AL-AMEEN COLLEGE OF LAW

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TAXATION

MODEL ANSWER

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1. Define tax. State the different types of tax levied in India.

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Introduction:

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A tax may be defined as a "pecuniary burden laid upon individuals or
property owners to support the government or a payment exacted by legislative

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authority.

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A tax "is not a voluntary payment or donation, but an enforced contribution, exacted
pursuant to legislative authority" and is "any contribution imposed by government
whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise,
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subsidy, aid, supply, or other name.

Types of taxation:
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Personal income tax is often collected on a pay-as-you-earn basis, with small

corrections made soon after the end of the tax year. These corrections take one of
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two forms: payments to the government, for taxpayers who have not paid enough
during the tax year; and tax refunds from the government for those who have
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overpaid. Income tax systems will often have deductions available that lessen the
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total tax liability by reducing total taxable income. They may allow losses from one
type of income to be counted against another. For example, a loss on the stock
market may be deducted against taxes paid on wages. Other tax systems may isolate
the loss, such that business losses can only be deducted against business tax by
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carrying forward the loss to later tax years.

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The following are the different types of tax :

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Income tax

Income tax is levied on the income of the assessee. There are 5 heads of
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income under Income tax Act, 1961. They are as follows;

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Salary
Income from house property
Profits and gains from business or profession
 Income from other sources
Capital gains.

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Capital gains tax

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Most jurisdictions imposing an income tax treat capital gains as part of

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income subject to tax. Capital gain is generally gain on sale of capital assets, i.e.,
those assets not held for sale in the ordinary course of business. Capital assets
include personal assets in many jurisdictions. Some jurisdictions provide preferential

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rates of tax or only partial taxation for capital gains. Some jurisdictions impose

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different rates or levels of capital gains taxation based on the length of time the
asset was held.

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Corporate tax

Corporate tax refers to income, capital, net worth, or other taxes imposed on

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corporations. Rates of tax and the taxable base for corporations may differ from
those for individuals or other taxable persons.

Social security contributions LA

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Many countries provide publicly funded retirement or health care systems. In
connection with these systems, the country typically requires employers and/or
employees to make compulsory payments. These payments are often computed by
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reference to wages or earnings from self employment. Tax rates are generally fixed,
but a different rate may be imposed on employers than on employees. Some
systems provide an upper limit on earnings subject to the tax. A few systems provide
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that the tax is payable only on wages above a particular amount. Such upper or
lower limits may apply for retirement but not health care components of the tax.
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Taxes on payroll or workforce

Unemployment and similar taxes are often imposed on employers based on

total payroll. These taxes may be imposed at both the country and sub-country
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levels.
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Taxes on property
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Recurrent [property taxes] may be imposed on immovable property (real

property) and some classes of movable property. In addition, recurrent taxes may be
imposed on net wealth of individuals or corporations. Many jurisdictions impose
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estate tax, gift tax or other inheritance taxes on property at death or gift transfer.
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Some jurisdictions impose taxes on financial or capital transactions.

 Property tax

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A property tax (or millage tax) is an ad valorem tax levy on the value of
property that the owner of the property is required to pay to a government in which

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the property is situated. Multiple jurisdictions may tax the same property. There are
three general varieties of property: land, improvements to land (immovable man-

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made things, e.g. buildings) and personal property (movable things). Real estate or
realty is the combination of land and improvements to land.

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Property taxes are usually charged on a recurrent basis (e.g., yearly). A

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common type of property tax is an annual charge on the ownership of real estate,
where the tax base is the estimated value of the property.

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Inheritance tax

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Inheritance tax, estate tax, and death tax or duty is the names given to
various taxes which arise on the death of an individual. In United States tax law,

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there is a distinction between an estate tax and an inheritance tax: the former taxes
the personal representatives of the deceased, while the latter taxes the beneficiaries
of the estate. However, this distinction does not apply in other jurisdictions; for
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example, if using this terminology UK inheritance tax would be an estate tax.

Expatriation tax
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An Expatriation Tax is a tax on individuals who renounce their citizenship or

residence. The tax is often imposed based on a deemed disposition of all the
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individual's property.

