1st day of June, 2003
disposing of such appeal, an or der imposing penalty shall be passed
befor e the expir y of the financial year in which the pr oceedings, in the
cour se of which action for imposition of penalty has been initiated,
ar e completed, or within one year fr om the end of the financial year
in which the or der of the Commissioner (Appeals) is r eceived by the
Chief Commissioner or Commissioner , whichever is later ;]
(b) in a case wher e the r elevant assessment or other or der is the subject-
matter of r evision under section 263
18
[or section 264], after the expir y
of six months fr om the end of the month in which such or der of
r evision is passed;
(c) in any other case, after the expir y of the financial year in which the
pr oceedings, in the cour se of which action for the imposition of
penalty has been initiated, ar e completed, or six months fr om the end
substitution, sub-section (3) was substituted by the Finance (No. 2) Act, 1977, w.e.f.
10-7-1978.
13. Renumber ed by the Dir ect Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989.
14. Subst it ut ed for clauses (a) and (b) by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989. Pr ior to its substitution, clause (a) was amended by the Finance (No. 2) Act, 1977,
w.e.f. 10-7-1978.
w.e.f. 1-10-1998.
16a. For the meaning of ter m completed, see Taxmanns Dir ect Taxes Manual, Vol. 3.
w.e.f. 1-10-1998. Ear lier the quoted wor ds wer e inser ted by the Dir ect Tax Laws (Amend-
ment) Act, 1989, w.e.f. 1-4-1989.
S. 275 I.T. ACT, 1961 1.920
of the month in which action for imposition of penalty is initiated,
whichever per iod expir es later .]
19
[(1A) In a case wher e the r elevant assessment or other or der is the subject-
matter of an appeal to the Commissioner (Appeals) under section 246 or section
246A or an appeal to the Appellate Tr ibunal under section 253 or an appeal to the
High Cour t under section 260A or an appeal to the Supr eme Cour t under section
261 or r evision under section 263 or section 264 and an or der imposing or
enhancing or r educing or cancelling penalty or dr opping the pr oceedings for the
imposition of penalty is passed befor e the or der of the Commissioner (Appeals)
or the Appellate Tr ibunal or the High Cour t or the Supr eme Cour t is r eceived by
the Chief Commissioner or the Commissioner or the or der of r evision under
section 263 or section 264 is passed, an or der imposing or enhancing or r educing
or cancelling penalty or dr opping the pr oceedings for the imposition of penalty
may be passed on the basis of assessment as r evised by giving effect to such or der
of the Commissioner (Appeals) or , the Appellate Tr ibunal or the High Cour t, or
the Supr eme Cour t or or der of r evision under section 263 or section 264:
Provided that no or der of imposing or enhancing or r educing or cancelling
penalty or dr opping the pr oceedings for the imposition of penalty shall be
passed
(a) unless the assessee has been hear d, or has been given a r easonable
oppor tunity of being hear d;
(b) after the expir y of six months fr om the end of the month in which the
or der of the Commissioner (Appeals) or the Appellate Tr ibunal or the
High Cour t or the Supr eme Cour t is r eceived by the Chief Commis-
sioner or the Commissioner or the or der of r evision under section 263
or section 264 is passed:
Provided further that the pr ovisions of sub-section (2) of section 274 shall apply
in r espect of the or der imposing or enhancing or r educing penalty under this sub-
section.]
20
apply to and in r elation to any action initiated for the imposition of penalty on or
befor e the 31st day of Mar ch, 1989.]
21
[Explan ation .In computing the per iod of limitation for the pur poses of this
section,
(i) the time taken in giving an oppor tunity to the assessee to be r ehear d
under the pr oviso to section 129;
(ii) any per iod dur ing which the immunity gr anted under section 245H
r emained in for ce; and
(iii) any per iod dur ing which a pr oceeding under this Chapter for the levy
of penalty is stayed by an or der or injunction of any cour t,
shall be excluded.]]
CHAPTER XXI I
OFFENCES AND PROSECUTIONS
22
[Contravention of order made under sub-section (3) of section 132.
275A. Whoever contr avenes any or der r efer r ed to in
23
[the second pr oviso
to sub-section (1) or ] sub-section (3) of section 132 shall be punishable with
r igor ous impr isonment which may extend to two year s and shall also be liable
to fine.]
24
[Failure to comply with the provisions of clause (iib) of sub-section (1) of
section 132.
275B. If a per son who is r equir ed to affor d the author ised officer the necessar y
facility to inspect the books of account or other documents, as r equir ed
under clause (iib) of sub-section (1) of section 132, fails to affor d such facility to
the author ised officer , he shall be punishable with r igor ous impr isonment for a
t er m which may ext end t o t wo year s and shall also be liable t o fine.]
25
[Removal, concealment, transfer or delivery of property to thwart tax recovery.
276. Whoever fr audulently r emoves, conceals, tr ansfer s or deliver s to any
per son
26
, any pr oper ty or any inter est ther ein, intending ther eby to pr event
that pr oper ty or inter est ther ein fr om being taken in execution of a cer tificate
under the pr ovisions of the Second Schedule shall be punishable with r igor ous
impr isonment for a ter m which may extend to two year s and shall also be liable
to fine.]
27
[Failure to comply with the provisions of sub-sections (1) and (3) of section 178.
276A. If a per son
28
[***]
(i) fails to give the notice in accor dance with sub-section (1) of section
178; or
(ii) fails to set aside the amount as r equir ed by sub-section (3) of that
section; or
(iii) par ts with any of the assets of the company or the pr oper ties in his
hands in contr avention of the pr ovisions of the afor esaid sub-section,
he shall be punishable with r igor ous impr isonment for a ter m which may extend
to two year s :
Provided that in the absence of special and adequate r easons to the contr ar y to
be r ecor ded in the judgment of the cour t, such impr isonment shall not be for less
than six months.]
1.921 CH. XXII - OFFENCES AND PROSECUTIONS S. 276A
25. Inser ted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Or iginal section,
dealing with failur e to make payment or deliver r etur n, etc., as amended by the Finance
Act, 1968, w.e.f. 1-4-1968 and the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971,
was omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
26. For the meaning of the ter m per son, see Taxmanns Dir ect Taxes Manual, Vol. 3.
28. Wor ds , without r easonable cause or excuse, omitted by the Taxation Laws (Amendment
& Miscellaneous Pr ovisions) Act, 1986, w.e.f. 10-9-1986.
Failure to comply with the provisions of section 269AB or section 269-I.
276AA. [Om itted by th e Fin an ce Act, 1986, w.e.f. 1-10-1986. Origin al section
was in serted by th e In com e-tax (Am en dm en t) Act, 1981, w.e.f .
1-7-1982.]
29
[Failure to comply with the provisions of sections 269UC, 269UE and 269UL.
276AB. Whoever
30
[***] fails to comply with the pr ovisions of section 269UC or
fails to sur r ender or deliver possession of the pr oper ty under sub-
section (2) of section 269UE or contr avenes the pr ovisions of sub-section (2) of
section 269UL shall be punishable with r igor ous impr isonment for a ter m which
may extend to two year s and shall also be liable to fine :
Provided that in the absence of special and adequate r easons to the contr ar y to
be r ecor ded in the judgment of the cour t, such impr isonment shall not be for less
than six months.]
31
[Failure to pay tax to the credit of Central Government under Chapter XII-D or
XVII-B.
276B. If a per son fails to pay to the cr edit of the Centr al Gover nment,
(a) the tax deducted at sour ce by him as r equir ed by or under the
pr ovisions of Chapter XVII-B; or
(b) the tax payable by him, as r equir ed by or under
(i) sub-section (2) of section 115-O; or
(ii) the second pr oviso to section 194B,
he shall be punishable with r igor ous impr isonment for a ter m which shall not be
less than thr ee months but which may extend to seven year s and with fine.]
32
[Failure to pay the tax collected at source.
276BB. If a per son fails to pay to the cr edit of the Centr al Gover nment, the tax
collected by him as r equir ed under the pr ovisions of section 206C, he
shall be punishable with r igor ous impr isonment for a ter m which shall not be less
than thr ee months but which may extend to seven year s and with fine.]
33
[Wilful attempt to evade tax, etc.
276C. (1) If a per son wilfully attempts in any manner whatsoever to evade
34
any
tax, penalty or inter est char geable or imposable under this Act, he shall,
S. 276C I.T. ACT, 1961 1.922
30. Wor ds , without r easonable cause or excuse, omitted by the Taxation Laws (Amendment
& Miscellaneous Pr ovisions) Act, 1986, w.e.f. 10-9-1986.
31. Substituted by the Finance Act, 1997, w.e.f. 1-6-1997. Pr ior to its substitution, section 276B,
as inser ted by the Finance Act, 1968, w.e.f. 1-4-1968 and later on substituted by the
Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975 and amended by the Taxation
Laws (Amendment & Miscellaneous Pr ovisions) Act, 1986, w.e.f. 10-9-1986 and fur ther
substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, r ead as under :
276B. Failure to pay th e tax deducted at source.If a per son fails to pay to the cr edit of the
Centr al Gover nment, the tax deducted at sour ce by him as r equir ed by or under the
pr ovisions of Chapter XVII-B, he shall be punishable with r igor ous impr isonment for a
ter m which shall not be less than thr ee months but which may extend to seven year s and
with fine.
33. Subst it ut ed for sect ion 276C by t he Taxat ion Laws (Amendment ) Act , 1975, w.e.f.
1-10-1975. Or iginal section 276C was inser ted by the Taxation Laws (Amendment) Act,
1970, w.e.f. 1-4-1971.
34. For the meaning of the ter m evade, see Taxmanns Dir ect Taxes Manual, Vol. 3.
without pr ejudice to any penalty that may be imposable on him under any other
pr ovision of this Act, be punishable,
(i) in a case wher e the amount sought to be evaded exceeds one hundr ed
thousand r upees, with r igor ous impr isonment for a ter m which shall
not be less than six months but which may extend to seven year s and
with fine;
(ii) in any other case, with r igor ous impr isonment for a ter m which shall
not be less than thr ee months but which may extend to thr ee year s
and with fine.
(2) If a per son wilfully attempts in any manner whatsoever to evade the payment
of any tax, penalty or inter est under this Act, he shall, without pr ejudice to any
penalty that may be imposable on him under any other pr ovision of this Act, be
punishable with r igor ous impr isonment for a ter m which shall not be less than
thr ee months but which may extend to thr ee year s and shall, in the discr etion of
the cour t, also be liable to fine.
Explan ation .For the pur poses of this section, a wilful attempt to evade any tax,
penalty or inter est char geable or imposable under this Act or the payment
ther eof shall include a case wher e any per son
(i) has in his possession or contr ol any books of account or other
documents (being books of account or other documents r elevant to
any pr oceeding under this Act) containing a false entr y or statement;
or
(ii) makes or causes to be made any false entr y or statement in such
books of account or other documents; or
(iii) wilfully omits or causes to be omitted any r elevant entr y or statement
in such books of account or other documents; or
(iv) causes any other cir cumstance to exist which will have the effect of
enabling such per son to evade any tax, penalty or inter est char geable
or imposable under this Act or the payment ther eof.]
35
[Failure to furnish returns of income.
276CC. If a per son wilfully fails to fur nish in due time
36
[the r etur n of fr inge
benefits which he is r equir ed to fur nish under sub-section (1) of section
115WD or by notice given under sub-section (2) of the said section or section
115WH or ] the r etur n of income which he is r equir ed to fur nish under sub-
section (1) of section 139 or by notice given under
37
[clause (i) of sub-section (1)
of section 142] or section 148
38
[or section 153A], he shall be punishable,
(i) in a case wher e the amount of tax, which would have been evaded if
the failur e had not been discover ed
39
, exceeds one hundr ed thousand
1.923 CH. XXII - OFFENCES AND PROSECUTIONS S. 276CC
37. Substituted for sub-section (2) of section 139 by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989.
39. For the meaning of the expr ession if the failur e had not been discover ed, see Taxmanns
r upees, with r igor ous impr isonment for a ter m which shall not be less
than six months but which may extend to seven year s and with fine;
(ii) in any other case, with impr isonment for a ter m which shall not be less
than thr ee months but which may extend to thr ee year s and with fine:
Provided that a per son shall not be pr oceeded against under this section for
failur e to fur nish in due time the
40
[r etur n of fr inge benefits under sub-section
(1) of section 115WD or ] r etur n of income under sub-section (1) of section 139
(i) for any assessment year commencing pr ior to the 1st day of Apr il,
1975; or
(ii) for any assessment year commencing on or after the 1st day of Apr il
1975, if
(a) the r etur n is fur nished by him befor e the expir y of the assessment
year ; or
(b) the tax payable by him on the total income deter mined on r egular
assessment, as r educed by the advance tax, if any, paid, and any
tax deducted at sour ce, does not exceed thr ee thousand r upees.]
41
[Failure to furnish return of income in search cases.
276CCC. If a per son wilfully fails to fur nish in due time the r etur n of total
income which he is r equir ed to fur nish by notice given under clause (a)
of section 158BC, he shall be punishable with impr isonment for a ter m which shall
not be less than thr ee months but which may extend to thr ee year s and with fine :
Provided that no per son shall be punishable for any failur e under this section in
r espect of sear ch initiated under section 132 or books of account, other docu-
ments or any assets r equisitioned under section 132A, after the 30th day of June,
1995 but befor e the 1st day of Januar y, 1997.]
42
[Failure to produce accounts and documents.
276D. If a per son wilfully fails to pr oduce, or cause to be pr oduced, on or befor e
the date specified in any notice ser ved on him under sub-section (1) of
section 142, such accounts and documents as ar e r efer r ed to in the notice
43
[or
wilfully fails to comply with a dir ection issued to him under sub-section (2A) of
that section], he shall be punishable with r igor ous impr isonment for a ter m which
may extend to one year or with fine equal to a sum calculated at a r ate which shall
not be less than four r upees or mor e than ten r upees for ever y day dur ing which
the default continues, or with both.]
Failure to comply with the provisions of section 269SS.
276DD.
44
[Om itted by th e Direct Tax Laws (Am en dm en t) Act, 1987, w.e.f.
1-4-1989.]
S. 276DD I.T. ACT, 1961 1.924
44. Pr ior to its omission, section 276DD was inser ted by the Finance Act, 1984, w.e.f. 1-4-1984,
and later on amended by the Taxation Laws (Amendment & Miscellaneous Pr ovisions)
Act, 1986, w.e.f. 10-9-1986.
Failure to comply with the provisions of section 269T.
276E.
45
1-4-1989.]
46
[False statement in verification, etc.
277. If a per son
47
makes a statement in any ver ification under this Act or under
any r ule made ther eunder , or deliver s an account or statement which is
false, and which he either knows or believes to be false, or does not believe to be
tr ue, he shall be punishable,
(i) in a case wher e the amount of tax, which would have been evaded if
the statement or account had been accepted as tr ue, exceeds one
hundr ed thousand r upees, with r igor ous impr isonment for a ter m
which shall not be less than six months but which may extend to seven
year s and with fine;
and with fine.]
48
[Falsification of books of account or document, etc.
277A. If any per son (her eafter in this section r efer r ed to as the fir st per son)
wilfully and with intent to enable any other per son (her eafter in this
section r efer r ed to as the second per son) to evade any tax or inter est or penalty
char geable and imposable under this Act, makes or causes to be made any entr y
or statement which is false and which the fir st per son either knows to be false or
does not believe to be tr ue, in any books of account or other document r elevant
to or useful in any pr oceedings against the fir st per son or the second per son,
under this Act, the fir st per son shall be punishable with r igor ous impr isonment
for a ter m which shall not be less than thr ee months but which may extend to
thr ee year s and with fine.
Explan ation .For the pur poses of establishing the char ge under this section, it
shall not be necessar y to pr ove that the second per son has actually evaded any
tax, penalty or inter est char geable or imposable under this Act.]
49
[Abetment of false return, etc.
278. If a per son abets or induces in any manner another per son to make and
deliver an account or a statement or declar ation r elating to any income
50
[or any fr inge benefits] char geable to tax which is false and which he either
knows to be false or does not believe to be tr ue or to commit an offence under
sub-section (1) of section 276C, he shall be punishable,
(i) in a case wher e the amount of tax, penalty or inter est which would
have been evaded, if the declar ation, account or statement had been
accepted as tr ue, or which is wilfully attempted to be evaded, exceeds
one hundr ed thousand r upees, with r igor ous impr isonment for a ter m
1.925 CH. XXII - OFFENCES AND PROSECUTIONS S. 278
45. Pr ior to its omission, section 276E was inser ted by the Income-tax (Second Amendment)
Act, 1981, w.e.f. 11-7-1981 and later on amended by the Taxation Laws (Amendment &
47. For the meaning of the ter m per son, see Taxmanns Dir ect Taxes Manual, Vol. 3.
which shall not be less than six months but which may extend to seven
year s and with fine;
and with fine.]
51
[Punishment for second and subsequent offences.
278A. If any per son convicted of an offence under section 276B or sub-section
(1) of section 276C or section 276CC
52
[or section 276DD]
53
[or section
276E] or section 277 or section 278 is again convicted of an offence under any
of the afor esaid pr ovisions, he shall be punishable for the second and for ever y
subsequent offence with r igor ous impr isonment for a ter m which shall not be
less than six months but which may extend to seven year s and with fine.]
54
[Punishment not to be imposed in certain cases.
278AA. Notwithstanding anything contained in the pr ovisions of section 276A,
section 276AB,
55
[or section 276B,] no per son shall be punishable for any
failur e r efer r ed to in the said pr ovisions if he pr oves that ther e was r easonable
cause
56
for such failur e.]
56a
[Power of Commissioner to grant immunity from prosecution.
278AB. (1) A person m ay m ak e an application to th e Com m ission er for gran tin g
im m un ity from prosecution , if h e h as m ade an application for settle-
m en t un der section 245C an d th e proceedin gs for settlem en t h ave abated un der
section 245HA.
(2) Th e application to th e Com m ission er un der sub-section (1) sh all n ot be m ade
after in stitution of th e prosecution proceedin gs after abatem en t.
(3) Th e Com m ission er m ay, subject to such con dition s as h e m ay th in k fit to
impose, gran t to th e person immun ity from prosecution for an y offen ce un der th is
Act, if h e is satisfied th at th e person h as, after th e abatem en t, co-operated with th e
in com e-tax auth ority in th e proceedin gs before h im an d h as m ade a full an d true
disclosure of h is in come an d th e man n er in wh ich such in come h as been derived:
Provided th at wh ere th e application for settlem en t un der section 245C h ad been
m ade before th e 1st day of Jun e, 2007, th e Com m ission er m ay gran t im m un ity
from prosecution for an y offen ce un der th is Act or un der th e In dian Pen al Code
(45 of 1860) or un der an y oth er Cen tral Act for th e tim e bein g in force.
(4) Th e im m un ity gran ted to a person un der sub-section (3) sh all stan d with -
drawn , if such person fails to com ply with an y con dition subject to wh ich th e
im m un ity was gran ted an d th ereupon th e provision s of th is Act sh all apply as if
such im m un ity h ad n ot been gran ted.
(5) Th e im m un ity gran ted to a person un der sub-section (3) m ay, at an y tim e, be
with drawn by th e Com m ission er, if h e is satisfied th at such person h ad, in th e
S. 278AB I.T. ACT, 1961 1.926
10-9-1986.
55. Substituted for section 276B, section 276DD or section 276E, by the Dir ect Tax Laws
56. For the meaning of the expr ession r easonable cause, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
course of an y proceedin gs, after abatem en t, con cealed an y particulars m aterial to
th e assessm en t f rom th e in com e-tax auth ority or h ad given f alse eviden ce, an d
th ereupon such person m ay be tried for th e offen ce with respect to wh ich th e
im m un ity was gran ted or for an y oth er offen ce of wh ich h e appears to h ave been
guilty in con n ection with th e proceedin gs.]
57
[Offences by companies.
278B. (1) Wher e an offence under this Act has been committed by a company
58
,
ever y per son who, at the time the offence was committed, was in char ge
of, and was r esponsible to, the company for the conduct of the business of the
company as well as the company shall be deemed to be guilty of the offence and
shall be liable to be pr oceeded against and punished accor dingly:
Provided that nothing contained in this sub-section shall r ender any such per son
liable to any punishment if he pr oves that the offence was committed without his
knowledge or that he had exer cised all due diligence to pr event the commission
of such offence.
(2) Notwithstanding anything contained in sub-section (1), wher e an offence
u nder t his Act ha s been commit t ed by a compa ny a nd it is pr oved
that the offence has been committed with the consent or connivance of, or is
attr ibutable to any neglect on the par t of, any dir ector , manager , secr etar y or
other officer of the company, such dir ector , manager , secr etar y or other
officer shall also be deemed to be guilty of that offence and shall be liable to
be pr oceeded against and punished accor dingly.
59
[(3) Wher e an offence under this Act has been committed by a per son, being a
company, and the punishment for such offence is impr isonment and fine, then,
without pr ejudice to the pr ovisions contained in sub-section (1) or sub-section (2),
such company shall be punished with fine and ever y per son, r efer r ed to in sub-
section (1), or the dir ector , manager , secr etar y or other officer of the company
r efer r ed to in sub-section (2), shall be liable to be pr oceeded against and punished
in accor dance with the pr ovisions of this Act.]
(a) company means a body cor por ate, and includes
(i) a fir m; and
(ii) an association of per sons or a body of individuals whether
incor por ated or not; and
(b) dir ector , in r elation to
(i) a fir m, means a par tner in the fir m;
(ii) any association of per sons or a body of individuals, means any
member contr olling the affair s ther eof.]
60
[Offences by Hindu undivided families.
278C. (1) Wher e an offence under this Act has been committed by a Hindu
undivided family, the kar ta ther eof shall be deemed to be guilty of the
offence and shall be liable to be pr oceeded against and punished accor dingly:
1.927 CH. XXII - OFFENCES AND PROSECUTIONS S. 278C
58. For the meaning of the ter m company, see Taxmanns Dir ect Taxes Manual, Vol. 3.
S. 278E I.T. ACT, 1961 1.928
Provided that nothing contained in this sub-section shall r ender the kar ta liable
to any punishment if he pr oves that the offence was committed without his
knowledge or that he had exer cised all due diligence to pr event the commission
of such offence.
(2) Notwithstanding anything contained in sub-section (1), wher e an offence
under this Act, has been committed by a Hindu undivided family and it is pr oved
that the offence has been committed with the consent or connivance of, or is
attr ibutable to any neglect on the par t of, any member of the Hindu undivided
family, such member shall also be deemed to be guilty of that offence and shall
be liable to be pr oceeded against and punished accor dingly.]
61
[Presumption as to assets, books of account, etc., in certain cases.
278D. (1) Wher e dur ing the cour se of any sear ch made under section 132, any
money, bullion, jeweller y or other valuable ar ticle or thing (her eafter in
this section r efer r ed to as the assets) or any books of account or other documents
has or have been found in the possession or contr ol of any per son and such assets
or books of account or other documents ar e tender ed by the pr osecution in
evidence against such per son or against such per son and the per son r efer r ed to
in section 278 for an offence under this Act, the pr ovisions of sub-section (4A) of
section 132 shall, so far as may be, apply in r elation to such assets or books of
account or other documents.
(2) Wher e any assets or books of account or other documents taken into
custody, fr om the possession or contr ol of any per son, by the officer or author ity
r efer r ed to in clause (a) or clause (b) or clause (c), as the case may be, of
sub-section (1) of section 132A ar e deliver ed to the r equisitioning officer under
sub-section (2) of that section and such assets, books of account or other
documents ar e tender ed by the pr osecution in evidence against such per son
or against such per son and the per son r efer r ed to in section 278 for an
offence under this Act, the pr ovisions of sub-section (4A) of section 132 shall, so
far as may be, apply in r elation to such assets or books of account or other
documents.]
62
[Presumption as to culpable mental state.
278E. (1) In any pr osecution for any offence under this Act which r equir es a
culpable mental state on the par t of the accused, the cour t shall pr esume
the existence of such mental state but it shall be a defence for the accused to
pr ove the fact that he had no such mental state with r espect to the act char ged
as an offence in that pr osecution.
Explan ation .In this sub-section, culpable mental state includes intention,
motive or knowledge of a fact or belief in, or r eason to believe, a fact.
(2) For the pur poses of this section, a fact is said to be pr oved only when the cour t
believes it to exist beyond r easonable doubt and not mer ely when its existence
is established by a pr eponder ance of pr obability.]
10-9-1986.
Prosecution to be at instance of
63
[Chief Commissioner or Commissioner].
64
279.
65
[(1) A per son shall not be pr oceeded against for an offence under
section 275A
66
[, section 275B], section 276, section 276A, section 276B,
section 276BB, section 276C, section 276CC, section 276D, section 277
67
[, section
277A] or section 278 except with the pr evious sanction of the Commissioner or
Commissioner (Appeals) or the appr opr iate author ity:
Provided that the Chief Commissioner or , as the case may be, Dir ector Gener al
may issue such instr uctions or dir ections to the afor esaid income-tax author ities
as he may deem fit for institution of pr oceedings under this sub-section.
Explan ation .For the pur poses of this section, appr opr iate author ity shall
have the same meaning as in clause (c) of section 269UA.]
68
[(1A) A per son shall not be pr oceeded against for an offence under section
276C or section 277 in r elation to the assessment for an assessment year in
r espect of which the penalty imposed or imposable on him under clause (iii) of
sub-section (1) of section 271 has been r educed or waived by an or der under
section 273A.]
69
[(2) Any offence under this Chapter may, either befor e or after the institution
of pr oceedings, be compounded by the Chief Commissioner or a Dir ector
Gener al.]
70
[(3) Wher e any pr oceeding has been taken against any per son under sub-
section (1), any statement made or account or other document pr oduced by
such per son befor e any of the income-tax author ities specified in
71
[clauses (a)
t o (g)] of section 116 shall not be inadmissible as evidence for the pur pose of
such pr oceedings mer ely on the gr ound that such statement was made or
such account or other document was pr oduced in the belief that the penalty
imposable would be r educed or waived,
72
[under section 273A] or that the
offence in r espect of which such pr oceeding was taken would be compounded.]
73
[Explan ation .For the r emoval of doubts, it is her eby declar ed that the power
of the Boar d to issue or der s, instr uctions or dir ections under this Act shall include
and shall be deemed always to have included the power to issue instr uctions or
dir ections (including instr uctions or dir ections to obtain the pr evious appr oval
of the Boar d) to other income-tax author ities for the pr oper composition of
offences under this section.]
1.929 CH. XXII - OFFENCES AND PROSECUTIONS S. 279
1-4-1988.
64. See also Letter [F. No. 4/ 7/ 69-IT(Inv.)], dated 21-3-1969 and Instr uction No. 1317 of 1980.
section was inser ted by the Income-tax (Amendment) Act, 1965, w.e.f. 12-3-1965.
section (2) was substituted by the Finance Act, 1988, w.e.f. 1-4-1989.
71. Substituted for clauses (a), (b), (c), (d) and (e) by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1988.
72. Substituted for under sub-section (4A) of section 271 by the Taxation Laws (Amend-
ment) Act, 1975, w.e.f. 1-10-1975.
74
[Certain offences to be non-cognizable.
279A. Notwithstanding anything contained in the Code of Cr iminal Pr ocedur e,
1973 (2 of 1974), an offence punishable under section 276B or section
276C or section 276CC or section 277 or section 278 shall be deemed to be non-
cognizable within the meaning of that Code.]
75
[Proof of entries in records or documents.
279B. Entr ies in the r ecor ds or other documents in the custody of an income-
tax author ity shall be admitted in evidence in any pr oceedings for the
pr osecution of any per son for an offence under this Chapter , and all such entr ies
may be pr oved either by the pr oduction of the r ecor ds or other documents in the
custody of the income-tax author ity containing such entr ies, or by the pr oduc-
tion of a copy of the entr ies cer tified by the income-tax author ity having
custody of the r ecor ds or other documents under its signatur e and stating thatit
is a tr ue copy of the or iginal entr ies and that such or iginal entr ies ar e contained
in the r ecor ds or other documents in its custody.]
Disclosure of particulars by public servants.
280. (1) If a public ser vant
76
[fur nishes any infor mation or pr oduces any
document in contr avention of the pr ovisions of sub-section (2) of section
138], he shall be punishable with impr isonment which may extend to six months,
and shall also be liable to fine.
(2) No pr osecution shall be instituted under this section except with the pr evious
sanction of the Centr al Gover nment.
CHAPTER XXI I -A
ANNUITY DEPOSITS
[Ch apter XXII-A, con sistin g of section s 280A, 280B, 280C, 280D, 280E, 280F, 280G,
280H, 280-I, 280J, 280K, 280L, 280M, 280N, 280-O, 280P, 280Q, 280R, 280S, 280T,
280U, 280V, 280W an d 280X, omitted by th e Fin an ce Act, 1988, w.e.f. 1-4-1988. Th e
Ch apter was in serted by th e Fin an ce Act, 1964, w.e.f. 1-4-1964 an d h as n ot been
in operation sin ce 1-4-1969 wh en th e requirem en t as to an n uity deposit was
discon tin ued by th e Fin an ce Act, 1968, w.e.f. 1-4-1968 th rough an am en dm en t
m ade in section 280C.]
CHAPTER XXI I -B
TAX CREDIT CERTIFICATES
[Ch apter XXII-B, con sistin g of section s 280Y, 280Z, 280ZA, 280ZB, 280ZC,
280ZD an d 280ZE, om itted by th e Fin an ce Act, 1990, w.e.f. 1-4-1990. No tax
credit certificate gran ted un der section 280Z or section 280ZC sh all be produced
before th e Assessin g Officer after th e 31st day of March , 1991 for th e purposes
of sub-section (6) of section 280Z or, as th e case m ay be, sub-section (4) of
section 280ZC. Earlier Ch apter XXII-B was in serted by th e Fin an ce Act, 1965, w.e.f.
1-4-1965.]
S. 280 I.T. ACT, 1961 1.930
76. Substituted for discloses any par ticular s, the disclosur e of which is pr ohibited by section
Definitions.
280Y. [Om itted by th e Fin an ce Act, 1990, w.e.f. 1-4-1990.]
Tax credit certificates to certain equity shareholders.
280Z.
77
Tax credit certificates for shifting of industrial undertaking from urban area.
280ZA.
78
Tax credit certificate to certain manufacturing companies in certain cases.
280ZB.
79
Tax credit certificate in relation to exports.
280ZC.
80
Tax credit certificates in relation to increased production of certain goods.
280ZD.
81
Tax credit certificate scheme.
280ZE. [Om itted by th e Fin an ce Act, 1990, w.e.f. 1-4-1990.]
CHAPTER XXI I I
MISCELLANEOUS
82
[Certain transfers to be void.
281. (1) Wher e, dur ing the pendency of any pr oceeding under this Act or after
the completion ther eof, but befor e the ser vice of notice under r ule 2 of the
Second Schedule, any assessee cr eates a char ge on, or par ts with the possession
(by way of sale, mor tgage, gift, exchange or any other mode of tr ansfer
whatsoever ) of, any of his assets in favour of any other per son, such char ge or
tr ansfer shall be void as against any claim in r espect of any tax or any other sum
payable by the assessee as a r esult of the completion of the said pr oceeding or
other wise :
Provided that such char ge or tr ansfer shall not be void if it is made
(i) for adequate consider ation and without notice of the pendency of
such pr oceeding or , as the case may be, without notice of such tax or
other sum payable by the assessee ; or
(ii) with the pr evious per mission of the
83
[Assessing] Officer .
1.931 CH. XXIII - MISCELLANEOUS S. 281
77. Pr ior to omission, section 280Z was amended by the Finance Act, 1968, w.e.f. 1-4-1968 and
78. Section 280ZA was amended by the Finance Act, 1968, w.e.f. 1-4-1968, the Taxation Laws
(Amendment) Act, 1970, w.e.f. 1-4-1971 and the Finance Act, 1983, w.e.f. 1-4-1984.
79. Pr ior to omission, section 280ZB was amended by the Finance Act, 1966, w.e.f. 1-4-1966,
the Finance Act, 1968, w.e.f. 1-4-1968, the Finance Act, 1987, w.e.f. 1-4-1988 and the Dir ect
80. Pr ior to omission, section 280ZC was amended by the Finance (No. 2) Act, 1965, w.r .e.f.
1-4-1964/ w.e.f. 11-9-1965 and the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
81. Pr ior to omission, section 280ZD was amended by the Finance Act, 1968, w.e.f. 1-4-1968
and the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
1-4-1988.
S. 281B I.T. ACT, 1961 1.932
(2) This section applies to cases wher e the amount of tax or other sum payable
or likely to be payable exceeds five thousand r upees and the assets char ged or
tr ansfer r ed exceed ten thousand r upees in value.
Explan ation .In this section, assets means land, building, machiner y, plant,
shar es, secur ities and fixed deposits in banks, to the extent to which any of the
assets afor esaid does not for m par t of the stock-in-tr ade of the business of the
assessee.]
Effect of failure to furnish information in respect of properties held benami.
281A.
84
[Repealed by th e Ben am i Tran saction s (Proh ibition ) Act, 1988, w.e.f.
19-5-1988.]
85
[Provisional attachment to protect revenue in certain cases.
86
281B. (1) Wher e, dur ing the pendency of any pr oceeding for the assessment of
any income or for the assessment or r eassessment of any income which
has escaped assessment, the
87
[Assessing] Officer is of the opinion that for
the pur pose of pr otecting the inter ests of the r evenue it is necessar y so to do, he
may, with the pr evious appr oval of the
88
[Chief Commissioner , Commissioner ,
Dir ector Gener al or Dir ector ], by or der in wr iting, attach pr ovisionally any
pr oper ty belonging to the assessee in the manner pr ovided in the Second
Schedule.
89
[Explan ation .For the pur poses of this sub-section, pr oceedings under sub-
section (5) of section 132 shall be deemed to be pr oceedings for the assessment
of any income or for the assessment or r eassessment of any income which has
escaped assessment.]
(2) Ever y such pr ovisional attachment shall cease to have effect after the expir y
of a per iod of six months fr om the date of the or der made under sub-section (1):
Provided that the
90
[Chief Commissioner , Commissioner , Dir ector Gener al or
Dir ector ] may, for r easons to be r ecor ded in wr iting, extend the afor esaid per iod
by such fur ther per iod or per iods as he thinks fit, so, however , that the total per iod
of extension shall not in any case exceed two year s :
91
[Provided further that wher e an application for settlement under section 245C
is made, the per iod commencing fr om the date on which such application is
made and ending with the date on which an or der under sub-section (1) of section
245D is made shall be excluded fr om the per iod specified in the pr eceding
pr oviso.]
84. Pr ior to its r epeal, section 281A was inser ted by the Taxation Laws (Amendment) Act, 1972,
w.e.f. 15-11-1972 and later amended by the Finance Act, 1984, w.e.f. 1-4-1984.
86. See Instr uction No. 8/ 2004, dated 2-9-2004 and Cir cular F. No. 404/ 22/ 2004-ITCC, dated
1-4-1988.
Service of notice generally.
282. (1) A notice or r equisition under this Act may be ser ved on the per son
ther ein named either by post or as if it wer e a summons issued by a cour t
under the Code of Civil Pr ocedur e, 1908 (5 of 1908).
(2) Any such notice or r equisition may be addr essed
(a) in the case of a fir m or a Hindu undivided family, to any member of
the fir m or to the manager or any adult member of the family ;
(b) in the case of a local author ity or company, to the pr incipal officer
ther eof ;
(c) in the case of any other association or body of individuals, to the
pr incipal officer or any member ther eof ;
(d) in the case of any other per son (not being an individual), to the per son
who manages or contr ols his affair s.
91a
[Authentication of notices and other documents.
282A. (1) Wh ere th is Act requires a n otice or oth er docum en t to be issued by an y
in com e-tax auth ority, such n otice or oth er docum en t sh all be sign ed in
m an uscript by th at auth ority.
(2) Every n otice or oth er docum en t to be issued, served or given for th e purposes
of th is Act by an y in com e-tax auth ority, sh all be deem ed to be auth en ticated if th e
n am e an d office of a design ated in com e-tax auth ority is prin ted, stam ped or
oth erwise written th ereon .
(3) For th e purposes of th is section , a design ated in com e-tax auth ority sh all m ean
an y in com e-tax auth ority auth orised by th e Board to issue, serve or give such
n otice or oth er docum en t after auth en tication in th e m an n er as provided in sub-
section (2).]
Service of notice when family is disrupted or firm, etc., is dissolved.
283. (1) After a finding of total par tition has been r ecor ded by the
92
[Assessing]
Officer under section 171 in r espect of any Hindu family, notices under this
Act in r espect of the income of the Hindu family shall be ser ved on the per son
who was the last manager of the Hindu family, or , if such per son is dead, then on
all adults who wer e member s of the Hindu family immediately befor e the
par tition.
(2) Wher e a fir m or other association of per sons is dissolved, notices under this
Act in r espect of the income of the fir m or association may be ser ved on any
per son who was a par tner (not being a minor ) or member of the association, as
the case may be, immediately befor e its dissolution.
Service of notice in the case of discontinued business.
284. Wher e an assessment is to be made under section 176, the
92
[Assessing]
Officer may ser ve on the per son whose income is to be assessed, or , in the
case of a fir m or an association of per sons, on any per son who was a member of
such fir m or association at the time of its discontinuance or , in the case of a
company, on the pr incipal officer ther eof, a notice containing all or any of the
r equir ements which may be included in a notice under sub-section (2) of section
139, and the pr ovisions of this Act shall, so far as may be, apply accor dingly as if
the notice wer e a notice issued under that section.
1-4-1988.
S. 285BA I.T. ACT, 1961 1.934
Information by persons responsible for paying interest.
Information by contractors in certain cases.
285A.
93
[Om itted by th e Fin an ce Act, 1988, w.e.f. 1-4-1988. Section 285A was
in serted by th e Direct Taxes (Am en dm en t) Act, 1964, w.e.f. 6-10-1964.]
94
[Submission of statements by producers of cinematograph films.
285B.
95
Any per son car r ying on the pr oduction of a cinematogr aph film dur ing
the whole or any par t of any financial year shall, in r espect of the per iod
dur ing which such pr oduction is car r ied on by him in such financial year , pr epar e
and deliver or cause to be deliver ed to the
96
[Assessing] Officer , within thir ty days
fr om the end of such financial year or within thir ty days fr om the date of the
completion of the pr oduction of the film, whichever is ear lier , a statement in
the pr escr ibed for m containing par ticular s of all payments of over
97
[fifty]
thousand r upees in the aggr egate made by him or due fr om him to each such
per son as is engaged by him in such pr oduction
98
[***].]
99
[Obligation to furnish annual information return
1
.
285BA. (1) Any per son, being
(a) an assessee; or
(b) the pr escr ibed per son in the case of an office of Gover nment; or
(c) a local author ity or other public body or association; or
(d) the Registr ar or Sub-Registr ar appointed under section 6 of the
Registr ation Act, 1908 (16 of 1908); or
(e) the r egister ing author ity empower ed to r egister motor vehicles under
Chapter IV of the Motor Vehicles Act, 1988 (59 of 1988); or
(f) the Post Master Gener al as r efer r ed to in clause (j) of section 2 of the
Indian Post Office Act, 1898 (6 of 1898); or
(g) the Collector r efer r ed to in clause (c) of section 3 of the Land
Acquisition Act, 1894 (1 of 1894); or
1975, w.e.f. 1-4-1976.
95. See r ule 121A and For m No. 52A for For m of Statement to be fur nished by pr oducer of
films.
1-4-1988.
97. Substituted for twenty-five by the Finance Act, 2000, w.e.f. 1-4-2001. Ear lier twenty-five
was substituted for fiveby the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
98. Wor ds as employee or other wise omitted by the Finance Act, 1989, w.e.f. 1-6-1989.
section 285BA, as inser ted by the Finance Act, 2003, w.e.f. 1-4-2004, r ead as under :
285BA. An n ual in form ation return .Any assessee, who enter s into any financial tr ans-
action, as may be pr escr ibed, with any other per son, shall fur nish, within the pr escr ibed
time, an annual infor mation r etur n in such for m and manner , as may be pr escr ibed, in
r espect of such financial tr ansaction enter ed into by him dur ing any pr evious year .
1. For clar ifications r egar ding fur nishing of Annual Infor mation Retur n, see Cir cular No. 7/
2005, dated 24-8-2005. For details, see Taxmanns Master Guide to Income-tax Act.
(h) the r ecognised stock exchange r efer r ed to in clause (f) of section 2 of
the Secur ities Contr acts (Regulation) Act, 1956 (42 of 1956); or
(i) an officer of the Reser ve Bank of India, constituted under section 3
of the Reser ve Bank of India Act, 1934 (2 of 1934); or
(j) a depositor y r efer r ed to in clause (e) of sub-section (1) of section 2 of
the Depositor ies Act, 1996 (22 of 1996)
1a
,
who is r esponsible for r egister ing, or , maintaining books of account or other
document containing a r ecor d of any specified financial tr ansaction, under any
law for the time being in for ce, shall fur nish an annual infor mation r etur n
2
, in
r espect of such specified financial tr ansaction which is r egister ed or r ecor ded by
him dur ing any financial year beginning on or after the 1st day of Apr il, 2004 and
infor mation r elating to which is r elevant and r equir ed for the pur poses of this
Act, to the pr escr ibed income-tax author ity
3
or such other author ity or agency
as may be pr escr ibed.
(2) The annual infor mation r etur n r efer r ed to in sub-section (1) shall be fur nished
within the pr escr ibed time
4
after the end of such financial year , in such for m and
manner (including on a floppy, diskette, magnetic car tr idge tape, CD-ROM or any
computer r eadable media) as may be
2
pr escr ibed
5
.
(3) For the pur poses of sub-section (1), specified financial tr ansaction means
any
(a) tr ansaction of pur chase, sale or exchange of goods or pr oper ty or
r ight or inter est in a pr oper ty; or
(b) tr ansaction for r ender ing any ser vice; or
(c) tr ansaction under a wor ks contr act; or
(d) tr ansaction by way of an investment made or an expenditur e in-
cur r ed; or
(e) tr ansaction for taking or accepting any loan or deposit,
which may be pr escr ibed
6
:
Provided that the Boar d may pr escr ibe differ ent values for differ ent tr ansac-
tions in r espect of differ ent per sons having r egar d to the natur e of such
tr ansaction :
Provided further that the value or , as the case may be, the aggr egate value of such
tr ansactions dur ing a financial year so pr escr ibed shall not be less than fifty
thousand r upees.
(4) Wher e the pr escr ibed income-tax author ity consider s that the annual infor -
mation r etur n fur nished under sub-section (1) is defective, he may intimate the
defect to the per son who has fur nished such r etur n and give him an oppor tunity
of r ectifying the defect within a per iod of one month fr om the date of such
1.935 CH. XXIII - MISCELLANEOUS S. 285BA
1a. For definition of r ecognised stock exchange and depositor y, see Appendix.
2. See r ule 114E and For m No. 61A.
3. Pr escr ibed aut hor it y is Commissioner of Income-t ax (Cent r al Infor mat ion Br anch)/
NSDL.
4. Retur n shall be fur nished on or befor e 31st August, immediately following the financial
year in which tr ansaction is r egister ed or r ecor ded.
5. Dir ector Gener al of Income-tax (Systems) is the designated Annual Infor mation Retur n
Administr ator under r ule 114E.
6. See r ule 114E.
intimation or within such fur ther per iod which, on an application made in this
behalf, the pr escr ibed income-tax author ity may, in his discr etion, allow; and if
the defect is not r ectified within the said per iod of one month or , as the case may
be, the fur ther per iod so allowed, then, notwithstanding anything contained in
any other pr ovision of this Act, such r etur n shall be tr eated as an invalid r etur n
and the pr ovisions of this Act shall apply as if such per son had failed to fur nish
the annual infor mation r etur n.
(5) Wher e a per son who is r equir ed to fur nish an annual infor mation r etur n
under sub-section (1) has not fur nished the same within the pr escr ibed time, the
pr escr ibed income-tax author ity may ser ve upon such per son a notice r equir ing
him to fur nish such r etur n within a per iod not exceeding sixty days fr om the date
of ser vice of such notice and he shall fur nish the annual infor mation r etur n
within the time specified in the notice.]
Information by companies respecting shareholders to whom dividends have
been paid.
7
[Publication of information respecting assessees in certain cases.
287. (1) If the Centr al Gover nment is of opinion that it is necessar y or expedient
in the public inter est to publish the names of any assessees and any other
par ticular s r elating to any pr oceedings
8
[or pr osecutions] under this Act in
r espect of such assessees, it may cause to be published such names and
par ticular s in such manner as it thinks fit.
9
[(2) No publication under this section shall be made in r elation to any penalty
imposed under this Act until the time for pr esenting an appeal to the
10
[* * *]
11
[Commissioner (Appeals)] has expir ed wit hou t an appeal having been
pr esented or the appeal, if pr esented, has been disposed of.]
Explan ation .In the case of a fir m, company or other association of per sons, the
names of the par tner s of the fir m, dir ector s, managing agents, secr etar ies and
tr easur er s, or manager s of the company, or the member s of the association, as
the case may be, may also be published if, in the opinion of the Centr al
Gover nment, the cir cumstances of the case justify it.]
12
[Appearance by registered valuer in certain matters.
287A. Any assessee who is entitled or r equir ed to attend befor e any income-tax
author ity or the Appellate Tr ibunal in connection with any matter r elating
to the valuation of any asset, other wise than when r equir ed under section 131 to
S. 287A I.T. ACT, 1961 1.936
Finance (No. 2) Act, 1998, w.e.f. 1-10-1998. Ear lier Deputy Commissioner (Appeals)was
(No. 2) Act, 1977, w.e.f. 10-7-1978.
attend per sonally for examination on oath or affir mation, may attend by a
r egister ed valuer .
Explan ation .In this section, r egister ed valuer has the same meaning as in
clause (oaa) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).]
13
Appearance by authorised representative.
14
15
288. (1) Any assessee who is entitled or r equir ed to attend befor e any
income-tax author ity or the Appellate Tr ibunal in connection with any
pr oceeding under this Act other wise than when r equir ed under section 131 to
attend per sonally for examination on oath or affir mation, may, subject to the
other pr ovisions of this section, attend by an author ised r epr esentative.
16
(2) For the pur poses of this section, author ised r epr esentative means a per son
author ised by the assessee in wr iting to appear on his behalf, being
(i) a per son r elated to the assessee in any manner , or a per son r egular ly
employed by the assessee; or
(ii) any officer of a Scheduled Bank with which the assessee maintains a
cur r ent account or has other r egular dealings; or
(iii) any legal pr actitioner who is entitled to pr actise in any civil cour t in
India; or
(iv) an accountant; or
(v) any per son who has passed any accountancy examination r ecognised
in this behalf by the Boar d
17
; or
(vi) any per son who has acquir ed such educational qualifications as the
Boar d may pr escr ibe
18
for this pur pose; or
19
[(via) any per son who, befor e the coming into for ce of this Act in the Union
ter r itor y of Dadr a and Nagar Haveli, Goa, Daman and Diu, or
Pondicher r y, attended befor e an income-tax author ity in the said
13. For notifications issued by the Appellate Tr ibunal under this section, see Taxmanns
14. See r ules 49 to 66 and For m Nos. 38 to 40.
15. See also Cir cular No. 19-D (XL-62), dated 3-7-1964 and Letter [F. No. 21/ 4/ 63-IT], dated
16. See r ule 12A. Par ticular s to be fur nished by author ised r epr esentative who has pr epar ed
the assessees r etur n, ar e as follows :
(a) par ticular s of accounts, statements or other documents supplied to him by the
assessee for the pr epar ation of the r etur n of income; and
(b) wher e the author ised r epr esentative has for the pur pose of pr epar ation of the
r etur n of income car r ied out any examination of such accounts, statements or
documents, a r epor t on the scope and r esults of such examination.
See r ule 54 and For m No. 39 for application for r egistr ation as author ised income-tax
pr actitioner and r ule 55 and For m No. 40 for For m of Cer tificate by Commissioner for
r egistr ation of author ised r epr esentative.
17. See r ule 50.
18. See r ule 51.
1-4-1963.
Goa has now become a State.
ter r itor y on behalf of any assessee other wise than in the capacity of
an employee or r elative of that assessee; or ]
(vii) any other per son who, immediately befor e the commencement of this
Act, was an income-tax pr actitioner within the meaning of clause (iv)
of sub-section (2) of section 61 of the Indian Income-tax Act, 1922 (11
of 1922), and was actually pr actising as such.
Explan ation .In this section, accountant means a
20
char ter ed accountant
within the meaning of the Char ter ed Accountants Act, 1949 (38 of 1949), and
includes, in r elation to any State, any per son who by vir tue of the pr ovisions of
sub-section (2) of section 226
21
of the Companies Act, 1956 (1 of 1956), is entitled
to be appointed to act as an auditor of companies r egister ed in that State.