Transfer tax
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Historically, in many countries, a contract needed to have a stamp affixed to

make it valid. The charge for the stamp was either a fixed amount or a percentage of
the value of the transaction. In most countries the stamp has been abolished but
stamp duty remains. Stamp duty is levied in the UK on the purchase of shares and
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securities, the issue of bearer instruments, and certain partnership transactions. Its
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modern derivatives, stamp duty reserve tax and stamp duty land tax, are
respectively charged on transactions involving securities and land. Stamp duty has
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the effect of discouraging speculative purchases of assets by decreasing liquidity. In

the United States transfer tax is often charged by the state or local government and
(in the case of real property transfers) can be tied to the recording of the deed or
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other transfer documents.

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Wealth (net worth) tax

 Some countries' governments will require declaration of the tax payers'
balance sheet (assets and liabilities), and from that exact a tax on net worth (assets

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minus liabilities), as a percentage of the net worth, or a percentage of the net worth
exceeding a certain level. The tax may be levied on "natural" or legal "persons". An

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example is France's ISF.

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Taxes on goods and services

Value added tax (Goods and Services Tax)

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A value added tax (VAT), also known as Goods and Services Tax (G.S.T), Single
Business Tax, or Turnover Tax in some countries, applies the equivalent of a sales tax
to every operation that creates value. To give an example, sheet steel is imported by

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a machine manufacturer. That manufacturer will pay the VAT on the purchase price,
remitting that amount to the government. The manufacturer will then transform the

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steel into a machine, selling the machine for a higher price to a wholesale
distributor. The manufacturer will collect the VAT on the higher price, but will remit

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to the government only the excess related to the "value added" (the price over the
cost of the sheet steel). The wholesale distributor will then continue the process,
charging the retail distributor the VAT on the entire price to the retailer, but
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remitting only the amount related to the distribution mark-up to the government.
The last VAT amount is paid by the eventual retail customer who cannot recover any
of the previously paid VAT. For a VAT and sales tax of identical rates, the total tax
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paid is the same, but it is paid at differing points in the process.

VAT is usually administrated by requiring the company to complete a VAT

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return, giving details of VAT it has been charged (referred to as input tax) and VAT it
has charged to others (referred to as output tax). The difference between output tax
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and input tax is payable to the Local Tax Authority. If input tax is greater than output
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tax the company can claim back money from the Local Tax Authority.

Sales taxes
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Sales taxes are levied when a commodity is sold to its final consumer. Retail
organizations contend that such taxes discourage retail sales. The question of
whether they are generally progressive or regressive is a subject of much current
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debate. People with higher incomes spend a lower proportion of them, so a flat-rate
sales tax will tend to be regressive. It is therefore common to exempt food, utilities
and other necessities from sales taxes, since poor people spend a higher proportion
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of their incomes on these commodities, so such exemptions make the tax more
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progressive. This is the classic "You pay for what you spend" tax, as only those who
spend money on non-exempt (i.e. luxury) items pay the tax.
 A small number of U.S. states rely entirely on sales taxes for state revenue, as
those states do not levy a state income tax. Such states tend to have a moderate to

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large amount of tourism or inter-state travel that occurs within their borders,
allowing the state to benefit from taxes from people the state would otherwise not

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tax. In this way, the state is able to reduce the tax burden on its citizens. The U.S.

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states that do not levy a state income tax are Alaska, Tennessee, Florida, Nevada,
South Dakota, Texas, Washington state, and Wyoming. Additionally, New Hampshire
and Tennessee levy state income taxes only on dividends and interest income. Of the

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above states, only Alaska and New Hampshire do not levy a state sales tax.

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Additional information can be obtained at the Federation of Tax Administrators
website.

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In the United States, there is a growing movement for the replacement of all
federal payroll and income taxes (both corporate and personal) with a national retail
sales tax and monthly tax rebate to households of citizens and legal resident aliens.

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The tax proposal is named FairTax. In Canada, the federal sales tax is called the

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Goods and Services tax (GST) and now stands at 5%. The provinces of British
Columbia, Saskatchewan, Manitoba, and Prince Edward Island also have a provincial
sales tax [PST]. The provinces of Nova Scotia, New Brunswick, Newfoundland &
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Labrador, and Ontario have harmonized their provincial sales taxes with the GST—
Harmonized Sales Tax [HST], and thus is a full VAT. The province of Quebec collects
the Quebec Sales Tax [QST] which is based on the GST with certain differences. Most
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businesses can claim back the GST, HST and QST they pay, and so effectively it is the
final consumer who pays the tax.
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Excises

Unlike an ad valorem, an excise is not a function of the value of the product

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being taxed. Excise taxes are based on the quantity, not the value, of product
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purchased. For example, in the United States, the Federal government imposes an
excise tax of 18.4 cents per U.S. gallon (4.86¢/L) of gasoline, while state governments
levy an additional 8 to 28 cents per U.S. gallon. Excises on particular commodities are
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frequently hypothecated. For example, a fuel excise (use tax) is often used to pay for
public transportation, especially roads and bridges and for the protection of the
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environment. A special form of hypothecation arises where an excise is used to

compensate a party to a transaction for alleged uncontrollable abuse; for example, a
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blank media tax is a tax on recordable media such as CD-Rs, whose proceeds are
typically allocated to copyright holders. Critics charge that such taxes blindly tax
those who make legitimate and illegitimate usages of the products; for instance, a
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person or corporation using CD-R's for data archival should not have to subsidize the
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producers of popular music.

 Excises (or exemptions from them) are also used to modify consumption
patterns (social engineering). For example, a high excise is used to discourage

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alcohol consumption, relative to other goods. This may be combined with
hypothecation if the proceeds are then used to pay for the costs of treating illness

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caused by alcohol abuse. Similar taxes may exist on tobacco, pornography, etc., and

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they may be collectively referred to as "sin taxes". A carbon tax is a tax on the
consumption of carbon-based non-renewable fuels, such as petrol, diesel-fuel, jet
fuels, and natural gas. The object is to reduce the release of carbon into the

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atmosphere. In the United Kingdom, vehicle excise duty is an annual tax on vehicle

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ownership.

Tariff

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An import or export tariff (also called customs duty or impost) is a charge for
the movement of goods through a political border. Tariffs discourage trade, and they

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may be used by governments to protect domestic industries. A proportion of tariff
revenues is often hypothecated to pay government to maintain a navy or border

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police. The classic ways of cheating a tariff are smuggling or declaring a false value of
goods. Tax, tariff and trade rules in modern times are usually set together because of
their common impact on industrial policy, investment policy, and agricultural policy.
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A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs
against trade with each other, and possibly to impose protective tariffs on imports
from outside the bloc. A customs union has a common external tariff, and the
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participating countries share the revenues from tariffs on goods entering the
customs union.
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Other taxes
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License fees
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Poll tax

Bank tax
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Financial transaction taxes including currency transaction taxes

Ad valorem tax
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Consumption tax
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Consumption tax
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Environmental tax
 Fees and effective taxes

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Conclusion:

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Many jurisdictions tax the income of individuals and business entities,
including corporations. Generally the tax is imposed on net profits from business, net

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gains, and other income. Computation of income subject to tax may be determined
under accounting principles used in the jurisdiction, which may be modified or

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replaced by tax law principles in the jurisdiction. The incidence of taxation varies by
system, and some systems may be viewed as progressive or regressive. Rates of tax

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may vary or be constant (flat) by income level. Many systems allow individuals
certain personal allowances and other non business reductions to taxable income.

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2. Explain the various Income Tax Authorities under the Income tax Act, 1961.

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Income tax authorities

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According to section 116 of the Income Tax Act, there shall be the following types of
income tax authorities for the purposes of this Act . they are as follows ;

(a) The Central Board of Direct Taxes constituted under the Central Board of
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Revenue Act, 1963.

(b) Directors-General of Income-tax or Chief Commissioners of Income-tax.

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(c) Directors of Income-tax or Commissioners of Income-tax or Commissioner of

Income-tax (Appeals).
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(d) Additional Directors of Income-tax, or Additional Commissioners of Income-tax

or Additional Commissioners of Income-tax (Appeals).
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(e) Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or

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Deputy Commissioners of Income-tax (Appeals).

(f) Assistant Directors of Income-tax or Assistant Commissioners of Income-tax.

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(g) Income-tax Officers.

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(h) Tax Recovery Officers.

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(i) Inspector of Income-tax.

The authorities acting under the Income-tax Act have to act judicially and one
of the requirements of judicial action is to give a fair hearing to the person before
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deciding against him. The taxing authorities exercise quasi-judicial powers and in
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doing so they must act in a fair and not a partisan manner.