(3)
22
[***]
(4) No per son
(a) who has been dismissed or r emoved fr om Gover nment ser vice after
the 1st day of Apr il, 1938; or
(b) who has been convicted of an offence connected with any income-tax
pr oceeding or on whom a penalty has been imposed under this Act,
other than a penalty imposed on him under
23
[clause (ii) of sub-
section (1) of] section 271; or
(c) who has become an insolvent,
shall be qualified to r epr esent an assessee under sub-section (1), for all times in
the case of a per son r efer r ed to in sub-clause (a)*, for such time as the
24
[Chief
Commissioner or Commissioner ] may by or der deter mine in the case of a per son
r efer r ed to in sub-clause (b)*, and for the per iod dur ing which the insolvency
continues in the case of a per son r efer r ed to in sub-clause (c)*.
(5) If any per son
(a) who is a legal pr actitioner or an accountant is found guilty of
misconduct in his pr ofessional capacity by any author ity entitled to
institute disciplinar y pr oceedings against him, an or der passed by that
author ity shall have effect in r elation to his r ight to attend befor e an
income-tax author ity as it has in r elation to his r ight to pr actise as a
legal pr actitioner or accountant, as the case may be;
S. 288 I.T. ACT, 1961 1.938
20. Clause (1)(b) of section 2 of the Char ter ed Accountants Act, 1949 defines char ter ed
account ant as under :
(b) char ter ed accountant means a per son who is a member of the *Institute;
*Clause (1)(e) of section 2 defines the Institute as the Institute of Char ter ed Accountants
of India constituted under this Act.
21. For text of section 226(2) of the Companies Act, 1956, see Appendix.
23. Inser ted by the Finance Act, 1990, w.e.f. 1-4-1990. Ear lier , it was amended by the Dir ect Tax
1-4-1988.
*Should be r ead as clause.
25
(b) who is not a legal pr actitioner or an accountant, is found guilty of
misconduct in connection with any income-tax pr oceedings by the
pr escr ibed author ity, the pr escr ibed author ity
26
may dir ect that he
shall thencefor th be disqualified to r epr esent an assessee under sub-
section (1).
(6) Any or der or dir ection under clause (b) of sub-section (4) or clause (b) of sub-
section (5) shall be subject to the following conditions, namely :
(a) no such or der or dir ection shall be made in r espect of any per son
unless he has been given a r easonable oppor tunity of being hear d;
(b) any per son against whom any such or der or dir ection is made may,
within one month of the making of the or der or dir ection, appeal to
the Boar d to have the or der or dir ection cancelled; and
(c) no such or der or dir ection shall take effect until the expir ation of one
month fr om the making ther eof, or , wher e an appeal has been
pr efer r ed, until the disposal of the appeal.
(7) A per son disqualified to r epr esent an assessee by vir tue of the pr ovisions of
sub-section (3) of section 61 of the Indian Income-tax Act, 1922 (11 of 1922), shall
be disqualified to r epr esent an assessee under sub-section (1).
27
[Rounding off of income.
288A.
28
[The amount of t ot al income] comput ed in accor dance wit h t he
for egoing pr ovisions of this Act shall be r ounded off to the near est
multiple of ten r upees and for this pur pose any par t of a r upee consisting of paise
shall be ignor ed and ther eafter if such amount is not a multiple of ten, then, if the
last figur e in that amount is five or mor e, the amount shall be incr eased to the
next higher amount which is a multiple of ten and if the last figur e is less than five,
the amount shall be r educed to the next lower amount which is a multiple of ten;
and the amount so r ounded off shall be deemed to be the total income of the
assessee for the pur poses of this Act.]
29
[***]
30
[Rounding off amount payable and refund due.
288B. Any amount payable, and the amount of r efund due, under the pr ovisions
of this Act shall be r ounded off to the near est multiple of ten r upees and
1.939 CH. XXIII - MISCELLANEOUS S. 288B
25. See r ules 52 and 59 to 66.
26. The pr escr ibed author ity under r ule 52 is the Chief Commissioner or Commissioner
having r equisite jur isdiction.
28. Substituted for (1) Subject to the pr ovisions of sub-section (2), the amount of total
income by the Finance Act, 1968, w.e.f. 1-4-1969.
29. Sub-section (2) and Explan ation , omitted, ibid.
substitution, section 288B, as amended by the Finance Act, 1966, w.e.f. 1-4-1966, r ead as
under :
288B. Roun din g off of tax, etc.The amount of tax (including tax deductible at sour ce or
payable in advance), inter est, penalty, fine or any other sum payable, and the amount of
r efund due, under the pr ovisions of this Act shall be r ounded off to the near est r upee and,
for this pur pose, wher e such amount contains a par t of a r upee consisting of paise then,
if such par t is fifty paise or mor e, it shall be incr eased to one r upee and if such par t is less
than fifty paise it shall be ignor ed.
S. 292A I.T. ACT, 1961 1.940
for this pur pose any par t of a r upee consisting of paise shall be ignor ed and
ther eafter if such amount is not a multiple of ten, then, if the last figur e in that
amount is five or mor e, the amount shall be incr eased to the next higher amount
which is a multiple of ten and if the last figur e is less than five, the amount shall
be r educed to the next lower amount which is a multiple of ten.]
Receipt to be given.
289. A r eceipt shall be given for any money paid or r ecover ed under this Act.
Indemnity.
290. Ever y per son deducting, r etaining, or paying any tax in pur suance of this
Act in r espect of income belonging to another per son is her eby indemnified
for the deduction, r etention, or payment ther eof.
Power to tender immunity from prosecution.
291. (1) The Centr al Gover nment may, if it is of opinion (the r easons for such
opinion being r ecor ded in wr iting) that with a view to obtaining the
evidence of any per son appear ing to have been dir ectly or indir ectly concer ned
in or pr ivy to the concealment of income or to the evasion of payment of tax on
income
31
[it is necessar y or expedient so to do], tender to such per son immunity
fr om pr osecution for any offence under this Act or under the Indian Penal Code
(45 of 1860), or under any other Centr al Act for the time being in for ce and also
fr om the imposition of any penalty under this Act on condition of his making a
full and tr ue disclosur e of the whole cir cumstances r elating to the concealment
of income or evasion of payment of tax on income.
(2) A tender of immunity made to, and accepted by, the per son concer ned, shall,
to the extent to which the immunity extends, r ender him immune fr om pr osecu-
tion for any offence in r espect of which the tender was made or fr om the
imposition of any penalty under this Act.
(3) If it appear s to the Centr al Gover nment that any per son to whom immunity
has been tender ed under this section has not complied with the condition on
which the tender was made or is wilfully concealing anything or is giving false
evidence, the Centr al Gover nment may r ecor d a finding to that effect, and
ther eupon the immunity shall be deemed to have been withdr awn, and any such
per son may be tr ied for the offence in r espect of which the tender of immunity
was made or for any other offence of which he appear s to have been guilty in
connection with the same matter and shall also become liable to the imposition
of any penalty under this Act to which he would other wise have been liable.
Cognizance of offences.
292. No cour t infer ior to that of a pr esidency magistr ate or a magistr ate of the
fir st class shall tr y any offence under this Act.
32
[Section 360 of the Code of Criminal Procedure, 1973, and the Probation of
Offenders Act, 1958, not to apply.
292A. Nothing contained in section 360
33
of the Code of Cr iminal Pr ocedur e,
1973 (2 of 1974), or in the Pr obation of Offender s Act, 1958 (20 of 1958),
shall apply to a per son convicted of an offence under this Act unless that per son
is under eighteen year s of age.]
33. For text of section 360 of the Code of Cr iminal Pr ocedur e, 1973, see Appendix.
1.941 CH. XXIII - MISCELLANEOUS S. 292C
34
[Return of income, etc., not to be invalid on certain grounds.
292B. No r etur n of income, assessment, notice, summons or other pr oceeding,
fur nished or made or issued or taken or pur por ted to have been fur nished
or made or issued or taken in pur suance of any of the pr ovisions of this Act shall
be invalid or shall be deemed to be invalid mer ely by r eason of any mistake,
defect or omission in such r etur n of income, assessment, notice, summons or
other pr oceeding if such r etur n of income, assessment, notice, summons or other
pr oceeding is in substance and effect in confor mity with or accor ding to the
intent and pur pose of this Act.]
34a
[Notice deemed to be valid in certain circumstances.
292BB. Wh ere an assessee h as appeared in an y proceedin g or co-operated in
an y in quiry relatin g to an assessm en t or reassessm en t, it sh all be
deem ed th at an y n otice un der an y provision of th is Act, wh ich is required to be
served upon h im , h as been duly served upon h im in tim e in accordan ce with th e
provision s of th is Act an d such assessee sh all be precluded from tak in g an y
objection in an y proceedin g or in quiry un der th is Act th at th e n otice was
(a) n ot served upon h im ; or
(b) n ot served upon h im in tim e; or
(c) served upon h im in an im proper m an n er:
Provided th at n oth in g con tain ed in th is section sh all apply wh ere t h e assessee
h as raised su ch object ion bef ore t h e com pletion of su ch assessm en t or
reassessmen t.]
35
[Presumption as to assets, books of account, etc.
292C.
35a
[(1)] Wher e any books of account, other documents, money, bullion,
jeweller y or other valuable ar ticle or thing ar e or is found in the possession
or contr ol of any per son in the cour se of a sear ch under section 132
35b
[or survey
un der section 133A], it may, in any pr oceeding under this Act, be pr esumed
(i) that such books of account, other documents, money, bullion, jewellery
or other valuable ar ticle or thing belong or belongs to such per son;
(ii) that the contents of such books of account and other documents ar e
tr ue; and
(iii) that the signatur e and ever y other par t of such books of account and
other documents which pur por t to be in the handwr iting of any
par ticular per son or which may r easonably be assumed to have been
signed by, or to be in the handwr iting of, any par ticular per son, ar e in
that per sons handwr iting, and in the case of a document stamped,
executed or attested, that it was duly stamped and executed or
attested by the per son by whom it pur por ts to have been so executed
or attested.]
35c
[(2) Wh ere an y books of accoun t, oth er documen ts or assets h ave been delivered
to th e requisition in g officer in accordan ce with th e provision s of section 132A,
th en , th e provision s of sub-section (1) sh all apply as if such books of accoun t, oth er
35a. Renumber ed as sub-section (1) by the Finance Act, 2008, w.r .e.f. 1-10-1975.
35b. Inser ted by the Finance Act, 2008, w.r .e.f. 1-6-2002.
35c. Inser ted by the Finance Act, 2008, w.r .e.f. 1-10-1975.
docum en ts or assets wh ich h ad been tak en in to custody from th e person referred
to in clause (a) or clause (b) or clause (c), as th e case m ay be, of sub-section (1) of
section 132A, h ad been foun d in th e possession or con trol of th at person in th e
course of a search un der section 132.]
Bar of suits in civil courts.
293. No suit shall be br ought in any civil cour t to set aside or modify any
36
[***]
37
[pr oceeding taken
38
or ] or der made under this Act; and no pr osecution,
suit or other pr oceeding shall lie against
39
[the Gover nment or ] any officer of the
Gover nment for anything in good faith done or intended to be done under this
Act.
40
[Power to make exemption, etc., in relation to participation in the business of
prospecting for, extraction, etc., of mineral oils.
293A. (1) If the Centr al Gover nment is satisfied that it is necessar y or expedient
so to do in the public inter est, it may, by notification
41
in the Official
Gazette, make an exemption, r eduction in r ate or other modification in r espect
of income-tax in favour of any class of per sons specified in sub-section (2) or in
r egar d to the whole or any par t of the income of such class of per sons
42
[or in
r egar d to the status in which such class of per sons or the member s ther eof
ar e to be assessed on their income fr om the business r efer r ed to in clause (a) of
sub-section (2) :
Provided that the notification for modification in r espect of the status may be
given effect fr om an assessment year beginning on or after the 1st day of Apr il,
1993.]
(2) The per sons r efer r ed to in sub-section (1) ar e the following, namely :
(a) per sons with whom the Centr al Gover nment has enter ed into agr ee-
ments for the association or par ticipation of that Gover nment or any
per son author ised by that Gover nment in any business consisting of
the pr ospecting for or extr action or pr oduction of miner al oils;
(b) per sons pr oviding any ser vices or facilities or supplying any ship,
air cr aft, machiner y or plant (whether by way of sale or hir e) in
connection with any business consisting of the pr ospecting for or
extr action or pr oduction of miner al oils car r ied on by that Gover n-
ment or any per son specified by that Gover nment in this behalf by
notification in the Official Gazette; and
(c) employees of the per sons r efer r ed to in clause (a) or clause (b).
(3) Ever y notification issued under this section shall be laid befor e each House
of Par liament.
S. 293A I.T. ACT, 1961 1.942
36. Wor d assessment omitted by the Finance Act, 1987, w.r .e.f. 1-3-1987.
38. For the meaning of the expr ession pr oceeding taken, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
41. For notifications issued under this section, see Taxmanns Master Guide to Income-tax
Act .
43
(a) miner al oil includes petr oleum and natur al gas;
(b) status means the categor y under which the assessee is assessed as
individual, Hindu undivided family and so on.]]
44
[Power of Central Government or Board to condone delays in obtaining
approval.
293B. Wher e, under any pr ovision of this Act, the appr oval of the Centr al
Gover nment or the Boar d is r equir ed to be obtained befor e a specified
date, it shall be open to the Centr al Gover nment or , as the case may be, the Boar d
to condone, for sufficient cause, any delay in obtaining such appr oval.]
Act to have effect pending legislative provision for charge of tax.
294. If on the 1st day of Apr il in any assessment year pr ovision has not yet been
made by a Centr al Act for the char ging of income-tax
45
[***] for that
assessment year , this Act shall never theless have effect until such pr ovision is so
made as if the pr ovision in for ce in the pr eceding assessment year or the
pr ovision pr oposed in the Bill then befor e Par liament, whichever is mor e
favour able to the assessee, wer e actually in for ce.
46
[Power to make exemption, etc., in relation to certain Union territories.
294A. If the Centr al Gover nment consider s it necessar y or expedient so to do
for avoiding any har dship or anomaly or r emoving any difficulty that
may ar ise as a r esult of the application of this Act to the Union ter r itor ies of
Dadr a and Nagar Haveli, Goa*, Daman and Diu, and Pondicher r y, or in the case
of the Union ter r itor y of Pondicher r y, for implementing any pr ovision of the
Tr eaty of Cession concluded between Fr ance and India on the 28th day of May,
1956, that Gover nment may, by gener al or special or der , make an exemption,
r eduction in r ate or other modification in r espect of income-tax or super -tax in
favour of any assessee or class of assessees or in r egar d to the whole or any par t
of the income of any assessee or class of assessees :
Provided that the power confer r ed by this section shall not be exer cisable after
the 31st day of Mar ch, 1967, except for the pur pose of r escinding an exemption,
r eduction or modification alr eady made.]
Power to make rules.
295. (1) The Boar d may, subject to the contr ol of the Centr al Gover nment, by
notification in the Gazette of India, make r ules for the whole or any par t of
India for car r ying out the pur poses of this Act.
(2) In par ticular , and without pr ejudice to the gener ality of the for egoing power ,
such r ules may pr ovide for all or any of the following matter s :
43. Substituted by the Finance Act, 1995, w.r .e.f. 1-4-1993. Pr ior to its substitution, the
Explan ation , as inser ted by the Finance Act, 1981, w.e.f. 1-4-1981, r ead as under :
Explan ation .For the pur poses of this section, miner al oil includes petr oleum and
natur al gas.
45. Wor ds or super -tax omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
1-4-1963.
*Goa has now become a State.
(a) the ascer tainment and deter mination of any class of income;
(b) the manner in which and the pr ocedur e by which the income shall be
ar r ived at in the case of
(i) income der ived in par t fr om agr icultur e and in par t fr om busi-
ness;
(ii) per sons r esiding outside India;
47
[(iii) an individual who is liable to be assessed under the pr ovisions of
sub-section (2) of section 64;]
(c) the deter mination of the value of any per quisite char geable to tax
under this Act in such manner and on such basis as appear s to the
Boar d to be pr oper and r easonable;
(d) the per centage on the wr itten down value which may be allowed as
depr eciation in r espect of buildings, machiner y, plant or fur nitur e;
48
[(dd) the extent to which, and the conditions subject to which, any expen-
ditur e r efer r ed to in sub-section (3) of section 37 may be allowed;]
49
[(dda) the matter s specified in sub-sections (2) and (3) of section 44AA;]
(e)
50
[***]
51
[(ee) the conditions or limitations subject to which any payment of r ent
made by an assessee shall be deducted under section 80GG;
(eea) the cases, the natur e and value of assets, the limits and heads of
expenditur e and the outgoings, which ar e r equir ed to be pr escr ibed
under sub-section (6) of section 139;
(eeb) the time within which any per son may apply for the allotment of a
per manent account number , the for m and the manner in which such
application may be made and the par ticular s which such application
shall contain and the tr ansactions with r espect to which per manent
account number s shall be quoted on documents r elating to such
tr ansactions under section 139A;
52
[(eeba) the documents, statements, r eceipts, cer tificates or audited r epor ts
which may not be fur nished along with the r etur n but shall be
pr oduced befor e the Assessing Officer on demand under section
139C;
(eebb) the class or classes of per sons who shall be r equir ed to fur nish the
r etur n of income in electr onic for m; the for m and the manner of
fur nishing the said r etur n in electr onic for m; documents, statements,
r eceipts, cer tificates or r epor ts which shall not be fur nished with the
r etur n in electr onic for m and the computer r esour ce or electr onic
r ecor d to which such r etur n may be tr ansmitted under section 139D;]
S. 295 I.T. ACT, 1961 1.944
50. Omitted by the Finance Act, 2005, w.e.f. 1-4-2006. Pr ior to its omission, clause (e), as
(e) the per centage or the amount to be pr escr ibed under clause (i) of sub-section (4) of
section 80C;
(eec) the for m of the r epor t of audit and the par ticular s which such r epor t
shall contain under sub-section (2A) of section 142;]
(f) the manner in which and the per iod to which any such income as is
r efer r ed to in section 180 may be allocated;
52a
[(fa) th e form an d m an n er in wh ich th e in form ation relatin g to paym en t of
an y sum m ay be furn ish ed un der sub-section (6) of section 195;]
(g) the author ity to be pr escr ibed for any of the pur poses of this Act;
(h) the pr ocedur e for giving effect to the ter ms of any agr eement for the
gr anting of r elief in r espect of double taxation or for the avoidance of
double taxation which may be enter ed into by the Centr al Gover n-
ment under this Act;
(i) the for m and manner in which any application, claim, r etur n or
infor mation may be made or fur nished and the fees that may be
levied in r espect of any application or claim;
(j) the manner in which any document r equir ed to be filed under this Act
may be ver ified;
(k) the pr ocedur e to be followed on applications for r efunds;
53
[(kk) the pr ocedur e to be followed in calculating inter est payable by
assessees or inter est payable by Gover nment to assessees under any
pr ovision of this Act, including the r ounding off of the per iod for
which such inter est is to be calculated in cases wher e such per iod
includes a fr action of a month, and specifying the cir cumstances in
which and the extent to which petty amounts of inter est payable by
assessees may be ignor ed;]
(l) the r egulation of any matter for which pr ovision is made in section
230;
(m) the for m and manner in which any appeal or cr oss-objection may be
filed under this Act, the fee payable in r espect ther eof and the manner
in which intimation of any such or der as is r efer r ed to in clause (c) of
sub-section (2) of section 249 may be ser ved;
54
[(mm) the cir cumstances in which, the conditions subject to which and the
manner in which, the
55
[* * *]
56
[Commissioner (Appeals)] may per mit
an appellant to pr oduce evidence which he did not pr oduce or which
he was not allowed to pr oduce befor e the
57
[Assessing] Officer ;]
58
[(mma) the for m in which the statement under section 285B shall be deliver ed
to the
57
[Assessing] Officer ;]
(n) the maintenance of a r egister of per sons other than legal pr acti-
tioner s or accountants as defined in sub-section (2) of section 288
w.e.f. 1-10-1998. Ear lier , Deputy Commissioner (Appeals)was substituted for Appellate
1-4-1988.
S. 297 I.T. ACT, 1961 1.946
63. Substituted for ever y notification issued under sub-clause (iv) of clause (23C) of section
pr actising befor e income-tax author ities and for the constitution of
and the pr ocedur e to be followed by the author ity r efer r ed to in sub-
section (5) of that section;
(o) the issue of cer tificate ver ifying the payment of tax by assessees;
(p) any other matter which by this Act is to be, or may be, pr escr ibed.
(3) In cases coming under clause (b) of sub-section (2), wher e the income liable
to tax cannot be definitely ascer tained, or can be ascer tained only with an
amount of tr ouble and expense to the assessee which in the opinion of the Boar d
is unr easonable, the r ules made under this section may
(a) pr escr ibe methods by which an estimate of such income may be
made; and
(b) in cases coming under sub-clause (i) of clause (b) of sub-section (2)
specify the pr opor tion of the income which shall be deemed to be
income liable to tax,
and an assessment based on such estimate or pr opor tion shall be deemed to be
duly made in accor dance with the pr ovisions of this Act.
59
[(4) The power to make r ules confer r ed by this section shall include the power
to give r etr ospective effect, fr om a date not ear lier than the date of commence-
ment of this Act, to the r ules or any of them and, unless the contr ar y is per mitted
(whether expr essly or by necessar y implication), no r etr ospective effect shall be
given to any r ule so as to pr ejudicially affect the inter ests of assessees.]
60
[
61
[Rules and certain notifications to be placed before Parliament.
296. The Centr al Gover nment shall cause ever y r ule made under this Act
62
[, the r ules of pr ocedur e fr amed by the Settlement Commission under
sub-section (7) of section 245F, the Author ity for Advance Rulings under section
245V and the Appellate Tr ibunal under sub-section (5) of section 255] and
63
[ever y notification issued befor e the 1st day of June, 2007 under sub-clause (iv)
of clause (23C) of section 10] to be laid as soon as may be after the r ule is made
or the notification is issued befor e each House of Par liament while it is in session,
for a total per iod of thir ty days, which may be compr ised in one session or in two
or mor e successive sessions, and if, befor e the expir y of the session immediately
following the session or the successive sessions afor esaid, both Houses agr ee in
making any modification in the r ule or notification or both Houses agr ee that the
r ule or notification should not be made or issued, that r ule or notification shall
ther eafter have effect, only in such modified for m or be of no effect, as the case
may be; so, however , that any such modification or annulment shall be without
pr ejudice to the validity of anything pr eviously done under that r ule or notifica-
tion.]]
Repeals and savings.
297. (1) The Indian Income-tax Act, 1922 (11 of 1922), is her eby r epealed.
(2) Notwithstanding the r epeal of the Indian Income-tax Act, 1922 (11 of 1922)
(her einafter r efer r ed to as the r epealed Act),
(a) wher e a r etur n of income has been filed befor e the commencement
of this Act by any per son for any assessment year , pr oceedings for the
assessment
64
of that per son for that year may be taken and continued
as if this Act had not been passed;
(b) wher e a r etur n of income is filed after the commencement of this Act
other wise than in pur suance of a notice under section 34 of the
r epealed Act by any per son for the assessment year ending on the 31st
day of Mar ch, 1962, or any ear lier year , the assessment of that per son
for that year shall be made in accor dance with the pr ocedur e
specified in this Act;
(c) any pr oceeding pending on the commencement of this Act befor e any
income-tax author ity, the Appellate Tr ibunal or any cour t, by way of
appeal, r efer ence, or r evision, shall be continued and disposed of as
if this Act had not been passed;
(d) wher e in r espect of any assessment year after the year ending on the
31st day of Mar ch, 1940,
(i) a notice under section 34 of the r epealed Act had been issued
befor e t he commencement of t his Act , t he pr oceedings in
pur suance of such notice may be continued and disposed of as if
this Act had not been passed;
(ii) any income char geable to tax had escaped assessment within the
meaning of that expr ession in section 147 and no pr oceedings
under section 34 of the r epealed Act in r espect of any such income
ar e pending at the commencement of this Act, a notice under
section 148 may, subject to the pr ovisions contained in section
149 or section 150, be issued with r espect to that assessment year
and all the pr ovisions of this Act shall apply accor dingly
65
;
(e)
66
[subject to the pr ovisions of clause (g) and clause (j) of this sub-
section,] section 23A of the r epealed Act shall continue to have effect
in r elation to the assessment of any company or its shar eholder s for
the assessment year ending on the 31st day of Mar ch, 1962 or any
ear lier year , and the pr ovisions of the r epealed Act shall apply to all
matter s ar ising out of such assessment as fully and effectually as if
this Act had not been passed;
(f) any pr oceeding for the imposition of a penalty in r espect of any
assessment completed befor e the fir st day of Apr il, 1962, may be
initiated and any such penalty may be imposed as if this Act had not
been passed;
(g) any pr oceeding for the imposition of a penalty in r espect of any
assessment for the year ending on the 31st day of Mar ch, 1962, or any
64. For the meaning of the expr ession pr oceedings for the r eassessment, see Taxmanns
65. For the meaning of the expr ession all the pr ovisions of this Act shall apply accor dingly,
ear lier year , which is completed on or after the 1st day of Apr il, 1962,
may be initiated and any such penalty may be imposed under this Act;
(h) any election or declar ation made or option exer cised by an assessee
under any pr ovision of the r epealed Act and in for ce immediately
befor e the commencement of this Act shall be deemed to have been
an election or declar ation made or option exer cised under the
cor r esponding pr ovision of this Act;
(i) wher e, in r espect of any assessment completed befor e the com-
mencement of this Act, a r efund falls due after such commencement
or default is made after such commencement in the payment of any
sum due under such completed assessment,
67
the pr ovisions of this
Act r elating to inter est payable by the Centr al Gover nment on r efunds
and inter est payable by the assessee for default shall apply;
(j) any sum payable by way of income-tax, super -tax, inter est, penalty or
other wise under the r epealed Act may be r ecover ed under this Act,
but without pr ejudice to any action alr eady taken for the r ecover y of
such sum under the r epealed Act;
(k) any agr eement enter ed into, appointment made, appr oval given,
r ecognition gr anted, dir ection, instr uction, notification, or der or r ule
issued under any pr ovision of the r epealed Act shall, so far as it is not
inconsistent with the cor r esponding pr ovision of this Act, be deemed
to have been enter ed into, made, gr anted, given or issued under the
cor r esponding pr ovision afor esaid and shall cont inue in for ce
accor dingly;
(l)
68
any notification issued under sub-section (1) of section 60
69
[or
section 60A] of the r epealed Act and in for ce immediately befor e the
commencement of this Act shall, to the extent to which pr ovision has
not been made under this Act, continue in for ce
70
[***]:
71
[Provided that the Centr al Gover nment may r escind any such
notification or amend it so as to r escind any exemption, r eduction in
r ate or other modification made ther eunder ;]
(m) wher e the per iod pr escr ibed for any application, appeal, r efer ence or
r evision under the r epealed Act had expir ed on or befor e the com-
mencement of this Act, nothing in this Act shall be constr ued as
enabling any such application, appeal, r efer ence or r evision to be
made under this Act by r eason only of the fact that a longer per iod
ther efor is pr escr ibed or pr ovision is made for extension of time in
suitable cases by the appr opr iate author ity.
S. 297 I.T. ACT, 1961 1.948
67. For the meaning of the expr ession completed assessment, see Taxmanns Dir ect Taxes
Manual, Vol. 3.
68. For exemptions notified under section 60(1) of the 1922 Act, which continued to be in for ce
under this clause, see Taxmanns Dir ect Taxes Cir cular s.
70. Wor ds until r escinded by the Centr al Gover nment omitted by the Ruler s of Indian States
(Abolition of Pr ivileges) Act, 1972, w.e.f. 9-9-1972.
Power to remove difficulties.
298. (1) If any difficulty ar ises in giving effect to the pr ovisions of this Act the
Centr al Gover nment may, by gener al or special or der , do anything not
inconsistent with such pr ovisions which appear s to it to be necessar y or
expedient for the pur pose of r emoving the difficulty.
(2) In par ticular , and without pr ejudice to the gener ality of the for egoing power ,
any such or der may pr ovide for the adaptations or modifications subject to
which the r epealed Act shall apply in r elation to the assessments for the
assessment year ending on the 31st day of Mar ch, 1962, or any ear lier year .
72
[(3) If any difficulty ar ises in giving effect to the pr ovisions of this Act as
amended by the Dir ect Tax Laws (Amendment) Act, 1987, the Centr al Gover n-
ment may, by or der , do anything not inconsistent with such pr ovisions for the
pur pose of r emoving the difficulty:
Provided that no such or der shall be made after the expir ation of thr ee year s
fr om the 1st day of Apr il, 1988.
(4) Ever y or der made under sub-section (3) shall be laid befor e each House of
Par liament.]
T HE FIRS T S CHEDULE
INSURANCE BUSINESS
[See section 44]
A.Life in suran ce busin ess
Profits of life insurance business to be computed separately.
1. In the case of a per son who car r ies on or at any time in the pr evious year
car r ied on life insur ance business, the pr ofits and gains of such per son fr om
that business shall be computed separ ately fr om his pr ofits and gains fr om any
other business.
73
[Computation of profits of life insurance business.
2. The pr ofits and gains of life insur ance business shall be taken to be the annual
aver age of the sur plus ar r ived at by adjusting the sur plus or deficit disclosed
by the actuar ial valuation made in accor dance with the Insur ance Act, 1938
(4 of 1938), in r espect of the last inter -valuation per iod ending befor e the
commencement of the assessment year , so as to exclude fr om it any sur plus or
deficit included ther ein which was made in any ear lier inter -valuation per iod.]
Deductions.
3. [Om itted by th e Fin an ce Act, 1976, w.e.f. 1-4-1977. Earlier, th e rule was first
am en ded by th e Fin an ce Act, 1966, w.e.f. 1-4-1966 an d by th e Fin an ce Act, 1965,
w.e.f. 1-4-1965.]
Adjustment of tax paid by deduction at source.
4. Wher e for any year an assessment of the pr ofits of life insur ance business is
made in accor dance with the annual aver age of a sur plus disclosed by a
1.949 SCH. I - INSURANCE BUSINESS R. 4
R. 7 I.T. ACT, 1961 1.950
valuation for an inter -valuation per iod exceeding twelve months, then, in
computing the income-tax payable for that year , cr edit shall not be given in
accor dance with section 199 for the income-tax paid in the pr evious year , but
cr edit shall be given for the annual aver age of the income-tax paid by deduction
at sour ce fr om inter est on secur ities or other wise dur ing such per iod.
B.Oth er in suran ce busin ess
Computation of profits and gains of other insurance business.
5. The pr ofits and gains of any business of insur ance other than life insur ance
shall be taken to be the balance of the pr ofits disclosed by the annual accounts,
copies of which ar e r equir ed under the Insur ance Act, 1938 (4 of 1938), to be
fur nished to the Contr oller of Insur ance, subject to the following adjustments:
(a) subject to the other pr ovisions of this r ule, any expenditur e or
allowance
74
[including any amount debited to the pr ofit and loss
account either by way of a pr ovision for any tax, dividend, r eser ve or
any other pr ovision as may be pr escr ibed] which is not admissible
under the pr ovisions of sections 30 to
75
[43B] in computing the pr ofits
and gains of a business shall be added back;
(b)
76
[***]
77
(c) such amount car r ied over to a r eser ve for unexpir ed r isks as may be
pr escr ibed in this behalf shall be allowed as a deduction.
C.Oth er provision s
Profits and gains of non-resident person.
6. (1) The pr ofits and gains of the br anches in India of a per son not r esident in
India and car r ying on any business of insur ance, may, in the absence of mor e
r eliable data, be deemed to be that pr opor tion of the wor ld income of such per son
which cor r esponds to the pr opor tion which his pr emium income der ived fr om
India bear s to his total pr emium income.
(2) For the pur poses of this r ule, the wor ld income in r elation to life insur ance
business of a per son not r esident in India shall be computed in the manner laid
down in this Act for the computation of the pr ofits and gains of life insur ance
business car r ied on in India.
Interpretation.
7. (1) For the pur poses of these r ules
75. Substituted for 43A by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
Ear lier , 43A was substituted for 43 by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
77. See r ule 6E for limits pr escr ibed for amount that can be car r ied over to a r eser ve for
unexpir ed r isk : (50 per cent of net pr emium in case of fir e or miscellaneous insur ance
business ; 100 per cent of net pr emium in case of mar ine insur ance business and 100 per
cent of net pr emium wher e insur ance business r elates to fir e insur ance or engineer ing
insur ance and which pr ovides insur ance for ter r or ism r isks.)
(i)
78
[***]
(ii) investments includes secur ities, stocks and shar es;
(iii)
79
[***]
(iv) life insur ance business
80
means life insur ance business as defined in
clause (11) of section 2 of the Insur ance Act, 1938 (4 of 1938) ;
(v) r ule means a r ule contained in this Schedule.
(2) Refer ences in these r ules to the Insur ance Act, 1938 (4 of 1938), or any
pr ovision ther eof, shall, in r elation to the Life Insur ance Cor por ation of India, be
constr ued as r efer ences to that Act or pr ovision as r ead with section 43
81
of the
Life Insur ance Cor por ation Act, 1956 (31 of 1956).
THE S ECOND S CHEDULE
PROCEDURE FOR RECOVERY OF TAX
82
[[See sections 222 and 276]]
PART I
GENERAL PROVISIONS
Definitions.
1. In this Schedule, unless the context other wise r equir es,
83
[(a) cer tificate, except in r ules 7, 44, 65 and sub-r ule (2) of r ule 66, means
the cer tificate dr awn up by the Tax Recover y Officer under section
222 in r espect of any assessee r efer r ed to in that section;]
(b) defaulter means the assessee mentioned in the cer tificate;
1.951 SCH. II - PROCEDURE FOR RECOVERY OF TAX R. 1
78. Omitted by the Finance Act, 1976, w.e.f. 1-4-1977. Ear lier , clause (i) was amended by the
80. Clause (11) of section 2 of the Insur ance Act, 1938 defines life insur ance business as
follows :
(11) life insur ance business means the business of effecting contr acts of insur ance
upon human life, including any contr act wher eby the payment of money is assur ed
on death (except death by accident only) or the happening of any contingency
dependent on human life, and any cont r act which is subject t o payment of
pr emiums for a ter m dependent on human life and shall be deemed to include
(a) the gr anting of disability and double or tr iple indemnity accident benefits, if
so pr ovided in the contr act of insur ance,
(b) the gr anting of annuities upon human life, and
(c) the gr anting of super annuation allowances and annuities payable out of any
fund applicable solely to the r elief and maintenance of per sons engaged or
who have been engaged in any par ticular pr ofession, tr ade or employment
or of the dependants of such per son;
81. For text of section 43 of the Life Insur ance Cor por ation Act, 1956, see Appendix.
82. Substituted for [See section 222] by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989.
(c) execution, in r elation to a cer tificate, means r ecover y of ar r ear s in
pur suance of the cer tificate;
(d) movable pr oper ty includes gr owing cr ops;
(e) officer means a per son author ised to make an attachment or sale
under this Schedule;
(f) r ule means a r ule contained in this Schedule; and
(g) shar e in a cor por ation includes stock, debentur e-stock, debentur es
or bonds.
Issue of notice.
2.
84
[When a cer tificate has been dr awn up by the Tax Recover y Officer ] for the
r ecover y of ar r ear s under this Schedule, the Tax Recover y Officer shall cause
to be ser ved upon the defaulter a notice r equir ing the defaulter to pay the
amount specified in the cer tificate within fifteen days fr om the date of ser vice
of the notice and intimating that in default steps would be taken to r ealise the
amount under this Schedule.
When certificate may be executed.
3. No step in execution of a cer tificate shall be taken until the per iod of fifteen
days has elapsed since the date of the ser vice of the notice r equir ed by the
pr eceding r ule :
Provided that, if the Tax Recover y Officer is satisfied that the defaulter is likely
to conceal, r emove or dispose of the whole or any par t of such of his movable
pr oper ty as would be liable to attachment in execution of a decr ee of a civil cour t
and that the r ealisation of the amount of the cer tificate would in consequence
be delayed or obstr ucted, he may at any time dir ect, for r easons to be r ecor ded
in wr iting, an attachment of the whole or any par t of such pr oper ty:
Provided further that if the defaulter whose pr oper ty has been so attached
fur nishes secur ity to the satisfaction of the Tax Recover y Officer , such attach-
ment shall be cancelled fr om the date on which such secur ity is accepted by the
Tax Recover y Officer .
Mode of recovery.
4. If the amount mentioned in the notice is not paid within the time specified
ther ein or within such fur ther time as the Tax Recover y Officer may gr ant in
his discr etion, the Tax Recover y Officer shall pr oceed to r ealise the amount by
one or mor e of the following modes :
(a) by attachment and sale of the defaulter s movable pr oper ty;
(b) by attachment and sale of the defaulter s immovable pr oper ty;
(c) by ar r est of the defaulter and his detention in pr ison;
(d) by appointing a r eceiver for the management of the defaulter s
movable and immovable pr oper ties.
R. 4 I.T. ACT, 1961 1.952
84. Substituted for When a cer tificate has been r eceived by the Tax Recover y Officer fr om
t he *Assessin g Officer by the Dir ect Tax Laws (Amendment) Act, 1989, w.r .e.f. 1-4-1988.
*Substituted for Income-tax, ibid.
Interest, costs and charges recoverable.
5. Ther e shall be r ecover able, in t he pr oceedings in execut ion of ever y
cer tificate,
(a) such inter est upon the amount of tax or penalty or other sum to which
the cer tificate r elates as is payable in accor dance with sub-section (2)
of section 220, and
(b) all char ges incur r ed in r espect of
(i) the ser vice of notice upon the defaulter to pay the ar r ear s, and of
war r ants and other pr ocesses, and
(ii) all other pr oceedings taken for r ealising the ar r ear s.
Purchasers title.
6. (1) Wher e pr oper ty is sold in execution of a cer tificate, ther e shall vest in the
pur chaser mer ely the r ight, title and inter est of the defaulter at the time of the
sale, even though the pr oper ty itself be specified.
(2) Wher e immovable pr oper ty is sold in execution of a cer tificate, and such sale
has become absolute, the pur chaser s r ight, title and inter est shall be deemed to
have vested in him fr om the time when the pr oper ty is sold, and not fr om the time
when the sale becomes absolute.
Suit against purchaser not maintainable on ground of purchase being made on
behalf of plaintiff.
7. (1) No suit shall be maintained against any per son claiming title under a
pur chase cer tified by the Tax Recover y Officer in the manner laid down in this
Schedule, on the gr ound that the pur chase was made on behalf of the plaintiff
or on behalf of some one thr ough whom the plaintiff claims.
(2) Nothing in this section shall bar a suit to obtain a declar ation that the name
of any pur chaser cer tified as afor esaid was inser ted in the cer tificate fr audulent-
ly or without the consent of the r eal pur chaser , or inter fer e with the r ight of a
thir d per son to pr oceed against that pr oper ty, though ostensibly sold to the
cer tified pur chaser , on the gr ound that it is liable to satisfy a claim of such thir d
per son against the r eal owner .
85
[Disposal of proceeds of execution.
8. (1) Whenever assets ar e r ealised by sale or other wise in execution of
a cer tificate, the pr oceeds shall be disposed of in the following manner ,
namely :
(a) they shall fir st be adjusted towar ds the amount due under the
cer tificate in execution of which the assets wer e r ealised and the costs
incur r ed in the cour se of such execution;
(b) if ther e r emains a balance after the adjustment r efer r ed to in clause
(a), the same shall be utilised for satisfaction of any other amount
r ecover able fr om the assessee under this Act which may be due on the
date on which the assets wer e r ealised; and
85. Substituted by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Ear lier , r ule
8 was amended by the Dir ect Tax Laws (Amendment) Act, 1989, w.r .e.f. 1-4-1988.
(c) the balance, if any, r emaining after the adjustments under clauses (a)
and (b) shall be paid to the defaulter .
(2) If the defaulter disputes any adjustment under clause (b) of sub-r ule (1), the
Tax Recover y Officer shall deter mine the dispute.]
General bar to jurisdiction of civil courts, save where fraud alleged.
9. Except as other wise expr essly pr ovided in this Act, ever y question ar ising
between the
86
[Tax Recover y] Officer and the defaulter or their r epr esenta-
tives, r elating to the execution, dischar ge or satisfaction of a cer tificate
87
[***], or
r elating to the confir mation or setting aside by an or der under this Act of a sale
held in execution of such cer tificate, shall be deter mined, not by suit, but by or der
of the Tax Recover y Officer befor e whom such question ar ises :
Provided that a suit may be br ought in a civil cour t in r espect of any such
question upon the gr ound of fr aud.
Property exempt from attachment.
10. (1) All such pr oper ty as is by the Code of Civil Pr ocedur e, 1908 (5 of 1908),
exempted fr om attachment and sale in execution of a decr ee of a civil cour t
shall be exempt fr om attachment and sale under this Schedule.
(2) The Tax Recover y Officer s decision as to what pr oper ty is so entitled to
exemption shall be conclusive.
Investigation by Tax Recovery Officer.
11. (1) Wher e any claim is pr efer r ed to, or any objection is made to the
attachment or sale of, any pr oper ty in execution of a cer tificate, on the
gr ound that such pr oper ty is not liable to such attachment or sale, the Tax
Recover y Officer shall pr oceed to investigate the claim or objection :
Provided that no such investigation shall be made wher e the Tax Recover y
Officer consider s that the claim or objection was designedly or unnecessar ily
delayed.
(2) Wher e the pr oper ty to which the claim or objection applies has been
adver tised for sale, the Tax Recover y Officer or der ing the sale may postpone it
pending the investigation of the claim or objection, upon such ter ms as to
secur ity or other wise as the Tax Recover y Officer shall deem fit.
(3) The claimant or objector must adduce evidence to show that
(a) (in the case of immovable pr oper ty) at the date of the ser vice of the
notice issued under this Schedule to pay the ar r ear s, or
(b) (in the case of movable pr oper ty) at the date of the attachment,
he had some inter est in, or was possessed
88
of, the pr oper ty in question.
R. 11 I.T. ACT, 1961 1.954
86. Subst it ut ed for *Assessing by t he Dir ect Tax Laws (Amendment ) Act , 1989, w.e.f.
1-4-1989.
*Substituted for Income-tax, ibid., w.r .e.f. 1-4-1988.
87. Wor ds duly filed under this Act omitted by the Dir ect Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989.
88. For the meaning of the ter m possessed, see Taxmanns Dir ect Taxes Manual, Vol. 3.
(4) Wher e, upon the said investigation, the Tax Recover y Officer is satisfied that,
for the r eason stated in the claim or objection, such pr oper ty was not, at the said
date, in the possession of the defaulter or of some per son in tr ust for him or in
the occupancy of a tenant or other per son paying r ent to him, or that, being in the
possession of the defaulter at the said date, it was so in his possession, not on his
own account or as his own pr oper ty, but on account of or in tr ust for some other
per son, or par tly on his own account and par tly on account of some other per son,
the Tax Recover y Officer shall make an or der r eleasing the pr oper ty, wholly or
to such extent as he thinks fit, fr om attachment or sale.
(5) Wher e the Tax Recover y Officer is satisfied that the pr oper ty was, at the said
date, in the possession of the defaulter as his own pr oper ty and not on account
of any other per son, or was in the possession of some other per son in tr ust for him,
or in the occupancy of a tenant or other per son paying r ent to him, the Tax
Recover y Officer shall disallow the claim.
(6) Wher e a claim or an objection is pr efer r ed, the par ty against whom an or der
is made may institute a suit in a civil cour t to establish the r ight which he claims
to the pr oper ty in dispute; but, subject to the r esult of such suit (if any), the or der
of the Tax Recover y Officer shall be conclusive.
Removal of attachment on satisfaction or cancellation of certificate.
12. Wher e
(a) the amount due, with costs and all char ges and expenses r esulting
fr om the attachment of any pr oper ty or incur r ed in or der to hold a
sale, ar e paid to the Tax Recover y Officer , or
(b) the cer tificate is cancelled,
the attachment shall be deemed to be withdr awn and, in the case of immovable
pr oper ty, the withdr awal shall, if the defaulter so desir es, be pr oclaimed at his
expense, and a copy of the pr oclamation shall be affixed in the manner pr ovided
by this Schedule for a pr oclamation of sale of immovable pr oper ty.
Officer entitled to attach and sell.
13. The attachment and sale of movable pr oper ty and the attachment and sale
of immovable pr oper ty may be made by such per sons as the Tax Recover y
Officer may fr om time to time dir ect.
Defaulting purchaser answerable for loss on resale.
14. Any deficiency of pr ice which may happen on a r esale by r eason of the
pur chaser s default, and all expenses attending such r esale, shall be cer tified
to the Tax Recover y Officer by the officer holding the sale, and shall, at the
instance of either the
89
[Tax Recover y] Officer or the defaulter , be r ecover able
fr om the defaulting pur chaser under the pr ocedur e pr ovided by this Schedule:
Provided that no such application shall be enter tained unless filed within fifteen
days fr om the date of r esale.
1-4-1989.
Adjournment or stoppage of sale.
15. (1) The Tax Recover y Officer may, in his discr etion, adjour n any sale
her eunder to a specified day and hour ; and the officer conducting any such
sale may, in his discr etion, adjour n the sale, r ecor ding his r easons for such
adjour nment :
Provided that, wher e the sale is made in, or within the pr ecincts of, the office of
the Tax Recover y Officer , no such adjour nment shall be made without the leave
of the Tax Recover y Officer .
(2) Wher e a sale of immovable pr oper ty is adjour ned under sub-r ule (1) for a
longer per iod than one calendar month, a fr esh pr oclamation of sale under this
Schedule shall be made unless the defaulter consents to waive it.
(3) Ever y sale shall be stopped if, befor e the lot is knocked down, the ar r ear s and
costs (including the costs of the sale) ar e tender ed to the officer conducting the
sale, or pr oof is given to his satisfaction that the amount of such ar r ear s and costs
has been paid to the Tax Recover y Officer who or der ed the sale.
Private alienation to be void in certain cases.
16. (1) Wher e a notice has been ser ved on a defaulter under r ule 2, the
default er or his r epr esent at ive in int er est shall not be compet ent t o
mor tgage, char ge, lease or other wise deal with any pr oper ty
90
belonging to him
except with the per mission of the Tax Recover y Officer , nor shall any civil
cour t issue any pr ocess against such pr oper ty in execution of a decr ee for the
payment of money.
(2) Wher e an attachment has been made under this Schedule, any pr ivate
tr ansfer or deliver y of the pr oper ty attached or of any inter est ther ein and any
payment to the defaulter of any debt, dividend or other moneys contr ar y to such
attachment, shall be void as against all claims enfor ceable under the attachment.
Prohibition against bidding or purchase by officer.
17. No officer or other per son having any duty to per for m in connection with
any sale under this Schedule shall, either dir ectly or indir ectly, bid for ,
acquir e or attempt to acquir e any inter est in the pr oper ty sold.
Prohibition against sale on holidays.
18. No sale under this Schedule shall take place on a Sunday or other gener al
holiday r ecognised by the State Gover nment or on any day which has been
notified by the State Gover nment to be a local holiday for the ar ea in which the
sale is to take place.
Assistance by police.
19. Any officer author ised to attach or sell any pr oper ty or to ar r est the defaulter
or char ged with any duty to be per for med under this Schedule, may apply
to the officer -in-char ge of the near est police station for such assistance as may
be necessar y in the dischar ge of his duties, and the author ity to whom such
application is made shall depute a sufficient number of police officer s for
fur nishing such assistance.
R. 19 I.T. ACT, 1961 1.956
90. For the meaning of the expr ession other wise deal with any pr oper ty, see Taxmanns
91
[Entrustment of certain functions by Tax Recovery Officer.
19A. A Tax Recover y Officer may, with the pr evious appr oval of the
92
[Joint]
Commissioner , entr ust any of his functions as the Tax Recover y Officer to
any other officer lower than him in r ank (not being lower in r ank than an
Inspector of Income-tax) and such officer shall, in r elation to the functions so
entr usted to him, be deemed to be a Tax Recover y Officer .]
PART I I
ATTACHMENT AND SALE OF MOVABLE PROPERTY
Attach men t
Warrant.
20. Except as other wise pr ovided in this Schedule, when any movable pr oper ty
is to be attached, the officer shall be fur nished by the Tax Recover y Officer
(or other officer empower ed by him in that behalf) a war r ant in wr iting and
signed with his name specifying the name of the defaulter and the amount to be
r ealised.
Service of copy of warrant.
21. The officer shall cause a copy of the war r ant to be ser ved on the defaulter .
Attachment.
22. If, after ser vice of the copy of the war r ant, the amount is not paid for thwith,
the officer shall pr oceed to attach the movable pr oper ty of the defaulter .
Property in defaulters possession.
23. Wher e t he pr oper t y t o be at t ached is movable pr oper t y (ot her t han
agr icultur al pr oduce) in the possession of the defaulter , the attachment
shall be made by actual seizur e, and the officer shall keep the pr oper ty in his own
custody or the custody of one of his subor dinates and shall be r esponsible for due
custody ther eof:
Provided that when the pr oper ty seized is subject to speedy and natur al decay
or when the expense of keeping it in custody is likely to exceed its value, the
officer may sell it at once.
Agricultural produce.
24. Wher e the pr oper ty to be attached is agr icultur al pr oduce the attachment
shall be made by affixing a copy of the war r ant of attachment
(a) wher e such pr oduce is gr owing cr op,on the land on which such cr op
has gr own, or
(b) wher e such pr oduce has been cut or gather ed,on the thr eshing
floor or place for tr eading out gr ain or the like, or fodder -stack, on or
in which it is deposited,
substitution, r ule 19A was inser ted by the Finance Act, 1963, w.r .e.f. 1-4-1962 and later on
amended by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975.
92. Substituted for Deputyby the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998.
and another copy on the outer door or on some other conspicuous par t of the
house in which the defaulter or dinar ily r esides, or with the leave of the Tax
Recover y Officer , on the outer door or on some other conspicuous par t of the
house in which he car r ies on business or per sonally wor ks for gain, or in which
he is known to have last r esided or car r ied on business or per sonally wor ked for
gain. The pr oduce shall, ther eupon, be deemed to have passed into the possession
of the Tax Recover y Officer .
Provisions as to agricultural produce under attachment.
25. (1) Wher e agr icultur al pr oduce is attached, the Tax Recover y Officer shall
make such ar r angements for the custody, watching, tending, cutting and
gather ing ther eof as he may deem sufficient;
93
[and he shall have power to defr ay
the cost of such ar r angements].
(2) Subject to such conditions as may be imposed by the Tax Recover y Officer
in this behalf, either in the or der of attachment or in any subsequent or der , the
defaulter may tend, cut, gather and stor e the pr oduce and do any other act
necessar y for matur ing or pr eser ving it; and, if the defaulter fails to do all or any
of such acts, any per son appointed by the Tax Recover y Officer in this behalf
may, subject to the like conditions, do all or any of such acts, and the costs
incur r ed by such per son shall be r ecover able fr om the defaulter as if they wer e
included in the cer tificate.
(3) Agr icultur al pr oduce attached as a gr owing cr op shall not be deemed to have
ceased to be under attachment or to r equir e r e-attachment mer ely because it has
been sever ed fr om the soil.
(4) Wher e an or der for the attachment of a gr owing cr op has been made at a
consider able time befor e the cr op is likely to be fit to be cut or gather ed, the Tax
Recover y Officer may suspend the execution of the or der for such time as he
thinks fit, and may, in his discr etion, make a fur ther or der pr ohibiting the
r emoval of the cr op pending the execution of the or der of attachment.
(5) A gr owing cr op which fr om its natur e does not admit of being stor ed shall not
be attached under this r ule at any time less than twenty days befor e the time at
which it is likely to be fit to be cut or gather ed.
Debts and shares, etc.
26. (1) In the case of
(a) a debt not secur ed by a negotiable instr ument,
(b) a shar e in a cor por ation, or
(c) other movable pr oper ty not in the possession of the defaulter except
pr oper ty deposited in, or in the custody of, any cour t,
the attachment shall be made by a wr itten or der pr ohibiting,
(i) in the case of the debtthe cr editor fr om r ecover ing the debt and the
debtor fr om making payment ther eof until the fur ther or der of the
Tax Recover y Officer ;
R. 26 I.T. ACT, 1961 1.958
93. Substituted for and the *Assessin g Officer shall bear such sum as the Tax Recover y
Officer shall r equir e in or der to defr ay the cost of such ar r angement by the Dir ect Tax
(ii) in the case of the shar ethe per son in whose name the shar e may be
standing fr om tr ansfer r ing the same or r eceiving any dividend ther e-
on;
(iii) in the case of the other movable pr oper ty (except as afor esaid)the
per son in possession of the same fr om giving it over to the defaulter .
(2) A copy of such or der shall be affixed on some conspicuous par t of the office
of the Tax Recover y Officer , and another copy shall be sent, in the case of the
debt, to the debtor , in the case of the shar e, to the pr oper officer of the
cor por ation, and in the case of the other movable pr oper ty (except as afor esaid),
to the per son in possession of the same.
(3) A debtor pr ohibited under clause (i) of sub-r ule (1) may pay the amount of his
debt to the Tax Recover y Officer , and such payment shall dischar ge him as
effectually as payment to the par ty entitled to r eceive the same.
Attachment of decree.
27. (1) The attachment of a decr ee of a civil cour t for the payment of money or
for sale in enfor cement of a mor tgage or char ge shall be made by the issue
to the civil cour t of a notice r equesting the civil cour t to stay the execution of the
decr ee unless and until
(i) the Tax Recover y Officer cancels the notice, or
(ii) the
94
[Tax Recover y] Officer or the defaulter applies to the cour t
r eceiving such notice to execute the decr ee.
(2) Wher e a civil cour t r eceives an application under clause (ii) of sub-r ule (1),
it shall, on the application of the
94
[Tax Recover y] Officer or the defaulter
and subject to the pr ovisions of the Code of Civil Pr ocedur e, 1908 (5 of 1908),
pr oceed to execute the attached decr ee and apply the net pr oceeds in satisfaction
of the cer tificate.
(3) The
94
[Tax Recover y] Officer shall be deemed to be the r epr esentative of the
holder of the attached decr ee, and to be entitled to execute such attached decr ee
in any manner lawful for the holder ther eof.
Share in movable property.
28. Wher e the pr oper ty to be attached consists of the shar e or inter est of the
defaulter in movable pr oper ty belonging to him and another as co-owner s,
the attachment shall be made by a notice to the defaulter pr ohibiting him fr om
tr ansfer r ing the shar e or inter est or char ging it in any way.
Salary of Government servants.
29. Attachment of the salar y or allowances of ser vants of the Gover nment or a
local author ity may be made in the manner pr ovided by r ule 48 of Or der 21
of the Fir st Schedule to the Code of Civil Pr ocedur e, 1908 (5 of 1908), and the
pr ovisions of the said r ule shall, for the pur poses of this r ule, apply subject to such
modifications as may be necessar y.
1-4-1989.
Attachment of negotiable instrument.
30. Wher e the pr oper ty is a negotiable instr ument not deposited in a cour t nor
in the custody of a public officer , the attachment shall be made by actual
seizur e, and the instr ument shall be br ought befor e the Tax Recover y Officer
and held subject to his or der s.
Attachment of property in custody of court or public officer.
31. Wher e the pr oper ty to be attached is in the custody of any cour t or public
officer , the attachment shall be made by a notice to such cour t or officer ,
r equesting that such pr oper ty, and any inter est or dividend becoming payable
ther eon, may be held subject to the fur ther or der s of the Tax Recover y Officer
by whom the notice is issued:
Provided that, wher e such pr oper ty is in the custody of a cour t, any question of
title or pr ior ity ar ising between the
95
[Tax Recover y] Officer and any other
per son, not being the defaulter , claiming to be inter ested in such pr oper ty by
vir tue of any assignment, attachment or other wise, shall be deter mined by such
court.
Attachment of partnership property.
32. (1) Wher e the pr oper ty to be attached consists of an inter est of the
defaulter , being a par tner , in the par tner ship pr oper ty, the Tax Recover y
Officer may make an or der char ging the shar e of such par tner in the par tner ship
pr oper ty and pr ofits with payment of the amount due under the cer tificate, and
may, by the same or subsequent or der , appoint a r eceiver of the shar e of such
par tner in the pr ofits, whether alr eady declar ed or accr uing and of any other
money which may become due to him in r espect of the par tner ship, and dir ect
accounts and inquir ies and make an or der for the sale of such inter est or such
other or der as the cir cumstances of the case may r equir e.
(2) The other per sons shall be at liber ty at any time to r edeem the inter est char ged
or , in the case of a sale being dir ected, to pur chase the same.
Inventory.
33. In the case of attachment of movable pr oper ty by actual seizur e, the officer
shall, after attachment of the pr oper ty, pr epar e an inventor y of all the
pr oper ty attached, specifying in it the place wher e it is lodged or kept, and shall
for war d the same to the Tax Recover y Officer and a copy of the inventor y shall
be deliver ed by the officer to the defaulter .
Attachment not to be excessive.
34. The attachment by seizur e shall not be excessive, that is to say, the pr oper ty
attached shall be as near ly as possible pr opor tionate to the amount specified
in the war r ant.
R. 34 I.T. ACT, 1961 1.960
1-4-1989.
Seizure between sunrise and sunset.
35. Attachment by seizur e shall be made after sunr ise and befor e sunset and not
other wise.
Power to break open doors, etc.
36. The officer may br eak open any inner or outer door or window of any
building and enter any building in or der to seize any movable pr oper ty if the
officer has r easonable gr ounds to believe that such building contains movable
pr oper ty liable to seizur e under the war r ant and the officer has notified his
author ity and intention of br eaking open if admission is not given. He shall,
however , give all r easonable oppor tunity to women to withdr aw.
Sale
Sale.
37. The Tax Recover y Officer may dir ect that any movable pr oper ty attached
under this Schedule or such por tion ther eof as may seem necessar y to
satisfy the cer tificate shall be sold.
Issue of proclamation.
38. When any sale of movable pr oper ty is or der ed by the Tax Recover y Officer ,
the Tax Recover y Officer shall issue a pr oclamation, in the language of the
distr ict, of the intended sale, specifying the time and place of sale and whether
the sale is subject to confir mation or not.
Proclamation how made.
39. (1) Such pr oclamation shall be made by beat of dr um or other customar y
mode,
(a) in the case of pr oper ty attached by actual seizur e
(i) in the village in which the pr oper ty was seized, or , if the pr oper ty
was seized in a town or city, then, in the locality in which it was
seized; and
(ii) at such other places as the Tax Recover y Officer may dir ect;
(b) in the case of pr oper ty attached other wise than by actual seizur e, in
such places, if any, as the Tax Recover y Officer may dir ect.
(2) A copy of the pr oclamation shall also be affixed in a conspicuous par t of the
office of the Tax Recover y Officer .
Sale after fifteen days.
40. Except wher e the pr oper ty is subject to speedy and natur al decay or when
the expense of keeping it in custody is likely to exceed its value, no sale of
movable pr oper ty under this Schedule shall, without the consent in wr iting of the
defaulter , take place until after the expir y of at least fifteen days calculated fr om
the date on which a copy of the sale pr oclamation was affixed in the office of the
Tax Recover y Officer .
Sale of agricultural produce.
41. (1) Wher e the pr oper ty to be sold is agr icultur al pr oduce, the sale shall be
held,
(a) if such pr oduce is a gr owing cr opon or near the land on which such
cr op has gr own, or
(b) if such pr oduce has been cut or gather edat or near the thr eshing
floor or place for tr eading out gr ain or the like, or fodder -stack, on or
in which it is deposited:
Provided that the Tax Recover y Officer may dir ect the sale to be held at the
near est place of public r esor t, if he is of opinion that the pr oduce is ther eby likely
to sell to gr eater advantage.
(2) Wher e, on the pr oduce being put up for sale,
(a) a fair pr ice, in the estimation of the per son holding the sale, is not
offer ed for it, and
(b) the owner of the pr oduce, or a per son author ised to act on his behalf,
applies to have the sale postponed till the next day or , if a mar ket is
held at the place of sale, the next mar ket day,
the sale shall be postponed accor dingly, and shall be then completed, whatever
pr ice may be offer ed for the pr oduce.
Special provisions relating to growing crops.
42. (1) Wher e the pr oper ty to be sold is a gr owing cr op and the cr op fr om its
natur e admits of being stor ed but has not yet been stor ed, the day of the sale
shall be so fixed as to admit of the cr op being made r eady for stor ing befor e the
ar r ival of such day, and the sale shall not be held until the cr op has been cut or
gather ed and is r eady for stor ing.
(2) Wher e the cr op fr om its natur e does not admit of being stor ed or can be sold
to a gr eater advantage in an unr ipe stage (e.g., as gr een wheat), it may be sold
befor e it is cut and gather ed, and the pur chaser shall be entitled to enter on the
land, and to do all that is necessar y for the pur pose of tending or cutting or
gather ing the cr op.
Sale to be by auction.
43. The pr oper ty shall be sold by public auction in one or mor e lots as the officer
may consider advisable, and if the amount to be r ealised by sale is satisfied
by the sale of a por tion of the pr oper ty, the sale shall be immediately stopped with
r espect to the r emainder of the lots.
Sale by public auction.
44. (1) Wher e movable pr oper ty is sold by public auction, the pr ice of each lot
shall be paid at the time of sale or as soon after as the officer holding the sale
dir ects and in default of payment, the pr oper ty shall for thwith be r esold.
(2) On payment of the pur chase-money, the officer holding the sale shall gr ant
a cer tificate specifying the pr oper ty pur chased, the pr ice paid and the name of
the pur chaser , and the sale shall become absolute.
(3) Wher e the movable pr oper ty to be sold is a shar e in goods belonging to the
defaulter and a co-owner , and two or mor e per sons, of whom one is such co-
owner , r espectively bid the same sum for such pr oper ty or for any lot, the bidding
shall be deemed to be the bidding of the co-owner .
R. 44 I.T. ACT, 1961 1.962
Irregularity not to vitiate sale, but any person injured may sue.
45. No ir r egular ity in publishing or conducting the sale of movable pr oper ty
shall vitiate the sale, but any per son sustaining substantial injur y by r eason
of such ir r egular ity at the hand of any other per son may institute a suit in a civil
cour t against him for compensation, or (if such other per son is the pur chaser ) for
the r ecover y of the specific pr oper ty and for compensation in default of such
r ecover y.
Negotiable instruments and shares in a corporation.
46. Notwithstanding anything contained in this Schedule, wher e the pr oper ty to
be sold is a negotiable instr ument or a shar e in a cor por ation, the Tax
Recover y Officer may, instead of dir ecting the sale to be made by public auction,
author ise the sale of such instr ument or shar e thr ough a br oker .
Order for payment of coin or currency notes to the
96
[Assessing] Officer.
47. Wher e the pr oper ty attached is cur r ent coin or cur r ency notes, the Tax
Recover y Officer may, at any time dur ing the continuance of the attach-
ment,
97
[dir ect that such coins or notes shall be cr edited to the Centr al Gover n-
ment and the amount so cr edited shall be dealt with in the manner specified in
r ule 8].
PART I I I
ATTACHMENT AND SALE OF IMMOVABLE PROPERTY
Attach men t
Attachment.
48. Attachment of the immovable pr oper ty of the defaulter shall be made by an
or der pr ohibiting the defaulter fr om tr ansfer r ing or char ging the pr oper ty
in any way and pr ohibiting all per sons fr om taking any benefit under such
tr ansfer or char ge.
Service of notice of attachment.
49. A copy of the or der of attachment shall be ser ved on the defaulter .
Proclamation of attachment.
50. The or der of attachment shall be pr oclaimed at some place on or adjacentto
the pr oper ty attached by beat of dr um or other customar y mode, and a copy
of the or der shall be affixed on a conspicuous par t of the pr oper ty and on the
notice boar d of the office of the Tax Recover y Officer .
Attachment to relate back from the date of service of notice.
51. Wher e any immovable pr oper ty is attached under this Schedule, the
attachment shall r elate back to, and take effect fr om, the date on which the
1-4-1988.
97. Substituted for dir ect that such coins or notes, or a par t ther eof sufficient to satisfy the
cer tificate, be paid over to the *Assessin g Officer by the Dir ect Tax Laws (Amendment)
Act, 1989, w.e.f. 1-4-1989.
R. 55 I.T. ACT, 1961 1.964
98. Wor d and omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975.
not ice t o pay t he ar r ear s, issued under t his Schedule, was ser ved upon
the defaulter .
Sale
Sale and proclamation of sale.
52. (1) The Tax Recover y Officer may dir ect that any immovable pr oper ty
which has been attached, or such por tion ther eof as may seem necessar y to
satisfy the cer tificate, shall be sold.
(2) Wher e any immovable pr oper ty is or der ed to be sold, the Tax Recover y
Officer shall cause a pr oclamation of the intended sale to be made in the
language of the distr ict.
Contents of proclamation.
53. A pr oclamation of sale of immovable pr oper ty shall be dr awn up after notice
to the defaulter , and shall state the time and place of sale, and shall specify,
as fair ly and accur ately as possible,
(a) the pr oper ty to be sold;
(b) the r evenue, if any, assessed upon the pr oper ty or any par t ther eof;
(c) the amount for the r ecover y of which the sale is or der ed;
98
[***]
99
[(cc) the r eser ve pr ice, if any, below which the pr oper ty may not be sold;
and]
(d) any other thing which the Tax Recover y Officer consider s it mater ial
for a pur chaser to know, in or der to judge the natur e and value of the
pr oper ty.
Mode of making proclamation.
54. (1) Ever y pr oclamation for the sale of immovable pr oper ty shall be made at
some place on or near such pr oper ty by beat of dr um or other customar y
mode, and a copy of the pr oclamation shall be affixed on a conspicuous par t of
the pr oper ty and also upon a conspicuous par t of the office of the Tax Recover y
Officer .
(2) Wher e the Tax Recover y Officer so dir ects, such pr oclamation shall also be
published in the Official Gazette or in a local newspaper , or in both; and the cost
of such publication shall be deemed to be costs of the sale.
(3) Wher e the pr oper ty is divided into lots for the pur pose of being sold
separ ately, it shall not be necessar y to make a separ ate pr oclamation for each lot,
unless pr oper notice of the sale cannot, in the opinion of the Tax Recover y
Officer , other wise be given.
Time of sale.
55. No sale of immovable pr oper ty under this Schedule shall, without the
consent in wr iting of the defaulter , take place until after the expir ation of at
least thir ty days calculated fr om the date on which a copy of the pr oclamation
of sale has been affixed on the pr oper ty or in the office of the Tax Recover y
Officer , whichever is later .
Sale to be by auction.
56. The sale shall be by public auction to the highest bidder and shall be subject
to confir mation by the Tax Recover y Officer :
1
[Provided that no sale under this r ule shall be made if the amount bid by the
highest bidder is less than the r eser ve pr ice, if any, specified under clause (cc) of
r ule 53.]
Deposit by purchaser and resale in default.
57. (1) On ever y sale of immovable pr oper ty, the per son declar ed to be the
pur chaser shall pay, immediately after such declar ation, a deposit of twenty-
five per cent on the amount of his pur chase money, to the officer conducting the
sale; and, in default of such deposit, the pr oper ty shall for thwith be r esold.
(2) The full amount of pur chase money payable shall be paid by the pur chaser
to the Tax Recover y Officer on or befor e the fifteenth day fr om the date of the
sale of the pr oper ty.
Procedure in default of payment.
58. In default of payment within the per iod mentioned in the pr eceding r ule, the
deposit may, if the Tax Recover y Officer thinks fit, after defr aying the
expenses of the sale, be for feited to the Gover nment, and the pr oper ty shall be
r esold, and the defaulting pur chaser shall for feit all claims to the pr oper ty or to
any par t of the sum for which it may subsequently be sold.
Authority to bid.
59.
2
[(1) Wher e the sale of a pr oper ty, for which a r eser ve pr ice has been
specified under clause (cc) of r ule 53, has been postponed for want of a bid
of an amount not less than such r eser ve pr ice, it shall be lawful for an
3
[Assessing]
Officer , if so author ised by the
4
[Chief Commissioner or Commissioner ] in this
behalf, to bid for the pr oper ty on behalf of the Centr al Gover nment at any
subsequent sale.]
5
[(2)] All per sons bidding at the sale shall be r equir ed to declar e, if they ar e bidding
on their own behalf or on behalf of their pr incipals. In the latter case, they shall
be r equir ed to deposit their author ity, and in default their bids shall be r ejected.
6
[(3) Wher e the
3
[Assessing] Officer r efer r ed to in sub-r ule (1) is declar ed to be the
pur chaser of the pr oper ty at any subsequent sale, nothing contained in r ule 57
shall apply to the case and the amount of the pur chase pr ice shall be adjusted
towar ds the amount specified in the cer tificate.]
2. Inser ted, ibid.
1-4-1988.
1-4-1988.
Application to set aside sale of immovable property on deposit.
60. (1) Wher e immovable pr oper ty has been sold in execution of a cer tificate,
the defaulter , or any per son whose inter ests ar e affected by the sale, may, at
any time within thir ty days fr om the date of the sale, apply to the Tax Recover y
Officer to set aside the sale, on his depositing
7
(a)
8
[***] the amount specified in the pr oclamation of sale as that for the
r ecover y of which the sale was or der ed, with inter est ther eon at the
r ate of
9
[on e an d on e-f ourth per cen t f or every m on th on part of a
m on h ], calculated fr om the date of the pr oclamation of sale to the
date when the deposit is made; and
(b) for payment to the pur chaser , as penalty, a sum equal to five per cent
of the pur chase money, but not less than one r upee.
(2) Wher e a per son makes an application under r ule 61 for setting aside the sale
of his immovable pr oper ty, he shall not, unless he withdr aws that application, be
entitled to make or pr osecute an application under this r ule.
Application to set aside sale of immovable property on ground of non-service of
notice or irregularity.
61. Wher e immovable pr oper ty has been sold in execution of a cer tificate,
10
[such Income-tax Officer as may be author ised by the Chief Commissioner
or Commissioner in this behalf], the defaulter , or any per son whose inter ests ar e
affected by the sale, may, at any time within thir ty days fr om the date of the sale,
apply to the Tax Recover y Officer to set aside the sale of the immovable pr oper ty
on the gr ound that notice was not ser ved on the defaulter to pay the ar r ear s as
r equir ed by this Schedule or on the gr ound of a mater ial ir r egular ity in
publishing or conducting the sale:
Provided that
(a) no sale shall be set aside on any such gr ound unless the Tax Recover y
Officer is satisfied that the applicant has sustained substantial injur y
by r eason of the non-ser vice or ir r egular ity; and
(b) an application made by a defaulter under this r ule shall be disallowed
unless the applicant deposits the amount r ecover able fr om him in the
execution of the cer tificate.
R. 61 I.T. ACT, 1961 1.966
7. See r ule 119A.
8. Wor ds for payment t o t he *Assessin g Officer omitted by the Dir ect Tax Laws (Amend-
ment) Act, 1989, w.e.f. 1-4-1989.
9. Substituted for fifteen per cent per annum by the Finance Act, 2007, w.e.f. 1-4-2008.
Ear lier wor d fifteen was substituted for twelve by the Taxation Laws (Amendment)
Act, 1984, w.e.f. 1-10-1984; section 84 of the Amendment Act has clar ified that the incr ease
in the r ate of inter est will apply in r espect of any per iod falling after 30-9-1984 and also
in cases wher e the inter est became char geable or payable fr om an ear lier date. Ear lier ,
twelve was substituted for nine by the Finance Act, 1972, w.e.f. 1-4-1972 and nine was
substituted for six by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
10. Subst it ut ed for *Assessin g Officer by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
Setting aside sale where defaulter has no saleable interest.
62. At any time within thir ty days of the sale, the pur chaser may apply to the Tax
Recover y Officer to set aside the sale on the gr ound that the defaulter had
no saleable inter est in the pr oper ty sold.
Confirmation of sale.
63. (1) Wher e no application is made for setting aside the sale under the
for egoing r ules or wher e such an application is made and disallowed by the
Tax Recover y Officer , the Tax Recover y Officer shall (if the full amount of
the pur chase money has been paid) make an or der confir ming the sale, and,
ther eupon, the sale shall become absolute.
(2) Wher e such application is made and allowed, and wher e, in the case of an
application made to set aside the sale on deposit of the amount and penalty and
char ges, the deposit is made within thir ty days fr om the date of the sale, the Tax
Recover y Officer shall make an or der setting aside the sale :
Provided that no or der shall be made unless notice of the application has been
given to the per sons affected ther eby.
Return of purchase money in certain cases.
64. Wher e a sale of immovable pr oper ty is set aside, any money paid or
deposited by the pur chaser on account of the pur chase, together with the
penalty, if any, deposited for payment to the pur chaser , and such inter est as the
Tax Recover y Officer may allow, shall be paid to the pur chaser .
Sale certificate.
65. (1) Wher e a sale of immovable pr oper ty has become absolute, the Tax
Recover y Officer shall gr ant a cer tificate specifying the pr oper ty sold, and
the name of the per son who at the time of sale is declar ed to be the pur chaser .
(2) Such cer tificate shall state the date on which the sale became absolute.
Postponement of sale to enable defaulter to raise amount due under certificate.
66. (1) Wher e an or der for the sale of immovable pr oper ty has been made, if
the defaulter can satisfy the Tax Recover y Officer that ther e is r eason to
believe that the amount of the cer tificate may be r aised by the mor tgage or lease
or pr ivate sale of such pr oper ty, or some par t ther eof, or of any other immovable
pr oper ty of the defaulter , the Tax Recover y Officer may, on his application,
postpone the sale of the pr oper ty compr ised in the or der for sale, on such ter ms,
and for such per iod as he thinks pr oper , to enable him to r aise the amount.
(2) In such case, the Tax Recover y Officer shall gr ant a cer tificate to the
defaulter , author ising him, within a per iod to be mentioned ther ein, and notwith-
standing anything contained in this Schedule, to make the pr oposed mor tgage,
lease or sale:
Provided that all moneys payable under such mor tgage, lease or sale shall be
paid, not to the defaulter , but to the Tax Recover y Officer :
Provided also that no mor tgage, lease or sale under this r ule shall become
absolute until it has been confir med by the Tax Recover y Officer .
R. 68A I.T. ACT, 1961 1.968
Fresh proclamation before re-sale.
67. Ever y r e-sale of immovable pr oper ty, in default of payment of the pur chase
money within the per iod allowed for such payment, shall be made after the
issue of a fr esh pr oclamation in the manner and for the per iod her einbefor e
pr ovided for the sale.
Bid of co-sharer to have preference.
68. Wher e the pr oper ty sold is a shar e of undivided immovable pr oper ty, and
two or mor e per sons, of whom one is a co-shar er , r espectively bid the same
sum for such pr oper ty or for any lot, the bid shall be deemed to be the bid of the
co-shar er .
11
[Acceptance of property in satisfaction of amount due from the defaulter.
68A. (1) Without prejudice to the provisions contained in this Part, an
12
[Assessing]
Officer , duly author ised by the
13
[Chief Commissioner or Commissioner ] in
this behalf, may accept in satisfaction of the whole or any par t of the amount due
fr om the defaulter the pr oper ty, the sale of which has been postponed for the
r eason mentioned in sub-r ule (1) of r ule 59, at such pr ice as may be agr eed upon
between the
14
[Assessing] Officer and the defaulter .
(2) Wher e any pr oper ty is accepted under sub-r ule (1), the defaulter shall deliver
possession of such pr oper ty to the
15
[Assessing] Officer and on the date the
possession of the pr oper ty is deliver ed to the
15
[Assessing] Officer , the pr oper ty
shall vest in the Centr al Gover nment and the Centr al Gover nment shall, wher e
necessar y, intimate the concer ned Register ing Officer appointed under the
Registr ation Act, 1908 (16 of 1908), accor dingly.
(3) Wher e the pr ice of the pr oper ty agr eed upon under sub-r ule (1) exceeds the
amount due fr om the defaulter , such excess shall be paid by the
15
[Assessing]
Officer to the defaulter within a per iod of thr ee months fr om the date of deliver y
of possession of the pr oper ty and wher e the
15
[Assessing] Officer fails to pay such
excess within the per iod afor esaid, the Centr al Gover nment shall, for the per iod
commencing on the expir y of such per iod and ending with the date of payment
of the amount r emaining unpaid, pay simple inter est at
16
[on e-h alf per cen t for
every m on th or part of a m on th ] to the defaulter on such amount.]
1-4-1988.
1-4-1988.
1-4-1988.
16. Substituted for six per cent per annum by the Finance Act, 2007, w.e.f. 1-4-2008.
Substituted for eight by the Taxation Laws (Amendment) Act, 2003, w.e.f. 8-9-2003.
Ear lier eight was substituted for nine by the Finance Act, 2002, w.e.f. 1-6-2002 and
nine was substituted for twelve by the Finance Act, 2001, w.e.f. 1-6-2001.
17
[Time limit for sale of attached immovable property.
68B. (1) No sale of immovable pr oper ty shall be made under this Par t after
the expir y of thr ee year s
18
fr om the end of the financial year in which the
or der giving r ise to a demand of any tax, inter est, fine, penalty or any other sum,
for the r ecover y of which the immovable pr oper ty has been attached, has
become conclusive under the pr ovisions of section 245-I or , as the case may be,
final in ter ms of the pr ovisions of Chapter XX:
Provided that wher e the immovable pr oper ty is r equir ed to be r e-sold due to the
amount of highest bid being less than the r eser ve pr ice or under the cir cumstan-
ces mentioned in r ule 57 or r ule 58 or wher e the sale is set aside under r ule 61,
the afor esaid per iod of limitation for the sale of the immovable pr oper ty shall
stand extended by one year .
(2) In computing the per iod of limitation under sub-r ule (1), the per iod
(i) dur ing which the levy of the afor esaid tax, inter est, fine, penalty or any
other sum is stayed by an or der or injunction of any cour t; or
(ii) dur ing which the pr oceedings of attachment or sale of the immovable
pr oper ty ar e stayed by an or der or injunction of any cour t; or
(iii) commencing fr om the date of the pr esentation of any appeal against
the or der passed by the Tax Recover y Officer under this Schedule
and ending on the day the appeal is decided,
shall be excluded :
Provided that wher e immediately after the exclusion of the afor esaid per iod, the
per iod of limitation for the sale of the immovable pr oper ty is less than 180 days,
such r emaining per iod shall be extended to 180 days and the afor esaid per iod of
limitation shall be deemed to be extended accor dingly.
(3) Wher e any immovable pr oper ty has been attached under this Par t befor e
the 1st day of June, 1992, and the or der giving r ise to a demand of any tax,
inter est, fine, penalty or any other sum, for the r ecover y of which the immovable
pr oper ty has been attached, has also become conclusive or final befor e the said
date, that date shall be deemed to be the date on which the said or der has become
conclusive or , as the case may be, final.
(4) Wher e the sale of immovable pr oper ty is not made in accor dance with the
pr ovisions of sub-r ule (1), the attachment or der in r elation to the said pr oper ty
shall be deemed to have been vacated on the expir y of the time of limitation
specified under this r ule.]
1.969 SCH. II - PROCEDURE FOR RECOVERY OF TAX R. 68B
18. Per iod is extended to 4 year s, see SO 164(E), dated 1-3-1996. For details, see Taxmanns
Master Guide to Income-tax Act. Extension of per iod to 4 year s is not valid - see S.V. Gopala
Rao v. CIT [2004] 270 ITR 433 (AP).
PART I V
APPOINTMENT OF RECEIVER
Appointment of receiver for business.
69. (1) Wher e the pr oper ty of a defaulter consists of a business, the Tax
Recover y Officer may attach the business and appoint a per son as r eceiver
to manage the business.
(2) Attachment of a business under this r ule shall be made by an or der pr ohibiting
the defaulter fr om tr ansfer r ing or char ging the business in any way and
pr ohibiting all per sons fr om taking any benefit under such tr ansfer or char ge,
and intimating that the business has been attached under this r ule. A copy of the
or der of attachment shall be ser ved on the defaulter , and another copy shall be
affixed on a conspicuous par t of the pr emises in which the business is car r ied on
and on the notice boar d of the office of the Tax Recover y Officer .
Appointment of receiver for immovable property.
70. Wher e immovable pr oper ty is attached, the Tax Recover y Officer may,
instead of dir ecting a sale of the pr oper ty, appoint a per son as r eceiver to
manage such pr oper ty.
Powers of receiver.
71. (1) Wher e any business or other pr oper ty is attached and taken under
management under the for egoing r ules, the r eceiver shall, subject to the
contr ol of the Tax Recover y Officer , have such power s as may be necessar y for
the pr oper management of the pr oper ty and the r ealisation of the pr ofits, or r ents
and pr ofits, ther eof.
(2) The pr ofits, or r ents and pr ofits, of such business or other pr oper ty, shall, after
defr aying the expenses of management, be adjusted towar ds dischar ge of the
ar r ear s, and the balance, if any, shall be paid to the defaulter .
Withdrawal of management.
72. The attachment and management under the for egoing r ules may be
withdr awn at any time at the discr etion of the Tax Recover y Officer , or if
the ar r ear s ar e dischar ged by r eceipt of such pr ofits and r ents or ar e other wise
paid.
PART V
ARREST AND DETENTION OF THE DEFAULTER
Notice to show cause.
73. (1) No or der for the ar r est and detention in civil pr ison of a defaulter shall
be made unless the Tax Recover y Officer has issued and ser ved a notice
upon the defaulter calling upon him to appear befor e him on the date specified
in the notice and to show cause why he should not be committed to the civil
pr ison, and unless the Tax Recover y Officer , for r easons r ecor ded in wr iting, is
satisfied
R. 73 I.T. ACT, 1961 1.970
(a) that the defaulter , with the object or effect of obstr ucting the execu-
tion of the cer tificate, has, after
19
[the dr awing up of the cer tificate
by the Tax Recover y Officer ], dishonestly tr ansfer r ed, concealed, or
r emoved any par t of his pr oper ty, or
(b) that the defaulter has, or has had since
19
[the dr awing up of the
cer tificate by the Tax Recover y Officer ], the means to pay the ar r ear s
or some substantial par t ther eof and r efuses or neglects or has
r efused or neglected to pay the same.
(2) Notwithstanding anything contained in sub-r ule (1), a war r ant for the ar r est
of the defaulter may be issued by the Tax Recover y Officer if the Tax Recover y
Officer is satisfied, by affidavit or other wise, that with the object or effect of
delaying the execution of the cer tificate, the defaulter is likely to abscond or
leave the local limits of the jur isdiction of the Tax Recover y Officer .
(3) Wher e appear ance is not made in obedience to a notice issued and ser ved
under sub-r ule (1), the Tax Recover y Officer may issue a war r ant for the ar r est
of the defaulter .
20
[(3A) A war r ant of ar r est issued by a Tax Recover y Officer under sub-r ule (2)
or sub-r ule (3) may also be executed by any other Tax Recover y Officer within
whose jur isdiction the defaulter may for the time being be found.]
(4) Ever y per son ar r ested in pur suance of a war r ant of ar r est under
21
[this r ule]
shall be br ought befor e the Tax Recover y Officer
22
[issuing the war r ant] as soon
as pr acticable and in any event within twenty-four hour s of his ar r est (exclusive
of the time r equir ed for the jour ney):
Provided that, if the defaulter pays the amount enter ed in the war r ant of ar r est
as due and the costs of the ar r est to the officer ar r esting him, such officer shall
at once r elease him.
23
[Explan ation .For the pur poses of this r ule, wher e the defaulter is a Hindu
undivided family, the kar ta ther eof shall be deemed to be the defaulter .]
Hearing.
74. When a defaulter appear s befor e the Tax Recover y Officer in obedience toa
notice to show cause or is br ought befor e the Tax Recover y Officer under
r ule 73,
24
[the Tax Recover y Officer shall give the defaulter ] an oppor tunity of
showing cause why he should not be committed to the civil pr ison.
19. Substituted for the r eceipt of the cer tificate in the office of the Tax Recover y Officer by
21. Substituted for sub-r ule (2) or sub-r ule (3), ibid.
24. Substituted for the Tax Recover y Officer shall pr oceed to hear the *Assessin g Officer and
take all such evidence as may be pr oduced by him in suppor t of execution by ar r est, and
shall then give the defaulter by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-
1989.
Custody pending hearing.
75. Pending the conclusion of the inquir y, the Tax Recover y Officer may, in his
discr etion, or der the defaulter to be detained in the custody of such officer
as the Tax Recover y Officer may think fit or r elease him on his fur nishing
secur ity to the satisfaction of the Tax Recover y Officer for his appear ance when
r equir ed.
Order of detention.
76. (1) Upon the conclusion of the inquir y, the Tax Recover y Officer may make
an or der for the detention of the defaulter in the civil pr ison and shall in that
event cause him to be ar r ested if he is not alr eady under ar r est:
Provided that in or der to give the defaulter an oppor tunity of satisfying the
ar r ear s, the Tax Recover y Officer may, befor e making the or der of detention,
leave the defaulter in the custody of the officer ar r esting him or of any other
officer for a specified per iod not exceeding 15 days, or r elease him on his
fur nishing secur ity to the satisfaction of the Tax Recover y Officer for his
appear ance at the expir ation of the specified per iod if the ar r ear s ar e not so
satisfied.
(2) When the Tax Recover y Officer does not make an or der of detention under
sub-r ule (1) he shall, if the defaulter is under ar r est, dir ect his r elease.
Detention in and release from prison.
77. (1) Ever y per son detained in the civil pr ison in execution of a cer tificate may
be so detained,
(a) wher e the cer tificate is for a demand of an amount exceeding two
hundr ed and fifty r upeesfor a per iod of six months, and
(b) in any other casefor a per iod of six weeks:
Provided that he shall be r eleased fr om such detention
(i) on the amount mentioned in the war r ant for his detention being paid
to the officer -in-char ge of the civil pr ison, or
25
[(ii) on the r equest of the Tax Recover y Officer on any gr ound other than
the gr ounds mentioned in r ules 78 and 79.]
26
[***]
(2) A defaulter r eleased fr om detention under this r ule shall not, mer ely by r eason
of his r elease, be dischar ged fr om his liability for the ar r ear s; but he shall not be
liable to be r ear r ested under the cer tificate in execution of which he was
detained in the civil pr ison.
Release.
78. (1) The Tax Recover y Officer may or der the r elease of a defaulter who has
been ar r ested in execution of a cer tificate upon being satisfied that he has
R. 78 I.T. ACT, 1961 1.972
omission, pr oviso was amended by the Dir ect Tax Laws (Amendment) Act, 1989, w.r .e.f.
1-4-1988.
disclosed the whole of his pr oper ty and has placed it at the disposal of the Tax
Recover y Officer and that he has not committed any act of bad faith.
(2) If the Tax Recover y Officer has gr ound for believing the disclosur e made by
a defaulter under sub-r ule (1) to have been untr ue, he may or der the r ear r est of
the defaulter in execution of the cer tificate, but the per iod of his detention in the
civil pr ison shall not in the aggr egate exceed that author ised by r ule 77.
Release on ground of illness.
79. (1) At any time after a war r ant for the ar r est of a defaulter has been issued,
the Tax Recover y Officer may cancel it on the gr ound of his ser ious
illness.
(2) Wher e a defaulter has been ar r ested, the Tax Recover y Officer may r elease
him if, in the opinion of the Tax Recover y Officer , he is not in a fit state of health
to be detained in the civil pr ison.
(3) Wher e a defaulter has been committed to the civil pr ison, he may be r eleased
ther efr om by the Tax Recover y Officer on the gr ound of the existence of any
infectious or contagious disease, or on the gr ound of his suffer ing fr om any
ser ious illness.
(4) A defaulter r eleased under this r ule may be r ear r ested, but the per iod of his
detention in the civil pr ison shall not in the aggr egate exceed that author ised by
r ule 77.
Entry into dwelling house.
80. For the pur pose of making an ar r est under this Schedule
(a) no dwelling house shall be enter ed after sunset and befor e sunr ise;
(b) no outer door of a dwelling house shall be br oken open unless such
dwelling house or a por tion ther eof is in the occupancy of the
defaulter and he or other occupant of the house r efuses or in any way
pr events access ther eto; but, when the per son executing any such
war r ant has duly gained access to any dwelling house, he may br eak
open the door of any r oom or apar tment if he has r eason to believe
that the defaulter is likely to be found ther e;
(c) no r oom, which is in the actual occupancy of a woman who, accor ding
to the customs of the countr y, does not appear in public, shall be
enter ed into unless the officer author ised to make the ar r est has given
notice to her that she is at liber ty to withdr aw and has given her
r easonable time and facility for withdr awing.
Prohibition against arrest of women or minors, etc.
81. The Tax Recover y Officer shall not or der the ar r est and detention in the civil
pr ison of
(a) a woman, or
(b) any per son who, in his opinion, is a minor or of unsound mind.
PART VI
MISCELLANEOUS
Officers deemed to be acting judicially.
82. Ever y
27
[Chief Commissioner or Commissioner ], Tax Recover y Officer or
other officer acting under this Schedule shall, in the dischar ge of his
functions under this Schedule, be deemed to be acting judicially within the
meaning of the Judicial Officer s Pr otection Act, 1850 (18 of 1850).
Power to take evidence.
83. Ever y
27
[Chief Commissioner or Commissioner ], Tax Recover y Officer or
other officer acting under the pr ovisions of this Schedule shall have the
power s of a civil cour t while tr ying a suit for the pur pose of r eceiving evidence,
administer ing oaths, enfor cing the attendance of witnesses and compelling the
pr oduction of documents.
Continuance of certificate.
84. No cer tificate shall cease to be in for ce by r eason of the death of the
defaulter .
Procedure on death of defaulter.
85.
28
[If at any time after the cer tificate is dr awn up by the Tax Recover y
Officer ] the defaulter dies, the pr oceedings under this Schedule (except
ar r est and detention) may be continued against the legal r epr esentative of the
defaulter , and the pr ovisions of this Schedule shall apply as if the legal r epr esen-
tative wer e the defaulter .
Appeals.
86.
29
[(1) An appeal fr om any or iginal or der passed by the Tax Recover y Officer
under this Schedule, not being an or der which is conclusive, shall lie to the
Chief Commissioner or Commissioner .]
(2) Ever y appeal under this r ule must be pr esented within thir ty days fr om the
date of the or der appealed against.
(3) Pending the decision of any appeal, execution of the cer tificate may be stayed
if the appellate author ity so dir ects, but not other wise.
30
[(4) Notwithstanding anything contained in sub-r ule (1), wher e a Chief Commis-
sioner or Commissioner is author ised to exer cise power s as such in r espect of any
ar ea, then, all appeals against the or der s passed befor e the date of such
author isation by any Tax Recover y Officer author ised to exer cise power s as
R. 86 I.T. ACT, 1961 1.974
27. Substituted for Tax Recover y Commissioner by the Dir ect Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989. Ear lier it was inser ted by the Finance (No. 2) Act, 1971, w.e.f. 1-1-1972.
28. Substituted for If at any time after the issue of the cer tificate by the *Assessin g Officer
to the Tax Recover y Officer by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
substitution, r ule 86 was substituted by the Finance Act, 1963, w.r .e.f. 1-4-1962 and
substitution, sub-r ule (4) was inser ted by the Finance (No. 2) Act, 1971, w.e.f. 1-1-1972.
such in r espect of that ar ea, or an ar ea which is included in that ar ea, shall lie to
such Chief Commissioner or Commissioner .]
Review.
87. Any or der passed under this Schedule may, after notice to all per sons
inter ested, be r eviewed by the
31
[Chief Commissioner or Commissioner ],
Tax Recover y Officer or other officer who made the or der , or by his successor
in office, on account of any mistake appar ent fr om the r ecor d.
Recovery from surety.
88. Wher e any per son has under this Schedule become sur ety for the amount
due by the defaulter , he may be pr oceeded against under this Schedule as
if he wer e the defaulter .
Penalties.
Subsistence allowance.
90. (1) When a defaulter is ar r ested or detained in the civil pr ison, the sum
payable for the subsistence of the defaulter fr om the time of ar r est until he
is r eleased shall be bor ne by the
32
[Tax Recover y Officer ].
(2) Such sum shall be calculated on the scale fixed by the State Gover nment for
the subsistence of judgment-debtor s ar r ested in execution of a decr ee of a civil
court.
(3) Sums payable under this r ule shall be deemed to be costs in the pr oceeding:
Provided that the defaulter shall not be detained in the civil pr ison or ar r ested on
account of any sum so payable.
Forms.
91. The Boar d may pr escr ibe the for m to be used for any or der , notice, war r ant,
or cer tificate to be issued under this Schedule.
Power to make rules.
92. (1) The Boar d may make r ules, consistent with the pr ovisions of this Act,
r egulat ing t he pr ocedur e t o be followed by
33
[Chief Commissioner s,
Commissioner s], Tax Recover y Officer s and other officer s acting under this
Schedule.
(2) In par ticular , and without pr ejudice to the gener ality of the power confer r ed
by sub-r ule (1), such r ules may pr ovide for all or any of the following matter s,
namely:
(a) the ar ea within which
33
[Chief Commissioner s, Commissioner s] or
Tax Recover y Officer s may exer cise jur isdiction;
31. Substituted for Tax Recover y Commissioner by the Dir ect Tax Laws (Amendment) Act,
32. Substituted for *Assessin g Officer by the Dir ect Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989.
33. Substituted for Tax Recover y Commissioner s by the Dir ect Tax Laws (Amendment) Act,
(b) the manner in which any pr oper ty sold under this Schedule may be
deliver ed;
(c) the execution of a document or the endor sement of a negotiable
instr ument or a shar e in a cor por ation, by or on behalf of the Tax
Recover y Officer , wher e such execution or endor sement is r equir ed
to tr ansfer such negotiable instr ument or shar e to a per son who has
pur chased it under a sale under this Schedule;
(d) the pr ocedur e for dealing with r esistance or obstr uction offer ed by
any per son to a pur chaser of any immovable pr oper ty sold under this
Schedule, in obtaining possession of the pr oper ty;
(e) the fees to be char ged for any pr ocess issued under this Schedule;
(f) the scale of char ges to be r ecover ed in r espect of any other pr oceed-
ing taken under this Schedule;
(g) r ecover y of poundage fee;
(h) the maintenance and custody, while under attachment, of livestock or
other movable pr oper ty, the fees to be char ged for such maintenance
and custody, the sale of such livestock or pr oper ty, and the disposal
of pr oceeds of such sale;
(i) the mode of attachment of business.
Saving regarding charge.
93. Nothing in this Schedule shall affect any pr ovision of this Act wher eunder
the tax is a fir st char ge upon any asset.
34
[Continuance of certain pending proceedings and power to remove difficulties.
94. All pr oceedings for the r ecover y of tax pending immediately befor e the
coming into for ce of the amendments to this Schedule by the Dir ect Tax
Laws (Amendment) Act, 1987 shall be continued under this Schedule as amend-
ed by that Act fr om the stage they had r eached, and, for this pur pose, ever y
cer tificate issued by the
35
[Assessing] Officer under section 222 befor e such
amendment shall be deemed to be a cer tificate dr awn up by the Tax Recover y
Officer under that section after such amendment, and, if any difficulty ar ises in
continuing the said pr oceedings, the Boar d may issue (whether by way of
modification, not affecting the substance, of any r ule in this Schedule or
other wise) gener al or special or der s which appear to it to be necessar y or
expedient for the pur pose of r emoving the difficulty.]
R. 94 I.T. ACT, 1961 1.976
1-4-1988.
1.977 SCH. IV - RECOGNISED PROVIDENT FUNDS R. 2
THE THIRD S CHEDULE
PROCEDURE FOR DISTRAINT BY
36
[ASSESSING OFFICER]
37
[OR TAX RECOVERY OFFICER]
[See section 226(5)]
Distraint and sale.
Wher e any distr aint and sale of movable pr oper ty ar e to be effected by any
36
[Assessing Officer ]
37
[or Tax Recover y Officer ] author ised for the pur pose,
such distr aint and sale shall be made, as far as may be, in the same manner as
attachment and sale of any movable pr oper ty attachable by actual seizur e, and
the pr ovisions of the Second Schedule r elating to attachment and sale shall, so
far as may be, apply in r espect of such distr aint and sale.
THE FOURTH S CHEDULE
PART A
38
RECOGNISED PROVIDENT FUNDS
39
[See sections 2(38), 10(12), 10(25), 36(1)(iv),
40
87(1)(d), 111, 192(4)]
Application of Part.
1. This Par t shall not apply to any pr ovident fund to which the Pr ovident Funds
Act, 1925 (19 of 1925), applies.
Definitions.
2. In this Par t, unless the context other wise r equir es,
(a) employer means any per son who maintains a pr ovident fund for the
benefit of his or its employees, being
(i) a Hindu undivided family, company, fir m or other association of
per sons, or
(ii) an individual engaged in a business or pr ofession the pr ofits and
gains wher eof ar e assessable to income-tax under the head
Pr ofits and gains of business or pr ofession;
(b) employee means an employee par ticipating in a pr ovident fund, but
does not include a per sonal or domestic ser vant;
(c) contr ibution means any sum cr edited by or on behalf of any
employee out of his salar y, or by an employer out of his own moneys,
to the individual account of an employee, but does not include any
sum cr edited as inter est;
(d) balance to the cr edit of an employee means the total amount to the
cr edit of his individual account in a pr ovident fund at any time;
36. Substituted for Income-tax Officer by the Dir ect Tax Laws (Amendment) Act, 1989,
w.r .e.f. 1-4-1988.