 Power of Income Tax Authorities

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For all purposes of the Income-tax Act, the IT authorities are vested with the

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various powers which are vested in a Court of Law under the Code of Civil Procedure

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while trying a suit in respect of any case. More particularly, the provisions of the
Code of Civil procedure and the powers granted to the tax authorities under the
code would be in respect of:

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AN
1. Discovery and inspection
2. enforcing the attendance, including any officer of a bank and examining him on
oath
3. compelling the production of books of account and the documents

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4. collection certain information [section 133B-inserted by the finance act, 1986]
5. Issuing commissions and summons

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It shall be duty of every person who has been allotted permanent account

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number to quote such number in all his returns or correspondence with income tax
authorities, in all challans for the payment of any sum, in all documents prescribed by
the board in the interest of revenue.
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113. Power to call for information.
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The Deputy Commissioner of Taxes, the Inspecting Joint Commissioner, the

Commissioner or any other officer authorised in this behalf by the Commissioner or
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the Board may, for the purposes of this Ordinance, by notice in writing, require—
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(a) Any firm, to furnish him with a statement of the names and addresses of the
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partners and their respective shares;

(b) Any Hindu undivided family, to furnish him with a statement of the names and
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Addresses of the manager and the members of the family;

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(c) Any person, whom he has reason to believe to be a trustee, guardian or agent to
furnish him with a statement of the names and addresses of the persons for or of
whom he is trustee, guardian or agent;
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 (d) any assessee to furnish him with a statement of the names and address of all
persons to whom he has paid in any income year any rent, interest, commission,

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royalty or brokerage, or any annuity, not being an annuity classifiable under the
head "Salaries", amounting to more than three thousand taka, together with

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particulars of all such payment;

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(e) any dealer, broker or agent, or any person concerned in the management of a

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Stock Exchange, to furnish a statement of the names and addresses of all person to

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whom he or the Exchange has paid any sum in connection with the transfer of capital
assets, or on whose behalf or from whom he or the Exchange has received any such
sum, together with the particulars of all such payments and receipts; or

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(f) any person, including a banking company, to furnish information in relation to
such points or matters, or to furnish such statements or accounts giving such

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particulars, as may be specified in the notice: Provided that no such notice on a
banking company shall be issued by the Deputy Commissioner of Taxes or the
Inspector, without the approval of the Commissioner, and by any other officer,
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without the approval of the Board.
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114. Power to Inspect registers of companies.—

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The Deputy Commissioner of Taxes, the Joint Commissioner of Taxes or any

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person authorised in writing in this behalf by either of them, may

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Inspect and, if necessary, take copies, or cause copies to be taken, of any register of
the members, Debenture-holders or mortgagees of any company or any entry in
such register.
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115. Power of survey.—

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(1) For the purpose of survey of liability of any person to tax under this Ordinance, an
income tax authority may, notwithstanding anything contained in other provisions
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of this Ordinance but subject to such directions or instructions as the Board may
issue in this behalf, enter any place of premises within the limits of its jurisdiction
and—
 (a) Inspect any accounts or documents and check or verify any article or thing;

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(b) Make an inventory of any cash, stock or other valuable articles or things checked
or

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verified by it;

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(c) Place marks of identification on or stamp the books of accounts or other
documents

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Inspected by it and make or cause to be made extracts or copies there from;

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(d) Record the statement of any person which may be useful for, or relevant to, any

Proceeding under this Ordinance; and

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(e) Make such enquiries as may be necessary.

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(2) Subject to the provisions of section 117, any income-tax authority exercising

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powers under

sub-section (1), shall not remove or cause to be removed from any place or premises
wherein he has entered, any books of accounts or other documents, or any cash,
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stock or other valuable article or thing.

(3) Every proprietor, employee or other person who may be attending in any manner
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to, or helping in, the carrying on of any business or profession, or every person who
may be
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Residing in the place or premises in respect of which an income tax authority may be

Exercising power under sub-section (1), shall in aid of the exercise of such power,--
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(a) Afford the authority necessary facilities for inspection of books of accounts or
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other

Documents, or for checking or verifying the cash, stock or other valuable article or
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Thing found in such place or premises; and

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(b) Furnish such information as the authority may require in respect of any matter
which
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may be useful for, or relevant to, any proceeding under this Ordinance.
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116. Additional powers of enquiry and production of documents.—

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(1) The Directors-General of Inspection, the Commissioner and the Inspecting Joint

Commissioner may, without prejudice to other powers which they may have under

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other

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provisions of this Ordinance, make any enquiry which they consider necessary as
respects any person liable, or believed by them to be liable, to assessment under this

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Ordinance, or require any such person to produce, or cause to be produced, any
accounts or documents which they may consider necessary.