Income-tax Act.
39. See r ules 67 to 81 and For m Nos. 40A, 40B, 40C, 41 and 42.
40. 88(2)(vi) should now be substituted for 87(1)(d).
(e) annual accr etion, in r elation to the balance to the cr edit of an
employee, means the incr ease to such balance in any year , ar ising
fr om contr ibutions and inter est;
(f) accumulated balance due to an employee means the balance to his
cr edit, or such por tion ther eof as may be claimable by him under the
r egulations of the fund, on the day he ceases to be an employee of the
employer maintaining the fund;
(g) r egulations of a fund means the special body of r egulations gover n-
ing the constitution and administr ation of a par ticular pr ovident fund;
and
(h) salar y includes dear ness allowance, if the ter ms of employment so
pr ovide, but excludes all other allowances and per quisites.
According and withdrawal of recognition.
3. (1) The
41
[Chief Commissioner or Commissioner ] may accor d r ecognition to
any pr ovident fund which, in his opinion, satisfies the conditions pr escr ibed in
r ule 4 and the r ules made by the Boar d in this behalf, and may, at any time,
withdr aw such r ecognition if, in his opinion, the pr ovident fund contr avenes any
of those conditions :
42
[Provided that in a case wher e r ecognition has been accor ded to any pr ovident
fund on or befor e the 31st day of Mar ch, 2006 and such pr ovident fund does not
satisfy the conditions set out in clause (ea) of r ule 4, the r ecognition to such fund
shall be withdr awn, if such fund does not satisfy, on or befor e the 31st day of
Mar ch,
43
[2009], the conditions set out in the said clause and any other condition
which the Boar d may, by r ules specify, in this behalf :]
44
[Provided further that nothing contained in the fir st pr oviso shall apply to the
pr ovident fund of an establishment in r espect of which a notification has been
issued by the Centr al Gover nment under sub-section (2) of section 16 of the
Employees Pr ovident Funds and Miscellaneous Pr ovisions Act, 1952 (19 of
1952).]
(2) An or der accor ding r ecognition shall take effect on such date as the
45
[Chief
Commissioner or Commissioner ] may fix in accor dance with any r ules the Boar d
may make in this behalf, such date not being later than the last day of the
financial year in which the or der is made.
(3) An or der withdr awing r ecognition shall take effect fr om the date on which it
is made.
(4) An or der accor ding r ecognition to a pr ovident fund shall not, unless the
45
[Chief Commissioner or Commissioner ] other wise dir ects, be affected by the
R. 3 I.T. ACT, 1961 1.978
1-4-1988.
for 2007 by the Finance Act, 2007, w.e.f. 1-4-2007.
1-4-1988.
fact that the fund is subsequently amalgamated with another pr ovident fund on
the occur r ence of an amalgamation of the under takings in connection with
which the two funds ar e maintained, or that it subsequently absor bs the whole
or a par t of another pr ovident fund belonging to an under taking which is wholly
or in par t tr ansfer r ed to or mer ged in the under taking of the employer maintain-
ing the fir st-mentioned fund.
Conditions to be satisfied by recognised provident funds.
4. In or der that a pr ovident fund may r eceive and r etain r ecognition, it shall,
subject to the pr ovisions of r ule 5, satisfy the conditions set out below and any
other conditions which the Boar d may, by r ules, specify
(a) all employees shall be employed in India, or shall be employed by an
employer whose pr incipal place of business is in India;
(b) the contr ibutions of an employee in any year shall be a definite
pr opor tion of his salar y for that year , and shall be deducted by the
employer fr om the employees salar y in that pr opor tion, at each
per iodical payment of such salar y in that year , and cr edited to the
employees individual account in the fund;
(c) the contr ibutions of an employer to the individual account of an
employee in any year shall not exceed the amount of thecontr ibutions
of the employee in that year , and shall be cr edited to the employees
individual account at inter vals not exceeding one year ;
(d) the fund shall be vested in two or mor e tr ustees or in the Official
Tr ustee under a tr ust which shall not be r evocable, save with the
consent of all the beneficiar ies;
(e) the fund shall consist of contr ibutions as above specified, r eceived by
the tr ustees, of accumulations ther eof, and of inter est cr edited in
r espect of such contr ibutions and accumulations, and of secur ities
pur chased ther ewith and of any capital gains ar ising fr om the tr ans-
fer of capital assets of the fund, and of no other sums;
46
[(ea) the fund shall be a fund of an establishment to which the pr ovisions
of sub-section (3) of section 1 of the Employees Pr ovident Funds and
Miscellaneous Pr ovisions Act, 1952 (19 of 1952)
47
apply or of an
establishment which has been notified by the Centr al Pr ovident Fund
Commissioner under sub-section (4) of section 1 of the said Act, and
such establishment shall obtain exemption under section 17 of the
said Act fr om the oper ation of all or any of the pr ovisions of any
scheme r efer r ed to in that section;]
46. Substituted by the Finance Act, 2007, w.e.f. 1-4-2007. Pr ior to its substitution, clause (ea)
(ea) the fund of an establishment to which the pr ovisions of sub-section (3) or sub-
section (4) of section 1 of the Employees Pr ovident Funds and Miscellaneous
Pr ovisions Act, 1952 (19 of 1952) apply, and such establishment has been exempted
under section 17 of the said Act fr om the oper ation of all or any of the pr ovisions
of any Scheme r efer r ed to in that section;
47. For text of section 1(3)/ (4) of Employees Pr ovident Funds & Miscellaneous Pr ovisions
Act, see Appendix.
(f) the employer shall not be entitled to r ecover any sum whatsoever
fr om the fund, save in cases wher e the employee is dismissed for
misconduct or voluntar ily leaves his employment other wise than on
account of ill-health or other unavoidable cause befor e the expir ation
of the ter m of ser vice specified in this behalf in the r egulations of the
fund :
Provided that in such cases the r ecover ies made by the employer shall
be limited to the contr ibutions made by him to the individual account
of the employee, and to inter est cr edited in r espect of such contr ibu-
tions in accor dance with the r egulations of the fund and the accumu-
lations ther eof;
(g) the accumulated balance due to an employee shall be payable on the
day he ceases to be an employee of the employer maintaining the
fund;
(h) save as pr ovided in clause (g) or in accor dance with such conditions
and r estr ictions as the Boar d may, by r ules, specify, no por tion of the
balance to the cr edit of an employee shall be payable to him.
Relaxation of conditions.
5. (1) Notwithstanding anything contained in clause (a) of r ule 4, the
48
[Chief
Commissioner or Commissioner ] may, if he thinks fit and subject to such
conditions, if any, as he thinks pr oper to attach to the r ecognition, accor d
r ecognition to a fund maintained by an employer whose pr incipal place of
business is not in India, pr ovided the pr opor tion of employees employed outside
India does not exceed ten per cent.
(2) Notwithstanding anything contained in clause (b) of r ule 4, an employee who
r etains his employment while ser ving in the ar med for ces of the Union or when
taken into or employed in the national ser vice under any law for the time being
in for ce, may, whether he r eceives fr om the employer any salar y or not,
contr ibute to the fund dur ing his ser vice in the ar med for ces of the Union or while
so taken into or employed in the national ser vice a sum not exceeding the amount
he would have contr ibuted had he continued to ser ve the employer .
(3) Notwithstanding anything contained in clause (e) or clause (g) of r ule 4,
(a) at the r equest made in wr iting by the employee who ceases to be an
employee of the employer maintaining the fund, the tr ustees of the
fund may consent to r etain the whole or any par t of the accumulated
balance due to the employee to be dr awn by him at any time on
demand;
(b) wher e the accumulated balance due to an employee who has ceased
to be an employee is r etained in the fund in accor dance with the
pr eceding clause, the fund may consist also of inter est in r espect of
such accumulated balance;
49
[(c) the fund may also consist of any amount tr ansfer r ed fr om the
individual account of an employee in any r ecognised pr ovident fund
R. 5 I.T. ACT, 1961 1.980
1-4-1988.
maintained by his for mer employer and the inter est in r espect
ther eof.]
(4) Subject to any r ules
50
which the Boar d may make in this behalf, the
51
[Chief
Commissioner or Commissioner ] may, in r espect of any par ticular fund, r elax the
pr ovisions of clause (c) of r ule 4,
(a) so as to per mit the payment of lar ger contr ibutions by an employer to
the individual accounts of employees whose salar ies do not in each
case exceed five hundr ed r upees per mensem; and
(b) so as to per mit the cr editing by employer s to the individual accounts
of employees of per iodical bonuses or other contr ibutions of a
contingent natur e, wher e the calculation and payment of such
bonuses or other contr ibutions is pr ovided for on definite pr inciples
by the r egulations of the fund.
(5) Notwithstanding anything contained in clause (h ) of r ule 4, in or der to enable
an employee to pay the amount of tax assessed on his total income as deter mined
under sub-r ule (4) of r ule 11, he shall be entitled to withdr aw fr om the balance
to his cr edit in the r ecognised pr ovident fund a sum not exceeding the differ ence
between such amount and the amount to which he would have been assessed if
the tr ansfer r ed balance r efer r ed to in sub-r ule (2) of r ule 11 had not been
included in his total income.
Employers annual contributions, when deemed to be income received by
employee.
6. That por tion of the annual accr etion in any pr evious year to the balance at
the cr edit of an employee par ticipating in a r ecognised pr ovident fund as
consists of
(a) contr ibutions made by the employer in excess of
52
[twelve] per cent
of the salar y of the employee, and
(b) inter est cr edited on the balance to the cr edit of the employee in so far
as it
53
[***] is allowed at a r ate exceeding such r ate as may be fixed by
the Centr al Gover nment in this behalf by notification in the Official
Gazette,
shall be deemed to have been r eceived by the employee in that pr evious year and
shall be included in his total income for that pr evious year , and shall be liable to
income-tax
54
[***].
55
[Exemption for employees contributions.
7. An employee par ticipating in a r ecognised pr ovident fund shall, in r espect of
his own contr ibutions to his individual account in the fund in the pr evious
50. See r ule 75.
1-4-1988.
53. Wor ds exceeds one-thir d of the salar y of the employee or omitted by the Finance
(No. 2) Act, 1980, w.e.f. 1-4-1981.
year , be entitled to a deduction in the computation of his total income of an
amount deter mined in accor dance with
56
[section 80C].]
Exclusion from total income of accumulated balance.
8. The accumulated balance due and becoming payable to an employee
par ticipating in a r ecognised pr ovident fund shall be excluded fr om the
computation of his total income
(i) if he has r ender ed continuous ser vice with his employer for a per iod
of five year s or mor e, or
(ii) if, though he has not r ender ed such continuous ser vice, the ser vice
has been ter minated by r eason of the employees ill-health, or by the
contr action or discontinuance of the employer s business or other
cause beyond the contr ol of the employee,
57
[or ]
57
[(iii) if, on the cessation of his employment, the employee obtains employ-
ment with any other employer , to the extent the accumulated balance
due and becoming payable to him is tr ansfer r ed to his individual
account in any r ecognised pr ovident fund maintained by such other
employer .
Explan ation .Wher e the accumulated balance due and becoming payable to an
employee par ticipating in a r ecognised pr ovident fund maintained by his em-
ployer includes any amount tr ansfer r ed fr om his individual account in any other
r ecognised pr ovident fund or funds maintained by his for mer employer or
employer s, then, in computing the per iod of continuous ser vice for the pur poses
of clause (i) or clause (ii) the per iod or per iods for which such employee r ender ed
continuous ser vice under his for mer employer or employer s afor esaid shall be
included.]
Tax on accumulated balance.
9. (1) Wher e the accumulated balance due to an employee par ticipating in a
r ecognised pr ovident fund is included in his total income owing to the pr ovi-
sions of r ule 8 not being applicable, the
58
[Assessing] Officer shall calculate the
total of the var ious sums of
59
[tax] which would have been payable by the emp-
loyee in r espect of his total income for each of the year s concer ned if the fund
had not been a r ecognised pr ovident fund, and the amount by which such total
exceeds the total of all sums paid by or on behalf of such employee by way of tax
for such year s shall be payable by the employee in addition to any other
59
[tax]
for which he may be liable for the pr evious year in which the accumulated
balance due to him becomes payable.
(2) Wher e the accumulated balance due to an employee par ticipating in a
r ecognised pr ovident fund which is not included in his total income under the
R. 9 I.T. ACT, 1961 1.982
56. Substituted for section 80A or , as the case may be, to a deduction fr om the amount of
income-tax with which he is char geable on his total income of an amount of income-tax
deter mined in accor dance with section 87 by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
1-4-1988.
59. Substituted for income-tax and super tax by the Finance Act, 1965, w.e.f. 1-4-1965.
1-4-1988.
pr ovisions of r ule 8 becomes payable, an amount equal to the aggr egate of the
amounts of super -tax on annual accr etions that would have been payable under
section 58E of the Indian Income-tax Act, 1922 (11 of 1922), for any assessment
year up to and including the assessment year 1932-33, if the Indian Income-tax
(Second Amendment) Act, 1933 (18 of 1933), had come into for ce on the 15th
day of Mar ch, 1930, shall be payable by the employee in addition to any other
tax payable by him for the pr evious year in which such balance becomes
payable.
Deduction at source of tax payable on accumulated balance.
10. The tr ustees of a r ecognised pr ovident fund, or any per son author ised by
the r egulations of the fund to make payment of accumulated balances due
to employees, shall, in cases wher e sub-r ule (1) of r ule 9 applies, at the time an
accumulated balance due to an employee is paid, deduct ther efr om the amount
payable under that r ule and all the pr ovisions of Chapter XVII-B shall apply as
if the accumulated balance wer e income char geable under the head Salar ies.
Treatment of balance in newly recognised provident fund.
11. (1) Wher e r ecognition is accor ded to a pr ovident fund with existing
balances, an account shall be made of the fund up to the day immediately
pr eceding the day on which the r ecognition takes effect, showing the balance to
the cr edit of each employee on such day, and containing such fur ther par ticular s
as the Boar d may pr escr ibe.
(2) The account shall also show in r espect of the balance to the cr edit of each
employee the amount ther eof which is to be tr ansfer r ed to that employees
account in the r ecognised pr ovident fund, and such amount (her einafter called
his tr ansfer r ed balance) shall be shown as the balance to his cr edit in the
r ecognised pr ovident fund on the date on which the r ecognition of the fund
takes effect, and sub-r ule (4) of this r ule and sub-r ule (5) of r ule 5 shall apply
ther eto.
(3) Any por tion of the balance to the cr edit of an employee in the existing fund
which is not tr ansfer r ed to the r ecognised fund shall be excluded fr om the
accounts of the r ecognised fund and shall be liable to income-tax
60
[***] in
accor dance with the pr ovisions of this Act, other than this Par t.
(4) Subject to such r ules as the Boar d may make in this behalf, the
61
[Assessing]
Officer shall make a calculation of the aggr egate of all sums compr ised in a
tr ansfer r ed balance which would have been liable to income-tax if this Par t had
been in for ce fr om the date of the institution of the fund, without r egar d to any
tax which may have been paid on any sum, and such aggr egate (if any) shall be
deemed to be income r eceived by the employee in the pr evious year in which the
r ecognition of the fund takes effect and shall be included in the employees total
income for that pr evious year , and, for the pur poses of assessment, the r emain-
der of the tr ansfer r ed balance shall be disr egar ded, but no other exemption or
r elief, by way of r efund or other wise, shall be gr anted in r espect of any sum
compr ised in such tr ansfer r ed balance :
Provided that, in cases of ser ious accounting difficulty, the
62
[Chief Commis-
sioner or Commissioner ] may, subject to the said r ules, make a summar y
calculation of such aggr egate.
(5) Nothing in this r ule shall affect the r ights of the per sons administer ing an
unr ecognised pr ovident fund or dealing with it, or with the balance to the cr edit
of any individual employee befor e r ecognition is accor ded, in any manner which
may be lawful.
Accounts of recognised provident funds.
12. (1) The accounts of a r ecognised pr ovident fund shall be maintained by the
tr ustees of the fund and shall be in such for m and for such per iods, and shall
contain such par ticular s, as the Boar d may pr escr ibe.
(2) The accounts shall be open to inspection at all r easonable times by income-
tax author ities, and the tr ustees shall fur nish to the
63
[Assessing] Officer such
abstr acts ther eof as the Boar d may pr escr ibe.
Appeals.
13. (1) An employer objecting to an or der of the
64
Commissioner ] r efusing to r ecognise or an or der withdr awing r ecognition
fr om a pr ovident fund may appeal, within sixty days of such or der , to the Boar d.
(2) The appeal shall be in such for m and shall be ver ified in such manner and shall
be subject to the payment of such fee as the Boar d may pr escr ibe.
Treatment of fund transferred by employer to trustee.
14. (1) Wher e an employer , who maintains a pr ovident fund (whether r ecog-
nised or not) for the benefit of his employees and has not tr ansfer r ed the fund
or any por tion of it, tr ansfer s such fund or por tion to tr ustees in tr ust for the
employees par ticipating in the fund, the amount so tr ansfer r ed shall be deemed
to be of the natur e of capital expenditur e.
(2) When an employee par ticipating in such fund is paid the accumulated
balance due to him ther efr om, any por tion of such balance as r epr esents his
shar e in the amount so tr ansfer r ed to the tr ustees (without addition of inter est,
and exclusive of the employees contr ibutions and inter est ther eon) shall, if the
employer has made effective ar r angements to secur e that tax shall be deducted
at sour ce fr om the amount of such shar e when paid to the employee, be deemed
to be an expenditur e by the employer within the meaning of section 37, incur r ed
in the pr evious year in which the accumulated balance due to the employee is
paid.
65
Provisions relating to rules.
15. (1) In addition to any power confer r ed by this Par t, the Boar d may make
r ules
R. 15 I.T. ACT, 1961 1.984
1-4-1988.
65. See r ules 67 to 81.
(a) pr escr ibing the statements and other infor mation to be submitted
along with an application for r ecognition;
(b) limiting the contr ibutions to a r ecognised pr ovident fund by employ-
ees of a company who ar e shar eholder s in the company;
66
[(bb) r egulating the investment or deposit of the moneys of a r ecognised
pr ovident fund :
Provided that no r ule made under this clause shall r equir e the
investment of mor e than fifty per cent of the moneys of such fund in
Gover nment secur ities
67
as defined in section 2 of the Public Debt Act,
1944 (18 of 1944);]
(c) pr oviding for the assessment by way of penalty of any consider ation
r eceived by an employee for an assignment of, or cr eation of a char ge
upon, his beneficial inter est in a r ecognised pr ovident fund;
(d) deter mining the extent to and the manner in which exemption fr om
payment of
68
[tax] may be gr anted in r espect of contr ibutions and
inter est cr edited to the individual accounts of employees in a pr ovi-
dent fund fr om which r ecognition has been withdr awn; and
(e) gener ally, to car r y out the pur poses of this Par t and to secur e such
fur ther contr ol over the r ecognition of pr ovident funds and the
administ r at ion of r ecognised pr ovident funds as it may deem
r equisite.
(2) All r ules made under this Par t shall be subject to the pr ovisions of section 296.
PART B
APPROVED SUPERANNUATION FUNDS
69
[See sections 2(6), 10(13), 10(25)(iii), 36(1)(iv),
70
87(1)(e), 192(5),
71
[206]]
Definitions.
1. In this Par t, unless the context other wise r equir es, employer , employee,
contr ibution and salar y have, in r elation to super annuation funds, the
meanings assigned to those expr essions in r ule 2 of Par t A in r elation to pr ovident
funds.
Approval and withdrawal of approval.
2. (1) The
72
[Chief Commissioner or Commissioner ] may accor d appr oval to
any super annuation fund or any par t of a super annuation fund which, in his
opinion, complies with the r equir ements of r ule 3, and may at any time withdr aw
such appr oval, if, in his opinion, the cir cumstances of the fund or par t cease to
war r ant the continuance of the appr oval.
1.985 SCH. IV - APPROVED SUPERANNUATION FUNDS R. 2
69. See r ules 82 to 97 and For m No. 43 for for m of appeal.
70. 88(2)(vii) should now be substituted for 87(1)(e).
71. Substituted for 206(2) by the Finance Act, 1987, w.e.f. 1-6-1987.
1-4-1988.
(2) The
73
[Chief Commissioner or Commissioner ] shall communicate in wr iting
to the tr ustees of the fund the gr ant of appr oval with the date on which the
appr oval is to take effect, and, wher e the appr oval is gr anted subject to
conditions, those conditions.
(3) The
73
to the tr ustees of the fund any withdr awal of appr oval with the r easons for such
withdr awal and the date on which the withdr awal is to take effect.
(4) The
73
[Chief Commissioner or Commissioner ] shall neither r efuse nor with-
dr aw appr oval to any super annuation fund or any par t of a super annuation fund
unless he has given the tr ustees of that fund a r easonable oppor tunity of being
hear d in the matter .
Conditions for approval.
3. In or der that a super annuation fund may r eceive and r etain appr oval, it shall
satisfy the conditions set out below and any other conditions which the Boar d
may, by r ules, pr escr ibe
74
(a) the fund shall be a fund established under an ir r evocable tr ust
in connection with a tr ade or under taking car r ied on in India, and
not less than ninety per cent of the employees shall be employed in
India;
(b) the fund shall have for its sole pur pose the pr ovision of annuities for
employees in the tr ade or under taking on their r etir ement at or after
a specified age or on their becoming incapacitated pr ior to such
r etir ement, or for the widows, childr en or dependants of per sons who
ar e or have been such employees on the death of those per sons ;
(c) the employer in the tr ade or under taking shall be a contr ibutor to the
fund ; and
(d) all annuities, pensions and other benefits gr anted fr om the fund shall
be payable only in India.
Application for approval.
4. (1) An application for appr oval of a super annuation fund or par t of a
super annuation fund shall be made in wr iting by the tr ustees of the fund to
the
75
[Assessing] Officer by whom the employer is assessable, and shall be
accompanied by a copy of the instr ument under which the fund is established
and by two copies of the r ules
76
[and, wher e the fund has been in existence dur ing
any year or year s pr ior to the financial year in which the application for appr oval
is made, also two copies of the accounts of the fund r elating to such pr ior year
or year s (not being mor e than thr ee year s immediately pr eceding the year in
which the said application is made)] for which such accounts have been made up,
R. 4 I.T. ACT, 1961 1.986
1-4-1988.
No. 482, dated 26-3-1987 and Cir cular No. 595, dated 5-3-1991. For details, see Taxmanns
75. Substituted for Income-tax by the Dir ect Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
76. Substituted for and of the accounts of the fund for the last year by the Taxation Laws
but the
77
[Chief Commissioner or Commissioner ] may r equir e such fur ther
infor mation to be supplied as he thinks pr oper .
(2) If any alter ation in the r ules, constitution, objects or conditions of the fund is
made at any time after the date of the application for appr oval, the tr ustees of
the fund shall for thwith communicate such alter ation to the
78
[Assessing]
Officer mentioned in sub-r ule (1), and in default of such communication any
appr oval given shall, unless the
79
[Chief Commissioner or Commissioner ] other -
wise or der s, be deemed to have been withdr awn fr om the date on which the
alter ation took effect.
Contributions by employer when deemed to be income of employer.
5. Wher e any contr ibutions by an employer (including the inter est ther eon, if
any) ar e r epaid to the employer , the amount so r epaid shall be deemed for the
pur pose of income-tax
80
[***] to be the income of the employer of the pr evious
year in which it is so r epaid.
Deduction of tax on contributions paid to an employee.
81
6. Wher e any contr ibutions made by an employer , including inter est on
contr ibutions, if any, ar e paid to an employee dur ing his lifetime
82
[in
cir cumstances other than those r efer r ed to in clause (13) of section 10],
83
[tax]
on the amounts so paid shall be deducted at the aver age r ate of
83
[tax] at which
the employee was liable to
83
[tax] dur ing the pr eceding thr ee year s or dur ing the
per iod, if less than thr ee year s, when he was a member of the fund, and shall be
paid by the tr ustees to the cr edit of the Centr al Gover nment within the
pr escr ibed time and in such manner as the Boar d may dir ect.
Deduction from pay of and contributions on behalf of employee to be included
in return.
7. Wher e an employer deducts fr om the emoluments paid to an employee or
pays on his behalf any contr ibutions of that employee to an appr oved
super annuation fund, he shall include all such deductions or payments in the
r etur n which he is r equir ed to fur nish under
84
[***] section 206.
Appeals.
85
Commissioner ] r efusing to accor d appr oval to a super annuation fund or an
or der withdr awing such appr oval may appeal, within sixty days of such or der , to
the Boar d.
1.987 SCH. IV - APPROVED SUPERANNUATION FUNDS R. 8
1-4-1988.
83. Substituted for income-tax and super -tax, ibid.
84. Wor ds sub-section (1) of omitted by the Finance Act, 1987, w.e.f. 1-6-1987.
1-4-1988.
be subject to the payment of such fee as may be pr escr ibed.
86
Liability of trustees on cessation of approval.
9. If a fund or a par t of a fund for any r eason ceases to be an appr oved
super annuation fund, the tr ustees of the fund shall never theless r emain liable
to tax on any sum paid on account of r etur ned contr ibutions (including inter est
on contr ibutions, if any), in so far as the sum so paid is in r espect of contr ibutions
made befor e the fund or par t of the fund ceased to be an appr oved super annu-
ation fund under the pr ovisions of this Par t.
Particulars to be furnished in respect of superannuation funds.
10. The tr ustees of an appr oved super annuation fund and any employer who
contr ibutes to an appr oved super annuation fund shall, when r equir ed by
notice fr om the
87
[Assessing] Officer , within such per iod, not being less than
twenty-one days fr om the date of the notice, as may be specified in the notice,
fur nish such r etur n, statement, par ticular s or infor mation, as the
87
[Assessing]
Officer may r equir e.
11. (1) In addition to any power confer r ed by this Par t, the Boar d may make
r ules
along with an application for appr oval ;
(b) pr escr ibing t he r et ur ns, st at ement s, par t icular s, or infor mat ion
which the
87
[Assessing] Officer may r equir e fr om the tr ustees of an
appr oved super annuation fund or fr om the employer ;
(c) limiting the or dinar y annual contr ibution and any other contr ibu-
tions to an appr oved super annuation fund by an employer ;
88
[(cc) r egulating the investment or deposit of the moneys of an appr oved
super annuation fund :
89
Gover nment secur ities as defined in section 2 of the Public Debt Act,
1944 (18 of 1944) ;]
(d) pr oviding for the assessment by way of penalty of any consider ation
r eceived by an employee for an assignment of, or cr eation of a char ge
upon, his beneficial inter est in an appr oved super annuation fund ;
(e) deter mining the extent to, and the manner in, which exemption fr om
payment of
90
[tax] may be gr anted in r espect of any payment made
R. 11 I.T. ACT, 1961 1.988
1-4-1988.
fr om a super annuation fund fr om which appr oval has been with-
dr awn ;
(f) pr oviding for the withdr awal of appr oval in the case of a fund which
ceases to satisfy the r equir ements of this Par t or of the r ules made
ther eunder ; and
(g) gener ally, to car r y out the pur poses of this Par t and to secur e such
fur ther contr ol over the appr oval of the super annuation funds and
the administr ation of appr oved super annuation funds as it may deem
r equisite.
(2) All r ules made under this Par t shall be subject to the pr ovisions of section
296.
PART C
APPROVED GRATUITY FUNDS
91
[See sections 2(5),
92
[10(25)(iv),] 17(1)(iii), 36(1)(v)]
Definitions.
1. In this Par t, unless the context other wise r equir es employer , employee,
contr ibution and salar y have, in r elation to gr atuity funds, the meanings
assigned to those expr essions in r ule 2 of Par t A in r elation to pr ovident funds.
Approval and withdrawal of approval.
2. (1) The
93
[Chief Commissioner or Commissioner ] may accor d appr oval to
any gr atuity fund which, in his opinion, complies with the r equir ements of r ule
3 and may at any time withdr aw such appr oval if, in his opinion, the cir cum-
stances of the fund cease to war r ant the continuance of the appr oval.
(2) The
94
to the tr ustees of the fund the gr ant of appr oval with the date on which the
appr oval is to take effect and wher e the appr oval is gr anted subject to conditions,
those conditions.
(3) The
94
to the tr ustees of the fund any withdr awal of appr oval with the r easons for such
withdr awal and the date on which the withdr awal is to take effect.
(4) The
94
[Chief Commissioner or Commissioner ] shall neither r efuse nor with-
dr aw appr oval to any gr atuity fund unless he has given the tr ustees of that fund
a r easonable oppor tunity of being hear d in the matter .
Conditions for approval.
3. In or der that a gr atuity fund may r eceive and r etain appr oval, it shall satisfy
the conditions set out below and any other conditions which the Boar d may,
by r ules, pr escr ibe
1.989 SCH. IV - APPROVED GRATUITY FUNDS R. 3
91. See r ules 98 to 111 and For m No. 44 for for m of appeal.
1-4-1988.
(a) the fund shall be a fund established under an ir r evocable tr ust in
connection with a tr ade or under taking car r ied on in India, and not
less than ninety per cent of the employees shall be employed in India;
(b) the fund shall have for its sole pur pose the pr ovision of a gr atuity to
employees in the tr ade or under taking on their r etir ement at or after
a specified age or on their becoming incapacitated pr ior to such
r etir ement or on ter mination of their employment after a minimum
per iod of ser vice specified in the r ules of the fund or to the widows,
childr en or dependants of such employees on their death ;
(c) the employer in the tr ade or under taking shall be a contr ibutor to the
fund ; and
(d) all benefits gr anted by the fund shall be payable only in India.
Application for approval.
4. (1) An application for appr oval of a gr atuity fund shall be made in wr iting by
the tr ustees of the fund to the
95
[Assessing] Officer by whom the employer is
assessable and shall be accompanied by a copy of the instr ument under which
the fund is established and by two copies of the r ules
96
[and, wher e the fund has
been in existence dur ing any year or year s pr ior to the financial year in which
the application for appr oval is made, also two copies of the accounts of the
fund r elating to such pr ior year or year s (not being mor e than thr ee year s
immediately pr eceding the year in which the said application is made)] for which
such accounts have been made up, but the
97
sioner ] may r equir e such fur ther infor mation to be supplied as he thinks pr oper .
(2) If any alter ation in the r ules, constitution, objects or conditions of the fund is
made at any time after the date of the application for appr oval, the tr ustees of
the fund shall for thwith communicate such alter ations to the
98
[Assessing]
Officer mentioned in sub-r ule (1), and in default of such communication, any
appr oval given shall, unless the
97
[Chief Commissioner or Commissioner ] other -
wise or der s, be deemed to have been withdr awn fr om the date on which the
alter ation took effect.
Gratuity deemed to be salary.
5. Wher e any gr atuity is paid to an employee dur ing his lifetime, the gr atuity
shall be tr eated as salar y paid to the employee for the pur poses of this Act.
Liability of trustees on cessation of approval.
6. If a gr atuity fund for any r eason ceases to be an appr oved gr atuity fund, the
tr ustees of the fund shall never theless r emain liable to tax on any gr atuity paid
to any employee.
R. 6 I.T. ACT, 1961 1.990
1-4-1988.
96. Substituted for and of the accounts of the fund for the last thr ee year s by the Taxation
1-4-1988.
Contributions by employer, when deemed to be income of employer.
7. Wher e any contr ibutions by an employer (including the inter est ther eon, if
any) ar e r epaid to the employer , the amount so r epaid shall be deemed for the
pur poses of income-tax
99
[***] to be the income of the employer of the pr evious
year in which they ar e so r epaid.
Appeals.
1
Commissioner ] r efusing to accor d appr oval to a gr atuity fund or an or der
withdr awing such appr oval may appeal, within sixty days of such or der , to the
Boar d.
be subject to the payment of such fee as may be pr escr ibed.
2
3
[Particulars to be furnished in respect of gratuity funds.
8A. The tr ustees of an appr oved gr atuity fund and any employer who contr i-
butes to an appr oved gr atuity fund shall, when r equir ed by notice fr om the
4
[Assessing] Officer , fur nish within such per iod, not being less than twenty-one
days fr om the date of the notice, as may be specified in the notice, such r etur n,
statement, par ticular s or infor mation, as the
4
[Assessing] Officer may r equir e.]
9. (1) In addition to any power confer r ed in this Par t, the Boar d may make r ules
along with an application for appr oval ;
(b) limiting the or dinar y annual and other contr ibutions of an employer
to the fund ;
5
[(bb) r egulating the investment or deposit of the moneys of an appr oved
gr atuity fund :
Gover nment secur ities
6
as defined in section 2 of the Public Debt Act,
1944 (18 of 1944) ;]
(c) pr oviding for the assessment by way of penalty of any consider ation
r eceived by an employee for an assignment of, or the cr eation of a
char ge upon, his beneficial inter est in an appr oved gr atuity fund ;
1.991 SCH. IV - APPROVED GRATUITY FUNDS R. 9
1-4-1988.
1-4-1988.
(d) pr oviding for the withdr awal of the appr oval in the case of a fund
which ceases to satisfy the r equir ements of this Par t or the r ules made
ther eunder ; and
(e) gener ally, to car r y out the pur poses of this Par t and to secur e such
fur ther contr ol over the appr oval of gr atuity funds and the adminis-
tr ation of gr atuity funds as it may deem r equisite.
(2) All r ules made under this Par t shall be subject to the pr ovisions of section 296.
7
[THE FIFTH S CHEDULE
8
[[See section 33(1)(b)(B)(i)]]
LIST OF ARTICLES AND THINGS
(1) Ir on and steel (metal), fer r o-alloys and special steels.
(2) Aluminium, copper , lead and zinc (metals).
(3)
9
[Coal, lignite, ir on or e], bauxite, manganese or e, dolomite, limestone,
magnesite and miner al oil.
(4) Industr ial machiner y specified under the heading 8. Industr ial machin-
er y, sub-heading A. Major items of specialised equipment used in
specific industr ies, of the Fir st Schedule to the Industr ies (Development
and Regulation) Act, 1951 (65 of 1951).
(5) Boiler s and steam gener ating plants, steam engines and tur bines and
inter nal combustion engines.
(6) Flame and dr ip pr oof motor s.
(7) Equipment for the gener ation and tr ansmission of electr icity including
tr ansfor mer s, cables and tr ansmission tower s.
(8) Machine tools and pr ecision tools (including their attachments and
accessor ies, cutting tools and small tools), dies and jigs.
(9) Tr actor s, ear th-moving machiner y and agr icultur al implements.
(10) Motor tr ucks and buses.
(11) Steel castings and for gings and malleable ir on and steel castings.
(12) Cement and r efr actor ies.
(13) Fer tiliser s, namely, ammonium sulphate, ammonium sulphate nitr ate
(double salt), ammonium nitr ate, calcium ammonium nitr ate (nitr olime
stone), ammonium chloride, superphosphate, urea and complex fertilisers
of synthetic or igin containing both nitr ogen and phosphor us, such as
Item 13 I.T. ACT, 1961 1.992
7. Inser ted by the Finance Act, 1965, w.e.f. 1-4-1965. The or iginal Schedule was omitted by
8. Substituted for [See sections 33(1)(b)(B)(i) and 80B(7)] by the Finance Act, 1968, w.e.f.
1-4-1969. [See sections 33(1)(b)(B)(i) and 80B(7)] was substituted for [See sections
33(1)(iii)(c), 80E and 85A] by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 and [See
sections 33(1)(iii)(c), 80E and 85A] was substituted for [See section 33(1)(iii)(c)] by the
Finance Act, 1966, w.e.f. 1-4-1966.
9. Substituted for Ir on or e by the Finance (No. 2) Act, 1965, w.e.f. 1-4-1965.
ammonium phosphates, ammonium sulphate phosphate and ammo-
nium nitr o phosphate.
(14) Soda ash.
(15) Pesticides.
(16) Paper and pulp
10
[including newspr int].
(17) Electr onic equipment, namely, r adar equipment, computer s, electr onic
accounting and business machines, electr onic communication equip-
ment, electr onic contr ol instr uments and basic components, such as
valves, tr ansistor s, r esistor s, condenser s, coils, magnetic mater ials and
micr owave components.
(18) Petr ochemicals including cor r esponding pr oducts manufactur ed fr om
other basic r aw mater ials like calcium car bide, ethyl alcohol or hydr o-
car bons fr om other sour ces.
(19) Ships.
(20) Automobile ancillar ies.
(21) Seamless tubes.
(22) Gear s.
(23) Ball, r oller and taper ed bear ings.
(24) Component par ts of the ar ticles mentioned in item Nos. (4), (5), (7) and
(9), that is to say, such par ts as ar e essential for the wor king of the
machiner y r efer r ed to in the items afor esaid and have been given for
that pur pose some special shape or quality which would not be essential
for their use for any other pur pose and ar e in complete finished for m and
r eady for fitment.
(25) Cotton seed oil.
10
[(26) Tea.
(27) Pr inting machiner y.]
11
[(28) Pr ocessed seeds.
(29) Pr ocessed concentr ates for cattle and poultr y feed.
(30) Pr ocessed (including fr ozen) fish and fish pr oducts.
(31) Vegetable oils and oil-cakes manufactur ed by the solvent extr action
pr ocess fr om seeds other than cotton seed.]
12
[(32) Textiles (including those dyed, pr inted or other wise pr ocessed) made
wholly or mainly of cotton, including cotton yar n, hosier y and r ope.
(33) Textiles (including those dyed, pr inted or other wise pr ocessed) made
wholly or mainly of jute, including jute twine and jute r ope.]]
1.993 SCH. V - LIST OF ARTICLES AND THINGS Item 33
10. Inser ted by the Finance Act, 1966, w.e.f. 1-4-1966 ; but for the pur poses of section 33(1), the
amendment shall have effect in r espect of machiner y or plant installed after 31-3-1966.
THE S IXTH S CHEDULE
[Om itted by th e Fin an ce Act, 1972, w.e.f. 1-4-1973. Origin ally, th e Sch edule was
in serted by th e Fin an ce Act, 1968, w.e.f. 1-4-1969 an d was later am en ded by
th e Fin an ce (No. 2) Act, 1971, w.e.f. 1-4-1972.]
13
[THE S EV ENTH S CHEDULE
[See section 35E]
PART A
MINERALS
1. Aluminium or es.
2. Apatite and phosphatic or es.
3. Ber yl.
4. Chr ome or e.
5. Coal and lignite.
6. Columbite, Samar skite and other miner als of the r ar e ear ths gr oup.
7. Copper .
8. Gold.
9. Gypsum.
10. Ir on or e.
11. Lead.
12. Manganese or e.
13. Molybdenum.
14. Nickel or es.
15. Platinum and other pr ecious metals and their or es.
16. Pitchblende and other ur anium or es.
17. Pr ecious stones.
18. Rutile.
19. Silver .
20. Sulphur and its or es.
21. Tin.
22. Tungsten or es.
23. Ur anifer ous allanite, monazite and other thor ium miner als.
24. Ur anium bear ing tailings left over fr om or es after extr action of copper and
gold, ilmenite and other titanium or es.
25. Vanadium or es.
26. Zinc.
27. Zircon.
Item 27 I.T. ACT, 1961 1.994
PART B
GROUPS OF ASSOCIATED MINERALS
1. Apat it e, Ber yl, Cassit er it e, Colu mbit e, Emer ald, Felspar , Lepidolit e,
Mica, Pitchblende, Quar tz, Samar skite, Scheelite, Topaz, Tantalite, Tour -
maline.
2. Ir on, Manganese, Titanium, Vanadium and Nickel miner als.
3. Lead, Zinc, Copper , Cadmium, Ar senic, Antimony, Bismuth, Cobalt, Nickel,
Molybdenum, and Ur anium miner als, and Gold and Silver , Ar sinopyr ite,
Chalcopyr ite, Pyr ite, Pyphr otite and Pentalandite.
4. Chr omium, Osmir idium, Platinum and Nickel miner als.
5. Kyanite, Sillimanite, Cor r undum, Dumor tier ite and Topaz.
6. Gold, Silver , Tellur ium, Selenium and Pyr ite.
7. Bar ytes, Fluor ite, Chalcocite, Selenium, and miner als of Zinc, Lead and
Silver .
8. Tin and Tungsten miner als.
9. Limestone, Dolomite and Magnesite.
10. Ilmenite, Monazite, Zir con, Rutile, Gar net and Sillimanite.
11. Sulphides of Copper and Ir on.
12. Coal, Fir eclay and Shale.
13. Magnetite and Apatite.
14. Magnesite and Chr omite.
15. Talc (Soapstone and Steatite) and Dolomite.
16. Bauxite, Later ite, Aluminous Clays, Lithomor ge, Titanium, Vanadium,
Gallium and Columbium miner als.]
14
[THE EIGHTH S CHEDULE
[See section 80-IA(2)(iv)(b)]
LIST OF INDUSTRIALLY BACKWARD STATES
AND UNION TERRITORIES
(1) Ar unachal Pr adesh
(2) Assam
(3) Goa
(4) Himachal Pr adesh
(5) Jammu and Kashmir
(6) Manipur
(7) Meghalaya
1.995 SCH. VIII - LIST OF BACKWARD STATES It em 7
14. Inser ted by the Finance Act, 1993, w.e.f. 1-4-1994. Pr ior to its omission, the Eighth Schedule
was inser ted by the Dir ect Taxes (Amendment) Act, 1974, w.e.f. 1-4-1974, later on amended
by the Finance Act, 1976, w.e.f. 1-4-1976, and omitted by the Taxation Laws (Amendment
& Miscellaneous Pr ovisions) Act, 1986, with r etr ospective effect fr om 1-4-1984.
(8) Mizor am
(9) Nagaland
(10) Sikkim
(11) Tr ipur a
(12) Andaman and Nicobar Islands
(13) Dadr a and Nagar Haveli
(14) Daman and Diu
(15) Lakshadweep
(16) Pondicher r y.]
THE NINTH S CHEDULE
15
[Om itted by th e Taxation Laws (Am en dm en t & Miscellan eous Provision s)
Act, 1986, w.e.f. 1-4-1988. Origin al Nin th Sch edule was in serted by th e
Direct Taxes (Am en dm en t) Act, 1974, w.e.f. 1-4-1975.]
THE TENTH S CHEDULE
[See section 3(5)]
16
17
[THE ELEV ENTH S CHEDULE
[See section 32A,
18
[section 32AB,]
19
[section 80CC*(3)(a)(i), section 80-I(2)]
20
[, section 80J(4) and section 88A (3)(a)(i)]
LIST OF ARTICLES OR THINGS
1. Beer , wine and other alcoholic spir its.
2. Tobacco and tobacco pr epar ations, such as, cigar s and cher oots,
cigar ettes, bir is, smoking mixtur es for pipes and cigar ettes, chewing
tobacco and snuff.
3. Cosmetics and toilet pr epar ations.
It em 3 I.T. ACT, 1961 1.996
15. Omitted Ninth Schedule was amended by the Finance Act, 1975, w.e.f. 1-4-1976, the
Finance Act, 1976, w.e.f. 1-4-1976, the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978, the Finance
Act, 1981, w.e.f. 1-4-1982 and the Finance Act, 1984, w.e.f. 1-4-1985.
16. Pr ior to its omission, the Tenth Schedule was inser ted by the Dir ect Tax Laws (Amend-
ment) Act, 1987, w.e.f. 1-4-1989, and later on amended by the Dir ect Tax Laws (Amend-
ment) Act, 1989, w.e.f. 1-4-1989.
Or iginal Tenth Schedule was inser ted by the Finance Act, 1975, w.e.f. 1-4-1976 and was
later on omitted by the Finance Act, 1985, w.e.f. 1-4-1986.
20. Substituted for and section 80J(4) by the Finance Act, 1990, w.e.f. 1-4-1990. Ear lier , these
wor ds wer e inser ted by the Finance Act, 1979, w.e.f. 1-4-1979.
*Section 80CC has now been omitted by the Finance (No. 2) Act, 1996, w.r .e.f. 1-4-1993.
Section 80J has now been omitted, ibid., w.r .e.f. 1-4-1989.
Section 88A has now been omitted, ibid., w.r .e.f. 1-4-1994.
1.997 SCH. XI - LIST OF ARTICLES OR THINGS Item 29
23. Substituted for Cinematogr aph films and pr ojector s. by the Finance Act, 1988, w.e.f.
1-4-1989.
24. Substituted for , for data pr ocessing and for tr ansmission and r eception of messages by
4. Tooth paste, dental cr eam, tooth powder and soap.
5. Aer ated water s in the manufactur e of which blended flavour ing
concentr ates in any for m ar e used.
21
[Explan ation .Blended flavour ing concentr ates shall include, and
shall be deemed always to have included, synthetic essences in any
for m.]
6. Confectioner y and chocolates.
7. Gr amophones, including r ecor d-player s and gr amophone r ecor ds.
8.
22
[***]
9.
23
[Pr ojector s.]
10. Photogr aphic appar atus and goods.
11-21.
22
[***]
22. Office machines and appar atus such as typewr iter s, calculating
machines, cash r egister ing machines, cheque wr iting machines, inter -
com machines and telepr inter s.
Explan ation .The expr ession office machines and appar at us
includes all machines and appar atus used in offices, shops, factor ies,
wor kshops, educational institutions, r ailway stations, hotels and
r estaur ants for doing office wor k
24
[and for data pr ocessing (not
being computer s within the meaning of section 32AB)].
23. Steel fur nitur e, whether made par tly or wholly of steel.
24. Safes, str ong boxes, cash and deed boxes and str ong r oom door s.
25. Latex foam sponge and polyur ethane foam.
26.
25
[***]
27. Cr own cor ks, or other fittings of cor k, r ubber , polyethylene or any
other mater ial.
28. Pilfer -pr oof caps for packaging or other fittings of cor k, r ubber ,
polyethylene or any other mater ial.
29.
25
[***]]
26
[THE TWELFTH S CHEDULE
[See section 80HHC(2)(b)(ii)]
PROCESSED MINERALS AND ORES
(i) Pulver ised or micr onisedbar yt es, calcit e, st eat it e, pyr ophylit e,
wollastonite, zir con, bentonite, r ed or yellow oxide, r ed or yellow
ochr e, talc, quar tz, feldspar , silica powder , gar net, silliminite, fir eclay,
ballclay, manganese dioxide or e.
(ii) Pr ocessed or activatedbentonite, diatomious ear th, fuller s ear th.
(iii) Pr ocessedkaoline (china clay), whiting, calcium car bonate.
(iv) Beneficated-chromite, flourspar, graphite, vermiculite, ilmenite, brown
ilmenite (lencoxene) r utile, monazite and other miner al concentr ates.
(v) Mica blocks, mica splittings, mica condenser films, mica powder ,
micanite, silver ed mica, punched mica, mica paper , mica tapes, mica
flakes.
(vi) Exfoliated-ver miculite, calcined kyanite, magnesite, calcined magne-
site, calcined alumina.
(vii) Sized ir on or e pr ocessed by mechanical scr eening or cr ushing and
scr eening thr ough dr y pr ocess or mechanical cr ushing, scr eening,
washing and classification thr ough wet pr ocess.
(viii) Ir on or e concentr ates pr ocessed thr ough cr ushing, gr inding or mag-
netic separ ation.
(ix) Agglomer ated ir on or e.
(x) Cut and polished minerals and rocks including cut and polished granite.
Explan ation .For the pur poses of this Schedule, pr ocessed, in r elation to any
miner al or or e, means
(a) dr essing thr ough mechanical means to obtain concentr ates after
r emoval of gangue and unwanted deleter ious substances or thr ough
other means without alter ing the miner ological identity;
(b) pulver isation, calcination or micr onisation;
(c) agglomer ation fr om fines;
(d) cutting and polishing;
(e) washing and levigation;
(f) beneficat ion by mechanical cr u shing and scr eening t hr ou gh
dr y pr ocess;
(g) sizing by cr ushing, scr eening, washing and classification thr ough wet
pr ocess;
(h) other upgr ading techniques such as r emoval of impur ities thr ough
chemical tr eatment, r efining by gr avity separ ation, bleaching, floata-
tion or filtr ation.]
I.T. ACT, 1961 1.998
26. Inser ted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. Ear lier , the Twelfth Schedule was
inser ted by the Finance Act, 1982, w.e.f. 1-4-1983 and omitted by the Finance Act, 1986,
w.e.f. 1-4-1987.
27
[THE THIRTEENTH S CHEDULE
28
[[See sections 80-IB(4) and 80-IC(2)]]
LIST OF ARTICLES OR THINGS
PART A
FOR THE STATE OF SIKKIM
S. No. Article or th in g
1. Tobacco and tobacco pr oducts (including cigar ettes, cigar s and gutka, etc.)
2. Aer ated br anded bever ages
3. Pollution-causing paper and paper pr oducts
PART B
FOR THE STATE OF HIMACHAL PRADESH AND
THE STATE OF UTTARANCHAL
S. No. Activity or Excise Sub-class
article or th in g classif ication un der Nation al
In dustrial
Classif ication
(NIC), 1998
1. Tobacco and tobacco pr oducts including
cigar ettes and pan masala 24.01 to 24.04 1600
and 21.06
2. Ther mal Power Plant (coal/ oil based) 40102 or 40103
3. Coal washer ies/ dr y coal pr ocessing
4. Inor ganic Chemicals excluding medicinal
gr ade oxygen (2804.11), medicinal gr ade
hydr ogen per oxide (2847.11),
compr essed air (2851.30) Chapter 28
5. Or ganic chemicals excluding Pr ovitamins/
vitamins, Hor mones (29.36), Glycosides
(29.39), sugar s* (29.40) Chapter 29 24117
6. Tanning and dyeing extr acts, tannins and
their der ivatives, dyes, colour s, paints and
var nishes; putty, filler s and other mastics;
inks Chapter 32 24113 or 24114
7. Mar ble and miner al substances not
classified elsewher e 25.04
25.05 14106 or 14107
8. Flour mills/ r ice mills 11.01 15311
9. Foundr ies using coal
10. Miner als fuels, miner al oils and pr oducts of
t heir dist illat ion; bit uminous subst ances :
miner al waxes Chapter 27
1.999 SCH. XIII - LIST OF ARTICLES OR THINGS Item 10
28. Substituted for [See section 80-IC(2)] by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.
*Ser ial No. 5 - Repr oduction by synthesis not allowed as also downstr eam industr ies for sugar .
11. Synthetic r ubber pr oducts 40.02 24131
12. Cement clinker s and asbestos, r aw
including fibr e 2502.10, 2503.00
13. Explosive (including industr ial explosives,
detonator s and fuses, fir ewor ks, matches,
pr opellant powder s, etc.) 36.01 to 36.06 24292
14. Miner al or chemical fer tilizer s 31.02 to 31.05 2412
15. Insecticides, fungicides, her bicides and
pesticides (basic manufactur e and
for mulat ion) 3808.10 24211 or 24219
16. Fibr e glass and ar ticles ther eof 70.14 26102
17. Manufactur e of pulpwood pulp,
mechanical or chemical (including
dissolving pulp) 47.01 21011
18. Br anded aer ated water / soft dr inks
(non-fr uit based) 2201.20, 2202.20 15541 or 15542
19. Paper 4801 21011 to 21019
Wr iting or pr inting paper , etc. 4802.10
Paper or paper boar d, etc. 4802.20
Maplitho paper , etc. 4802.30
Newspr int, in r olls or sheets 4801.00
Cr aft paper , etc. 4804.10
Sanitar y towels, etc. 4818.10
Cigar ette paper 48.13
Gr ease-pr oof paper 4806.10
Toilet or facial tissue, etc. 4803
Paper and paper boar d, laminated
inter nally with bitumen, tar or asphalt 4807.10
Car bon or similar copying paper 4809.10
Pr oducts consisting of sheets of paper or
paper boar d, impr egnated, coated or
cover ed with plastics, etc. 4811.20
Paper and paper boar d, coated, impr egnated
or cover ed with wax, etc. 4811.40
20. Plastics and ar ticles ther eof 39.09 to 39.15]
Item 20 I.T. ACT, 1961 1.1000
S. No. Activity or Excise Sub-class
article or th in g classif ication un der Nation al
In dustrial
Classif ication
(NIC), 1998
29
[PART C
FOR THE STATE OF JAMMU AND KASHMIR
S. No. Article or th in g
1. Cigar ettes/ cigar s of tobacco, manufactur ed tobacco and substitutes
2. Distilled/ br ewed alcoholic dr inks
3. Aer ated br anded bever ages and their concentr ates.]
30
[THE FOURTEENTH S CHEDULE
[See section 80-IC(2)]
LIST OF ARTICLES OR THINGS OR OPERATIONS
PART A
FOR THE NORTH-EASTERN STATES
1. Fr uit and Vegetable Pr ocessing industr ies manufactur ing or pr oducing
(i) Canned or bottled pr oducts;
(ii) Aseptic packaged pr oducts;
(iii) Fr ozen pr oducts;
(iv) De-hydr ated pr oducts;
(v) Oleor esins.
2. Meat and Poultr y Pr oduct industr ies manufactur ing or pr oducing
(i) Meat Pr oducts (buffalo, sheep, goat and por k);
(ii) Poultr y pr oduction;
(iii) Egg Powder Plant.
3. Cer eal Based Pr oduct industr ies manufactur ing or pr oducing
(i) Maize Milling including star ch and its der ivatives;
(ii) Br ead, Biscuits, Br eakfast Cer eal.
4. Food and Bever age industr ies manufactur ing or pr oducing
(i) Snacks;
(ii) Non-alcoholic bever ages;
(iii) Confectioner y including chocolate;
(iv) Pasta pr oducts;
(v) Pr ocessed spices, etc.;
(vi) Pr ocessed pulses;
(vii) Tapioca pr oducts.
5. Milk and milk based pr oduct industr ies manufactur ing or pr oducing
(i) Milk powder ;
1.1001 SCH. XIV - LIST OF ARTICLES OR THINGS OR OPERATIONS It em 5
(ii) Cheese;
(iii) Butter / ghee;
(iv) Infant food;
(v) Weaning food;
(vi) Malted milk food.
6. Food packaging industr y.
7. Paper pr oducts industr y.
8. Jute and mesta pr oducts industr y.
9. Cattle or poultr y or fisher y feed pr oducts industr y.
10. Edible Oil pr ocessing or vanaspati industr y.
11. Pr ocessing of essential oils and fr agr ances industr y.
12. Pr ocessing and r aising of plantation cr opstea, r ubber , coffee, coconuts, etc.
13. Gas based Inter mediate Pr oducts Industr y manufactur ing or pr oducing
(i) Gas explor ation and pr oduction;
(ii) Gas distr ibution and bottling;
(iii) Power gener ation;
(iv) Plastics;
(v) Yar n r aw mater ials;
(vi) Fer tilizer s;
(vii) Methanol;
(viii) For maldehyde and FR r esin melamine and MF r esin;
(ix) Methylamine, Hexamethylene tetr amine, Ammonium bi-car bonate;
(x) Nitr ic Acid and Ammonium Nitr ate;
(xi) Car bon black;
(xii) Polymer chips.
14. Agr o for estr y based industr y.
15. Hor ticultur e industr y.
16. Miner al based industr y.
17. Flor icultur e industr y.
18. Agr o-based industr y.
PART B
FOR THE STATE OF SIKKIM
S. No. Activity or article or th in g or operation
1. Eco-Tour ism including Hotels, Resor ts, Spa, Amusement Par ks and
Ropeways.
2. Handicr afts and handlooms.
3. Wool and silk r eeling, weaving and pr ocessing, pr inting, etc.
It em 3 I.T. ACT, 1961 1.1002
4. Flor icultur e.
5. Pr ecision Engineer ing including watch making.
6. Elect r onics inclu ding compu t r onics ha r dwa r e a nd soft wa r e a nd
Infor mation Technology (IT) r elated industr ies.
7. Food processing including Agro-based industries. Processing, preservation
and packaging of fr uits and vegetables (excluding conventional gr inding/
extr action units).
8. Medicinal and ar omatic Her bsPlantation and Pr ocessing.
9. Raising and pr ocessing of plantation cr ops, i.e., tea, or anges and car da-
mom.
10. Miner al based industr y.
11. Phar ma pr oducts.
12. Honey.
13. Biotechnology.
PART C
FOR THE STATE OF HIMACHAL PRADESH AND THE
STATE OF UTTARANCHAL
S. No. Activity or article 4/ 6 digit Sub-class ITC(HS)
or th in g or excise un der NIC classif i-
operation classif ication classif ication cation
on 1998 4/ 6 digit
1. Flor icu lt u r e - - 0603 or
060120 or
06029020 or
06024000
2. Medicinal her bs and ar omatic
her bs, etc., pr ocessing - -
3. Honey - - 040900
4. Hor ticultur e and agr o-based
industr ies such as
(a) Sauces, ketchup, etc. 21.03 15135 to
15137 and
15139
(b) Fr uit juices and fr uit pulp 2202.40
(c) Jams, jellies, vegetable
juices, pur ee, pickles, etc. 20.01
(d) Pr eser ved fr uits and
veget ables
(e) Pr ocessing of fr esh fr uit s
and vegetables including
packaging
1.1003 SCH. XIV - LIST OF ARTICLES OR THINGS OR OPERATIONS It em 4
S. No. Activity or article or th in g or operation
(f ) Pr ocessing, pr eser vation,
packaging of mushr ooms
5. Food Pr ocessing Industr y
excluding those included in
the Thir teenth Schedule 19.01 to
19.04
6. Sugar and its by-pr oducts - - 17019100
7. Silk and silk pr oducts 50.04
50.05 17116
8. Wool and wool pr oducts 51.01 to
51.12 17117
9. Woven fabr ics (Excisable
gar ment s) - - 6101 to 6117
10. Spor ts goods and ar ticles and
equipment for gener al physical
exer cise and equipment for
adventur e spor ts/ activities,
tour ism (to be specified, by
notification, by the Centr al
Gover nment ) 9506.00
11. Paper and paper pr oducts
excluding those in the
Thir teenth Schedule
(as per excise classification)
12. Phar ma pr oducts 30.03 to
30.05
13. Infor mation and Communication
Technology Industr y, Computer
har dwar e, Call Centr es 84.71 30006/ 7
14. Bottling of miner al water 2201
15. Eco-tour ism including hotels,
r esor ts, spa, enter tainment/
amusement par ks and
r opeways - 55101
16. Industr ial gases (based on
atmospher ic fr action)
17. Handicr aft s
18. Non-timber for est pr oduct-based industr ies.]
Item 18 I.T. ACT, 1961 1.1004
S. No. Activity or article 4/ 6 digit Sub-class ITC(HS)
or th in g or excise un der NIC classif i-
operation classif ication classif ication cation
on 1998 4/ 6 digit
APPENDIX
TEXT OF REMAINING PROVISIONS
OF ALLIED ACTS REFERRED TO
IN INCOME-TAX ACT
SECTION 5(c) OF BANKING REGULATION ACT, 1949
Int erpret at ion
5. In this Act, unless ther e is anything r epugnant in this subject or context,
** ** **
(c) banking company means any company which tr ansacts the business of banking
in India;
Explan ation .Any company which is engaged in the manufactur e of goods or
car r ies on any tr ade and which accepts deposits of money fr om the public mer ely
for the pur pose of financing its business as such manufactur er or tr ader shall not
be deemed to tr ansact the business of banking within the meaning of this clause;
SECTION 45 OF BANKING REGULATION ACT, 1949
Power of Reserve Bank to apply to Central Government for suspension of business by a
banking company and to prepare scheme of reconstitution or amalgamation
45. (1) Notwithstanding anything contained in the for egoing pr ovisions of this Par t or in
any other law or any agr eement or other instr ument, for the time being in for ce, wher e
it appear s to the Reser ve Bank that ther e is good r eason so to do, the Reser ve Bank may
apply to the Centr al Gover nment for an or der of mor ator ium in r espect of a banking
company.
(2) The Centr al Gover nment, after consider ing the application made by the Reser ve Bank
under sub-section (1), may make an or der of mor ator ium staying the commencement or
continuance of all actions and pr oceedings against the company for a fixed per iod of time
on such ter ms and conditions as it thinks fit and pr oper and may fr om time to time extend
the per iod so however that the total per iod of mor ator ium shall not exceed six months.
(3) Except as other wise pr ovided by any dir ections given by the Centr al Gover nment in the
or der made by it under sub-section (2) or at any time ther eafter , the banking company
shall not dur ing the per iod of mor ator ium make any payment to any depositor s or
dischar ge any liabilities or obligations to any other cr editor s.
(4) Dur ing the per iod of mor ator ium, if the Reser ve Bank is satisfied that
(a) in the public inter est; or
(b) in the inter ests of the depositor s; or
(c) in or der to secur e the pr oper management of the banking company; or
(d) in the inter ests of the banking system of the countr y as a whole,
it is necessar y so to do, the Reser ve Bank may pr epar e a scheme
(i) for the r econstr uction of the banking company, or
1.1005
(ii) for the amalgamation of the banking company with any other banking institution
(in this section r efer r ed to as the tr ansfer ee bank).
(5) The scheme afor esaid may contain pr ovisions for all or any of the following matter s,
namely :
(a) the constitution, name and r egister ed office, the capital, assets, power s, r ights,
inter ests, author ities and pr ivileges, the liabilities, duties and obligations, of the
banking company on its r econstr uction or , as the case may be, of the tr ansfer ee
bank;
(b) in the case of amalgamation of the banking company, the tr ansfer to the
tr ansfer ee bank of the business, pr oper ties, assets and liabilities of the banking
company on such ter ms and conditions as may be specified in the scheme;
(c) any change in the Boar d of Dir ector s, or the appointment of a new Boar d of
Dir ector s, of the banking company on its r econstr uction or , as the case may be,
of the tr ansfer ee bank and the author ity by whom, the manner in which, and the
other ter ms and conditions on which, such change or appointment shall be made
and in the case of appointment of a new Boar d of Dir ector s or of any Dir ector ,
the per iod for which such appointment shall be made;
(d) the alter ation of the memor andum and ar ticles of association of the banking
company on its r econstr uction or , as the case may be, of the tr ansfer ee bank for
the pur pose of alter ing the capital ther eof or for such other pur poses as may be
necessar y to give effect to the r econstr uction or amalgamation;
(e) subject to the pr ovisions of the scheme, the continuation by or against the
banking company on its r econstr uction or , as the case may be, the tr ansfer ee
bank, of any actions or pr oceedings pending against the banking company
immediately befor e the date of the or der of mor ator ium;
(f ) the r eduction of the inter est or r ights which the member s, depositor s and other
cr editor s have in or against the banking company befor e its r econstr uction or
amalgamation to such extent as the Reser ve Bank consider s necessar y in the
public inter est or in the inter ests of the member s, depositor s and other cr editor s
or for the maintenance of the business of the banking company;
(g) the payment in cash or other wise to depositor s and other cr editor s in full
sat isfact ion of t heir claim
(i) in r espect of their inter est or r ights in or against the banking company
befor e its r econstr uction or amalgamation; or
(ii) wher e their inter est or r ights afor esaid in or against the banking company
has or have been r educed under clause (f ), in r espect of such inter est or
r ights as so r educed;
(h ) the allotment to the member s of the banking company for shar es held by them
ther ein befor e its r econstr uction or amalgamation [whether their inter est in such
shar es has been r educed under clause (f ) or not], of shar es in the banking
company on its r econstr uction or , as the case may be, in the tr ansfer ee bank and
wher e any member s claim payment in cash and not allotment of shar es, or wher e
it is not possible to allot shar es to any member s, the payment in cash to those
member s in full sat isfact ion of t heir claim
(i) in r espect of their inter est in shar es in the banking company befor e its
r econstr uction or amalgamation; or
(ii) wher e such inter est has been r educed under clause (f ), in r espect of t heir
inter est in shar es as so r educed;
(i) the continuance of the ser vices of all the employees of the banking company
(excepting such of them as not being wor kmen within the meaning of the
Industr ial Disputes Act, 1947 (14 of 1947) ar e specifically mentioned in the
I.T. ACT, 1961 1.1006
scheme) in the banking company itself on its r econstr uction or , as the case may
be, in the tr ansfer ee bank at the same r emuner ation and on the same ter ms and
conditions of ser vice, which they wer e getting or , as the case may be, by which
they wer e being gover ned, immediately befor e the date of the or der of mor ato-
r ium :
Provided that the scheme shall contain a pr ovision that
(i) the banking company shall pay or gr ant not later than the expir y of the
per iod of thr ee year s fr om the date on which the scheme is sanctioned by
the Centr al Gover nment, to the said employees the same r emuner ation
and the same ter ms and conditions of ser vice as ar e, at the time of such
payment or gr ant, applicable to employees of cor r esponding r ank or
status of a compar able banking company to be deter mined for this
pur pose by the Reser ve Bank (whose deter mination in this r espect shall
be final);
(ii) the tr ansfer ee bank shall pay or gr ant not later than the expir y of the
afor esaid per iod of thr ee year s, to the said employees the same r emu-
ner ation and the same ter ms and conditions of ser vice as ar e, at the time
of such payment or gr ant, applicable to the other employees of cor r e-
sponding r ank or status of the tr ansfer ee bank subject to the qualifica-
tions and exper ience of the said employees being the same as or equiva-
lent to those of such other employees of the tr ansfer ee bank :
Provided further that if in any case under clause (ii) of the fir st pr oviso any doubt
or differ ence ar ises as to whether the qualification and exper ience of any of the
said employees ar e the same as or equivalent to the qualifications and exper ience
of the other employees of cor r esponding r ank or status of the tr ansfer ee bank,
the doubt or differ ence shall be r efer r ed, befor e the expir y of a per iod of thr ee
year s fr om the date of the payment or gr ant mentioned in that clause, to the
Reser ve Bank whose decision ther eon shall be final;
(j) notwithstanding anything contained in clause (i) wher e any of the employees of
the banking company not being wor kmen within the meaning of the Industr ial
Disputes Act, 1947 (14 of 1947) ar e specifically mentioned in the scheme under
clause (i), or wher e any employees of the banking company have by notice in
wr iting given to the banking company or , as the case may be, the tr ansfer ee bank
at any time befor e the expir y of one month next following the date on which the
scheme is sanctioned by the Centr al Gover nment, intimated their intention of not
becoming employees of the banking company on its r econstr uction or , as the
case may be, of the tr ansfer ee bank, the payment to such employees of compen-
sation, if any, to which they ar e entitled under the Industr ial Disputes Act, 1947
(14 of 1947), and such pension, gr atuity, pr ovident fund and other r etir ement
benefits or dinar ily admissible to them under the r ules or author isations of the
banking company immediately befor e the date of the or der of mor ator ium;
(k ) any other ter ms and conditions for the r econstr uction or amalgamation of the
banking company;
(l) such incidental, consequential and supplemental matter s as ar e necessar y to
secur e that the r econstr uction or amalgamation shall be fully and effectively
car r ied out.
(6)(a) A copy of the scheme pr epar ed by the Reser ve Bank shall be sent in dr aft to the
banking company and also to be tr ansfer ee bank and any other banking company
concer ned in the amalgamation, for suggestions and objections, if any, within such per iod
as the Reser ve Bank may specify for this pur pose;
1.1007 APPENDIX
(b) The Reser ve Bank may make such modifications, if any, in the dr aft scheme as it may
consider necessar y in the light of the suggestions and objections r eceived fr om the banking
company and also fr om the tr ansfer ee bank, and any other banking company concer ned
in the amalgamation and fr om any member s, depositor s or other cr editor s of each of those
companies and the tr ansfer ee bank.
(7) The scheme shall ther eafter be placed befor e the Centr al Gover nment for its sanction
and the Centr al Gover nment may sanction the scheme without any modifications or with
such modifications as it may consider necessar y; and the scheme as sanctioned by the
Centr al Gover nment shall come into for ce on such date as the Centr al Gover nment may
specify in this behalf:
Provided that differ ent dates may be specified for differ ent pr ovisions of the scheme.
(7A) The sanction accor ded by the Centr al Gover nment under sub-section (7), whether
befor e or after the commencement of section 21 of the Banking Laws (Miscellaneous
Pr ovisions) Act, 1963 (55 of 1963), shall be conclusive evidence that all the r equir ements
of this section r elating to r econstr uction, or , as the case may be, amalgamation have been
complied with and a copy of the sanctioned scheme cer tified in wr iting by an officer of the
Centr al Gover nment to be a tr ue copy ther eof, shall, in all legal pr oceedings (whether in
appeal or other wise and whether instituted befor e or after the commencement of the said
section 21), be admitted as evidence to the same extent as the or iginal scheme.
(8) On and fr om the date of the coming into oper ation of the scheme or any pr ovision
ther eof, the scheme or such pr ovision shall be binding on the banking company or , as the
case may be, on the tr ansfer ee bank and any other banking company concer ned in the
amalgamation and also on all the member s, depositor s and other cr editor s and employees
of each of those companies and of the tr ansfer ee bank, and on any other per son having any
r ight or liability in r elation to any of those companies or the tr ansfer ee bank including the
tr ustees or other per sons managing, or connected in any other manner with, any pr ovident
fund or other fund maintained by any of those companies or the tr ansfer ee bank.
(9) On and fr om the date of the coming into oper ation of, or as the case may be, the date
specified in this behalf in, the scheme, the pr oper ties and assets of the banking company
shall, by vir tue of and to the extent pr ovided in the scheme, stand tr ansfer r ed to, and vest
in, and the liabilities of the banking company shall, by vir tue of and to the extent pr ovided
in the scheme, stand tr ansfer r ed to, and become the liabilities of, the tr ansfer ee bank.
(10) If any difficulty ar ises in giving effect to the pr ovisions of the scheme, the Centr al
Gover nment may by or der do anything not inconsistent with such pr ovisions which
appear s to it necessar y or expedient for the pur pose of r emoving the difficulty.
(11) Copies of the scheme or of the any or der made under sub-section (10) shall be laid
befor e both Houses of Par liament, as soon as may be, after the scheme has been sanctioned
by the Centr al Gover nment, or , as the case may be, the or der has been made.
(12) Wher e the scheme is a scheme for amalgamation of the banking company, any
business acquir ed by the tr ansfer ee bank under the scheme or under any pr ovision ther eof
shall, after the coming into oper ation of the scheme or such pr ovision, be car r ied on by the
tr ansfer ee bank in accor dance with the law gover ning the tr ansfer ee bank, subject to such
modifications in that law or such exemptions of the tr ansfer ee bank fr om the oper ation
of any pr ovisions ther eof as the Centr al Gover nment on the r ecommendation of the
Reser ve Bank may, by notification in the Official Gazette, make for the pur pose of giving
full effect to the scheme :
Provided that no such modification or exemption shall be made so as to have effect for a
per iod of mor e than seven year s fr om the date of the acquisition of such business.
(13) Nothing in this section shall be deemed to pr event the amalgamation with a banking
institution by a single scheme of sever al banking companies in r espect of each of which
an or der of mor ator ium has been made under this section.
I.T. ACT, 1961 1.1008
(14) The pr ovisions of this section and of any scheme made under it shall have effect
notwithstanding anything to the contr ar y contained in any other pr ovisions of this Act or
in any other law or any agr eement, awar d or other instr ument for the time being in for ce.
(15) In this section, banking institution means any banking company and includes the
State Bank of India or a subsidiar y bank or a cor r esponding new bank.
Explan ation .Refer ences in this section to the ter ms and conditions of ser vice as
applicable to an employee shall not be constr ued as extending to the r ank and status of
such employee.
PART V OF BANKING REGULATION ACT, 1949 :
APPLICATION OF THE ACT TO CO-OPERATIVE BANKS
Act to apply to co-operative societies subject to modifications.
56. The pr ovisions of this Act, as in for ce for the time being, shall apply to, or in r elation
to, Co-oper ative Societies as they apply to, or in r elation to, banking companies subject
to the following modifications, namely :
(a) thr oughout this Act, unless the context other wise r equir es,
(i) r efer ences to a banking company or the company or such company
shall be constr ued as r efer ences to a Co-oper ative Bank,
(ii) r efer ences to commencement of this Act shall be constr ued as r efer -
ences t o commencement of t he Banking Laws (Applicat ion t o Co-
oper ative Societies) Act, 1965 (23 of 1965) ;
(b) in section 2, the wor ds and figur es the Companies Act, 1956 (1 of 1956), and shall
be omit t ed ;
(c) in section 5,
(i) aft er clause (cc), the following clauses shall be inser ted, namely :
(cci) Co-oper ative Bank means a state Co-oper ative Bank, a centr al Co-
oper ative Bank and a pr imar y Co-oper ative Bank ;
(ccii) co-oper ative cr edit society means a Co-oper ative Society, the
pr imar y object of which is to pr ovide financial accommodation to its
member s and includes a co-oper ative land mor tgage bank ;
(cciia) co-oper ative society means a society r egister ed or deemed to have
been r egister ed under any Centr al Act for the time being in for ce
r elat ing t o t he mult i-St at e co-oper at ive societ ies, or any ot her
Centr al or State law r elating to co-oper ative societies for the time
being in for ce;
(cciii) Dir ector , in r elation to a Co-oper ative Society, includes a member
of any committee or body for the time being vested with the
management of the affair s of that society ;
(cciiia) multi-State co-oper ative bank means a multi-State co-oper ative
society which is a pr imar y co-oper ative bank;
(cciiib) multi-State co-oper ative society means a multi-State co-oper ative
society r egister ed as such under any Centr al Act for the time being
in for ce r elating to the multi-State co-oper ative societies but does
not include a national co-oper ative society and a feder al co-oper a-
tive;
(cciv) pr imar y agr icultur al cr edit society means a Co-oper ative Soci-
et y,
(1) the pr imar y object or pr incipal business of which is to
pr ovide financial accommodation to its member s for agr i-
1.1009 APPENDIX
cultur al pur poses or for pur poses connected with agr icul-
tur al activities (including the mar keting of cr ops) ; and
(2) the bye-laws of which do not per mit admission of any other
Co-oper ative Society as a member :
Provided that this sub-clause shall not apply to the admission
of a Co-oper ative Bank as a member by r eason of such Co-
oper ative Bank subscr ibing to the shar e capital of such Co-
oper ative Society out of funds pr ovided by the State Gover n-
ment for the pur pose ;
(ccv ) pr imar y Co-oper ative Bank means a Co-oper ative Society, other
than a pr imar y agr icultur al cr edit society,
(1) the pr imar y object or pr incipal business of which is the
tr ansaction of banking business ;
(2) the paid-up shar e capital and r eser ves of which ar e not less
than one lakh of r upees ; and
ment for the pur pose ;
(ccvi) pr imar y cr edit society means a Co-oper ative Society, other than a
pr imar y agr icultur al cr edit society,
(1) the pr imar y object or pr incipal business of which is the
tr ansaction of banking business ;
(2) the paid-up shar e capital and r eser ves of which ar e less than
one lakh of r upees ; and
ment for the pur pose.
Explan ation .If any dispute ar ises as to the pr imar y object
or pr incipal business of any Co-oper ative Society r efer r ed to
in clauses (cciv), (ccv) and (ccvi), a deter mination ther eof by
the Reser ve Bank shall be final ;
(ccvii) Centr al Co-oper ative Bank, pr imar y r ur al cr edit society and
State Co-oper ative Bank, shall have the meanings r espectively
assigned to them in the National Bank for Agr icultur al and Rur al
Development Act, 1981 (61 of 1981);
SECTION 3 OF CANTONMENTS ACT, 1924
Definition of cantonments.
3. (1) The Centr al Gover nment may, by notification in the Official Gazette, declar e any
place or places in which any par t of the For ces is quar ter ed or which, being in the
vicinity of any such place or places, is or ar e r equir ed for the ser vice of such for ces to be
a cantonment for the pur pose of this Act and of all other enactments for the time being
I.T. ACT, 1961 1.1010
in for ce, and may, by a like notification, declar e that any cantonment shall cease to be a
cant onment .
(2) The Centr al Gover nment may, by a like notification, define the limits of any canton-
ment for the afor esaid pur poses.
(3) When any place is declar ed a cantonment for the fir st time, the Centr al Gover nment
may, until a Boar d is constituted in accor dance with the pr ovisions of this Act, by or der
make any pr ovision which appear s necessar y to it either for the administr ation of the
cantonment or for the constitution of the Boar d.
(4) The Centr al Gover nment may, by notification in the Official Gazette, dir ect that in any
place declar ed a cantonment under sub-section (1) the pr ovisions of any enactment
r elating to local self-gover nment other than this Act shall have effect only to such extent
or subject to such modifications, or that any author ity constituted under any such
enactment shall exer cise author ity only to such extent, as may be specified in the
not ificat ion.
SECTION 2 OF COMPANIES ACT, 1956
Definit ions.
** ** **
(13) dir ector includes any per son occupying the position of dir ector , by whatever
name called ;
** ** **
(24) manager means an individual (not being the managing agent) who, subject to
the super intendence, contr ol and dir ection of the Boar d of dir ector s, has the
management of the whole, or substantially the whole, of the affair s of a company,
and includes a dir ector or any other per son occupying the position of a manager ,
by whatever name called, and whether under a contr act of ser vice or not ;
** ** **
Definit ions of compa ny, exist ing compa ny, pr iva t e compa ny a nd public
company.
3. (1) In this Act, unless the context other wise r equir es, the expr essions company,
existing company, pr ivate company and public company, shall, subject to the
pr ovisions of sub-section (2), have the meanings specified below :
(i) company means a company for med and r egister ed under this Act or an existing
company as defined in clause (ii) ;
(ii) existing company means a company for med and r egister ed under any of the
pr evious companies laws specified below :
(a) a ny Act or Act s r ela t ing t o compa nies in for ce befor e t he India n
Companies Act, 1866 (10 of 1866) and r epealed by that Act ;
(b) the Indian Companies Act, 1866 (10 of 1866) ;
(c) the Indian Companies Act, 1882 (6 of 1882) ;
(d) the Indian Companies Act, 1913 (7 of 1913) ;
(e) the Registr ation of Tr ansfer r ed Companies Or dinance, 1942 (54 of 1942);
(f ) any law cor r esponding to any of the Acts or the Or dinance afor esaid and in
for ce
1.1011 APPENDIX
I.T. ACT, 1961 1.1012
(1) in the mer ged ter r itor ies or in a Par t B State (other than the State of
Jammu and Kashmir ), or any par t ther eof, befor e the extension ther eto
of the Indian Companies Act, 1913 (7 of 1913) ; or
(2) in the State of Jammu and Kashmir , or any par t ther eof, befor e the
commencement of the Jammu and Kashmir (Extension of Laws) Act,
1956, in so far as banking, insur ance and financial cor por ations ar e
concer ned, and befor e the commencement of the Centr al Laws (Exten-
sion to Jammu and Kashmir ) Act, 1968, in so far as other cor por ations
ar e concer ned ; and
(g) the Por tuguese Commer cial Code, in so far as it r elates to sociedades
an on imas ;
(iii) pr ivate company means a company which has a minimum paid-up capital of
one lakh r upees or such higher paid-up capital as may be pr escr ibed, and by its
ar t icles,
(a) r est r ict s t he r ight t o t r ansfer it s shar es, if any ;
(b) limits the number of its member s to fifty not including
(i) per sons who ar e in the employment of the company ; and
(ii) per sons who, having been for mer ly in the employment of the company,
wer e member s of the company while in that employment and have
continued to be member s after the employment ceased ; and
(c) pr ohibits any invitation to the public to subscr ibe for any shar es in, or
debentur es of, the company ;
(d) pr ohibits any invitation or acceptance of deposits fr om per sons other than
it s member s, dir ect or s or t heir r elat ives :
Provided that wher e two or mor e per sons hold one or mor e shar es in a company
jointly, they shall, for the pur poses of this definition, be tr eated as a single
member ;
(iv) public company means a company which
(a) is not a pr ivate company ;
(b) has a minimum paid-up capital of five lakh r upees or such higher paid-up
capital, as may be pr escr ibed ;
(c) is a pr ivate company which is a subsidiar y of a company which is not a
pr ivate company.
(2) Unless the context other wise r equir es, the following companies shall not be included
within the scope of any of the expr essions defined in clauses (i) t o (iv) of sub-sect ion (1),
and such companies shall be deemed, for the pur poses of this Act, to have been for med and
r egister ed outside India :
(a) a company the r egister ed office wher eof is in Bur ma, Aden or Pakistan and which
immediately befor e the separ ation of that countr y fr om India was a company as
defined in clause (i) of sub-sect ion (1) ;
(b) ** ** **
Meaning of holding company and subsidiary.
4. (1) For the pur poses of this Act, a company shall, subject to the pr ovisions of sub-
section (3), be deemed to be a subsidiar y of another if, but only if,
(a) that other contr ols the composition of its Boar d of dir ector s; or
(b) that other
(i) wher e the fir st-mentioned company is an existing company in r espect of
which the holder s of pr efer ence shar es issued befor e the commencement
of this Act have the same voting r ights in all r espects as the holder s of
equity shar es, exer cises or contr ols mor e than half of the total voting
power of such company;
(ii) wher e the fir st-mentioned company is any other company, holds mor e
than half in nominal value of its equity shar e capital; or
(c) the fir st-mentioned company is a subsidiar y of any company which is that other s
subsidiar y.
Il l u st rat i on
Company B is a subsidiar y of Company A, and Company C is a subsidiar y of
Company B. Company C is a subsidiar y of Company A, by vir tue of clause (c)
above. If Company D is a subsidiar y of Company C, Company D will be a
subsidiar y of Company B and consequently also of Company A, by vir tue of
clause (c) above, and so on.
(2) For the pur poses of sub-section (1), the composition of a companys Boar d of dir ector s
shall be deemed to be contr olled by another company if, but only if, that other company
by the exer cise of some power exer cisable by it at its discr etion without the consent or
concur r ence of any other per son, can appoint or r emove the holder s of all or a major ity
of the dir ector ships; but for the pur poses of this pr ovision that other company shall be
deemed to have power to appoint to a dir ector ship with r espect to which any of the
following condit ions is sat isfied, t hat is t o say
(a) that a per son cannot be appointed ther eto without the exer cise in his favour by
that other company of such a power as afor esaid;
(b) that a per sons appointment ther eto follows necessar ily fr om his appointment as
dir ector or manager of, or to any other office or employment in, that other
company; or
(c) that the dir ector ship is held by an individual nominated by that other company
or a subsidiar y ther eof.
(3) In deter mining whether one company is a subsidiar y of another
(a) any shar es held or power exer cisable by that other company in a fiduciar y
capacity shall be tr eated as not held or exer cisable by it;
(b) subject to the pr ovisions of clauses (c) and (d), any shar es held or power
exer cisable
(i) by any per son as a nominee for that other company (except wher e that
other is concer ned only in a fiduciar y capacity); or
(ii) by, or by a nominee for , a subsidiar y of that other company, not being a
subsidiar y which is concer ned only in a fiduciar y capacity;
shall be tr eated as held or exer cisable by that other company;
(c) any shar es held or power exer cisable by any per son by vir tue of the pr ovisions
of any debentur es of the fir st-mentioned company or of a tr ust deed for secur ing
any issue of such debentur es shall be disr egar ded;
(d) any shar es held or power exer cisable by, or by a nominee for , that other or its
subsidiar y [not being held or exer cisable as mentioned in clause (c)] shall be
tr eated as not held or exer cisable by that other , if the or dinar y business of that
other or its subsidiar y, as the case may be, includes the lending of money and the
shar es ar e held or the power is exer cisable as afor esaid by way of secur ity only
for the pur poses of a tr ansaction enter ed into in the or dinar y cour se of that
business.
1.1013 APPENDIX
(4) For the pur poses of this Act, a company shall be deemed to be the holding company of
another if, but only if, that other is its subsidiar y.
(5) In this section, the expr ession company includes any body cor por ate, and the
expr ession equity shar e capital has the same meaning as in sub-section (2) of section 85.
(6) In the case of a body cor por ate which is incor por ated in a countr y outside India, a
subsidiar y or holding company of the body cor por ate under the law of such countr y shall
be deemed to be a subsidiar y or holding company of the body cor por ate within the
meaning and for the pur poses of this Act also, whether the r equir ements of this section ar e
fulfilled or not .
(7) A pr ivate company, being a subsidiar y of a body cor por ate incor por ated outside India,
which, if incor por ated in India, would be a public company within the meaning of this Act,
shall be deemed for the pur poses of this Act to be a subsidiar y of a public company if the
entir e shar e capital in that pr ivate company is not held by that body cor por ate whether
alone or together with one or mor e other bodies cor por ate incor por ated outside India.
SECTION 4A OF COMPANIES ACT, 1956
Public financial inst it ut ions.
4A. (1) Each of the financial institutions specified in this sub-section shall be r egar ded,
for the pur poses of this Act, as a public financial institution, namely :
(i) the Industr ial Cr edit and Investment Cor por ation of India Limited, a company
for med and r egister ed under the Indian Companies Act, 1913 (7 of 1913) ;
(ii) the Industr ial Finance Cor por ation of India, established under section 3 of the
Industr ial Finance Cor por ation Act, 1948 (15 of 1948) ;
(iii) the Industr ial Development Bank of India, established under section 3 of the
Industr ial Development Bank of India Act, 1964 (18 of 1964) ;
(iv) the Life Insur ance Cor por ation of India, established under section 3 of the Life
Insur ance Cor por ation Act, 1956 (31 of 1956) ;
(v) the Unit Tr ust of India, established under section 3 of the Unit Tr ust of India Act,
1963 (52 of 1963);
(vi) the infr astr uctur e Development Finance Company Limited, a company for med
and r egister ed under this Act;
(vii) [***]
(2) Subject to the pr ovisions of sub-section (1), the Centr al Gover nment may, by notifica-
tion in the Official Gazette, specify such other institution as it may think fit to be a public
financial inst it ut ion :
Provided that no institution shall be so specified unless
(i) it has been established or constituted by or under any Centr al Act, or
(ii) not less than fifty-one per cent of the paid-up shar e capital of such institution is
held or contr olled by the Centr al Gover nment.
NOTIFIED INSTITUTIONS UNDER SECTION 4A(2) OF
COMPANIES ACT, 1956
In exer cise of the power s confer r ed by sub-section (2) of section 4A of the Companies Act,
1956 (1 of 1956), the Centr al Gover nment her eby specifies the following institutions to be
public financial inst it ut ions, namely :
(1) The Industr ial Reconstr uction Cor por ation of India established under the Industr ial
Reconstr uction Bank of India Act, 1984 (62 of 1984); (2) The Gener al Insur ance Cor por a-
tion of India established under the Gener al Insur ance Business (Nationalisation) Act, 1972
(57 of 1972); (3) The National Insur ance Company Limited, for med and r egister ed under
the Companies Act, 1956 (1 of 1956); (4) The New India Assur ance Company Limited,
for med and r egister ed under the Companies Act, 1956 (1 of 1956); (5) The Or iental Fir e and
I.T. ACT, 1961 1.1014
1.1015 APPENDIX
Gener al Insur ance Company Limited, for med and r egister ed under the Companies Act,
1956 (1 of 1956); (6) The United Fir e and Gener al Insur ance Company Limited, for med and
r egister ed under the Companies Act, 1956 (1 of 1956); (7) * * *; (8) Tour ism Finance
Cor por ation of India Limited, for med and r egister ed under the Companies Act, 1956 (1 of
1956); (9) IFCI Ventur e Capital Funds Limited, for med and r egister ed under the Compa-
nies Act, 1956 (1 of 1956); (10) Technology Development and Infor mation Company of
India Limited, for med and r egister ed under the Companies Act, 1956 (1 of 1956); (11)
Power Finance Cor por ation Limited, for med and r egister ed under the Companies Act,
1956 (1 of 1956); (12) National Housing Bank established under the National Housing Bank
Act, 1987 (53 of 1987); (13) Small Industr ies Development Bank of India established under
the Small Industr ies Development Bank of India Act, 1989 (39 of 1989); (14) Rur al
Electr ification Cor por ation Ltd., for med and r egister ed under the Companies Act, 1956 (1
of 1956); (15) Indian Railway Finance Cor pn. Ltd.; (16) Industr ial Finance Cor por ation of
India Ltd. for med and r egister ed under the Companies Act, 1956; (17) Andhr a Pr adesh
State Financial Cor por ation; (18) Assam Financial Cor por ation; (19) Bihar State Financial
Cor por at ion; (20) Delhi Financial Cor por ation; (21) Gujar at State Financial Cor por ation;
(22) Har yana Financial Cor por ation; (23) Himachal Pr adesh Financial Cor por ation; (24)
Jammu & Kashmir State Financial Cor por ation; (25) Kar nataka State Financial Cor por a-
t ion; (26) Ker ala Financial Cor por ation; (27) Madhya Pr adesh Financial Cor por ation; (28)
Mahar ashtr a State Financial Cor por ation; (29) Or issa State Financial Cor por ation; (30)
Punjab Financial Cor por ation; (31) Rajasthan Financial Cor por ation; (32) Tamilnadu
Industr ial Development Cor por ation Limited; (33) Uttar Pr adesh Financial Cor por ation;
(34) West Bengal Financial Cor por ation; (35) Indian Renewable Ener gy Development
Agency Ltd.; (36) Nor th Easter n Development Finance Cor pn. Ltd.; (37) Housing & Ur ban
Development Cor pn. Ltd.; (38) Expor t-Impor t Bank of India; (39) National Bank for
Agr icultur e & Rur al Development (NABARD); (40) National Co-oper ative Development
Cor por at ion (NCDC); (41) National Dair y Development Boar d; (42) Pr adeshiya Industr ial
and Investment Cor por ation of U.P. Limited; (43) Rajasthan State Industr ial Development
and Invest ment Cor por at ion Limit ed; (44) SICOM Limit ed; (45) West Bengal Industr ial
Development Cor por ation Limited; (46) Tamil Nadu Industr ial Development Cor por ation
Limited; (47) Punjab State Industr ial Development Cor pn. Ltd. (PSIDC); (48) EDC Limited;
(49) Tamil Nadu Power Finance and Infr astr uctur e Development Cor por ation Ltd.;
(50) Tamil Nadu Ur ban Finance and Infr astr uctur e Development Cor por ation Limited;
(51) Ker ala Power Finance Cor por ation Limited; (52) Ker ala St at e Power & Infr ast r uct ur e
Finance Cor por ation Limited.
Source : Notification No. SO 1329, dated 13-5-1978, as amen ded by SO 2901, dated 9-10-
1987; SO 7(E), dated 3-1-1990; SO 238(E), dated 20-3-1990; SO 674(E), dated 31-8-1990; SO
321(E), dated 12-4-1990; SO 484(E), dated 26-7-1991; SO 812(E), dated 2-12-1991; SO 128(E),
dated 11-2-1992; SO 765(E), dated 8-10-1993; SO 98(E), dated 15-2-1995; SO 247(E), dated
28-3-1995; SO 843(E), dated 17-10-1995; SO 529(E), dated 23-7-1996; SO 837(E), dated 9-12-
1996; SO 433(E), dated 14-6-1999; SO 440(E), dated 17-4-2002; SO 322(E), dated 25-3-2003;
SO 518(E), dated 9-5-2003; SO 219(E), dated 23-2-2004; SO 544(E), dated 30-4-2004 an d
SO 1531(E), dated 25-10-2005; SO 20(E), dated 9-1-2007, SO 1583(E), dated 20-9-2007 an d
SO 2007(E), dated 29-11-2007.
Power to dispense with Limited in name of charitable or other company.
25. (1) Wher e it is pr oved t o t he sat isfact ion of t he Cent r al Gover nment t hat an
associat ion
(a) is about to be for med as a limited company for pr omoting commer ce, ar t,
science, r eligion, char ity or any other useful object, and
(b) intends to apply its pr ofits, if any, or other income in pr omoting its objects, and
to pr ohibit the payment of any dividend to its member s,
I.T. ACT, 1961 1.1016
the Centr al Gover nment may, by licence, dir ect that the association may be r egister ed as
a company with limited liability, without the addition to its name of the wor d Limited or
the wor ds Pr ivate Limited.
(2) The association may ther eupon be r egister ed accor dingly; and on r egistr ation shall
enjoy all the pr ivileges, and (subject to the pr ovisions of this section) be subject to all the
obligations, of limited companies.
(3) Wher e it is pr oved to the satisfaction of the Centr al Gover nment
(a) that the objects of a company r egister ed under this Act as a limited company ar e
r estr icted to those specified in clause (a) of sub-section (1), and
(b) that by its constitution the company is r equir ed to apply its pr ofits, if any, or other
income in pr omoting its objects and is pr ohibited fr om paying any dividend to its
member s,
the Centr al Gover nment may, by licence, author ise the company by a special r esolution
to change its name, including or consisting of the omission of the wor d Limited or the
wor ds Pr ivate Limited; and section 23 shall apply to a change of name under this sub-
section as it applies to a change of name under section 21.
(4) A fir m may be a member of any association or company licensed under this section,
but on the dissolution of the fir m, its member ship of the association or company shall
cease.
(5) A licence may be gr anted by the Centr al Gover nment under this section on such
conditions and subject to such r egulations as it thinks fit, and those conditions and
r egulations shall be binding on the body to which the licence is gr anted, and wher e the
gr ant is under sub-section (1), shall, if the Centr al Gover nment so dir ects, be inser ted in the
memor andum, or in the ar ticles, or par tly in the one and par tly in the other .
(6) It shall not be necessar y for a body to which a licence is so gr anted to use the wor d
Limited or the wor ds Pr ivate Limited as any par t of its name and, unless its ar ticles
other wise pr ovide, such body shall, if the Centr al Gover nment by gener al or special or der
so dir ects and to the extent specified in the dir ections, be exempt fr om such of the
pr ovisions of this Act as may be specified ther ein.
(7) The licence may at any time be r evoked by the Centr al Gover nment, and upon
r evocation, the Registr ar shall enter the wor d Limited or the wor ds Pr ivate Limited at
the end of the name upon the r egister of the body to which it was gr anted; and the body
shall cease to enjoy the exemption gr anted by this section :
Provided that, befor e a licence is so r evoked, the Centr al Gover nment shall give notice in
wr iting of its intention to the body, and shall affor d it an oppor tunity of being hear d in
opposition to the r evocation.
(8) (a) A body in r espect of which a licence under this section is in for ce shall not alter the
pr ovisions of its memor andum with r espect to its objects except with the pr evious
appr oval of the Centr al Gover nment signified in wr iting.
(b) The Centr al Gover nment may r evoke the licence of such a body if it contr avenes the
pr ovisions of clause (a).
(c) In accor ding the appr oval r efer r ed to in clause (a), the Centr al Gover nment may var y
the licence by making it subject to such conditions and r egulations as that Gover nment
thinks fit, in lieu of, or in addition to, the conditions and r egulations, if any, to which the
licence was for mer ly subject.
(d) Wher e the alter ation pr oposed in the pr ovisions of the memor andum of a body under
this sub-section is with r espect to the objects of the body so far as may be r equir ed to
enable it to do any of the things specified in clauses (a) t o (g) of sub-section (1) of section
17, the pr ovisions of this sub-section shall be in addition to, and not in der ogation of, the
pr ovisions of that section.
(9) Upon the r evocation of a licence gr anted under this section to a body the name of which
contains the wor ds Chamber of Commer ce, that body shall, within a per iod of thr ee
months fr om the date of r evocation or such longer per iod as the Centr al Gover nment may
think fit to allow, change its name to a name which does not contain those wor ds; and
(a) the notice to be given under the pr oviso to sub-section (7) to that body shall
include a statement of the effect of the for egoing pr ovisions of this sub-section;
and
(b) section 23 shall apply to a change of name under this sub-section as it applies to
a change of name under section 21.
(10) If the body makes default in complying with the r equir ements of sub-section (9), it
shall be punishable with fine which may extend to five thousand r upees for ever y day
dur ing which the default continues.
Power of company to purchase its own securities.
77A. (1) Notwithstanding anything contained in this Act, but subject to the pr ovisions of
sub-section (2) of this section and section 77B, a company may pur chase its own
shar es or other specified secur ities (her einafter r efer r ed to as buy-back) out of
(i) it s fr ee r eser ves; or
(ii) the secur ities pr emium account; or
(iii) the pr oceeds of any shar es or other specified secur ities :
Provided that no buy-back of any kind of shar es or other specified secur ities shall be made
out of the pr oceeds of an ear lier issue of the same kind of shar es or same kind of other
specified secur ities.
(2) No company shall pur chase its own shar es or other specified secur ities under sub-
section (1), unless
(a) the buy-back is author ised by its ar ticles;
(b) a special r esolution has been passed in gener al meeting of the company author ising
the buy-back :
Provided that nothing contained in this clause shall apply in any case wher e
(A) the buy-back is or less than ten per cent of the total paid-up equity capital
and fr ee r eser ves of the company; and
(B) such buy-back has been author ised by the Boar d by means of a r esolution
passed at it s meet ing :
Provided further that no offer of buy-back shall be made within a per iod of thr ee
hundr ed and sixty-five days r eckoned fr om the date of the pr eceding offer of
buy-back, if any.