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(2) For the purposes of sub section (1), the Directors-General of Inspection, the
Commissioner and the Inspecting Joint Commissioner shall have the same powers as

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the Deputy Commissioner of Taxes has under this Ordinance for the purposes of
making enquiry or requiring the production of accounts or documents including the
powers under section 117(2).
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(3) The Commissioner, the Inspecting Joint Commissioner, the Deputy Commissioner
of Taxes or an Inspector, if he is so authorised in writing, may, for the purpose of
making any enquiry which he considers necessary, enter the premises in which a
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person liable or believed by him to be liable to assessment, carries on his business or

profession, and may call for and inspect any such person's accounts or any
documents in his possession, and may stamp any accounts or documents so
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inspected, and may retain such accounts or documents for so long as may be
necessary for examination thereof or for the purposes of a prosecution: Provided
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that the Deputy Commissioner of Taxes or an Inspector shall not make any enquiries
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from any scheduled bank regarding any client of such bank except with the prior
approval of the Commissioner.
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117. Power of search and seizure.—

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(1) Where the Directors-General of Inspection or the Commissioner, or such other

officer
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empowered in this behalf by the Board, has, on account of information in his

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possession,
 reason to believe that

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(a) any person, to whom a summons or notice under this ordinance has been or
might be

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issued to produce, or cause to be produced, any books of accounts or other

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documents,

has failed to, or is not likely to, produce or cause to be produced such books of

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accounts or other documents, or

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(b) any person is in possession of any money, bullion, jewellery or other valuable
article

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or thing which represents, wholly or partly, income or property which is required to
be

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disclosed under this Ordinance but has not been so disclosed, he may authorize any

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officer subordinate to him, being not below the rank of the Deputy Commissioner of

Taxes, to exercise the powers under sub-section (2).

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(2) An officer authorised under sub-section (1) (hereinafter referred to as the

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authorised officer) may, notwithstanding anything contained in any other law for the
time being in force,--
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(a) enter and search any building, place, vessel, vehicle or aircraft where he has
reason to
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suspect that any books of accounts, documents, money, bullion, jewellery or other
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valuable article or thing referred to in sub-section (1) are or have been kept ;

(b) break-open the lock of any door, box, locker, safe, almirah or other receptacle for
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the
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purpose of the said entry, and search, if keys thereof are not available;
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(c) search any person who has got out of, or is about to get into, or is in, the building,

place, vessel, vehicle or aircraft, if he has reason to suspect that such person has
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secreted about his person any such books of accounts, documents, money, bullion,
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jewellery or other valuable article or thing;

 (d) seize any such books of accounts, documents, money, bullion, jewellery or other

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valuable article or thing found as a result of such search;

(e) place marks of identification on or stamp any books of accounts or other

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document or

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make or cause to be made extracts or copies there from; and

(f) make a note or an inventory of any such money, bullion, jewellery or other

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valuable

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article or thing.

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(3) The authorised officer may requisition the services of any police officer or other

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officer of the Government to assist him for all or any of the purposes specified in
sub-section (2); and it shall be the duty of every such officer to comply with such
requisition.
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(4) The authorised officer may, where it is not practicable to seize any such books of
accounts, documents, money, bullion, jewellery or other valuable article or thing, by
order in writing, require the owner or the person who is in immediate possession or
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control thereof not to remove, part with or otherwise deal with it without obtaining
his previous permission; and the authorised officer may take such steps as may be
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necessary for ensuring compliance with the order.

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(5) The authorised officer may, during the course of the search or seizure, examine
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on oath any person who is found to be in possession or control of any books of

accounts, documents, money, bullion, jewellery or other valuable article or thing and
any statement made by such person during the examination may thereafter be used
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in evidence in any proceeding under this Ordinance, or the Income-tax Act, 1922 (XI
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of 1922).
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(6) Where any books of accounts, documents, money, bullion, jewellery or other
valuable article or thing is found in the possession or control of any person in the
course of a search, it may be presumed that--
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 (a) the books of accounts, documents, money, bullion, jewellery, article or thing
belongs to such person;

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(b) the contents of the books of accounts and documents are true ; and

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(c) the signature on, or the handwriting in, any such books or documents is the

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signature or handwriting of the person whose signature or handwriting it purports to
be.

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(7) The person from whose custody any books of accounts or other documents are
seized under sub-section (2) may make copies thereof, or take extracts there from, in
the presence of the authorised officer or any other person designated by him, at

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such place and time as the authorised officer may appoint in this behalf.

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(8) The books of accounts or other documents seized under sub-section (2) shall not

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be retained by the authorised officer for a period exceeding one hundred and eighty
days from the date of the seizure unless for reasons recorded in writing, approval of
the Commissioner has been obtained for such retention: Provided that the
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Commissioner shall not approve such retention for a period exceeding thirty days
after all the proceedings under this Ordinance in respect of the years for which the
books of accounts or other documents, as are relevant, have been completed.
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(9) If any person, legally entitled to the books of accounts or other documents seized
under subsection (2) objects to the approval given by the Commissioner under sub-
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section (8), he may make an application, stating therein the reasons for his
objection, to the Board for the return of the books of accounts or other documents;
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and the Board may, after giving the applicant an opportunity of being heard, pass
such orders thereon as it may think fit.
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(10) Subject to the provisions of this Ordinance and the rules, if any, made in this
behalf by the Board, the provisions of the Code of Criminal Procedure, 1898 (Act V of
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1898), relating to search and seizure shall apply, so far as may be, to search and
seizure under sub-section (2).

Explanation.-- For the purposes of this section, the word "proceeding" means any
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proceeding in respect of any year under this Ordinance which may be pending on the
date on which a search is authorised under this section or which may have been
 completed on or before such date and also includes all proceedings under this
Ordinance which may be

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commenced after such date in respect of any year.

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118. Retention of seized assets.—

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(1) Where any money, bullion, jewellery or other valuable article or thing
(hereinafter referred to as assets) is seized under section 117, the authorised officer
shall, unless he himself is the Deputy Commissioner of Taxes, forward a report

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thereof, together with all relevant papers, to the Deputy Commissioner of Taxes.

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(2) Where he has seized any asset under section 117 or, as the case may be, he has

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received a report under sub-section (1), the Deputy Commissioner of Taxes shall,
after giving the person concerned a reasonable opportunity of being heard and
making such enquiry as the Directors-General of Inspection or the Commissioner
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may direct, within ninety days of the seizure of the assets, and with the previous
approval of the Commissioner,--

(a) estimate the undisclosed income (including income from the undisclosed
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property), in
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a summary manner to the best of his judgment on the basis of such materials as are

available with him;

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(b) calculate the amount of tax payable under this Ordinance on the income so
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estimated;

and
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(c) specify the amount that will be required to satisfy any existing liability under this
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Ordinance, the Income tax Act, 1922 (XI of 1922), the Gift-tax Act, 1963 (XIV of
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1963), and the Wealth-tax Act, 1963 (XV of 1963), in respect of which such person is

in default or is deemed to be in default: Provided that if, after taking into account
the materials available with him, the Deputy Commissioner of Taxes is of the view
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that it is not possible to ascertain to which particular income year or years such
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income or any part thereof relates, he may calculate the tax on such income or part,
 as the case may be, as if such income or part were the total income chargeable to tax
at the rates in force in the financial year in which the assets were seized.

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Explanation.-- In computing the period of ninety days for the purposes of subsection

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(2), any period during which any proceeding under this section is stayed by an order

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or injunction of any Court shall be excluded.

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(3) After completing the proceedings under sub-section (2), the Deputy

AN
Commissioner of Taxes shall, with the approval of the Commissioner, make an order
requiring the person concerned to pay the aggregate of the amounts referred to in
sub-section (2) (b) and (c) and shall, if such person pays, or makes satisfactory

,B
arrangement for the payment of, such amounts or any part thereof, release the
assets seized under section 117 or such part thereof as he may deem fit in he

W
circumstances of the case.

LA
(4) Where the person concerned fails to pay, or to make satisfactory arrangements
for the
OF

payment of, any amount required to be paid in pursuance of the order under sub-
section (3) or any part thereof, he shall be deemed to be an assessee in default in
GE

respect of the amount or part, and the Deputy Commissioner of Taxes may retain in
his custody the assets seized under section 117 on any part thereof as are in his
opinion sufficient for the realization of the said amount or, as the case may be, of
LE

such part thereof as has not been paid.