Explan ation : For the pur poses of this clause, the expr ession offer of buy-back
means the offer of such buy-back made in pur suance of the r esolution of the
Boar d r efer r ed in the fir st pr oviso;
(c) the buy-back is or less than twenty-five per cent of the total paid-up capital and
fr ee r eser ves of the company :
Provided that the buy-back of equity shar es in any financial year shall not exceed
twenty-five per cent of its total paid-up equity capital in that financial year ;
(d) the r atio of the debt owed by the company is not mor e than twice the capital and
its fr ee r eser ves after such buy-back :
Provided that the Centr al Gover nment may pr escr ibe a higher r atio of the debt
than that specified under this clause for a class or classes of companies.
1.1017 APPENDIX
Explan ation .For the pur poses of this clause, the expr ession debt includes all
amounts of unsecur ed and secur ed debts;
(e) all the shar es or other specified secur ities for buy-back ar e fully paid-up;
(f ) the buy-back of the shar es or other specified secur ities listed on any r ecognised
stock exchange is in accor dance with the r egulations made by the Secur ities and
Exchange Boar d of India in this behalf;
(g) the buy-back in r espect of shar es or other specified secur ities other than those
specified in clause (f ) is in accor dance with the guidelines as may be pr escr ibed.
(3) The notice of the meeting at which special r esolution is pr oposed to be passed shall be
accompanied by an explanator y statement stating
(a) a full and complete disclosur e of all mater ial facts;
(b) the necessity for the buy-back;
(c) the class of secur ity intended to be pur chased under the buy-back;
(d) the amount to be invested under the buy-back; and
(e) the time limit for completion of buy-back.
(4) Ever y buy-back shall be completed within twelve months fr om the date of passing the
special r esolution or a r esolution passed by the Boar d under clause (b) of sub-sect ion (2).
(5) The buy-back under sub-section (1) may be
(a) fr om the existing secur ity holder s on a pr opor tionate basis; or
(b) fr om the open mar ket; or
(c) fr om odd lots, that is to say, wher e the lot of secur ities of a public company, whose
shar es ar e listed on a r ecognised stock exchange, is smaller than such mar ketable
lot, as may be specified by the stock exchange; or
(d) by pur chasing the secur ities issued to employees of the company pur suant to a
scheme of stock option or sweat equity.
(6) Wher e a company has passed a special r esolution under clause (b) of sub-section (2) or
the Boar d has passed a r esolution under the fir st pr oviso to clause (b) of that sub-section
to buy-back its own shar es or other secur ities under this section, it shall, befor e making
such buy-back, file with the Registr ar and the Secur ities and Exchange Boar d of India a
declar ation of solvency in the for m as may be pr escr ibed and ver ified by an affidavit to
the effect that the Boar d has made a full inquir y into the affair s of the company as a r esult
of which they have for med an opinion that it is capable of meeting its liabilities and will
not be r ender ed insolvent within a per iod of one year of the date of declar ation adopted
by the Boar d, and signed by at least two dir ector s of the company, one of whom shall be
the managing dir ector , if any :
Provided that no declar ation of solvency shall be filed with the Secur ities and Exchange
Boar d of India by a company whose shar es ar e not listed on any r ecognised stock
exchange.
(7) Wher e a company buys-back its own secur ities, it shall extinguish and physically
destr oy the secur ities so bought-back within seven days of the last date of completion of
buy-back.
(8) Wher e a company completes a buy-back of its shar es or other specified secur ities under
this section, it shall not make fur ther issue of the same kind of shar es (including allotment
of fur ther shar es under clause (a) of sub-section (1) of section 81) or other specified
secur ities within a per iod of six months except by way of bonus issue or in the dischar ge
of subsisting obligations such as conver sion of war r ants, stock option schemes, sweat
equity or conver sion of pr efer ence shar es or debentur es into equity shar es.
I.T. ACT, 1961 1.1018
(9) Wher e a company buys-back its secur ities under this section, it shall maintain a r egister
of the secur ities so bought, the consider ation paid for the secur ities bought-back, the date
of cancellation of secur ities, the date of extinguishing and physically destr oying of
secur ities and such other par ticular s as may be pr escr ibed.
(10) A company shall, after the completion of the buy-back under this section, file with the
Registr ar and the Secur ities and Exchange Boar d of India, a r etur n containing such
par ticular s r elating to the buy-back within thir ty days of such completion, as may be
pr escr ibed :
Provided that no r etur n shall be filed with the Secur ities and Exchange Boar d of India by
a company whose shar es ar e not listed on any r ecognised stock exchange.
(11) If a company makes default in complying with the pr ovisions of this section or any
r ules made ther eunder , or any r egulations made under clause (f ) of sub-section (2), the
company or any officer of the company who is in default shall be punishable with
impr isonment for a ter m which may extend to two year s, or with fine which may extend
to fifty thousand r upees, or with both.
(a) specified secur ities includes employees stock option or other secur ities as may
be notified by the Centr al Gover nment fr om time to time;
(b) fr ee r eser ves shall have the meaning assigned to it in clause (b) of Explan ation
to section 372A.
Prohibition of tax-free payments.
200. (1) No company shall pay to any officer or employee ther eof, whether in his
capacity as such or other wise, r emuner ation fr ee of any tax, or other wise calculated
by r efer ence to, or var ying with, any tax payable by him, or the r ate or standar d r ate of any
such tax, or the amount ther eof.
Explan ation .In this sub-section, the expr ession tax compr ises any kind of income-tax
including super -tax.
(2) Wher e by vir tue of any pr ovision in for ce immediately befor e the commencement of
this Act, whether contained in the companys ar ticles, or in any contr act made with the
company, or in any r esolution passed by the company in gener al meeting or by the
companys Boar d of dir ector s, any officer or employee of the company holding any office
at the commencement of this Act is entitled to r emuner ation in any of the modes
pr ohibited by sub-section (1), such pr ovision shall have effect dur ing the r esidue of the
ter m for which he is entitled to hold such office at such commencement, as if it pr ovided
instead for the payment of a gr oss sum subject to the tax in question, which, after
deducting such tax, would yield the net sum actually specified in such pr ovision.
(3) This section shall not apply to any r emuner ation
(a) which fell due befor e the commencement of this Act, or
(b) which may fall due after the commencement of this Act, in r espect of any per iod
befor e such commencement.
SECTION 205(1) OF COMPANIES ACT, 1956
Dividend to be paid only out of profits.
205. (1) No dividend shall be declar ed or paid by a company for any financial year except
out of the pr ofits of the company for that year ar r ived at after pr oviding for
depr eciation in accor dance with the pr ovisions of sub-section (2) or out of the pr ofits of
the company for any pr evious financial year or year s ar r ived at after pr oviding for
1.1019 APPENDIX
depr eciation in accor dance with those pr ovisions and r emaining undistr ibuted or out of
both or out of moneys pr ovided by the Centr al Gover nment or a State Gover nment for the
payment of dividend in pur suance of a guar antee given by that Gover nment :
Provided t hat
(a) if the company has not pr ovided for depr eciation for any pr evious financial year
or year s which falls or fall after the commencement of the Companies (Amend-
ment) Act, 1960, it shall, befor e declar ing or paying dividend for any financial
year pr ovide for such depr eciation out of the pr ofits of that financial year or out
of the pr ofits of any other pr evious financial year or year s;
(b) if the company has incur r ed any loss in any pr evious financial year or year s,
which falls or fall after the commencement of the Companies (Amendment) Act,
1960, then, the amount of the loss or an amount which is equal to the amount
pr ovided for depr eciation for that year or those year s whichever is less, shall be
set off against the pr ofits of the company for the year for which dividend is
pr oposed to be declar ed or paid or against the pr ofits of the company for
any pr evious financial year or year s, ar r ived at in both cases after pr oviding
for depr eciation in accor dance with the pr ovisions of sub-section (2) or against
both;
(c) the Centr al Gover nment may, if it thinks necessar y so to do in the public inter est,
allow any company to declar e or pay dividend for any financial year out of the
pr ofits of the company for that year or any pr evious financial year or year s
without pr oviding for depr eciation :
Provided further that it shall not be necessar y for a company to pr ovide for depr eciation
as afor esaid wher e dividend for any financial year is declar ed or paid out of the pr ofits of
any pr evious financial year or year s which falls or fall befor e the commencement of the
Companies (Amendment) Act, 1960.
SECTION 226(2) OF COMPANIES ACT, 1956
Qualifications and disqualifications of auditors.
226. (1) ** ** **
(2) (a) Notwithstanding anything contained in sub-section (1), but subject to the pr ovisions
of any r ules made under clause (b), the holder of a cer tificate gr anted under a law in for ce
in the whole or any por tion of a Par t B State immediately befor e the commencement of
the Par t B States (Laws) Act, 1951 (3 of 1951) or of the Jammu and Kashmir (Extension
of Laws) Act, 1956 (62 of 1956), as the case may be, entitling him to act as an auditor of
companies in the ter r itor ies which, immediately befor e the 1st November , 1956, wer e
compr ised in that State or any por tion ther eof, shall be entitled to be appointed to act as
an auditor of companies r egister ed anywher e in India.
(b) The Centr al Gover nment may, by notification in the Official Gazette, make r ules
pr oviding for the gr ant, r enewal, suspension or cancellation of auditor s cer tificates to
per sons in the ter r itor ies which, immediately befor e the 1st November , 1956, wer e
compr ised in Par t B States for the pur poses of clause (a), and pr escr ibing conditions and
r estr ictions for such gr ant, r enewal, suspension or cancellation.
SECTION 233B OF COMPANIES ACT, 1956
Audit of cost accounts in certain cases.
233B. (1) Wher e in the opinion of the Centr al Gover nment it is necessar y so to do in
r elation to any company r equir ed under clause (d) of sub-section (1) of section 209
to include in its books of account the par ticular s r efer r ed to ther ein, the Centr al
Gover nment may, by or der , dir ect that an audit of cost accounts of the company shall be
I.T. ACT, 1961 1.1020
1.1021 APPENDIX
conducted in such manner as may be specified in the or der by an auditor who shall be a
cost accountant within the meaning of the Cost and Wor ks Accountants Act, 1959 (23 of
1959):
Provided that if the Centr al Gover nment is of opinion that sufficient number of cost
accountants within the meaning of the Cost and Wor ks Accountants Act, 1959 (23 of
1959), ar e not available for conducting the audit of the cost accounts of companies
gener ally, that Gover nment may, by notification in the Official Gazette, dir ect that, for
such per iod as may be specified in the said notification, such char ter ed accountant within
the meaning of the Char ter ed Accountants Act, 1949 (38 of 1949), as possesses the
pr escr ibed qualifications, may also conduct the audit of the cost accounts of companies,
and ther eupon a char ter ed accountant possessing the pr escr ibed qualifications may be
appointed to audit the cost accounts of the company.
(2) The auditor under this section shall be appointed by the Boar d of dir ector s of the
company in accor dance with the pr ovisions of sub-section (1B) of section 224 and with the
pr evious appr oval of the Centr al Gover nment :
Provided that befor e the appointment of any auditor is made by the Boar d, a wr itten
cer tificate shall be obtained by the Boar d fr om the auditor pr oposed to be so appointed
to the effect that the appointment, if made, will be in accor dance with the pr ovisions of sub-
section (1B) of section 224.
(3) An audit conducted by an auditor under this section shall be in addition to an audit
conducted by an auditor appointed under section 224.
(4) An auditor shall have the same power s and duties in r elation to an audit conducted by
him under this section as an auditor of a company has under sub-section (1) of section 227
and such auditor shall make his r epor t to the Centr al Gover nment in such for m and within
such time as may be pr escr ibed and shall also at the same time for war d a copy of the r epor t
to the company.
(5) (a) A per son r efer r ed to in sub-section (3) or sub-section (4) of section 226 shall not be
appointed or r e-appointed for conducting the audit of the cost accounts of a company.
(b) A per son appointed, under section 224, as an auditor of a company, shall not be
appointed or r e-appointed for conducting the audit of the cost accounts of that company.
(c) If a per son, appointed for conducting the audit of cost accounts of a company, becomes
subject, after his appointment, to any of the disqualifications specified in clause (a) or
clause (b) of this sub-section, he shall, on and fr om the date on which he becomes so
subject, cease to conduct the audit of the cost accounts of the company.
(6) Upon r eceipt of an or der under sub-section (1), it shall be the duty of the company to
give all facilities and assistance to the per son appointed for conducting the audit of the cost
accounts of the company.
(7) The company shall, within thir ty days fr om the date of r eceipt of a copy of the r epor t
r efer r ed to in sub-section (4), fur nish the Centr al Gover nment with full infor mation and
explanations on ever y r eser vation or qualification contained in such r epor t.
(8) If, after consider ing the r epor t r efer r ed to in sub-section (4) and the infor mation and
explanations fur nished by the company under sub-section (7), the Centr al Gover nment is
of opinion that any fur ther infor mation or explanation is necessar y, that Gover nment may
call for such fur ther infor mation and explanation and ther eupon the company shall
fur nish the same within such time as may be specified by that Gover nment.
(9) On r eceipt of the r epor t r efer r ed to in sub-section (4) and the infor mations and
explanations fur nished by the company under sub-section (7) and sub-section (8), the
Centr al Gover nment may take such action on the r epor t, in accor dance with the pr ovisions
of this Act or any other law for the time being in for ce, as it may consider necessar y.
(10) The Centr al Gover nment may dir ect the company whose cost accounts have been
audited under this section to cir culate to its member s, along with the notice of the annual
gener al meeting to be held for the fir st time after the submission of such r epor t, the whole
or such por tion of the said r epor t as it may specify in this behalf.
(11) If default is made in complying with the pr ovisions of this section, the company shall
be liable to be punished with fine which may extend to five thousand r upees, and ever y
officer of the company who is in default, shall be liable to be punished with impr isonment
for a ter m which may extend to thr ee year s, or with fine which may extend to fifty
thousand r upees, or with both.
Prohibitions and restrictions regarding political contributions.
293A. (1) Not wit hst a nding a nyt hing cont a ined in a ny ot her pr ovision of t his
Act ,
(a) no Gover nment company; and
(b) no other company which has been in existence for less than thr ee financial year s,
shall contr ibute any amount or amounts, dir ectly or indir ectly,
(i) to any political par ty; or
(ii) for any political pur pose to any per son.
(2) A company, not being a company r efer r ed to in clause (a) or clause (b) of sub-section
(1), may contr ibute any amount or amounts, dir ectly or indir ectly,
(a) to any political par ty; or
(b) for any political pur pose to any per son:
Provided that the amount or , as the case may be, the aggr egate of the amounts which may
be so contr ibuted by a company in any financial year shall not exceed five per cent of its
aver age net pr ofits deter mined in accor dance with the pr ovisions of sections 349 and 350
dur ing the thr ee immediately pr eceding financial year s.
Explan ation : Wher e a por tion of a financial year of the company falls befor e the
commencement of the Companies (Amendment) Act, 1985, and a por tion falls after such
commencement, the latter por tion shall be deemed to be a financial year within the
meaning and for the pur poses, of this sub-section:
Provided further that no such contr ibution shall be made by a company unless a r esolution
author ising the making of such contr ibution is passed at a meeting of the Boar d of
dir ector s and such r esolution shall, subject to the other pr ovisions of this section, be
deemed to be justification in law for the making and the acceptance of the contr ibution
author ised by it.
(3) Without pr ejudice to the gener ality of the pr ovisions of sub-sections (1) and (2),
(a) a donation or subscr iption or payment caused to be given by a company on its
behalf or on its account to a per son who, to its knowledge, is car r ying on any
activity which, at the time at which such donation or subscr iption or payment
was given or made, can r easonably be r egar ded as likely to effect public suppor t
for a political par ty shall also be deemed to be contr ibution of the amount of such
donation, subscr iption or payment to such per son for a political pur pose;
(b) the amount of expenditur e incur r ed, dir ectly or indir ectly, by a company on
adver tisement in any publication (being a publication in the natur e of a souvenir ,
br ochur e, tr act, pamphlet or the like) by or on behalf of a political par ty or for its
advantage shall also be deemed,
I.T. ACT, 1961 1.1022
(i) wher e such publication is by or on behalf of a political par ty, to be a
contr ibution of such amount to such political par ty, and
(ii) wher e such publication is not by or on behalf of but for the advantage of
a political par ty, to be a contr ibution for a political pur pose to the per son
publishing it.
(4) Ever y company shall disclose in its pr ofit and loss account any amount or amounts
contr ibuted by it to any political par ty or for any political pur pose to any per son dur ing
the financial year to which that account r elates, giving par ticular s of the total amount
contr ibuted and the name of the par ty or per son to which or to whom such amount has
been contr ibuted.
(5) If a company makes any contr ibution in contr avention of the pr ovisions of this
sect ion,
(a) the company shall be punishable with fine which may extend to thr ee times the
amount so contr ibuted; and
(b) ever y officer of t he company who is in default shall be punishable wit h
impr isonment for a ter m which may extend to thr ee year s and shall also be liable
to fine.
Explan ation .For the pur poses of this section, political par ty means a political par ty
r egister ed under section 29A of the Repr esentation of the People Act, 1951 (43 of 1951).
Power to compromise or make arrangements with creditors and members.
391. (1) Wher e a compr omise or ar r angement is pr oposed
(a) between a company and its cr editor s or any class of them; or
(b) between a company and its member s or any class of them,
the Tr ibunal may, on the application of the company or of any cr editor or member of the
company, or , in the case of a company which is being wound up, of the liquidator , or der
a meeting of the cr editor s or class of cr editor s, or of the member s or class of member s, as
the case may be, to be called, held and conducted in such manner as the Tr ibunal dir ects.
(2) If a major ity in number r epr esenting thr ee-four ths in value of the cr editor s, or class of
cr editor s, or member s, or class of member s, as the case may be, pr esent and voting either
in per son or , wher e pr oxies ar e allowed under the r ules made under section 643, by pr oxy,
at the meeting, agr ee to any compr omise or ar r angement, the compr omise or ar r ange-
ment shall, if sanctioned by the Tr ibunal, be binding on all the cr editor s, all the cr editor s
of the class, all the member s, or all the member s of the class, as the case may be, and also
on the company, or in the case of a company which is being wound up, on the liquidator
and contr ibutor ies of the company :
Provided that no or der sanctioning any compr omise or ar r angement shall be made by the
Tr ibunal unless the Tr ibunal is satisfied that the company or any other per son by whom
an application has been made under sub-section (1) has disclosed to the Tr ibunal, by
affidavit or other wise, all mater ial facts r elating to the company, such as the latest financial
position of the company, the latest auditor s r epor t on the accounts of the company, the
pendency of any investigation pr oceedings in r elation to the company under sections 235
to 251, and the like.
(3) An or der made by the Tr ibunal under sub-section (2) shall have no effect until a
cer tified copy of the or der has been filed with the Registr ar .
(4) A copy of ever y such or der shall be annexed to ever y copy of the memor andum of the
company issued after the cer tified copy of the or der has been filed as afor esaid, or in the
1.1023 APPENDIX
case of a company not having a memor andum, to ever y copy so issued of the instr ument
constituting or defining the constitution of the company.
(5) If default is made in complying with sub-section (4), the company, and ever y officer of
the company who is in default, shall be punishable with fine which may extend to one
hundr ed r upees for each copy in r espect of which default is made.
(6) The Tr ibunal may, at any time after an application has been made to it under this
section, stay the commencement or continuation of any suit or pr oceeding against the
company on such ter ms as the Tr ibunal thinks fit, until the application is finally disposed
of.
(7) ** ** **
Power of Tribunal to enforce compromise and arrangement.
392. (1) Wher e the Tr ibunal makes an or der under section 391 sanctioning a compr omise
or an ar r angement in r espect of a company, it
(a) shall have power to super vise the car r ying out of the compr omise or an
ar r angement; and
(b) may, at the time of making such or der or at any time ther eafter , give such
dir ections in r egar d to any matter or make such modifications in the compr omise
or ar r angement as it may consider necessar y for the pr oper wor king of the
compr omise or ar r angement.
(2) If the Tr ibunal afor esaid is satisfied that a compr omise or an ar r angement sanctioned
under section 391 cannot be wor ked satisfactor ily with or without modifications, it may,
either on its own motion or on the application of any per son inter ested in the affair s of the
company, make an or der winding up the company, and such an or der shall be deemed to
be an or der made under section 433 of this Act.
(3) The pr ovisions of this section shall, so far as may be, also apply to a company in r espect
of which an or der has been made befor e the commencement of the Companies (Amend-
ment) Act, 2001 sanctioning a compr omise or an ar r angement.
Information as to compromises or arrangements with creditors and members.
393. (1) Wher e a meeting of cr editor s or any class of cr editor s, or of member s or any class
of member s, is called under section 391,
(a) with ever y notice calling the meeting which is sent to a cr editor or member , ther e
shall be sent also a statement setting for th the ter ms of the compr omise or
ar r angement and explaining its effect, and in par ticular , stating any mater ial
inter ests of the dir ector s, managing dir ector or manager of the company,
whether in their capacity as such or as member s or cr editor s of the company or
other wise, and the effect on those inter ests, of the compr omise or ar r angement,
if, and in so far as, it is differ ent fr om the effect on the like inter ests of other
per sons; and
(b) in ever y notice calling the meeting which is given by adver tisement, ther e shall
be included either such a statement as afor esaid or a notification of the place at
which and the manner in which cr editor s or member s entitled to attend the
meeting may obtain copies of such a statement as afor esaid.
(2) Wher e the compr omise or ar r angement affects the r ights of debentur e holder s of the
company, the said statement shall give the like infor mation and explanation as r espects the
tr ustees of any deed for secur ing the issue of the debentur es as it is r equir ed to give as
r espects the companys dir ector s.
I.T. ACT, 1961 1.1024
1.1025 APPENDIX
(3) Wher e a notice given by adver tisement includes a notification that copies of a
statement setting for th the ter ms of the compr omise or ar r angement pr oposed and
explaining its effect can be obtained by cr editor s or member s entitled to attend the
meeting, ever y cr editor or member so entitled shall, on making an application in the
manner indicated by the notice, be fur nished by the company, fr ee of char ge, with a copy
of the statement.
(4) Wher e default is made in complying with any of the r equir ements of this section, the
company, and ever y officer of the company who is in default, shall be punishable with fine
which may extend to fifty thousand r upees; and for the pur pose of this sub-section any
liquidator of the company and any tr ustee of a deed for secur ing the issue of debentur es
of the company shall be deemed to be an officer of the company :
Provided that a per son shall not be punishable under this sub-section if he shows that the
default was due to the r efusal of any other per son, being a dir ector , managing dir ector ,
manager or tr ustee for debentur e holder s, to supply the necessar y par ticular s as to his
mat er ial int er est s.
(5) Ever y dir ector , managing dir ector , or manager of the company, and ever y tr ustee for
debentur e holder s of the company, shall give notice to the company of such matter s
r elating to himself as may be necessar y for the pur poses of this section; and if he fails to
do so, he shall be punishable with fine which may extend to five thousand r upees.
Provisions for facilitating reconstruction and amalgamation of companies.
394. (1) Wher e an application is made to the Tr ibunal under section 391 for the
sanctioning of a compr omise or ar r angement pr oposed between a company and any
such per sons as ar e mentioned in that section, and it is shown to the Tr ibunal
(a) that the compr omise or ar r angement has been pr oposed for the pur poses of, or
in connection with, a scheme for the r econstr uction of any company or compa-
nies, or the amalgamation of any two or mor e companies; and
(b) that under the scheme the whole or any par t of the under taking, pr oper ty or
liabilities of any company concer ned in the scheme (in this section r efer r ed to as
a tr ansfer or company) is to be tr ansfer r ed to another company (in this section
r efer r ed to as the tr ansfer ee company),
the Tr ibunal may, either by the or der sanctioning the compr omise or ar r angement or by
a subsequent or der , make pr ovision for all or any of the following matter s :
(i) the tr ansfer to the tr ansfer ee company of the whole or any par t of the under tak-
ing, pr oper ty or liabilities of any tr ansfer or company;
(ii) the allotment or appr opr iation by the tr ansfer ee company of any shar es, deben-
tur es, policies, or other like inter ests in that company which, under the compr o-
mise or ar r angement, ar e to be allotted or appr opr iated by that company to or
for any per son;
(iii) the continuation by or against the tr ansfer ee company of any legal pr oceedings
pending by or against any tr ansfer or company;
(iv) the dissolution, without winding up, of any tr ansfer or company;
(v) the pr ovision to be made for any per sons who, within such time and in such
manner as the Tr ibunal dir ects, dissent fr om the compr omise or ar r angement;
and
(vi) such incidental, consequential and supplemental matter s as ar e necessar y to
secur e that the r econstr uction or amalgamation shall be fully and effectively
car r ied out :
Provided that no compr omise or ar r angement pr oposed for the pur poses of, or in
connection with, a scheme for the amalgamation of a company, which is being wound up,
with any other company or companies, shall be sanctioned by the Tr ibunal unless the
Tr ibunal has r eceived a r epor t fr om the Registr ar that the affair s of the company have not
been conducted in a manner pr ejudicial to the inter ests of its member s or to public
int er est :
Provided further that no or der for the dissolution of any tr ansfer or company under clause
(iv) shall be made by the Tr ibunal unless the Official Liquidator has, on scr utiny of the
books and paper s of the company, made a r epor t to the Tr ibunal that the affair s of the
company have not been conducted in a manner pr ejudicial to the inter ests of its member s
or to public inter est.
(2) Wher e an or der under this section pr ovides for the tr ansfer of any pr oper ty or liabilities,
then, by vir tue of the or der , that pr oper ty shall be tr ansfer r ed to and vest in, and those
liabilities shall be tr ansfer r ed to and become the liabilities of, the tr ansfer ee company; and
in the case of any pr oper ty, if the or der so dir ects, fr eed fr om any char ge which is, by vir tue
of the compr omise or ar r angement, to cease to have effect.
(3) Within thir ty days after the making of an or der under this section, ever y company in
r elation to which the or der is made shall cause a cer tified copy ther eof to be filed with the
Regist r ar for r egist r at ion.
If default is made in complying with this sub-section, the company, and ever y officer of
the company who is in default, shall be punishable with fine which may extend to five
hundr ed r upees.
(4) In t his sect ion
(a) pr oper ty includes pr oper ty, r ights and power s of ever y descr iption; and liabili-
ties includes duties of ever y descr iption; and
(b) tr ansfer ee company does not include any company other than a company
within the meaning of this Act; but tr ansfer or company includes any body
cor por ate, whether a company within the meaning of this Act or not.
Power to modify Act in its application to Nidhis, etc.
620A. (1) In t his sect ion, Nidh i or Mutual Benefit Society means a company which
the Centr al Gover nment may, by notification in the Official Gazette, declar e to be
a Nidh i or Mutual Benefit Society, as the case may be.
(2) The Centr al Gover nment may, by notification in the Official Gazette, dir ect that any of
the pr ovisions of this Act specified in the notification
(a) shall not apply to any Nidh i or Mutual Benefit Society, or
(b) shall apply to any Nidh i or Mut ual Benefit Societ y wit h such except ions,
modifications and adaptations as may be specified in the notification.
(3) A copy of ever y notification issued under sub-section (1) shall be laid as soon as may
be after it is issued, befor e each House of Par liament.
NOTIFIED NIDHIS/ MUTUAL BENEFIT SOCIETIES
UNDER SECTION 620A OF COMPANIES ACT, 1956
In exer cise of the power s confer r ed by section 620A of the Companies Act, 1956 (1 of 1956),
the Centr al Gover nment her eby
(i) declar es the companies specified in Schedules I and II annexed her eto as n idh is
and mutual benefit societies r espectively; and
I.T. ACT, 1961 1.1026
(ii) dir ects that the pr ovisions of the said Act specified in column (1) of Schedule III
annexed her eto shall not apply or , as the case may be, shall apply with the
exceptions, modifications and adaptations specified in the cor r esponding entr y
in column (2) ther eof, to such n idh is and mutual benefit societies.
SCHEDULE I : NIDHIS
1. Adambakkam Janopakar a Saswatha Nidhi Ltd., Madr as
2. Alandur Pr aja Sahaya Saswatha Nidhi Ltd., Madr as
3. Bhuvanagir i Hindu Saswatha Par opakar a Nidhi Ltd., Madr as
4. Chennai Sr i Andal Dhanasekar a Saswatha Nidhi Ltd., Madr as
5. Chennai Sr i Ekambar eswar ar Saswatha Nidhi Ltd., Madr as
6. Chidambar am Hindu Saswatha Jananukula Nidhi Ltd., Madr as
7. Chingleput Dhanasekar a Nidhi Ltd., Madr as
8. Choolai Janopakar a Nidhi Ltd., Madr as
9. Conjeevar am Hodsonpet Dhanasekar a Nidhi Ltd., Madr as
10. Cuddalor e Per manent Fund Ltd., Madr as
11. Egmor e Benefit Society Thir d Br anch Ltd., Madr as
12. Kumbakonam Mutual Benefit Fund Ltd., Madr as
13. Madr as Catholic Per manent Fund Ltd., Madr as
14. Madr as Chr istian Benefit Fund Ltd., Madr as
15. Madr as Mutual Benefit Per manent Fund Ltd., Madr as
16. Madr as Pur asawalkam Hindu Janopakar a Saswat ha Nidhi or t he Per manent
Gener al Benefit Fund Ltd., Madr as
17. Madur a Hindu Per manent Fund Ltd., Madr as
18. Muthialpet Benefit Fund Ltd., Madr as
19. Mylapor e Hindu Per manent Fund Ltd., Madr as
20. Nagapatnam Per manent Fund Ltd., Madr as
21. Nungambakkam Saswatha Dhana Rakshaka Nidhi Ltd., Madr as
22. Pudupakkam Per manent Fund Ltd., Madr as
23. Pur asawalkam Dhana Var dhana Saswatha Nidhi Ltd., Madr as
24. Pur asawalkam Hindu Santhatha Sanga Nidhi Ist Br anch Ltd., Madr as
25. Pur asawalkam Per manent Fund Ltd., Madr as
26. Par aspar a Sahaya Nidhi (Per ambur ) Ltd., Madr as
27. Shiyali Janopakar a Nidhi Ltd., Madr as
28. Sivagana Shr i Meenakshi Swadeshi Saswatha Nidhi Ltd., Madr as
29. Shr i Villiputhur Per manent Fund Ltd., Madr as
30. Sunr ise Cor por ation Ltd., Madr as
31. Thiyagar ayanagar Fund Ltd., Madr as
32. Tinnelvelly Distr ict Per manent Fund Ltd., Madr as
33. Tir uvatteeswar an Hindu Janopakar a Nidhi Ltd., Madr as
34. Tr iplicate Per manent Fund Ltd., Madr as
35. Tr ivellor e Janopakar a Saswatha Nidhi Ltd., Madr as
36. Villupur am Peoples Mutual Benefit Society Ltd., Madr as
37. Abir amapur am Fund Ltd., Madr as
38. Ar cot Dhana Sekar a Nidhi Ltd., Madr as
39. Ar cot Tir uvalluvar Nidhi Ltd., Madr as
1.1027 APPENDIX
40. Sar aswathi Vilasam Shanmugananda Nidhi Ltd., Madr as
41. Thir umagal Mutual Benefit Fund Ltd., Madr as
42. Var alakshmi Fund (Vellor e) Ltd., Madr as
43. Vellor e Saswatha Nidhi Ltd., Madr as
44. Walajabad Dhanasekar a Saswatha Nidhi Ltd., Madr as
45. Chittoor Saswatha Nidhi Ltd., Andhr a Pr adesh
46. Madanapalle Sr i Venkateswar a Nidhi Ltd., Andhr a Pr adesh
47. Anantapur Sr i Satyanar ayana Nidhi Ltd., Andhr a Pr adesh
48. Nellor e Per manent Fund Ltd., Andhr a Pr adesh
49. Adoni Ar ya Vaisya Fund Ltd., Andhr a Pr adesh
50. Dhar amavar am Mutual Benefit Per manent Fund, Andhr a Pr adesh
51. Anantapur National Fund Ltd., Andhr a Pr adesh
52. Hindupur Mutual Benefit Per manent Fund Ltd., Andhr a Pr adesh
53. Madakasir a Mutual Benefit Per manent Fund Ltd., Andhr a Pr adesh
54. Penukonda Mar uthi Benefit Per manent Fund Ltd., Andhr a Pr adesh
55. Bangalor e Cantonment Per manent Fund Ltd., Mysor e
56. Har panahallai Sr ee Venkatar amanaswamy Per manent Bhandar Ltd., Mysor e
57. Ballar y Br ucepeettah Hindu Mutual Benefit Per manent Fund Ltd., Mysor e
58. Hospet Ryots Agr o-Industr ial Cor por ation Ltd., Mysor e
59. Anantapur Sr ee Vasavamba Per manent Fund Ltd., Andhr a Pr adesh

1
[60. Shr i Vasavi Par ameswar i Per manent Fund Ltd., Madr as
I.T. ACT, 1961 1.1028
1. Inser ted vide Notification Nos. GSR 853, dated 4-6-1964, GSR 1332, dated 30-8-1965, GSR
111, dated 14-1-1966, GSR 607, dated 22-4-1967, GSR 608, dated 22-9-1967, GSR 1306,
dated 23-7-1971, GSR 1, dated 21-12-1973, GSR 690, dated 22-6-1974, GSR 275, dated
14-2-1975, GSR 409, dated 29-3-1975, GSR 1300, dated 11-9-1976, GSR 426, dated 8-3-1978,
GSR 728, dated 28-4-1978, GSR 1269, dated 4-10-1979, GSR 1100, dated 9-10-1980, GSR
1099, dated 9-10-1980, GSR 164, dated 10-2-1983, GSR 843, dated 19-11-1983, GSR 844,
GSR 961, dated 24-10-1986, GSR 365, dated 22-4-1987, GSR 430, dated 20-5-1987, GSR 921,
GSR 598, dated 15-7-1988, GSR 959 to 961, dated 1-12-1988, GSR 800, dated 22-9-1988,
GSR 318, dated 24-4-1989, GSR 501, dated 7-7-1989, GSR 502, dated 22-7-1989, GSR 649,
5-2-1990, GSR 515, dated 7-8-1990, SO 3052, dated 7-10-1990, GSR 782, dated 13-12-1990,
GSR 783, dated 13-12-1990, GSR 784, dated 13-12-1990, GSR 314, dated 30-4-1991, SO
2146, dated 26-7-1991, SO 123, dated 30-12-1992, GSR 272, dated 12-5-1993, GSR 291,
dated 27-5-1993, GSR 307, dated 27-5-1993, GSR 292, dated 27-5-1993, GSR 102, dated 27-
5-1993, GSR 189, dated 4-4-1994, GSR 296, dated 27-5-1994, GSR 441, dated 11-8-1994, SO
2302, dated 16-8-1994, SO 2303, dated 19-8-1994, SO 2304, dated 23-8-1994, SO 2508, dated
27-8-1994, SO 2509, dated 23-8-1994, SO 1313, dated 28-4-1995, SO 1314, dated 28-4-1995,
SO 1315, dated 28-4-1995, GSR 32, dated 10-1-1996, GSR 207, dated 6-5-1996, GSR 230,
dated 22-5-1996, GSR 248, dated 6-6-1996, GSR 785(E), dated 6-10-2003, GSR 91(E), dated
3-1-2004, GSR 547(E), dated 25-8-2004, GSR 14(E), dated 11-1-2005, GSR 102(E), dated
25-2-2005, GSR 450(E), dated 1-7-2005; GSR 546(E), dated 8-9-2006 and GSR 611(E), dated
20-9-2007.
61. Kur ies & Tr ades Ltd., Er nakulam
62. Saidapet Saswatha Nidhi Ltd., Madr as
63. Shr ee Rajagopaul Benefit Fund Ltd., Madr as
64. The Madr as Chr omepet Per manent Fund Ltd., Madr as
65. The Adoni Mutual Benefit Per manent Fund Ltd., Andhr a Pr adesh
66. Sr iman Madhva Sidhanta Per manent Nidhi Ltd.
67. Thir umylai Saswatha Sahaya Nidhi Ltd.
68. Taher i Aid Fund Ltd.
69. Kumbakonam Diocesan Catholics Per manent Fund Ltd.
70. Matha Var a Nidhi Ltd.
71. Amr itsar Radhasaomi Finance Co. (P.) Ltd.
72. Nambalam Benefit Society Ltd.
73. Makkal Nala Abivir thi Niddhi Ltd.
74. Kilpank Benefit Society Ltd.
75. Samar asa Mutual Benefit Fund Ltd.
76. Chr omepet Saswatha Nidhi Ltd.
77. Sr i Raja Raja Cholan Mutual Benefit Fund Ltd.
78. Palghat Per manent Fund Ltd.
79. Gr ama Nala Saswatha Nidhi Ltd.
80. Kondan Mutual Benefit Fund Ltd.
81. Sr i Saithai Mutual Benefit Fund Ltd.
82. Mini Mutual Benefit Fund Ltd.
83. Annanagar Janopakar a Nidhi Ltd.
84. Dhanalakshmi Fund (India) Ltd.
85. Aminjikar ai Benefit Fund Ltd., Madr as
86.
87. Jawahar Nagar Nidhi (Madr as) Ltd.
88. Shenoy Nagar Saswatha Nidhi Ltd., Madr as
89.
90.
91. Kayanat Per manent Fund Ltd.
92. Pir avom Funds Ltd.
93. Chennapur i Mutual Benefit Fund Ltd.
94. Chetpet Saswatha Nidhi Ltd.
95. Royapettah Benefit Fund Ltd.
96. Shenoy Nagar Benefit Fund Ltd.
97. Kalaimagal Mutual Benefit Fund Ltd.
98. Mini Muthoottu Mutual Fund Ltd.
99. Dr avidian Benefit Fund Ltd.
100. Ashoknagar Janopakar a Saswatha Nidhi Ltd.
101.
102. St. Mar ys Finance Ltd.
1.1029 APPENDIX
103. Tamilnadu Viswakar ma Mutual Benefit Fund Ltd.
104. Shr ee Ambika Nidhi Ltd.
105. West Mambalm Per manent Fund Ltd.
106. Al-Falah Mutual Benefits Ltd.
107. Manipal Sowbhagya Nidhi Ltd.
108. Jayalakshmi Mutual Benefits Fund Ltd.
109. Kodam Bakkam Benefits Fund Ltd.
110.
111. Par k town Benefit Fund Ltd.
112.
113.
114.
115. Kanchi Mutual Benefit Fund Ltd.
116. Thir umangalam Janopakar a Per manent Fund Ltd.
117. St. Mar r ys Fund Ltd.
118. Sr eevar i Benefit Society Ltd.
119. Gillnagar Benefit Fund Ltd.
120. Ker ala Per manent Fund Ltd.
121. Pammal Makkal Nala Fund Ltd.
122. Pondicher r y Mutual Benefit Fund Ltd.
123. Bliss Benefit Fund Ltd.
132. Alwar pet Benefit Fund Ltd.
133. Al-Najib Milli Mutual Benefit Funds Ltd.
134. Nir appukattil Mutual Funds Ltd.
135. Mannady Per manent Fund Ltd.
136. Vir udhunagar Benefit Fund Ltd.
137. Sr i Akilakr ishna Benefit Society Ltd.
138. South East Benefit Fund Ltd.
139. Rasi Nidhi Ltd.
140. Sr i Kandaswamy Per manent Fund Ltd.
141. Sr i Padmanabha Per manent Fund Ltd.
142. Incan Mutual Benefit Ltd.
143. Subam Benefit Fund Ltd.
144. Saibala Benefit Fund Ltd.
145. Tulasi Kr ishna Per manent Fund Ltd.
146. Indian Member s Benefit Fund Ltd.
147. Nanganallur Per manent Fund Ltd.
148. Per avallur Per manent Fund Ltd.
149. Ayodhya Benefit Fund Ltd.
150. Self Gr owth Nidhi Ltd.
151. Shr i Samundeswar i Benefit Fund Ltd.
152. ICS Benefit Fund Ltd.
I.T. ACT, 1961 1.1030
153. Shr i Navr athana Benefit Fund Ltd.
154. Sullivan Gar den Benefit Fund Ltd.
155. Shabab Islamic Investment and Mutual Benefits (India) Limited, Lucknow
156. Venkatesapur am Benefit Fund Limited, Madr as
157. Canar a Nidhi Limited, Manipal
158. SMP Mutual Benefit Limited, Haldwani, Uttar Pr adesh
159. Tr ywell Finance Mutual Benefit Company Limited, New Delhi
160. The Hasnapur am Mutual Benefit Per manent Fund Limited, Madr as
161. Manappur am Benefit Fund Limited, Tr issur
162. Galaxy Mutual Benefit Company Limited, Lucknow
163. Alagendr an Benefit Fund Limited, Madr as
172. Devta Mutual Benefits Limited, Meer ut
173. Sanjeevar ayan Benefit Fund Limited, Madr as
174. Manali Benefit Fund Limited, Madr as
175. Eldico Mutual Benefit Company Limited, Lucknow.
176. Sidhar tha Mutual Benefit Fund Limited, New Delhi
177. Pallavan Mutual Benefit Fund Limited, Madr as
178. Devidas Finance Limited, Puttur
179. Thir u-Vi-Ka Nagar Benefit Fund Limited, Madr as
180. Kumar i Benefit Fund Limited, Madr as
181. Vellavedu Benefit Fund Limited, Vellavedu, Tamil Nadu
182. Pr omptekk Benefit Fund Limited, Madr as
183. Sar vajana Benefit Fund Limited, Madr as
184. Sr i Muthukumar aswamy Per manent Fund Limited, Madr as
185. Per fect Benefit Fund Limited, Madr as
186. Tr ichy Rockcity Benefit Fund Limited, Tr ichy, Tamil Nadu
187. Vedar aniam Benefit Fund Limited, Vedar aniam, Tamil Nadu
188. Cr yst al India Mut ual Benefit s Limit ed, Dist r ict Nainit al, Ut t ar Pr adesh
189. Gowthami Per manent Fund Limited, Kakinada, Andhr a Pr adesh
190. Kaver ipatnam Benefit Fund Limited, Dhar mapur i, Tamil Nadu
191. Shr i Shanthi Nath Benefit Fund Limited, Villupur am, Tamil Nadu
192. Veejay Benefit Fund Limited, Madr as.
193. Chepauk Benefit Fund Limited, Chennai
194. Baggyalakshmi Benefit Fund Limited, Chennai
195. Samayapur am Mar iamman Benefit Fund Limited, Tr ichy, Tamilnadu
196. Lakshmipur am Benefit Fund Limited, Tir uninr avur , Chennai
197. Sr i Devigayathr i Benefit Fund Limited, Chennai
198. Er avi Vinayagar Benefit Fund Limited, Kanyakumar i Distr ict, Tamilnadu
199. Bhavsar Mar atah Benefit Fund Limited, Chennai
200. Minjur Benefit Fund Limited, Minjur , Tamilnadu
201. Sakthi Benefit Fund Limited, Chennai
202. Kulitalai Benefit Funds Limited, Kulitalai, Tamilnadu
1.1031 APPENDIX
I.T. ACT, 1961 1.1032
203. Kudumba Vilakku Benefit Fund Limited, Thanjavur , Tamilnadu.*
204. Kar ur Benefit Fund Limited, Kar ur , Tamil Nadu.
205. Town Benefit Fund (Kumbakonam) Limited, Kumbakonam, Tamil Nadu.
206. City Benefit Fund (Kumbakonam) Limited, Kumbakonam, Tamil Nadu.
207. Kasthur ibai Benefit Fund Limited, Vellor e, Tamil Nadu.
208. Mer chants Benefit Fund Limited, 341, Indir a Nagar , Neyveli - 607801, Tamil Nadu.
209. Bethel Benefit Fund Limited, 33, (Old No. 18) Sr inivasa Raghavan Road, Sr inivasa
Nagar , Per ungalathur , Chennai - 600063.
210. Tindivanam Benefit Fund Limit ed, No. 4, Thir uvalluvar St r eet , Tindivanam -
604001, Tamil Nadu.
211. Neema Benefit Fund Limited, Neema Buildings, Adoor , Pathanamthitta Distt.,
Ker ala - 691523.
212. Sr i Mar agathambigai Benefit Fund Limited, 466, J.N. Str eet, Tindivanam - 604001,
Tamilnadu
213. Var thaka Mandal Nidhi Limited, XL/ 6013, T.D. Shopping Complex, T.D. West Road,
Er nakulam - 682035, Ker ala.
214. Ayanavar am Per manent Fund Limited, 11/ 7, Par asur ama Easwar an Koil Str eet,
Ayanavar am, Chennai - 600023.
215. Amar avat t hi Benefit Fu nd Limit ed, No. 15, 1st St r eet , Conr ansmit h Road,
Gopalapur am, Chennai - 600086.
216. Sr ee Venkata Kr upa Per manent Fund Limited, 3-5-131, Adr athi Lane, Tir upati -
517501, Andhr a Pr adesh.
217. Ar umbakkam Benefit Fund Limited, 28A, New No. 6, Poonamallee High Road,
Ar umbakkam, Chennai - 600106.
218. Thir u vanmiyoor Per manent Fu nd Limit ed, Annamalai Complex, 123-A, Dr .
Muthulakshmi Road, Chennai - 600041.
219. Har i Sankar a Benefit Fund Limit ed, No. 5, East St r eet , Tir ukoilur - 605757,
Tamilnadu.
220. Chir anjeevi Benefit Fund Limited, 13/ 7, Thir uchendur Road, Tuticor in - 628003,
Tamilnadu.
221. Sr i Benefit Fund Limited, 39, Bazaar Str eet, Sir kali - 609110, Tamilnadu.
222. Villivakkam Janopakar a Fund Limited, 1, Meetu Str eet, Villivakkam, Chennai -
600049.
223. South Madr as Benefit Fund Limited, 20, Kallukar an Str eet, Mylapor e, Chennai-
600004.
224. Thir uvallur Thr ipur asundar i Benefit Fund Limited, 33, Nor th Raja Str eet, Tir uvallur -
602001, Tamilnadu.
225. Sr i Annamalai Benefit Fund Limited, 1st Floor , Annamalai Tower , 50, Kuber a Str eet,
Villupur am-605602, Tamilnadu.
226. Thendr al Benefit Fund Ltd., No. 44, 6th Cr oss Str eet, M.K.B. Nagar , Chennai-600039.
227. T.V.R. Benefit Fund Limited, 66, East Main Str eet, Thir uvar ur -610001, Tamilnadu.
*Recognition to Kuber Mutual Benefits Ltd., U.P. (notified vide Notification GSR No. 163, dated
18-3-1993) withdr awn vide GSR 226(E), dated 26-3-1999.
Recognition to Singh Mutual Benefit Company Limited, Haldwani, Nainital withdr awn vide
Notification No. GSR 655(E), dated 4-10-2004.
1.1033 APPENDIX
228. Lalapet Benefit Fund Limited, 2/ 60 (New No. 2/ 87), Main Road, Lalapet-639105,
Kar ur Distr ict, Tamilnadu.
229. Jeya Bhar ath Benefit Fund Limited, New No. 15(8), C.N.K. Road, Chepauk, Chennai-
600005.
230. Twin Cities Per manent Fund Limited, 1-1-790, Ashok Nagar Extension, Gandhinagar ,
Hyder abad-500080, Andhr a Pr adesh.
231. Thiyagadur ugam Benefit Fund Limited, No. 7, Kavar ai Str eet, Thiyagadur ugam-
606206, Tamilnadu.
232. Sembiam Benefit Fund Limited, New No. 154 (Old No. 251), Paper Mills Road, Ist
Floor , Per ambur , Chennai-600011.
233. Vijaysubham Benefit Fund Limited, 117, Nor th Car Str eet, Sir kali-609110, Tamilnadu.
234. Madur ai City Benefit Fund Limited, 71, Nor th Veli Str eet, Simmakkal, Madur ai-
625001, Tamilnadu.
235. Rajapalayam Benefit Fund Limited, 428-A, Ambalapuli Bazar , Ist Floor , Rajapalayam-
626117, Tamilnadu.
236. Pr akasam Dist r ict Per manent Fund Limit ed, 23-1-106, Gandhi Road, Ongole-
237. Collector Nagar Benefit Fund Limited, 2/ 267, Mugappair East, Chennai-600050.
238. Chor dia Benefit Fund Limited, 29/ A2, Panr uti Road, Ulundur pet-606107, Tamilnadu.
239. SRM Benefit Fund Limited, 3, Veer asamy Str eet, West Mambalam, Chennai-
600033.
240. East West Benefit Fund Limited, F41/ 4, Ist. Floor , Fir st Main Road, Anna Nagar East,
Chennai-600102.
241. Var iar Benefit Fund Limited, Flat No. 193/ 8, Asiad Colony, Jawahar lal Nehr u Road,
Anna Nagar , West Extension, Chennai-600101.
242. Azax Benefit Fund Limited, No. 666/ 1, T.H. Road, Chennai-600019.
243. Muthoot Mer cantile Syndicate Limited, 75, Attukal Shopping Complex, East For t,
Thir uvananthapur a-695023, Ker ala.