L

(5) If the Deputy Commissioner of Taxes is satisfied that the assets seized under
section 117 or any part thereof were held by a person for or on behalf of any other
CO

person, he may proceed under this section against such other person, and all the
provisions of this section shall apply accordingly.
N
EE

(6) If any person objects, for any reason, to an order made under sub-section (3), he
may, within thirty day of the date of such order, make an application, stating therein
AM

the reasons for his objection, to the Commissioner for appropriate relief in the
matter; and the Commissioner may, after giving the applicant an opportunity of
being heard, pass such orders thereon as he may think fit.
-
AL

119. Application of retained assets.—

 RE
(1) Where the assets retained under sub-section (4) of section 118 consist solely of
money, or partly of money and partly of other assets,--

O
(a) the Deputy Commissioner of Taxes shall first apply such money towards payment

AL
of

the amount in respect of which the person concerned is deemed to be an assessee in

G
default under that sub-section; and thereupon such person shall be discharged of his

AN
liability to the extent of the money so applied; and

(b) where, after application of the money under clause (a), any part of the amount

,B
referred to therein remains unpaid, the Deputy Commissioner of Taxes may recover
the amount remaining unpaid, by sale of such of the assets as do not consist of

W
money in the

LA
manner movable property may be sold by a Tax Recovery Officer for the recovery of

tax; and for this purposes he shall have all the powers of a Tax Recovery Officer
under
OF

this Ordinance.
GE

(2) Nothing contained in sub-section (1) shall preclude the recovery of the amount
LE

referred to in section 118 (4) by any other mode provided in this Ordinance for the
recovery of any liability of an assessee in default.
L

(3) Any assets or proceeds thereof which remain after the discharge of the liability in
CO

respect of the amount referred to in section 118 (4) shall forthwith be made over or
paid to the persons from whose custody the assets were seized.
N

120. Power of Inspecting Joint Commissioner to revise orders of Deputy

EE

Commissioner of Taxes.—
AM

(1) The Inspecting Joint Commissioner may call for from the Deputy Commissioner of
Taxes and examine the record of any proceeding under this Ordinance, and , if he
-

considers that any order passed therein by the Deputy Commissioner of Taxes is
AL

erroneous in so far as it is prejudicial to the interests of the revenue, he may, after

giving the assessee an opportunity of being heard, and after making or causing to be
 made, such inquiry as he thinks necessary, pass such order thereon as in his view the
circumstances of the case would justify, including an order enhancing or modifying

RE
the assessment or cancelling the assessment and directing a fresh assessment to be
made.

O
AL
(2) No order shall be made under sub-section (1) after the expiry of four years from
the date of the order sought to be revised.

G
AN
,B
W
121. Revisional power of Commissioner.—

LA
(1) The Commissioner may, either of his own motion or on an application made by
OF
the assessee, call for the record of any proceeding under this Ordinance in which an
order has been passed by any authority subordinate to him and may make such
enquiry or cause such enquiry to be made and, subject to the provisions of this
GE

Ordinance, may pass such order thereon, not being an order prejudicial to the
assessee, as he thinks fit.
LE

(2) The application for revision of an order under this Ordinance passed by any
L

authority
CO

subordinate to the Commissioner shall be made within ninety days of the date on
which such order is communicated to the assessee or within such further period as
N

the Commissioner may consider fit to allow on being satisfied that the assessee was
prevented by sufficient cause from making the application within the said ninety
EE

days.
AM

(3) The Commissioner shall not exercise his power under sub-section(1) in respect of
any order--
-
AL

(a) where an appeal against the order lies to the Appellate Joint Commissioner or to
the
 Commissioner (Appeals) or to the Appellate Tribunal and the time within which such

RE
appeal may be made has not expired or the assessee has not waived his right of
appeal;

O
(b) where the order is pending on an appeal before the Appellate Joint

AL
Commissioner or it

has been made the subject of an appeal to the Commissioner (Appeals) or to the

G
Appellate Tribunal; or

AN
(c) where a period of more than one year has elapsed from the date of the order in
the case of action by the Commissioner on his own motion, unless the Commissioner

,B
is

satisfied that there is sufficient causes to be recorded in writing, for exercising his

W
power under sub-section (1).

LA
(4) No application under sub-section (1) shall be entertained unless--
OF

(a) it is accompanied by a fee of two hundred taka ; and

(b) the undisputed portion of the tax has been paid.