244. Uttir amer ur Benefit Fund Limited, No. 45, Bazar Str eet, Uttir amer ur -603406,
Tamilnadu.
245. Kasi Viswanathar (Chennai) Benefit Fund Limited, No. 9, Mar ket Str eet, (1st Floor ),
Ayanavar am, Chennai-600023.
246. Raj Benefit Fund Limited, 2F, Bhar athy Road, Cuddalor e-607 001, Tamil Nadu.
247. Tr isea Benefit Fu nd Limit ed, 227F, Roy Bu ilding, Rajakkamangalam Road,
Ramanputhoor , Nager coil-4, Tamil Nadu.
248. Vila va n c od e Se lf r e lia n c e Cr e d it Se r vic e s Limit e d , Good Ne ws Ce n t r e ,
Unnamalakadai-629 179, Tamil Nadu.
249. Muthoot M. Geor ge Per manent Fund Limited, P.B. No. 11, Muthoot Buildings,
Kozhencher r y, Ker ala.
250. Nor th West Madr as Benefit Society Limited, 59/ 22A, Fir st Main Road, Jawahar
Nagar , Chennai-600082.
251. Pur asai Benefit Fund Limited, 60 (Old No. 169), Vellala Str eet, Pur asawalkam,
Chennai-600084.
252. Dhana Chakr a Per manent Fund (India) Limited, Door No. 3-57/ 1, Opp. Vinayaka
Temple, Main Road, Kondapalli-521228, Vijayawada, Andhr a Pr adesh.
I.T. ACT, 1961 1.1034
253. Vijaya Kr ishna Benefit Fund Limited, Gajavalli Mansions, 11-14-5, Opp. S.B.I.
Velagaletivar i Str eet, Vijayawada-520001, Andhr a Pr adesh.
254. Rani Mangammal Benefit Fund Limited, 160, Big Bazar Str eet, Tr ichy-620008,
Tamil Nadu.
255. Sr ee Var adar aja Benefit Fund Limited, New No. 149/ 1, Old No. 63/ 1 Pur asawalkam
High Road, Pur asawalkam, Chennai-600007.
256. Sr i Kaalihambal Benefit Fund Limited, No. 281/ 18, T.H. Road, Chennai-600021.
257. Coastal Per manent Fund Limited, 11-62-125, Canal Road, Vijayawada-520001,
Andhr a Pr adesh.
258. Nachhiar koil Town Benefit Fund Ltd., 5/ 3, Nor th Str eet, Nachhiar koil-612 602,
Tamilnadu.
259. Bu sin ess Ben efit Compa n y Limit ed , Tr a n swor ld Tower s, Bu sin ess La n e,
Andamukkam, Beach Road, Kollam-1, Ker ala.
260. Kothattai Benefit Fund Limited, 369/ 1, Main Road, Pennadam-606 105, Tamilnadu.
261. Br indavan Nagar Benefit Fund Limited, Sr ee Venkateswar a Nilayam, No. 71,
Mahalakshmi Nagar , 5th Cr oss Str eet, Br indavan Nagar , Adambakkam, Chennai-
600 088, Tamilnadu.
262. Sr i Ambal Benefit Fund Limited, No. 6, Mela Sannadhi Str eet, Vedar anyam,
Tamilnadu.
263. Er ode Benefit Fund Limited, 116, Bazaar Str eet, Kavindapadi-638 455, Er ode
(RMS), Tamilnadu.
264. Sr i Mangalam Benefit Fund Limited, 139, T.H. Road, Kaladipet, Thir uvottiyur ,
Chennai-19, Tamilnadu.
265. Sr i Veer abathir a Benefit Fund Limited, 76, Nanayakar a Str eet, Nagapattinam-611
011, Tamilnadu.
266. Madr as Har bour Benefit Fund Limited, New No. 5, (Old No. 9) Nyniappn Str eet,
(behind Br oadway Theatr e), Mannady, Chennai-600 001, Tamilnadu.
267. Kumar i Chr istavar Benefit Fund Limited, III-A, Joshua Str eet, Nager coil-629 001,
Tamilnadu.
268. Kannadasan Nagar Benefit Fund Limited, New No. 144-A, (Old No. 32A), T.H. Road,
M.R. Nagar , Kodungaiyur , Chennai-600 118.
269. Kanya Benefit Fund Limit ed, Sat Anugr aha, Cr oss Road, Nor t h Car St r eet ,
Nager coil-629 001, Tamilnadu.
270. Hold & Gr ow Benefit Funds Limited, 1st Floor , Kamalam Complex, No. 8-B, Dr .
Besant Road, Kumbakonam-612 001, Tamilnadu.
271. Kundavai Benefit Fund Limited, 180/ 2435, South Main Str eet, Thanjavur -613 009,
Tamilnadu.
272. Koyambedu Per manent Fund Limited, 853, Sixth Avenue, 13th Main Road Junction,
Anna Nagar West, Chennai - 600 040, Tamilnadu.
273. Shr ee Vijayar am Benefit Fund Limited, Plot No. B4/ 4, 1st Floor , 80 Feet Road, Anna
Nagar , Madur ai - 625 020, Tamilnadu.
274. Sur iyan Benefit Fund (Madr as) Limited, New No. 46, (Old No. 487), Mint Str eet,
Chennai-600 079, Tamilnadu.
275. Wor iur Benefit Fund Limited, 116, Walaja Road, Wor iur , Tr ichy-620 003, Tamilnadu.
1.1035 APPENDIX
276. Panr uti Benefit Funds Limited, 124/ 4, V.O.C. Str eet, Panr uti-607 106, Tamilnadu.
277. Vaitheeswar ankoil Benefit Fund Limited, 6/ 7, Senbagavalli Str eet, Vaitheeswar ankoil
609 117, Nagapattinam Distr ict, Tamilnadu.
278. Dew Dr op Benefit Fund Limited, 10, 45th Str eet, 9th Avenue, Ashok Nagar , Chennai-
600 083, Tamilnadu.
279. Teacher s Welfar e Cr edit & Holding Limited, 10/ 99, Bejoygar h, Jadavpur , Calcutta
- 700 092.
280. Saligr amam Benefit Fu nd Limit ed, No. 7-D, Ar u nachalam Road (Upst air s),
Saligr amam, Chennai-600 093, Tamilnadu.
281. Pegasus Per manent Fund Limited, 3-6-736 & 737, Str eet No. 12, Himayatnagar ,
Hyder abad-500 029, Andhr a Pr adesh.
282. A.S.S. Benefit Fund Limited, Checkittavilai, Vattakottai, Mangar ai, P.O. 629 157,
Tamilnadu.
283. Cent r al Madr as Benefit Fund Limit ed, CMBF Maaligai, P-7 M.M.D.A. Colony,
(Ar umbakkam), Chennai-600 106, Tamilnadu.
284. East Gate Benefit Fund Limited, 126-A, Pampatti Str eet, East Gate, Thanjavur -613
001, Tamilnadu.
285. Camp Road Benefit Fund Limited, Sakthi Complex, 201/ 807, Velacher y Road,
Selaiyur , Chennai-600 073, Tamilnadu.
286. Ashok Nagar Benefit Fund Limited, New No. 72, Old No. 83/ 1, 53r d Str eet, 7th
Avenue, Ashok Nagar , Chennai-600 083, Tamilnadu.
287. Gomukhi Benefit Fund Limited 21-B, Gandhi Road, Kallakur ichi-606 202, Villupur am
Distr ict, Tamilnadu.
288. Social Mutual Benefits Co. Limited, Social Bhawan, Anekant Palace, 29, Rajpur
Road, Dehr adun - 248 001 (U.A.).
289. Kuzhithur ai Benefit Fund Limited, Kazhuvanthitta, Kuzhithur ai (P.O.), Kanyakumar i
290. Sur esh Benefit Fund Limited, New No. 5, Old No. 2, Kulandai Gr amani Str eet,
Pur asawakkam, Chennai-600 084, Tamilnadu.
291. Nagai Sivasakthi Benefit Fund Limited, No. 20, Neela South Str eet, Nagapattinam
- 611 001, Tamilnadu.
292. Pur asaiwakkam Gangatheeshwar ar Benefit Fund Limited, New No. 91, (Old No.
101), 1st Floor , Vellala Str eet, Pur asaiwakkam, Chennai-600 084.
293. Thir uvar angam Benefit Fund Limited, 2/ C, S.V.Char i Road, Sr ir angam, Tr ichy-620
006.
294. Ser var oys Benefit Fund Limited, Flat No. 37/ E, Kar uneegar Str eet, Adambakkam,
Chennai-600 088.
295. Pothigai Benefit Fund Limited, 75/ 34, College Road, Ambasamudr am-627 401,
Tamilnadu.
296. Tir upati Benefit Fund Limited, 559-A, Reddy & Reddy Colony, Tir upati-517 501,
Andhr a Pr adesh.
297. Sur ana Benefit Fund Limited, No. 14, Maniyam Kanda Swamy Str eet, Tindivanam-
604 001, Tamilnadu.
298. Sr i Gir ivar u Benefit Society Limited, New No. 1041, Old No. 525/ 2, Poonamallee
High Road, Ar umbakkam, Chennai-600 106.
I.T. ACT, 1961 1.1036
299. The Thir uvottiyur Benefit Fund Limited, 14, Sannadhi Str eet, Thir uvottiyur , Chennai-
600 019.
300. Sr ee Thanigaivelan Benefit Fund Limited, No. 14/ G1, 1st Main Road, South High
Cour t Colony, Villivakkam, Chennai-600 049.
301. Cheyyar Sr i Vasavi Benefit Fund Limited, B. Ramakannu Chettiar Building, N. No.
113, O.No. 40, Gandhi Road, Cheyyar -604 407, T.V.Malai Dt. Tamilnadu.
302. Sr i Bhagyalakshmi Benefit Fund Limited, 2/ 15, Opp. Balar am Theatr e, Sr ikalahasti-
517 644, Andhr a Pr adesh.
303. S.A. Benefit Fund Limited, 174, West Car Str eet, Chidambar am-608 001, Tamilnadu.
304. Puthu Per ungalathur Benefit Fund Limited, No. 41, Kamar ajar Nedunchalai, New
Per ungalathur , Chennai-600 063.
305. Ashwini Benefit Fund Limited, No. 101-B, Neeli Appadur ai Str eet, Ponner i-601 204,
Tamilnadu.
306. Mar agadhambal Benefit Fund Limited, No. 128 (New), Er ukkancher y High Road,
Vyasar padi, Chennai-600 039.
307. Sr i Ar unai Benefit Fund Limited, 13, Thenmathathi Str eet, Tir uvannamalai-606 601,
Tamilnadu.
308. Sr i Mukunt h Benefit Fund Limit ed, 9 J/ 1, Jawahar Main St r eet , S.S.Colony,
Madur ai-625 010, Tamilnadu.
309. East Rajaji Nagar Benefit Fund Limited, No. 84/ 71, Jayapr akash Str eet, Jambulingam
Main Road, G.K.M. Colony, Chennai-600 082.
310. Kudalmanagar Benefit Fund Limited, Ar una Ar cade, 37, Kansamettu Str eet, 1st
floor , Madur ai-625 020, Tamilnadu.
311. Sr i Ratna Per manent Fund Limited, D. No. 34-1-19/ 1, Temple Str eet, Kakinada-533
312. Bhuvanagir i Benefit Fund Limited, No. 30, Yadava Str eet, Bhuvanagir i - 608 601,
Cuddalor e - Distr ict, Tamilnadu.
313. Bhar ani Saswatha Sahaya Nidhi Limited, 3-35, Main Road, Uppal, Hyder abad-500
039.
314. Tir ukkoilur Benefit Fund Limited, 8, Mar ket Str eet, Tir ukkoilur -605 757, Tamilnadu.
315. Ananthapur i Benefit Fund Limited, Flat No. 207, Nandini Gar dens, West For t,
Tr ivandr um -23, Ker ala.
316. Alankar Benefit Fund Limited, 29, Shivaji Nagar , Thanjavur -620 001, Tamilnadu.
317. Vulcan Benefit Fund Limited, 29/ 30, 2nd Floor , SNS Plaza, No. 41, Kumar a Kr upa
Road, Bangalor e-560 001, Kar nataka.
318. Mahalakshmi Benefit Fund Limited, No. 71 (New 18), Jayar ama Chetty Str eet, 1st
Floor , Vellor e-632 004, Vellor e Distr ict, Tamilnadu.
319. Kottai Benefit Fund Limited, 121, Thalayar i Str eet, Pattukkottai-614 601, Thanjavur
320. Adhisesan Pettai Benefit Fund Limited, 258, Bodupatti Road, Mullai Nagar , A.S.
Pettai, Namakkal - 637 001, Tamilnadu.
321. Por t City Benefit Fund Limited, No. 21-D/ 2, W.G.C. Road, Tuticor in-628 002.
Tamilnadu.
322. Ar cot Sr i Mahaveer Benefit Fund Limited, No. 117, Bazar Str eet, Ar cot - 632 503,
Vellor e - Distr ict, Tamilnadu.
323. Per ambur Benefit Society Limited, 14/ 196, Per ambur Bar r acks Road, Chennai-600
012.
324. Nir mal Kr ishna Benefit Fund Limited, Mathempala, Palukal P.O., K.K. Distr ict-629
170, Tamilnadu.
325. Per iapet Benefit Fund Limited, 1, Soodiammanpet Str eet, Saidapet, Chennai - 600
015.
326. Mangaiyaar Benefit Fund Limit ed, 7/ 54, Junct ion Main Road, Ideal Gar den
Complex, Five Road, Salem - 636 004, Tamilnadu.
327. Veer Mutual Benefits Limited, Delhi Road, New Har dwar - 249 407.
328. KAY ESS ARR Benefit Fund Limited, 12/ 161, G.R. Complex, Theppakulam Str eet,
Tir uchengode-637 211, Namakkal Distr ict, Tamilnadu.
329. Vilavancode Benefit Fund Limited, VBF Tower s, Main Road, Mar thandam-629
165, Tamilnadu.
330. Ar unattu Benefit Fund Limited, New No. 399, Poonamalee High Road, Aminjikar ai,
Chennai-600 029.
331. Padma Balaji Benefit Fund Limited, 103A, Ayyanar Koil Main Road, Sellur , Madur ai
- 625 002, Tamilnadu.
332. Ramanathapur am Benefit Fund Limited, 87-B, Vandikkar a Str eet, Fir st Floor ,
Ramanathapur am -623 501.
333. Kar avilai Benefit Fund Limited, 8-12A, Vijayam, Kar avilai, Villukur y-629 180,
Kanyakumar i Distr ict, Tamilnadu.
SCHEDULE II : MUTUAL BENEFIT SOCIETIES
Ever y mutual insur ance company as defined in clause (a) of sub-section (1) of section 95
of the Insur ance Act, 1938 (4 of 1938).
PARTS II & III OF SCHEDULE VI TO COMPANIES ACT, 1956
SCHEDULE VI
PART II
REQUIREMENTS AS TO PROFIT AND LOSS ACCOUNT
1. The pr ovisions of this Par t shall apply to the income and expenditur e account r efer r ed
to in sub-section (2) of section 210 of the Act, in like manner as they apply to a pr ofit and
loss account, but subject to the modification of r efer ences as specified in that sub-section.
2. The pr ofit and loss account
(a) shall be so made out as clear ly to disclose the r esult of the wor king of the
company dur ing the per iod cover ed by the account; and
(b) shall disclose ever y mater ial featur e, including cr edits or r eceipts and debits or
expenses in r espect of non-r ecur r ing tr ansactions or tr ansactions of an excep-
tional natur e.
3. The pr ofit and loss account shall set out the var ious items r elating to the income and
expenditur e of the company ar r anged under the most convenient heads; and in par ticular ,
shall disclose the following infor mation in r espect of the per iod cover ed by the account :
1.1037 APPENDIX
I.T. ACT, 1961 1.1038
(i) (a) The tur nover , that is, the aggr egate amount for which sales ar e effected by
the company, giving the amount of sales in r espect of each class of goods
dealt with by the company, and indicating the quantities of such sales for
each class separ ately.
(b) Commission paid to sole selling agents within the meaning of section 294 of
the Act.
(c) Commission paid to other selling agents.
(d) Br oker age and discount on sales, other than the usual tr ade discount.
(ii) (a) In the case of manufactur ing companies,
(1) The value of the r aw mater ials consumed, giving item-wise br eak-up and
indicating the quantities ther eof. In this br eak-up, as far as possible, all
impor tant basic r aw mater ials shall be shown as separ ate items. The
inter mediates or components pr ocur ed fr om other manufactur er s may, if
their list is too lar ge to be included in the br eak-up, be gr ouped under
suitable headings without mentioning the quantities, pr ovided all those
items which in value individually account for 10%or mor e of the total value
of the r aw mater ial consumed shall be shown as separ ate and distinct items
with quantities ther eof in the br eak-up.
(2) The opening and closing stocks of goods pr oduced, giving br eak-up in
r espect of each class of goods and indicating the quantities ther eof.
(b) In the case of tr ading companies, the pur chases made and the opening and
closing stocks, giving br eak-up in r espect of each class of goods tr aded in by
the company and indicating the quantities ther eof.
(c) In the case of companies r ender ing or supplying ser vices, the gr oss income
der ived fr om ser vices r ender ed or supplied.
(d) In the case of a company, which falls under mor e than one of the categor ies
mentioned in (a), (b) and (c) above, it shall be sufficient compliance with the
r equir ements her ein if the total amounts ar e shown in r espect of the opening
and closing stocks, pur chases, sales and consumption of r aw mater ial with
value and quantitative br eak-up and the gr oss income fr om ser vices r en-
der ed is shown.
(e) In the case of other companies, the gr oss income der ived under differ ent
heads.
Note 1: The quantities of r aw mater ials, pur chases, stocks and the tur n-
over , shall be expr essed in quantitative denominations in which these ar e
nor mally pur chased or sold in the mar ket.
Note 2 : For the pur pose of items (ii)(a), (ii)(b) and (ii)(d), t he it ems for which
the company is holding separ ate industr ial licences, shall be tr eated as
separ ate classes of goods, but wher e a company has mor e than one industr ial
licence for pr oduction of the same item at differ ent places or for expansion
of the licensed capacity, the item cover ed by all such licences shall be tr eated
as one class. In the case of tr ading companies, the impor ted items shall be
classified in accor dance with the classification adopted by the Chief Contr ol-
ler of Impor ts and Expor ts in gr anting the impor t licences.
Note 3 : In giving the br eak-up of pur chases, stocks and tur nover , items like
spar e par ts and accessor ies, the list of which is too lar ge to be included in the
br eak-up, may be gr ouped under suitable headings without quantities,
pr ovided all those items, which in value individually account for 10%or mor e
of the total value of the pur chases, stocks, or tur nover , as the case may be,
ar e shown as separ ate and distinct items with quantities ther eof in the br eak-
up.
1.1039 APPENDIX
(iii) In the case of all concer ns having wor ks-in-pr ogr ess, the amounts for which such
wor ks have been completed at the commencement and at the end of the
accounting per iod.
(iv) The amount pr ovided for depr eciation, r enewals or diminution in value of fixed
asset s.
If such pr ovision is not made by means of a depr eciation char ge, the method
adopted for making such pr ovision.
If no pr ovision is made for depr eciation, the fact that no pr ovision has been made
shall be st at ed and t he quant um of ar r ear s of depr eciat ion comput ed in
accor dance with section 205(2) of the Act shall be disclosed by way of a note.
(v) The amount of inter est on the companys debentur es and other fixed loans, that
is to say, loans for fixed per iods, stating separ ately the amount of inter est, if any,
paid or payable to the managing dir ector , the managing agent, the secr etar ies and
tr easur er s and the manager , if any.
(vi) The amount of char ge for Indian income-tax and other Indian taxation on pr ofits,
including, wher e pr acticable, with Indian income-tax any taxation imposed
elsewher e to the extent of the r elief, if any, fr om Indian income-tax and
distinguishing, wher e pr acticable, between income-tax and other taxation.
(vii) The amounts r eser ved for
(a) r epayment of shar e capital; and
(b) r epayment of loans.
(viii) (a) The aggr egate, if mater ial, of any amounts set aside or pr oposed to be set
aside, to r eser ves, but not including pr ovisions made to meet any specific
liability, contingency or commitment known to exist at the date as at which
the balance sheet is made up.
(b) The aggr egate, if mater ial, of any amounts withdr awn fr om such r eser ves.
(ix) (a) The aggr egate, if mater ial, of the amounts set aside to pr ovisions made for
meeting specific liabilities, contingencies or commitments.
(b) The aggr egate, if mater ial, of the amounts withdr awn fr om such pr ovisions,
as no longer r equir ed.
(x) Expenditur e incur r ed on each of the following items, separ ately for each item :
(a) Consumption of stor es and spar e par ts.
(b) Power and fuel.
(c) Rent .
(d) Repair s to buildings.
(e) Repair s to machiner y.
(f ) (1) Salar ies, wages and bonus.
(2) Contr ibution to pr ovident and other funds.
(3) Wor kmen and staff welfar e expenses to the extent not adjusted fr om
any pr evious pr ovision or r eser ve.
Note 1 : Infor mation in r espect of this item should also be given in the balance
sheet under the r elevant pr ovision or r eser ve account.
Note 2 ** ** **
(g) Insur ance.
(h ) Rates and taxes, excluding taxes on income.
(i) Miscellaneous expenses :
Provided that any item under which the expenses exceed 1 per cent of the
total r evenue of the company or Rs. 5,000, whichever is higher , shall be
shown as a separ ate and distinct item against an appr opr iate account head
in the Pr ofit and Loss Account and shall not be combined with any other item
to be shown under Miscellaneous expenses.
(xi) (a) The amount of income fr om investments, distinguishing between tr ade
investments and other investments.
(b) Other income by way of inter est, specifying the natur e of the income.
(c) The amount of income-tax deducted if the gr oss income is stated under sub-
par agr aphs (a) and (b) above.
(xii) (a) Pr ofits or losses on investments showing distinctly the extent of the pr ofits
or losses ear ned or incur r ed on account of member ship of a par tner ship fir m
to the extent not adjusted fr om any pr evious pr ovision or r eser ve.
Note : Infor mation in r espect of this item should also be given in the balance
sheet under the r elevant pr ovision or r eser ve account.
(b) Pr ofits or losses in r espect of tr ansactions of a kind, not usually under taken
by the company or under taken in cir cumstances of an exceptional or non-
r ecur r ing natur e, if mater ial in amount.
(c) Miscellaneous income.
(xiii) (a) Dividends fr om subsidiar y companies.
(b) Pr ovisions for losses of subsidiar y companies.
(xiv) The aggr egate amount of the dividends paid, and pr oposed, and stating whether
such amounts ar e subject to deduction of income-tax or not.
(xv) Amount, if mater ial, by which any items shown in the pr ofit and loss account ar e
affected by any change in the basis of accounting.
4. The pr ofit and loss account shall also contain or give by way of a note detailed
infor mation, showing separ ately the following payments pr ovided or made dur ing the
financial year to the dir ector s (including managing dir ector s) the managing agents,
secr etar ies and tr easur er s or manager , if any, by the company, the subsidiar ies of the
company and any other per son :
(i) manager ial r emuner ation under section 198 of the Act paid or payable dur ing
the financial year to the dir ector s (including managing dir ector s), the managing
agent, secr etar ies and tr easur er s or manager , if any;
(ii) expenses r eimbur sed to the managing agent under section 354;
(iii) commission or other r emuner ation payable separ ately to a managing agent or his
associate under sections 356, 357 and 358;
(iv) commission r eceived or r eceivable under section 359 of the Act by the managing
agent or his associate as selling or buying agent of other concer ns in r espect of
contr acts enter ed into by such concer ns with the company;
(v) the money value of the contr acts for the sale or pur chase of goods and mater ials
or supply of ser vices, enter ed into by the company with the managing agent or
his associate under section 360 dur ing the financial year ;
(vi) other allowances and commission including guar antee commission (details to be
given);
(vii) any other per quisites or benefits in cash or in kind (stating appr oximate money
value wher e pr acticable);
(viii) pensions, etc.,
(a) pensions,
(b) gr at uit ies,
I.T. ACT, 1961 1.1040
(c) payments fr om pr ovident funds, in excess of own subscr iptions and inter est
ther eon,
(d) compensation for loss of office,
(e) consider ation in connection with r etir ement fr om office.
4A. The pr ofit and loss account shall contain or give by way of a note a statement showing
the computation of net pr ofits in accor dance with section 349 of the Act with r elevant
details of the calculation of the commissions payable by way of per centage of such pr ofits
to the dir ector s (including managing dir ector s), the managing agents, secr etar ies and
tr easur er s or manager (if any).
4B. The pr ofit and loss account shall fur ther contain or give by way of a note detailed
infor mation in r egar d to amounts paid to the auditor , whether as fees, expenses or
other wise for ser vices r ender ed
(a) as auditor ;
(b) as adviser , or in any other capacity, in r espect of
(i) taxation matter s;
(ii) company law matter s;
(iii) management ser vices; and
(c) in any other manner .
4C. In the case of manufactur ing companies, the pr ofit and loss account shall also contain,
by way of a note in r espect of each class of goods manufactur ed, detailed quantitative
infor mation in r egar d to the following, namely :
(a) the licensed capacity (wher e licence is in for ce);
(b) the installed capacity; and
(c) the actual pr oduction.
Note 1 : The licensed capacity and installed capacity of the company as on the last date of
the year to which the pr ofit and loss account r elates, shall be mentioned against items (a)
and (b) above, r espectively.
Note 2 : Against it em (c), the actual pr oduction in r espect of the finished pr oducts meant
for sale shall be mentioned. In cases wher e semi-pr ocessed pr oducts ar e also sold by the
company, separ ate details ther eof shall be given.
Note 3 : For the pur poses of this par agr aph, the items for which the company is holding
separ ate industr ial licences shall be tr eated as separ ate classes of goods but wher e a
company has mor e than one industr ial licence for pr oduction of the same item at differ ent
places or for expansion of the licensed capacity, the item cover ed by all such licences shall
be tr eated as one class.
4D. The pr ofit and loss account shall also contain by way of a note the following
infor mation, namely :
(a) value of impor ts calculated on C.I.F. basis by the company dur ing the financial
year in r espect of :
(i) r aw mat er ials;
(ii) components and spar e par ts;
(iii) capital goods;
(b) expenditur e in for eign cur r ency dur ing the financial year on account of r oyalty,
know-how, pr ofessional, consultation fees, inter est, and other matter s;
(c) value of all impor ted r aw mater ials, spar e par ts and components consumed
dur ing the financial year and the value of all indigenous r aw mater ials, spar e
1.1041 APPENDIX
I.T. ACT, 1961 1.1042
par ts and components similar ly consumed and the per centage of each to the total
consumpt ion;
(d) the amount r emitted dur ing the year in for eign cur r encies on account of
dividends, with a specific mention of the number of non-r esident shar eholder s,
the number of shar es held by them on which the dividends wer e due and the year
to which the dividends r elated;
(e) ear nings in for eign exchange classified under the following heads, namely :
(i) expor t of goods calculated on F.O.B. basis;
(ii) r oyalty, know-how, pr ofessional and consultation fees;
(iii) inter est and dividend;
(iv) other income, indicating the natur e ther eof.
5. The Centr al Gover nment may dir ect that a company shall not be obliged to show the
amount set aside to pr ovisions other than those r elating to depr eciation, r enewal or
diminution in value of assets, if the Centr al Gover nment is satisfied that the infor mation
should not be disclosed in the public inter est and would pr ejudice the company, but
subject to the condition that in any heading stating an amount ar r ived at after taking into
account the amount set aside as such, the pr ovision shall be so fr amed or mar ked as to
indicate that fact.
6. (1) Except in the case of the fir st pr ofit and loss account laid befor e the company after
the commencement of the Act, the cor r esponding amounts for the immediately pr eceding
financial year for all items shown in the pr ofit and loss account shall also be given in the
pr ofit and loss account.
(2) The r equir ement in sub-clause (1) shall, in the case of companies pr epar ing quar ter ly
or half-year ly accounts, r elate to the pr ofit and loss account for the per iod which enter ed
on the cor r esponding date of the pr evious year .
Note : Refer ence to managing agents, secr etar ies and tr easur er s should be omitted.
PART III
INTERPRETATION
7. (1) For the pur poses of Par ts I and II of this Schedule, unless the context other wise
r equir es,
(a) the expr ession pr ovision shall, subject to sub-clause (2) of this clause, mean any
amount wr itten off or r etained by way of pr oviding for depr eciation r enewals or
diminution in value of assets, or r etained by way of pr oviding for any known
liability of which the amount cannot be deter mined with substantial accur acy;
(b) the expr ession r eser ve shall not, subject as afor esaid, include any amount
wr itten off or r etained by way of pr oviding for depr eciation, r enewals or
diminution in value of assets or r etained by way of pr oviding for any known
liabilit y ;
(c) the expr ession capital r eser ve shall not include any amount r egar ded as fr ee for
distr ibution thr ough the pr ofit and loss account; and the expr ession r evenue
r eser ve shall mean any r eser ve other than a capital r eser ve;
and in this sub-clause the expr ession liability shall include all liabilities in r espect of
expenditur e contr acted for and all disputed or contingent liabilities.
(2) Wher e
(a) any amount wr itten off or r etained by way of pr oviding for depr eciation,
r enewals or diminution in value of assets, not being an amount wr itten off in
r elation to fixed assets befor e the commencement of this Act; or
(b) any amount r etained by way of pr oviding for any known liability;
is in excess of the amount which in the opinion of the dir ector s is r easonably necessar y for
the pur pose, the excess shall be tr eated for the pur poses of this Schedule as a r eser ve and
not as a pr ovision.
8. For the pur poses afor esaid, the expr ession quoted investment means an investment
as r espects which ther e has been gr anted a quotation or per mission to deal on a
r ecognised stock exchange, and the expr ession unquoted investment shall be constr ued
accor dingly.
ARTICLES 243(d) & 243P(e) OF CONSTITUTION OF INDIA
Definit ions.
243. ** ** **
(d) Panchayat means an institution (by whatever name called) of self-Gover nment
constituted under ar ticle 243B, for the r ur al ar eas;
Definit ions
243P. ** ** **
(e) Municipality means an institution of self-Gover nment constituted under ar ticle
243Q;
ARTICLE 276(2) OF CONSTITUTION OF INDIA
276. (2) The total amount payable in r espect of any one per son to the State or to any one
municipality, distr ict boar d, local boar d or other local author ity in the State by way
of taxes on pr ofessions, tr ades, callings and employments shall not exceed two thousand
and five hundr ed r upees per annum.
EIGHTH SCHEDULE TO THE CONSTITUTION OF INDIA
[Ar ticles 344(1) and 351]
Languages
1. Assamese.
2. Bengali.
3. Bodo
4. Dogr i
5. Gujar at i.
6. Hindi.
7. Kannada.
8. Kashmir i.
9. Konkani.
10. Mait hili
11. Malayalam.
SECTION 60 OF CODE OF CIVIL PROCEDURE, 1908
Property liable to attachment and sale in execution of decree.
60. (1) The following pr oper ty is liable to attachment and sale in execution of a decr ee,
namely, lands, houses or other buildings, goods, money, bank notes, cheques, bills of
exchange, hundis, pr omissor y notes, Gover nment secur ities, bonds or other secur ities for
money, debts, shar es in a cor por ation and, save as her einafter mentioned, all other saleable
pr oper ty, movable or immovable, belonging to the judgment-debtor , or over which, or the
1.1043 APPENDIX
12. Manipur i.
13. Mar at hi.
14. Nepali.
15. Or iya.
16. Punjabi.
17. Sanskr it .
18. Sant hali.
19. Sindhi.
20. Tamil.
21. Telugu.
22. Ur du.
pr ofits of which, he has a disposing power which he may exer cise for his own benefit,
whether the same be held in the name of the judgment-debtor or by another per son in tr ust
for him or on his behalf :
Provided that the following pr oper ties shall not be liable to such attachment or sale,
namely :
(a) the necessar y wear ing-appar el, cooking vessels, beds and bedding of the judg-
ment-debtor , his wife and childr en, and such per sonal or naments as, in accor -
dance with r eligious usage, cannot be par ted with by any woman ;
(b) tools of ar tisans, and, wher e the judgment-debtor is an agr icultur ist, his imple-
ments of husbandr y and such cattle and seed-gr ain as may, in the opinion of the
Cour t, be necessar y to enable him to ear n his livelihood as such, and such por tion
of agr icultur al pr oduce or of any class of agr icultur al pr oduce as may have been
declar ed to be fr ee fr om liability under the pr ovisions of the next following
sect ion ;
(c) houses and other buildings (with the mater ials and the sites ther eof and the land
immediately appur tenant ther eto and necessar y for their enjoyment) belonging
to an agr icultur ist or a labour er or a domestic ser vant and occupied by him ;
(d) books of account ;
(e) a mer e r ight to sue for damages ;
(f ) any r ight of per sonal ser vice ;
(g) stipends and gr atuities allowed to pensioner s of the Gover nment

or of a local
author ity or of any other employer , or payable out of any ser vice family pension
fund notified in the Official Gazette by the Centr al Gover nment or the State
Gover nment in this behalf, and political pension ;
(h ) the wages of labour er s and domestic ser vants, whether payable in money or in
kind ;
(i) salar y to the extent of the fir st one thousand r upees and two-thir ds of the
r emainder in execution of any decr ee other than a decr ee for maintenance :
Provided that wher e any par t of such por tion of the salar y as is liable to
attachment has been under attachment, whether continuously or inter mittently,
for a total per iod of twenty-four months, such por tion shall be exempt fr om
attachment until the expir y of a fur ther per iod of twelve months, and, wher e such
attachment has been made in execution of one and the same decr ee, shall, after
the attachment has continued for a total per iod of twenty-four months, be finally
exempt fr om attachment in execution of that decr ee ;
(ia) one-thir d of the salar y in execution of any decr ee for maintenance;
(j) the pay and allowances of per sons to whom the Air For ce Act, 1950 (45 of 1950),
or the Ar my Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957), applies ;
(k ) all compulsor y deposits and other sums in or der ived fr om any fund to which the
Pr ovident Funds Act, 1925 (19 of 1925), for the time being applies in so far as they
ar e declar ed by the said Act not to be liable to attachment ;
(ka) all deposits and other sums in or der ived fr om any fund to which the Public
Pr ovident Fund Act, 1968 (23 of 1968), for the time being applies, in so far as they
ar e declar ed by the said Act as not to be liable to attachment ;
(kb) all moneys payable under a policy of insur ance on the life of the judgment-
debt or ;
(kc) the inter est of lessee of a r esidential building to which the pr ovisions of law for
the time being in for ce r elating to contr ol of r ents and accommodation apply ;
I.T. ACT, 1961 1.1044
1.1045 APPENDIX
(l) any allowance for ming par t of the emoluments of any ser vant of the Gover nment
or of any ser vant of a Railway company or local author ity which the appr opr iate
Gover nment may by notification in the Official Gazette declar e to be exempt
fr om attachment, and any subsistence gr ant or allowance made to any such
ser vant while under suspension ;
(m ) an expectancy of succession by sur vivor ship or other mer ely contingent or
possible r ight or int er est ;
(n ) a r ight to futur e maintenance ;
(o) any allowance declar ed by any Indian law to be exempt fr om liability to
attachment or sale in execution of a decr ee ; and
(p) wher e the judgment-debtor is a per son liable for the payment of land-r evenue;
any movable pr oper ty which, under any law for the time being applicable to him,
is exempt fr om sale for the r ecover y of an ar r ear of such r evenue.
Explan ation I : The moneys payable in r elation to the matter s mentioned in clauses (g), (h ),
(i), (ia), (j), (l) and (o) ar e exempt fr om attachment or sale, whether befor e or after they ar e
actually payable, and, in the case of salar y, the attachable por tion ther eof is liable to
attachment, whether befor e or after it is actually payable.
Explan ation II : In clauses (i) and (ia), salar y means the total monthly emoluments,
excluding any allowance declar ed exempt fr om attachment under the pr ovisions of clause
(l), der ived by a per son fr om his employment whether on duty or on leave.
Explan ation III : In clause (l) appr opr iate Gover nment means
(i) as r espects any per son in the ser vice of the Centr al Gover nment, or any ser vant
of a Railway Administr ation or of a cantonment author ity or of the por t
author ity of a major por t, the Centr al Gover nment;
(ii) [om itted;]
(iii) as r espects any other ser vant of the Gover nment or a ser vant of any other local
author ity, the State Gover nment.
Explan ation IV : For the pur poses of this pr oviso, wages includes bonus, and labour er
includes a skilled, unskilled or semi-skilled labour er .
Explan ation V : For t he pur poses of t his pr oviso, t he expr ession agr icult ur ist means a
per son who cultivates land per sonally and who depends for his livelihood mainly on
the income fr om agr icultur al land, whether as owner , tenant, par tner or agr icultur al
labour er .
Explan ation VI : For the pur poses of Explan ation V, an agr icultur ist shall be deemed to
cultivate land per sonally, if he cultivates land
(a) by his own labour , or
(b) by the labour of any member of his family, or
(c) by ser vants or labour er s on wages payable in cash or in kind (not being as a shar e
of the pr oduce), or both.
(1A) Notwithstanding anything contained in any other law for the time being in for ce, an
agr eement by which a per son agr ees to waive the benefit of any exemption under this
section shall be void.
(2) Nothing in this section shall be deemed to exempt houses and other buildings (with the
mater ials and the sites ther eof and the lands immediately appur tenant ther eto and
necessar y for their enjoyment) fr om attachment or sale in execution of decr ees for r ent
of any such house, building, site or land.
SECTION 360 OF CODE OF CRIMINAL PROCEDURE, 1973
Order to release on probation of good conduct or after admonition.
360. (1) When any per son not under twenty-one year s of age is convicted of an offence
punishable with fine only or with impr isonment for a ter m of seven year s or less, or
when any per son under twenty-one year s of age or any woman is convicted of an offence
not punishable with death or impr isonment for life, and no pr evious conviction is pr oved
against the offender , if it appear s to the Cour t befor e which he is convicted, r egar d being
had to the age, char acter or antecedents of the offender , and to the cir cumstances in which
the offence was committed, that it is expedient that the offender should be r eleased on
pr obation of good conduct, the Cour t may, instead of sentencing him at once to any
punishment, dir ect that he be r eleased on his enter ing into a bond, with or without sur eties,
to appear and r eceive sentence when called upon dur ing such per iod (not exceeding thr ee
year s) as the Cour t may dir ect and in the meantime to keep the peace and be of good
behaviour :
Provided that wher e any fir st offender is convicted by a Magistr ate of the second class not
specially empower ed by the High Cour t, and the Magistr ate is of opinion that the power s
confer r ed by this section should be exer cised, he shall r ecor d his opinion to that effect, and
submit the pr oceedings to a Magistr ate of the fir st class for war ding the accused to, or
taking bail for his appear ance befor e, such Magistr ate, who shall dispose of the case in the
manner pr ovided by sub-section (2).
(2) Wher e pr oceedings ar e submitted to a Magistr ate of the fir st class as pr ovided by
sub-section (1), such Magistr ate may ther eupon pass such sentence or make such or der
as he might have passed or made if the case had or iginally been hear d by him, and, if he
thinks fur ther inquir y or additional evidence on any point to be necessar y, he may make
such inquir y or take such evidence himself or dir ect such inquir y or evidence to be made
or taken.
(3) In any case in which a per son is convicted of theft, theft in a building, dishonest
misappr opr iation, cheating or any offence under the Indian Penal Code (45 of 1860)
punishable with not mor e than two year s impr isonment or any offence punishable with
fine only and no pr evious conviction is pr oved against him, the Cour t befor e which he isso
convicted may, if it thinks fit, having r egar d to the age, char acter , antecedents or physical
or mental condition of the offender and to the tr ivial natur e of the offence or any
extenuating cir cumstances under which the offence was committed, instead of sentenc-
ing him to any punishment, r elease him after due admonition.
(4) An or der under this section may be made by any Appellate Cour t or by the High Cour t
or Cour t of Session when exer cising its power s of r evision.
(5) When an or der has been made under this section in r espect of any offender , the High
Cour t or Cour t of Session may, on appeal when ther e is a r ight of appeal to such Cour t, or
when exer cising its power s of r evision, set aside such or der , and in lieu ther eof pass
sentence on such offender accor ding to law :
Provided that the High Cour t or Cour t of Session shall not under this sub-section inflict
a gr eater punishment than might have been inflicted by the Cour t by which the offender
was convicted.
(6) The pr ovisions of sections 121, 124 and 373 shall, so far as may be apply in the case of
sur eties offer ed in pur suance of the pr ovisions of this section.
(7) The Cour t, befor e dir ecting the r elease of an offender under sub-section (1) shall be
satisfied that an offender or his sur ety (if any) has a fixed place of abode or r egular
occupation in the place for which the Cour t acts or in which the offender is likely to live
dur ing the per iod named for the obser vance of the conditions.
I.T. ACT, 1961 1.1046
(8) If the Cour t which convicted the offender , or a Cour t which could have dealt with
the offender in r espect of his or iginal offence, is satisfied that the offender has failed to
obser ve any of the conditions of his r ecognizance, it may issue a war r ant for his
appr ehension.
(9) An offender , when appr ehended on any such war r ant, shall be br ought for thwith
befor e the Cour t issuing the war r ant, and such Cour t may either r emand him in custody
until the case is hear d or admit him to bail with a sufficient sur ety conditioned on his
appear ing for sentence and such Cour t may after hear ing the case, pass sentence.
(10) Nothing in this section shall affect the pr ovisions of the Pr obation of Offender s Act,
1958 (20 of 1958), or the Childr en Act, 1960 (60 of 1960), or any other law for the time being
in for ce for the tr eatment, tr aining or r ehabilitation of youthful offender s.
SECTION 50 OF CUSTOMS ACT, 1962
Entry of goods for exportation.
50. (1) The expor ter of any goods shall make entr y ther eof by pr esenting to the pr oper
officer in the case of goods to be expor ted in a vessel or air cr aft, a shipping bill, and
in the case of goods to be expor ted by land, a bill of expor t in the pr escr ibed for m.
(2) The expor ter of any goods, while pr esenting a shipping bill or bill of expor t, shall at the
foot ther eof make and subscr ibe to a declar ation as to the tr uth of its contents.
SECTION 2(1)(a), (e) AND (l) OF DEPOSITORIES ACT, 1996
Definit ions.
2. (1) In this Act, unless the context other wise r equir es,
(a) beneficial owner means a per son whose name is r ecor ded as such with a
deposit or y;
** ** **
(e) depositor y means a company for med and r egister ed under the Companies Act,
1956 (1 of 1956), and which has been gr anted a cer tificate of r egistr ation under
sub-section (1A) of section 12 of the Secur ities and Exchange Boar d of India Act,
1992 (15 of 1992);
** ** **
(l) secur ity means such secur ity as may be specified by the Boar d;
** ** **
SECTION 2(d) OF DISASTER MANAGEMENT ACT, 2005
Definit ions.
** ** **
(d) disaster means a catastr ophe, mishap, calamity or gr ave occur r ence in any
ar ea, ar ising fr om natur al or man made causes, or by accident or negligence
which r esults in substantial loss of life or human suffer ing or damage to, and
destr uction of, pr oper ty, or damage to, or degr adation of, envir onment, and is of
such a natur e or magnitude as to be beyond the coping capacity of the
community of the affected ar ea;
1.1047 APPENDIX
SECTION 1 OF EMPLOYEES PROVIDENT FUNDS AND
MISCELLANEOUS PROVISIONS ACT, 1952
Short title, extent and application.
1. ** ** **
(3) Subject to the pr ovisions contained in section 16, it applies
(a) to ever y establishment which is a factor y engaged in any industr y specified in
Schedule I and in which twenty or mor e per sons ar e employed, and
(b) to any other establishment employing twenty or mor e per sons or class of such
establishments which the Centr al Gover nment may, by notification in the
Official Gazette, specify in this behalf :
Provided that the Centr al Gover nment may, after giving not less than two months notice
of its intention so to do, by notification in the Official Gazette, apply the pr ovisions of this
Act to any establishment employing such number of per sons less than twenty as may be
specified in the notification.
(4) Notwithstanding anything contained in sub-section (3) of this section or sub-section (1)
of section 16, wher e it appear s to the Centr al Pr ovident Fund Commissioner , whether on
an application made to him in this behalf or other wise, that the employer and the major ity
of employees in r elation to any establishment have agr eed that the pr ovisions of this Act
should be made applicable to the establishment, he may, by notification in the Official
Gazette, apply the pr ovisions of this Act to that establishment on and fr om the date of such
agr eement or fr om any subsequent date specified in such agr eement.
SECTION 2 OF FOREIGN EXCHANGE MANAGEMENT ACT, 1999
Definit ions.
** ** **
(c) author ised per son means an author ised dealer , money changer , offshor e banking
unit or any other per son for the time being author ised under sub-section (1) of
section 10 to deal in for eign exchange or for eign secur ities;
** ** **
(h ) cur r ency includes all cur r ency notes, postal notes, postal or der s, money or der s,
cheques, dr afts, tr aveller s cheques, letter s of cr edit, bills of exchange and pr omis-
sor y notes, cr edit car ds or such other similar instr uments, as may be notified by the
Reser ve Bank;
** ** **
(m ) for eign cur r ency means any cur r ency other than Indian cur r ency;
(n ) for eign exchange means for eign cur r ency and includes,
(i) deposits, cr edits and balances payable in any for eign cur r ency,
(ii) dr afts, tr aveller s cheques, letter s of cr edit or bills of exchange, expr essed or
dr awn in Indian cur r ency but payable in any for eign cur r ency,
(iii) dr afts, tr aveller s cheques, letter s of cr edit or bills of exchange dr awn by
banks, institutions or per sons outside India, but payable in Indian cur r ency;
** ** **
(q) Indian cur r ency means cur r ency which is expr essed or dr awn in Indian r upees
** ** **
(v) per son r esident in India means
I.T. ACT, 1961 1.1048
(i) a per son r esiding in India for mor e than one hundr ed and eighty-two days
dur ing the cour se of the pr eceding financial year but does not include
(A) a per son who has gone out of India or who stays outside India, in either
case
(a) for or on taking up employment outside India, or
(b) for car r ying on outside India a business or vocation outside India,
or
(c) for any other pur pose, in such cir cumstances as would indicate his
intention to stay outside India for an uncer tain per iod;
(B) a per son who has come to or stays in India, in either case, other wise
t han
(a) for or on taking up employment in India, or
(b) for car r ying on in India a business or vocation in India, or
(c) for any other pur pose, in such cir cumstances as would indicate his
intention to stay in India for an uncer tain per iod;
(ii) any per son or body cor por ate r egister ed or incor por ated in India,
(iii) an office, br anch or agency in India owned or contr olled by a per son r esident
outside India,
(iv ) an office, br anch or agency outside India owned or contr olled by a per son
r esident in India;
(w) per son r esident outside India means a per son who is not r esident in India;
SECTION 2 OF FORWARD CONTRACTS (REGULATION) ACT, 1952
Definit ions.
(a) association means any body of individuals, whether incor por ated or not,
constituted for the pur pose of r egulating and contr olling the business of the sale
or pur chase of any goods;
(b) Commission means t he For war d Mar ket s Commission est ablished under
section 3;
(c) for war d contr act means a contr act for the deliver y of goods and which is not
a r eady deliver y contr act;
(d) goods means ever y kind of movable pr oper ty other than actionable claims,
money and secur ities;
(e) Gover nment secur ity means a Gover nment secur ity as defined in the Public
Debt Act, 1944 (18 of 1944);
(f ) non-tr ansfer able specific deliver y contr act means a specific deliver y contr act,
the r ights or liabilities under which or under any deliver y or der , r ailway r eceipt,
bill of lading, war ehouse r eceipt or any other document of title r elating ther eto
ar e not tr ansfer able;
(g) option in goods means an agr eement, by whatever name called, for the
pur chase or sale of a r ight to buy or sell, or a r ight to buy and sell, goods in futur e,
and includes a teji, a m an di, a teji-m an di, a galli, a put, a call or a put and call in
goods;
(h ) pr escr ibed means pr escr ibed by r ules made under this Act;
(i) r eady deliver y contr act means a contr act which pr ovides for the deliver y of
goods and the payment of a pr ice ther efor , either immediately or within such
per iod not exceeding eleven days after the date of the contr act and subject to
1.1049 APPENDIX
I.T. ACT, 1961 1.1050
such conditions as the Centr al Gover nment may, by notification in the Official
Gazette, specify in r espect of any goods, the per iod under such contr act not being
capable of extension by the mutual consent of the par ties ther eto or other wise:
Provided that wher e any such contr act is per for med either wholly or in par t,
(1) by tender ing of the documents of title to the goods cover ed by the
contr act by any par ty ther eto (not being a commission agent or a bank)
who has acquir ed owner ship of the said documents by pur chase, ex-
change or other wise, to any other per son (including a commission agent
but not including a bank); or
(2) by the r ealisation of any sum of money, being the differ ence between the
contr act r ate and the settlement r ate or clear ing r ate or the r ate of any
offsetting contr act; or
(3) by any other means whatsoever ,
and as a r esult of which the actual tender ing of the goods cover ed by the contr act
or the payment of the full pr ice ther efor is dispensed with, then, such contr act
shall not be deemed to be a r eady deliver y contr act.
(i) bank includes any banking company as defined in the Banking Regu-
lation Act, 1949 (10 of 1949), a co-oper ative bank as defined in the Reser ve
Bank of India Act, 1934 (2 of 1934), the State Bank of India and any of its
subsidiar ies and any cor r esponding new bank constituted under section
3 of the Banking Companies (Acquisition and Tr ansfer of Under takings)
Act, 1970 (5 of 1970);
(ii) commission agent means a per son who, in the or dinar y cour se of
business, makes contr act for the sale or pur chase of goods for other s for
a r emuner ation (whether known as commission or other wise) which is
deter mined in the contr act itself or deter minable fr om the ter ms of the
contr act, in either case, only with r efer ence to the quantity of goods or to
the pr ice ther efor as stipulated in the contr act;
(j) r ecognised association means an association to which r ecognition for the time
being has been gr anted by the Centr al Gover nment under section 6 in r espect of
goods or classes of goods specified in such r ecognition;
(jj) r egister ed association means an association to which for the time being a
cer tificate of r egistr ation has been gr anted by the Commission under section
14B;
(k ) r ules, with r efer ence to the r ules r elating in gener al to the constitution and
management of an association, includes in the case of an incor por ated associa-
tion its memor andum and ar ticles of association;
(l) secur ities includes shar es, scr ips, stocks, bonds, debentur es, debentur e-stocks,
or other mar ketable secur ities of a like natur e in or of any incor por ated company
or other body cor por ate and also Gover nment secur ities;
(m ) specific deliver y contr act means a for war d contr act which pr ovides for the
actual deliver y of specific qualities or types of goods dur ing a specified futur e
per iod at a pr ice fixed ther eby or to be fixed in the manner ther eby agr eed and
in which the names of both the buyer and the seller ar e mentioned;
(n ) tr ansfer able specific deliver y contr act means a specific deliver y contr act which
is not a non-tr ansfer able specific deliver y contr act and which is subject to such
conditions r elating to its tr ansfer ability as the Centr al Gover nment may, by
notification in the Official Gazette, specify in this behalf.
1.1051 APPENDIX
CHAPTER IV OF HIGH COURT JUDGES (SALARIES &
CONDITIONS OF SERVICE) ACT, 1954
Travelling allowances to a Judge.
22. Ever y Judge shall r eceive such r easonable allowances to r eimbur se him for expenses
incur r ed in tr avelling on duty within the ter r itor y of India and shall be affor ded such
r easonable facilit ies in connect ion wit h t r avelling as may, fr om t ime t o t ime, be pr e-
scr ibed.
Facility of rent-free houses.
22A. (1) Ever y Judge shall be entitled without payment of r ent to the use of an official
r esidence in accor dance with such r ules as may, fr om time to time, be made in this
behalf.
(2) Wher e a Judge does not avail himself of the use of an official r esidence, he may be
paid ever y month an allowance of ten thousand r upees.
Conveyance facilities.
22B. Ever y Judge shall be entitled to a staff car and two hundr ed litr es of fuel ever y
month or the actual consumption of fuel per month, whichever is less.
Sumptuary allowance.
22C. The Chief Just ice and each of t he ot her Judges of ever y High Cour t shall be
entitled to a sumptuar y allowance of thr ee thousand r upees per month and two
thousand r upees per month, r espectively.
Exemption from liability to pay income-tax on certain perquisites received by a Judge.
22D. Notwithstanding anything contained in the Income-tax Act, 1961 (43 of 1961),
(a) the value of r ent-fr ee official r esidence pr ovided to a Judge under sub-section (1)
of section 22A or the allowance paid to him under sub-section (2) of that section;
(b) the value of the conveyance facilities pr ovided to a Judge under section 22B;
(c) the sumptuar y allowance pr ovided to a Judge under section 22C;
(d) the value of leave tr avel concession pr ovided to a Judge and member s of his
family,
shall not be included in the computation of his income char geable under the head Sala-
r ies under section 15 of the Income-tax Act, 1961.
SECTION 21 OF INDIAN PENAL CODE, 1860
Public servant.
21. The wor ds public ser vant denote a per son falling under any of the descr iptions
her einafter following, namely :
** ** **
Secon d - Ever y Commissioned Officer in the Militar y, Naval or Air For ces of India;
Th ird - Ever y Judge including any per son empower ed by law to dischar ge, whether by
himself or as a member of any body of per sons, any adjudicator y functions;
Fourth - Ever y officer of a Cour t of Justice (including a liquidator , r eceiver or Commis-
sioner ) whose duty it is, as such officer , to investigate or r epor t on any matter of law or fact,
or to make, authenticate, or keep any document, or to take char ge or dispose of any
pr oper ty, or to execute any judicial pr ocess, or to administer any oath, or to inter pr et, or
to pr eser ve or der in the Cour t, and ever y per son specially author ised by a Cour t of Justice
to per for m any of such duties;
I.T. ACT, 1961 1.1052
Fif th - Ever y jur yman, assessor , or member of a panchayat assisting a Cour t of Justice or
public ser vant;
Sixth - Ever y ar bitr ator or other per son to whom any cause or matter has been r efer r ed
for decision or r epor t by any Cour t of Justice, or by any other competent public author ity;
Seven th - Ever y per son who holds any office by vir tue of which he is empower ed to place
or keep any per son in confinement;
Eigh th - Ever y officer of the Gover nment whose duty it is, as such officer , to pr event
offences, to give infor mation of offences, to br ing offender s to justice, or to pr otect the
public health, safety or convenience;
Nin th - Ever y officer whose duty it is, as such officer , to take, r eceive, keep or expend any
pr oper ty on behalf of the Gover nment, or to make any sur vey, assessment or contr act on
behalf of the Gover nment, or to execute any r evenue-pr ocess, or to investigate, or to
r epor t, on any matter affecting the pecuniar y inter ests of the Gover nment, or to make,
authenticate or keep any document r elating to the pecuniar y inter ests of the Gover nment,
or to pr event the infr action of any law for the pr otection of the pecuniar y inter ests of the
Gover nment ;
Ten th - Ever y officer whose duty it is, as such officer , to take, r eceive, keep or expend any
pr oper ty, to make any sur vey or assessment or to levy any r ate or tax for any secular
common pur pose of any village, town or distr ict, or to make, authenticate or keep any
document for the ascer taining of the r ights of the people of any village, town or distr ict;
Eleven th - Ever y per son who holds any office by vir tue of which he is empower ed to
pr epar e, publish, maintain or r evise an elector al r oll or to conduct an election or par t of
an election;
Twelf th - Ever y per son
(a) in the ser vice or pay of the Gover nment or r emuner ated by fees or commission
for the per for mance of any public duty by the Gover nment;
(b) in the ser vice or pay of a local author ity, a cor por ation established by or under
a Centr al, Pr ovincial or State Act or a Gover nment company as defined in section
617 of the Companies Act, 1956 (1 of 1956).
Illustration
A Municipal Commissioner is a public ser vant.
Explan ation 1.Per sons falling under any of the above descr iptions ar e public ser vants,
whether appointed by the Gover nment or not.
Explan ation 2.Wher ever the wor ds public ser vant occur , they shall be under stood of
ever y per son who is in actual possession of the situation of a public ser vant, whatever legal
defect ther e may be in his r ight to hold that situation.
Explan ation 3.The wor d election denotes an election for the pur pose of selecting
member s of any legislative, municipal or other public author ity, of whatever char acter , the
method of selection to which is by, or under , any law pr escr ibed as by election.
SECTION 2 OF INDUSTRIAL DISPUTES ACT, 1947
Definit ions.
2. In this Act, unless ther e is anything r epugnant in the subject or context,
** ** **
(g) employer means
(i) in r elation to an industr y car r ied on by or under the author ity of any
depar tment of the Centr al Gover nment or a State Gover nment, the author -
ity pr escr ibed in this behalf, or wher e no author ity is pr escr ibed, the head of
the depar tment;
(ii) in r elation to an industr y car r ied on by or on behalf of a local author ity, the
chief executive officer of that author ity;
** ** **
(s) wor kman means any per son (including an appr entice) employed in any indus-
t r y t o do any manual, unskilled, skilled, t echnical, oper at ional, cler ical or
super visor y wor k for hir e or r ewar d, whether the ter ms of employment be
expr ess or implied, and for the pur poses of any pr oceeding under this Act in
r elation to an industr ial dispute, includes any such per son who has been
dismissed, dischar ged or r etr enched in connection with, or as a consequence of,
that dispute, or whose dismissal, dischar ge or r etr enchment has led to that
dispute, but does not include any such per son
(i) who is subject to the Air For ce Act, 1950 (45 of 1950), or the Ar my Act, 1950
(46 of 1950), or the Navy Act, 1957 (62 of 1957); or
(ii) who is employed in the police ser vice or as an officer or other employee of
a pr ison; or
(iii) who is employed mainly in a manager ial or administr ative capacity; or
(iv) who, being employed in a super visor y capacity, dr aws wages exceeding one
thousand six hundr ed r upees per mensem or exer cises, either by the natur e
of the duties attached to the office or by r eason of the power s vested in him,
functions mainly of a manager ial natur e.
SECTION 11B OF INDUSTRIES (DEVELOPMENT
AND REGULATION) ACT, 1951
Power of Central Government to specify the requirements which shall be complied with
by the small scale industrial undertakings.
11B. (1) The Centr al Gover nment may, with a view to ascer taining which ancillar y and
small scale industr ial under takings need suppor tive measur es, exemptions or other
favour able tr eatment under this Act to enable them to maintain their viability and str ength
so as to be effective in :
(a) pr omoting in a har monious manner the industr ial economy of the countr y and
easing the pr oblem of unemployment, and
(b) secur ing that the owner ship and contr ol of the mater ial r esour ces of the
community ar e so distr ibuted as best to subser ve the common good,
specify, having r egar d to the factor s mentioned in sub-section (2), by notified or der , the
r equir ements which shall be complied with by an industr ial under taking to enable it to be
r egar ded, for the pur poses of this Act, as an ancillar y, or a small scale industr ial
under taking and differ ent r equir ements, may be so specified for differ ent pur poses or with
r espect to industr ial under takings engaged in the manufactur e or pr oduction of differ ent
ar t icles :
Provided that no industr ial under taking shall be r egar ded as an ancillar y industr ial
under taking unless it is, or is pr oposed to be, engaged in :
(i) the manufactur e of par ts, components, sub-assemblies, toolings or inter medi-
ates; or
(ii) r ender ing of ser vices, or supplying or r ender ing, not mor e than fifty per cent of
its pr oduction or its total ser vices, as the case may be, to other units for
pr oduction of other ar ticles.
1.1053 APPENDIX
I.T. ACT, 1961 1.1054
(2) The factor s r efer r ed to in sub-section (1) ar e the following, namely :
(a) the investment by the industr ial under taking in :
(i) plant and machiner y, or
(ii) land, buildings, plant and machiner y;
(b) the natur e of owner ship of the industr ial under taking;
(c) the smallness of the number of wor ker s employed in the industr ial under taking;
(d) the natur e, cost and quality of the pr oduct of the industr ial under taking;
(e) for eign exchange, if any, r equir ed for the impor t of any plant or machiner y by the
industr ial under taking; and
(f ) such other r elevant factor s as may be pr escr ibed.
(3) A copy of ever y notified or der pr oposed to be made under sub-section (1) shall be laid
in dr aft befor e each House of Par liament, while it is in session, for a total per iod of thir ty
days which may be compr ised in one session or in two or mor e successive sessions, and
if, befor e the expir y of the session immediately following the session or the successive
sessions afor esaid, both Houses agr ee in disappr oving the issue of the pr oposed notified
or der or both Houses agr ee in making any modification in the pr oposed notified or der , the
notified or der shall not be made, or as the case may be, shall be made only in such modified
for m as may be agr eed upon by both the Houses.
(4) Notwithstanding anything contained in sub-section (1), an industr ial under taking
which, accor ding to the law for the time being in for ce, fell, immediately befor e the
commencement of the Industr ies (Development and Regulation) Amendment Act, 1984,
under the definition of an ancillar y, or small scale industr ial under taking, shall, after such
commencement, continue to be r egar ded as an ancillar y, or small scale industr ial
under taking for the pur poses of this Act until the definition afor esaid is alter ed or
super seded by any notified or der made under sub-section (1).
SECTION 14 OF INDUSTRIES (DEVELOPMENT AND
REGULATION) ACT, 1951
Procedure for the grant of licence or permission.
14. Befor e gr anting any licence or per mission under section 11, section 11A, section 13
or section 29B, the Centr al Gover nment may r equir e such officer or author ity as it
may appoint for the pur pose, to make a full and complete investigations in r espect of
applications r eceived in this behalf, and r epor t to it the r esult of such investigation and in
making any such investigation, the officer or author ity shall follow such pr ocedur e as may
be pr escr ibed.
SECTION 2(1)(t ) OF INFORMATION TECHNOLOGY ACT, 2000
Definit ions.
** ** **
(t) electr onic r ecor d means data, r ecor d or data gener ated, image or sound stor ed,
r eceived or sent in an electr onic for m or micr o film or computer gener ated
micr o fiche;
SECTION 2 OF INSURANCE ACT, 1938
Definit ions.
** ** **
(5B) Contr oller of Insur ance means the officer appointed by the Centr al Gover n-
ment under section 2B to exer cise all the power s, dischar ge the functions and
per for ms the duties of the Author ity under this Act or the Life Insur ance
Cor por a t ion Act , 1956 (31 of 1956) or t he Gener a l Insu r a nce Bu siness
(Nationalisation) Act, 1972 (57 of 1972) or the Insur ance Regulator y and Deve-
lopment Author ity Act, 1999;
** ** **
(7A) Indian insur ance company means any insur er being a company
(a) which is for med and r egister ed under the Companies Act, 1956 (1 of 1956);
(b) in which the aggr egate holdings of equity shar es by a for eign company,
either by itself or thr ough its subsidiar y companies or its nominees, do not
exceed twenty-six per cent paid-up equity capital of such Indian insur ance
company;
(c) whose sole pur pose is t o car r y on life insur ance business or gener al
insur ance business or r e-insur ance business.
Explan ation For the pur poses of this clause, the expr ession for eign com-
pany shall have the meaning assigned to it under clause (23A) of sect ion 2
of the Income-tax Act, 1961 (43 of 1961);
** ** **
(9) insur er means
(a) any individual or unincor por ated body of individuals or body cor por ate
incor por ated under the law of any countr y other than India, car r ying on
insur ance business not being a per son specified in sub-clause (c) of t his
clause which
(i) car r ies on that business in India, or
(ii) has his or its pr incipal place of business or is domiciled in India, or
(iii) with the object of obtaining insur ance business, employs a r epr esenta-
tive, or maintains a place of business, in India;
(b) any body cor por ate [not being a per son specified in sub-clause (c) of t his
clause] car r ying on the business of insur ance, which is a body cor por ate
incor por ated under any law for the time being in for ce in India; or stands to
any such body cor por ate in the r elation of a subsidiar y company within the
meaning of the Indian Companies Act, 1913 (7 of 1913), as defined by sub-
section (2) of section 2 of that Act, and
(c) any per son who in India has a standing contr act with under wr iter s who ar e
member s of the Society of Llyods wher eby such per son is author ised within
the ter ms of such contr act to issue pr otection notes, cover notes, or other
documents gr anting insur ance cover to other s on behalf of the under wr it-
er s,
but does not include a pr incipal agent, chief agent, special agent, or an insur ance
agent or a pr ovident society as defined in Par t III;
SECTION 43 OF LIFE INSURANCE CORPORATION ACT, 1956
Application of the Insurance Act.
43. (1) The following sections of the Insur ance Act shall, so far as may be, apply to the
Cor por ation as they apply to any other insur er , namely :
1.1055 APPENDIX
I.T. ACT, 1961 1.1056
Sections 2, 2B, 3, 18, 26, 33, 38, 39, 41, 45, 46, 47A, 50, 51, 52, 110A, 110B, 110C, 119, 121, 122
and 123.
(2) The Centr al Gover nment shall as soon as may be after the commencement of this Act,
by notification in the Official Gazette, dir ect that the following sections of the Insur ance
Act shall apply to the Cor por ation subject to such conditions and modifications as may be
specified in the notification, namely :
Sections 2D, 10, 11, 13, 14, 15, 20, 21, 22, 23, 25, 27A, 28A, 35, 36, 37, 40, 40A, 40B, 43, 44, 102
to 106, 107 to 110, 111, 113, 114 and 116A.
(2A) Section 42 of the Insur ance Act shall have effect in r elation to the issue to any
individual of a license to act as an agent for the pur pose of soliciting or pr ocur ing life
insur ance business for the Cor por ation as if the r efer ence to an officer author ised by the
Author ity in this behalf in sub-section (1) ther eof included a r efer ence to an officer of the
Cor por ation author ised by the Author ity in this behalf.
(3) The Centr al Gover nment may, by notification in the Official Gazette, dir ect that all or
any of the pr ovisions of the Insur ance Act other than those specified in sub-section (1) or
sub-section (2), shall apply to the Cor por ation subject to such conditions and modifications
as may be specified in the notification.
(4) Ever y notification issued under sub-section (2) or sub-section (3) shall be laid for not
less than thir ty days befor e both Houses of Par liament as soon as possible after it is issued,
and shall be subject to such modifications as Par liament may make dur ing the session in
which it is so laid or the session immediately following.
(5) Save as pr ovided in this section, nothing contained in the Insur ance Act shall apply to
the Cor por ation.
SECTION 3(12) OF MERCHANT SHIPPING ACT, 1958
Definit ions.
** ** **
(12) fishing vessel means a ship fitted with mechanical means of pr opulsion which
is exclusively engaged in sea fishing for pr ofit;
SECTION 2 OF NATIONAL TRUST FOR WELFARE OF PERSONS WITH
AUTISM, CEREBRAL PALSY, MENTAL RETARDATION AND
MULTIPLE DISABILITIES ACT, 1999
Definit ions.
(a) autism means a condition of uneven skill development pr imar ily affecting the
communication and social abilities of a per son, mar ked by r epetitive and
r itualistic behaviour ;
** ** **
(c) cer ebr al palsy means a gr oup of non-pr ogr essive conditions of a per son
char acter ised by abnor mal motor contr ol postur e r esulting fr om br ain insult or
injur ies occur r ing in the pr e-natal, per inatal or infant per iod of development;
** ** **
(g) mental r etar dation means a condition of ar r ested or incomplete development
of mind of a per son which is specially char acter ised by sub-nor mality of
int elligence;
1.1057 APPENDIX
(h ) multiple disabilities means a combination of two or mor e disabilities as defined
in clause (i) of section 2 of the Per sons with Disabilities (Equal Oppor tunities,
Pr otection of Rights and Full Par ticipation) Act, 1995 (1 of 1996);
** ** **
(j) per son with disability means a per son suffer ing fr om any of the conditions
r elating to autism, cer ebr al palsy, mental r etar dation or a combination of any two
or mor e of such conditions and includes a per son suffer ing fr om sever e multiple
disabilit y;
** ** **
(o) sever e disability means disability with eighty per cent or mor e of one or mor e
of mult iple disabilit ies;
** ** **
SECTION 2 OF PATENTS ACT, 1970
Definitions and interpretation
2. ** ** **
(b) Contr oller means the Contr oller Gener al of Patents, Designs and Tr ade Mar ks
r efer r ed to in section 73;
** ** **
(o) patented ar ticle and patented pr ocess mean r espectively an ar ticle or pr ocess
in r espect of which a patent is in for ce;
** ** **
(q) patent of addition means a patent gr anted in accor dance with section 54;
** ** **
(y) tr ue and fir st inventor does not include either the fir st impor ter of an invention
into India, or a per son to whom an invention is fir st communicated fr om outside
India.
SECTION 4 OF PAYMENT OF GRATUITY ACT, 1972
Payment of gratuity.
4. (1) ** ** **
(2) For ever y completed year of ser vice or par t ther eof in excess of six months, the
employer shall pay gr atuity to an employee at the r ate of fifteen days wages based on the
r ate of wages last dr awn by the employee concer ned :
Provided that in the case of a piece-r ated employee, daily wages shall be computed on the
aver age of the total wages r eceived by him for a per iod of thr ee months immediately
pr eceding the ter mination of his employment, and, for this pur pose, the wages paid for any
over time wor k shall not be taken into account :
Provided further that in the case of an employee who is employed in a seasonal
establishment and who is not so employed thr oughout the year , the employer shall pay the
gr atuity at the r ate of seven days wages for each season.
Explan ation .In the case of a monthly r ated employee, the fifteen days wages shall be
calculated by dividing the monthly r ate of wages last dr awn by him by twenty-six and
multiplying the quotient by fifteen.
(3) The amount of gr atuity payable to an employee shall not exceed thr ee lakhs and fifty
thousand r upees.
** ** **
SECTION 2 OF PERSONS WITH DISABILITIES (EQUAL OPPORTUNITIES,
PROTECTION OF RIGHTS & FULL PARTICIPATION) ACT, 1995
Definit ions
2. ** ** **
(a) appr opr iate Gover nment means,
(i) in r elat ion t o t he Cent r al Gover nment or any est ablishment wholly or
substantially financed by that Gover nment, or a Cantonment Boar d consti-
tuted under the Cantonment Act, 1924 (2 of 1924), the Centr al Gover nment;
(ii) in r elation to a State Gover nment or any establishment wholly or substan-
tially financed by that Gover nment, or any local author ity, other than a
Cantonment Boar d, the State Gover nment;
(iii) in r espect of the Centr al Co-or dination Committee and the Centr al Executive
Committee, the Centr al Gover nment;
(iv ) in r espect of the State Co-or dination Committee and the State Executive
Committee, the State Gover nment;
(b) blindness r efer s to a condition wher e a per son suffer s fr om any of the following
(i) total absence of sight; or
(ii) visual acuity not exceeding 6/ 60 or 20/ 200 (snellen) in the better eye with
cor r ecting lenses; or
(iii) limitation of the field of vision subtending an angle of 20 degr ee or wor se;
** ** **
(i) disability means
(i) blindness;
(ii) low vision;
(iii) lepr osy-cur ed;
(iv ) hear ing impair ment;
(v) locomotor disability;
(vi) mental r etar dation;
(vii) mental illness;
** ** **
(l) hear ing impair ment means loss of sixty decibels or mor e in the better ear in the
conver sational r ange of fr equencies;
** ** **
(n ) lepr osy-cur ed per son means any per son who has been cur ed of lepr osy but is
suffer ing fr om
(i) loss of sensation in hands or feet as well as loss of sensation and par esis in
the eye and eye-lid but with no manifest defor mity;
(ii) manifest defor mity and par esis but having sufficient mobility in their hands
and feet to enable them to engage in nor mal economic activity;
(iii) extr eme physical defor mity as well as advanced age which pr events him
fr om under taking any gainful occupation,
and the expr ession lepr osy-cur ed shall be constr ued accor dingly;
(o) locomotor disability means disability of the bones, joints or muscles leading to
substantial r estr iction of the movement of the limbs or any for m of cer ebr al palsy;
(p) medical author ity means any hospital or institution specified for the pur poses of
this Act by notification by the appr opr iate Gover nment;
I.T. ACT, 1961 1.1058
(q) mental illness means any mental disor der other than mental r etar dation;
(r) mental r etar dation means a condition of ar r ested or incomplete development of
mind of a per son which is specially char acter ised by subnor mality of intelligence;
** ** **
(t) per son with disability means a per son suffer ing fr om not less than for ty per cent
of any disability as cer tified by a medical author ity;
(u ) per son with low vision means a per son with impair ment of visual functioning even
after tr eatment or standar d r efr active cor r ection but who uses or is potentially
capable of using vision for the planning or execution of a task with appr opr iate
assistive device;
** ** **
(w) r ehabilitation r efer s to a pr ocess aimed at enabling per sons with disabilities to
r each and maintain their optimal physical, sensor y, intellectual, psychiatr ic or
social functional levels;
SECTION 56 OF PERSONS WITH DISABILITIES (EQUAL OPPORTUNITIES,
PROTECTION OF RIGHTS & FULL PARTICIPATION) ACT, 1995
Inst it ut ions for persons wit h severe disabilit ies.
56. (1) The appr opr iate Gover nment may establish and maintain institutions for per sons
wit h sever e disabilit ies at such places as it t hinks fit .
(2) Wher e, the appr opr iate Gover nment is of opinion that any institution other than an
inst it ut ion, est ablished under sub-sect ion (1), is fit for t he r ehabilit at ion of t he per sons wit h
sever e disabilities, the Gover nment may r ecognise such institution as an institution for
per sons with sever e disabilities for the pur poses of this Act :
Provided that no institution shall be r ecognised under this section unless such institution
has complied with the r equir ements of this Act and the r ules made ther eunder .
(3) Ever y institution established under sub-section (1) shall be maintained in such manner
and satisfy such conditions as may be pr escr ibed by the appr opr iate Gover nment.
(4) For the pur poses of this section per son with sever e disability means a per son with
eighty per cent or mor e of one or mor e disabilities.
SECTION 2(e) OF RESERVE BANK OF INDIA ACT, 1934
Definit ions.
** ** **
(e) scheduled bank means a bank included in the Second Schedule ;
REGULATION 2(p) OF SECURITIES AND EXCHANGE BOARD OF
INDIA (MUTUAL FUNDS) REGULATIONS, 1996
Definit ions.
2. In these r egulations, unless the context other wise r equir es:
** ** **
(p) money mar ket mutual fund means a scheme of a mutual fund which has been
set up with the objective of investing exclusively in money mar ket instr uments;
1.1059 APPENDIX
SECTION 2 OF SECURITIES CONTRACTS (REGULATION) ACT, 1956
Definit ions.
(a) contr act means a contr act for or r elating to the pur chase or sale of secur ities;
(aa) cor por atisation means the succession of a r ecognised stock exchange, being a
body of individuals or a society r egister ed under the Societies Registr ation Act,
1860 (21 of 1860), by another stock exchange, being a company incor por ated for
the pur pose of assisting, r egulating or contr olling the business of buying, selling
or dealing in secur ities car r ied on by such individuals or society;
(ab) demutualisation means the segr egation of owner ship and management fr om
the tr ading r ights of the member s of a r ecognised stock exchange in accor dance
with a scheme appr oved by the Secur ities and Exchange Boar d of India;
(ac) der ivative includes
(A) a secur ity der ived fr om a debt instr ument, shar e, loan, whether secur ed
or unsecur ed, r isk instr ument or contr act for differ ences or any other
for m of secur ity;
(B) a contr act which der ives its value fr om the pr ices, or index of pr ices, of
under lying secur ities;
(b) Gover nment secur ity means a secur ity cr eated and issued, whether befor e or
after the commencement of this Act, by the Centr al Gover nment or a State
Gover nment for the pur pose of r aising a public loan and having one of the for ms
specified in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944);
(c) member means a member of a r ecognised stock exchange;
(d) option in secur ities means a contr act for the pur chase or sale of a r ight to buy
or sell, or a r ight to buy and sell, secur ities in futur e, and includes a teji, a m an di,
a teji m an di, a galli, a put, a call or a put and call in secur ities;
(e) pr escr ibed means pr escr ibed by r ules made under this Act;
(f ) r ecognised stock exchange means a stock exchange which is for the time being
r ecognised by the Centr al Gover nment under section 4;
(g) r ules, with r efer ence to the r ules r elating in gener al to the constitution and
management of a stock exchange, includes, in the case of a stock exchange which
is an incor por ated association, its memor andum and ar ticles of association;
(ga) scheme means a scheme for cor por atisation or demutualisation of a r ecognised
stock exchange which may pr ovide for
(i) the issue of shar es for a lawful consider ation and pr ovision of tr ading
r ights in lieu of member ship car ds of member s of a r ecognised stock
exchange;
(ii) t he r est r ict ions on vot ing r ight s;
(iii) t he t r ansfer of pr oper t y, business, asset s, r ight s, liabilit ies, r ecognit ions,
contr acts of the r ecognised stock exchange, legal pr oceedings by, or
against, the r ecognised stock exchange, whether in the name of the
r ecognised stock exchange or any tr ustee or other wise and any per mis-
sion given to, or by, the r ecognised stock exchange;
(iv) the tr ansfer of employees of a r ecognised stock exchange to another
r ecognised stock exchange;
(v) any other matter r equir ed for the pur pose of, or in connection with, the
cor por atisation or demutualisation, as the case may be, of the r ecognised
stock exchange;
I.T. ACT, 1961 1.1060
(gb) Secur ities Appellate Tr ibunal means a Secur ities Appellate Tr ibunal estab-
lished under sub-section (1) of section 15K of the Secur ities and Exchange Boar d
of India Act, 1992 (15 of 1992);
(h ) secur ities include
(i) shar es, scr ips, stocks, bonds, debentur es, debentur e stock or other mar -
ketable secur ities of a like natur e in or of any incor por ated company or
other body cor por ate;
(ia) der ivat ive;
(ib) units or any other instr ument issued by any collective investment scheme
to the investor s in such schemes;
(ic) secur ity r eceipt as defined in clause (zg) of section 2 of the Secur itisation
and Reconstr uction of Financial Assets and Enfor cement of Secur ity
Inter est Act, 2002;
(id) units or any other such instr ument issued to the investor s under any
mutual fund scheme;
(ie) any cer tificate or instr ument (by whatever name called), issued to an
investor by any issuer being a special pur pose distinct entity which
possesses any debt or r eceivable, including mor tgage debt, assigned to
such entity, and acknowledging beneficial inter est of such investor in
such debt or r eceivable, including mor tgage debt, as the case may be;
(ii) Gover nment secur ities;
(iia) such other instr uments as may be declar ed by the Centr al Gover nment
to be secur ities; and
(iii) r ight s or int er est in secur it ies;
(i) spot deliver y contr act means a contr act which pr ovides for ,
(a) actual deliver y of secur ities and the payment of a pr ice ther efor either on
the same day as the date of the contr act or on the next day, the actual
per iod taken for the despatch of the secur ities or the r emittance of money
ther efor thr ough the post being excluded fr om the computation of the
per iod afor esaid if the par ties to the contr act do not r eside in the same
town or locality;
(b) tr ansfer of the secur ities by the depositor y fr om the account of a
beneficial owner to the account of another beneficial owner when such
secur ities ar e dealt with by a depositor y;
(j) stock exchange means
(a) any body of individuals, whether incor por ated or not, constituted befor e
cor por atisation and demutualisation under sections 4A and 4B, or
(b) a body cor por a t e incor por a t ed u nder t he Compa nies Act , 1956
(1 of 1956) whether under a scheme of cor por atisation and demu-
tualisation or other wise,
for the pur pose of assisting, r egulating or contr olling the business of buying,
selling or dealing in secur ities.
SECTION 3(1)(ga) OF SICK INDUSTRIAL COMPANIES
(SPECIAL PROVISIONS) ACT, 1985
Definit ions.
** ** **
(ga) net wor th means the sum total of the paid-up capital and fr ee r eser ves.
1.1061 APPENDIX
Explan ation .For the pur poses of this clause, fr ee r eser ves means all r eser ves cr edited
out of the pr ofits and shar e pr emium account but does not include r eser ves cr edited out
of r e-evaluation of assets, wr ite back of depr eciation pr ovisions and amalgamation.
** ** **
SECTION 17 OF SICK INDUSTRIAL COMPANIES
Powers of Board to make suitable order on the completion of inquiry.
17. (1) If after making an inquir y under section 16, the Boar d is satisfied that a company
has become a sick industr ial company, the Boar d shall, after consider ing all the
r elevant facts and cir cumstances of the case, decide, as soon as may be by or der in wr iting,
whether it is pr acticable for the company to make its net wor th exceed the accumulated
losses within a r easonable time.
(2) If the Boar d decides under sub-section (1) that it is pr acticable for a sick industr ial
company to make its net wor th exceed the accumulated losses within a r easonable time,
the Boar d, shall, by or der in wr iting and subject to such r estr ictions or conditions as may
be specified in the or der , give such time to the company as it may deem fit to make its net
wor th exceed the accumulated losses.
(3) If the Boar d decides under sub-section (1) that it is not pr acticable for a sick industr ial
company to make its net wor th exceed the accumulated losses within a r easonable time
and that it is necessar y or expedient in the public inter est to adopt all or any of the measur es
specified in section 18 in r elation to the said company it may, as soon as may be, by or der
in wr iting, dir ect any oper ating agency specified in the or der to pr epar e, having r egar d to
such guidelines as may be specified in the or der , a scheme pr oviding for such measur es
in r elation to such company.
(4) The Boar d may,
(a) if any of the r estr ictions or conditions specified in an or der made under sub-
section (2) ar e not complied with by the company concer ned, or if the company
fails to r evive in pur suance of the said or der , r eview such or der on a r efer ence
in that behalf fr om any agency r efer r ed to in sub-section (2) of section 15 or on
its own motion and pass a fr esh or der in r espect of such company under sub-
section (3);
(b) if the oper ating agency specified in an or der made under sub-section (3) makes
a submission in that behalf, r eview such or der and modify the or der in such
manner as it may deem appr opr iate.
SECTION 18 OF SICK INDUSTRIAL COMPANIES
Preparation and sanction of schemes.
18. (1) Wher e an or der is made under sub-section (3) of section 17 in r elation to any sick
industr ial company, the oper ating agency specified in the or der shall pr epar e, as
expeditiously as possible and or dinar ily within a per iod of ninety days fr om the date of
such or der , a scheme with r espect to such company pr oviding for any one or mor e of the
following measur es, namely :
(a) the financial r econstr uction of the sick industr ial company;
(b) the pr oper management of the sick industr ial company by change in, or take over
of, the management of the sick industr ial company;
(c) the amalgamation of
(i) the sick industr ial company with any other company, or
(ii) any other company with the sick industr ial company;
I.T. ACT, 1961 1.1062
(her eafter in this section, in the case of sub-clause (i), the other company, and in
the case of sub-clause (ii), the sick industr ial company, r efer r ed to as tr ansfer ee
company);
(d) the sale or lease of a par t or whole of any industr ial under taking of the sick
industr ial company;
(da) the r ationalisation of manager ial per sonnel, super visor y staff and wor kmen in
accor dance with law;
(e) such other pr eventive, amelior ative and r emedial measur es as may be appr opr i-
ate;
(f ) such incidental, consequential or supplemental measur es as may be necessar y or
expedient in connection with or for the pur poses of the measur es specified in
clauses (a) t o (e).
(2) The scheme r efer r ed to in sub-section (1) may pr ovide for any one or mor e of the
following, namely :
(a) the constitution, name and r egister ed office, the capital, assets, power s, r ights,
inter ests, author ities and pr ivileges, duties and obligations of the sick industr ial
company or , as the case may be, of the tr ansfer ee company;
(b) the tr ansfer to the tr ansfer ee company of the business, pr oper ties, assets and
liabilities of the sick industr ial company on such ter ms and conditions as may be
specified in the scheme;
(c) any change in the Boar d of Dir ector s, or the appointment of a new Boar d of
Dir ector s, of the sick industr ial company and the author ity by whom, the manner
in which and the other ter ms and conditions on which, such change or appoint-
ment shall be made and in the case of appointment of a new Boar d of Dir ector s
or of any dir ector , the per iod for which such appointment shall be made;
(d) the alter ation of the memor andum or ar ticles of association of the sick industr ial
company or , as the case may be, of the tr ansfer ee company for the pur pose of
alter ing the capital str uctur e ther eof or for such other pur poses as may be
necessar y to give effect to the r econstr uction or amalgamation;
(e) the continuation by, or against, the sick industr ial company or , as the case may
be, the tr ansfer ee company of any action or other legal pr oceeding pending
against the sick industr ial company immediately befor e the date of the or der
made under sub-section (3) of section 17;
(f ) the r eduction of the inter est or r ights which the shar eholder s have in the sick
industr ial company to such extent as the Boar d consider s necessar y in the
inter ests of the r econstr uction, r evival or r ehabilitation of the sick industr ial
company or for the maintenance of the business of the sick industr ial company;
(g) the allotment to the shar eholder s of the sick industr ial company of shar es in the
sick industr ial company or , as the case may be, in the tr ansfer ee company and
wher e any shar eholder claims payment in cash and not allotment of shar es, or
wher e it is not possible to allot shar es to any shar eholder , the payment of cash to
t hose shar eholder s in full sat isfact ion of t heir claims
(i) in r espect of their inter est in shar es in the sick industr ial company befor e its
r econstr uction or amalgamation; or
(ii) wher e such inter est has been r educed under clause (f ) in r espect of their
inter est in shar es as so r educed;
(h ) any other ter ms and conditions for the r econstr uction or amalgamation of the
sick industr ial company;
1.1063 APPENDIX
(i) sale of the industr ial under taking of the sick industr ial company fr ee fr om all
encumbr ances and all liabilities of the company or other such encumbr ances
and liabilities as may be specified, to any per son, including a co-oper ative society
for med by the employees of such under taking and fixing of r eser ve pr ice for such
sale;
(j) lease of the industr ial under taking of the sick industr ial company to any per son,
including a co-oper ative society for med by the employees of such under taking;
(k ) method of sale of the assets of the industr ial under taking of the sick industr ial
company such as by public auction or by inviting tender s or in any other manner
as may be specified and for the manner of publicity ther efor ;
(l) tr ansfer or issue of the shar es in the sick industr ial company at the face value or
at the intr insic value which may be at discount value or such other value as may
be specified to any industr ial company or any per son including the executives
and employees of the sick industr ial company;
(m ) such incidental, consequential and supplemental matter s as may be necessar y to
secur e that the r econstr uction or amalgamation or other measur es mentioned
in the scheme ar e fully and effectively car r ied out.
(3) (a) The scheme pr epar ed by the oper ating agency shall be examined by the Boar d and
a copy of the scheme with modification, if any, made by the Boar d shall be sent, in dr aft,
to the sick industr ial company and the oper ating agency and in the case of amalgamation,
also to any other company concer ned, and the Boar d shall publish or cause to be published
the dr aft scheme in br ief in such daily newspaper s as the Boar d may consider necessar y,
for suggestions and objections, if any, within such per iod as the Boar d may specify.
(b) The Boar d may make such modifications, if any, in the dr aft scheme as it may consider
necessar y in the light of the suggestions and objections r eceived fr om the sick industr ial
company and the oper ating agency and also fr om the tr ansfer ee company and any other
company concer ned in the amalgamation and fr om any shar eholder or any cr editor s or
employees of such companies :
Provided that wher e the scheme r elates to amalgamation, the said scheme shall be laid
befor e the company other than the sick industr ial company in the gener al meeting for the
appr oval of the scheme by its shar eholder s and no such scheme shall be pr oceeded with
unless it has been appr oved, with or without modification, by a special r esolution passed
by the shar eholder s of the tr ansfer ee company.
(4) The scheme shall ther eafter be sanctioned, as soon as may be, by the boar d (her einafter
r efer r ed to as the sanctioned scheme) and shall come into for ce on such date as the Boar d
may specify in this behalf :
Provided that differ ent dates may be specified for differ ent pr ovisions of the scheme.
(5) The Boar d may on the r ecommendations of the oper ating agency or other wise, r eview
any sanctioned scheme and make such modifications as it may deem fit or may by or der
in wr iting dir ect any oper ating agency specified in the or der , having r egar d to such
guidelines as may be specified in the or der , to pr epar e a fr esh scheme pr oviding for such
measur es as the oper ating agency may consider necessar y.
(6) When a fr esh scheme is pr epar ed under sub-section (5), the pr ovisions of sub-sections
(3) and (4) shall apply in r elation ther eto as they apply to in r elation to a scheme pr epar ed
under sub-section (1).
(6A) Wher e a sanctioned scheme pr ovides for the tr ansfer of any pr oper ty or liability of
the sick industr ial company in favour of any other company or per son or wher e such
scheme pr ovides for the tr ansfer of any pr oper ty or liability of any other company or
per son in favour of the sick industr ial company, then, by vir tue of, and to the extent
I.T. ACT, 1961 1.1064
pr ovided in, the scheme, on and fr om the date of coming into oper ation of the sanctioned
scheme or any pr ovision ther eof, the pr oper ty shall be tr ansfer r ed to, and vest in, and the
liability shall become the liability of, such other company or per son or , as the case may be,
the sick industr ial company.
(7) The sanction accor ded by the Boar d under sub-section (4) shall be conclusive evidence
that all the r equir ements of this scheme r elating to the r econstr uction or amalgamation,
or any other measur e specified ther ein have been complied with and a copy of the
sanctioned scheme cer tified in wr iting by an officer of the Boar d to be a tr ue copy ther eof,
shall, in all legal pr oceedings (whether in appeal or other wise) be admitted as evidence.
(8) On and fr om the date of the coming into oper ation of the sanctioned scheme or any
pr ovision ther eof, the scheme or such pr ovision shall be binding on the sick industr ial
company and the tr ansfer ee company or , as the case may be, the other company and also
on the shar eholder s, cr editor s and guar antor s and employees of the said companies.
(9) If any difficulty ar ises in giving effect to the pr ovisions of the sanctioned scheme, the
Boar d may, on the r ecommendation of the oper ating agency or other wise, by or der do
anything, not inconsistent with such pr ovisions, which appear s to it to be necessar y or
expedient for the pur pose of r emoving the difficulty.
(10) The Boar d may, if it deems necessar y or expedient so to do, by or der in wr iting, dir ect
any oper ating agency specified in the or der to implement a sanctioned scheme with such
ter ms and conditions and in r elation to such sick industr ial company as may be specified
in the or der .
(11) Wher e the whole of the under taking of the sick industr ial company is sold under a
sanctioned scheme, the Boar d may distr ibute the sale pr oceeds to the par ties entitled
ther eto in accor dance with the pr ovisions of section 529A and other pr ovisions of the
Companies Act, 1956 (1 of 1956).
(12) The Boar d may monitor per iodically the implementation of the sanctioned scheme.
SECTION 2 OF SPECIAL ECONOMIC ZONES ACT, 2005
Definit ions
** ** **
(g) Developer means a per son who, or a State Gover nment which, has been gr anted
by the Centr al Gover nment a letter of appr oval under sub-section (10) of section
3 and includes an author ity and a Co-Developer ;
** ** **
(j) entr epr eneur means a per son who has been gr anted a letter of appr oval by the
Development Commissioner under sub-section (9) of section 15;
** ** **
(q) Int er nat ional Financial Ser vices Cent r e means an Int er nat ional Financial
Ser vices Centr e which has been appr oved by the Centr al Gover nment under sub-
(r) manufactur e means to make, pr oduce, fabr icate, assemble, pr ocess or br ing
into existence, by hand or by machine, a new pr oduct having a distinctive name,
char acter or use and shall include pr ocesses such as r efr iger ation, cutting,
polishing, blending, r epair , r emaking, r e-engineer ing and includes agr icultur e,
aquacultur e, animal husbandr y, flor icultur e, hor ticultur e, piscicultur e, poultr y,
ser icultur e, viticultur e and mining;
** ** **
1.1065 APPENDIX
(u ) Offshor e Banking Unit means a br anch of a bank located in a Special Economic
Zone and which has obtained the per mission under clause (a) of sub-section (1)
of section 23 of the Banking Regulation Act, 1949 (10 of 1949);
** ** **
(za) Special Economic Zone means each Special Economic Zone notified under the
pr oviso to sub-section (4) of section 3 and sub-section (1) of section 4 (including
Fr ee Tr ade and War ehousing Zone) and includes an existing Special Economic
Zone;
** ** **
(zc) Unit means a Unit set up by an entr epr eneur in a Special Economic Zone and
includes an existing Unit, an Offshor e Banking Unit and a Unit in an Inter national
Financial Ser vices Centr e whether established befor e or established after the
commencement of this Act;
** ** **
CHAPTER IV OF SUPREME COURT JUDGES (SALARIES &
CONDITIONS OF SERVICE) ACT, 1958
Travelling allowance to a Judge.
22. A Judge shall r eceive such r easonable allowance t o r eimbur se him for expenses
incur r ed in tr avelling on duty within the ter r itor y of India and shall be affor ded such
r easonable facilit ies in connect ion wit h t r avelling as may, fr om t ime t o t ime, be pr e-
scr ibed.
Facilities for rent-free houses and other conditions of service.
23. (1) Ever y Judge shall be entitled without payment of r ent to the use of an official
r esidence in accor dance with such r ules as may, fr om time to time, be made in this
behalf.
(1A) Wher e a Judge does not avail himself of the use of an official r esidence, he may be
paid ever y month an allowance of ten thousand r upees.
(2) Ever y Judge and the member s of his family shall be entitled to such facilities for
medical tr eatment and for accommodation in hospitals as may, fr om time to time, be
pr escr ibed.
(3) The conditions of ser vice of a Judge for which no expr ess pr ovision has been made in
this Act shall be as such as may be deter mined by r ules made under this Act.
(4) Sub-sections (1), (2) and (3) shall be deemed to have come into for ce on the 26th day
of Januar y, 1950 and sub-section (1A) shall be deemed to have come into for ce on the 9th
day of May, 1986 and any r ule made under any of the said sub-sections may be made so
as to be r etr ospective to any date not ear lier than the commencement of the r espective
sub-sect ion.
Conveyance facilities.
23A. Ever y Judge shall be entitled to a staff car and two hundr ed litr es of fuel ever y
month or the actual consumption of fuel per month, whichever is less.
Sumptuary allowance.
23B. The Chief Justice and each of the other Judges shall be entitled to a sumptuar y
allowance of four thousand r upees per month and thr ee thousand r upees per month
r espectively.
I.T. ACT, 1961 1.1066
Medical facilities for retired Judges.
23C. Ever y r etir ed Judge shall, with effect fr om the date on which the Supr eme Cour t
Judges (Condit ions of Ser vice) Amendment Act , 1976 (36 of 1976), r eceives t he
assent of the Pr esident, be entitled, for himself and his family, to the same facilities as
r espects medical tr eatment and on the same conditions as r etir ed officer of the Centr al
Civil Ser vices, Class I and his family, ar e entitled under any r ules and or der s of the Cen-
tr al Gover nment for the time being in for ce.
Exemption from liability to pay income-tax on certain perquisites received by a Judge.
23D. Notwithstanding anything contained in the Income-tax Act, 1961 (43 of 1961),
(a) the value of r ent-fr ee official r esidence pr ovided to a Judge under sub-section (1)
of section 23 or the allowance paid to him under sub-section (1A) of that section;
(b) the value of the conveyance facilities pr ovided to a Judge under section 23A;
(c) the summar y allowance pr ovided to a Judge under section 23B;
(d) the value of leave tr avel concession pr ovided to a Judge and member s of his
family,
shall not be included in the computation of his income char geable under the head Sala-
r ies under section 15 of the Income-tax Act, 1961.
SECTION 2(e) OF TRADE UNIONS ACT, 1926
Definit ions.
2. ** ** **
(e) r egister ed Tr ade Union means a Tr ade Union r egister ed under this Act;
SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882
Part performance.
53A. Wher e any per son contr acts to tr ansfer for consider ation any immovable pr oper ty
by wr iting signed by him or on his behalf fr om which the ter ms necessar y to
constitute the tr ansfer can be ascer tained with r easonable cer tainty,
and the tr ansfer ee has, in par t per for mance of the contr act, taken possession of the
pr oper ty or any par t ther eof, or the tr ansfer ee, being alr eady in possession, continues in
possession in par t per for mance of the contr act and has done some act in fur ther ance of
the contr act,
and the tr ansfer ee has per for med or is willing to per for m his par t of the contr act,
then notwithstanding that wher e ther e is an instr ument of tr ansfer , that the tr ansfer has
not been completed in the manner pr escr ibed ther efor by the law for the time being in
for ce, the tr ansfer or or any per son claiming under him shall be debar r ed fr om enfor cing
against the tr ansfer ee and per sons claiming under him any r ight in r espect of the pr oper ty
of which the tr ansfer ee has taken or continued in possession, other than a r ight expr essly
pr ovided by the ter ms of the contr act :
Provided that nothing in this section shall affect the r ights of a tr ansfer ee for consider ation
who has no notice of the contr act or of the par t per for mance ther eof.
1.1067 APPENDIX

Income Tax Act 1961

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INCOME-TAX ACT, 1961*

(i) pr ofits and gains

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