GE

Explanation.--The "undisputed portion of the tax" means--

LE

(i) where the application is against an order of a Deputy Commissioner of Taxes,

the tax payable under section 74; and

L
CO

(ii) where the application is against an order of an Appellate Joint Commissioner,

the undisputed portion of the tax as determined on the basis of that order.
N
EE

(5) For the purposes of this section, an order by the Commissioner declining to
interfere shall not be construed as an order prejudicial to the assessee.
AM

(6) Notwithstanding anything contained in this Ordinance, an application for revision

-

made under sub-section (1) shall be deemed to have been allowed if the
AL

Commissioner fails to make an order thereon within a period of one year from the
end of the year in which the application was made.
 Explanation. For the purposes of this section, the Appellate Joint Commissioner of

RE
Taxes shall be deemed to be an authority subordinate to the Commissioner to whom
the

O
Deputy Commissioner of Taxes, whose order was the subject-matter of the appeal

AL
order under revision, is subordinate.

G
122. Power to take evidence on oath, etc.—

AN
(1) The Deputy Commissioner of Taxes, the Joint Commissioner of Taxes, the
Commissioner,

,B
the Commissioner (Appeals) and the Appellate Tribunal shall, for the purposes of this

W
Ordinance, have the same powers as are vested in a Court under the Code of Civil
Procedure,

LA
1908 (Act V of 1908), when trying a suit in respect of the following matters, namely:-

(a) discovery and inspection;

OF

(b) enforcing the attendance of any person and examining him on oath or
affirmation;
GE

(c) compelling the production of accounts or documents (including accounts or

documents relating to any period prior or subsequent to the income year); and
LE

(d) issuing commissions for the examination of witness.

L
CO

(2) The Deputy Commissioner of Taxes shall not exercise his powers under this
section for the purpose of enforcing the attendance of an employee of a scheduled
bank as a witness or compelling the production of books of account of such a bank
N

except with the prior approval of the Commissioner.

EE

(3) Any authority mentioned in sub-section (1) may impound and retain in its custody
AM

for such period as it considers fit, any books of accounts or other documents
produced before it in any proceeding under this Ordinance.
-
AL
 (4) Any proceeding under this Ordinance, before any authority mentioned in sub-
section (1), shall be deemed to be a judicial proceeding within the meaning of

RE
section 193 and 228, and for the purposes of section 196, of the Penal Code (Act XLV
of 1860).

O
GAL
AN
3. Explain the laws relating to the Classification of goods under the central excise
laws.

,B
Introduction:

W
LA
Central Excise Law is a combination of Central Excise Act, 1944; Central Excise Tariff
Act, (CETA) 1985 ; Central Excise Rules, 2002 ;CENVAT credit Rules, 2004.
OF

Excise duty is paid by people to the manufacturer who pays it to the government;
GE

therefore it is an indirect tax.

LE

As per Section 3 of the central excise Act, excise duty is levied if,
L

There is a good
Goods must be moveable
CO

Goods must be marketable

Goods are mentioned in the central excise tariff act
Goods are manufactured in India.
N

Classification of Goods:-
EE
AM

Excise duty is on excisable goods manufactured or produced in India. Excise duty is

paid by the Manufacturer.
-
AL

Two steps shall be followed to impose excise duty on them.

 RE
(1) Classify the goods to find out rate of excise duty.
(2) Valuation of goods

O
In this answer we are discussing about the various methods used in classification of

AL
the goods.

G
CETA classifies all the goods under 96 Chapters by giving specific code to them.

AN
Harmonised commodity description and coding system (HS) was developed by the

,B
world customs organisation (WCO) its an international nomenclature standard
adopted by 140 countries uniformity and classification in international trade.

W
LA
Harmonised system provides commodity or product codes and description upto 4
digit (Heading) and 6 digits (Sub Heading) levels only and members of WCO can
extend members.
OF
GE

India has develoved 8 digit classification indigenious products and to moniter the
trade volumes.
LE

Goods classified using 4 digits system called as headings.

L
CO

2 digits sub classification called Sub-heading.

N

2 digits sub sub classification called Tariff item.

EE

Rate of duty is indicated against each tariff item and not against
AM

heading/subheading.
-

Coding of dashes
AL
 Silgle dash (-) at beginning _ Group

RE
Two Dashes (--) at beginning _ Sub Group

Triple dashes (---) after Sub group Sub-Sub Class

O
Quadruple dashes(----) after Sub-group

G AL
Ex:- Mens wear

AN
,B
A Coding of Dashes Ready made garments

W
AA - Men’s wear

AA-1

AB
--

-
LA Suits

Ladies wear
OF
AB-! -- Salwar

AC - other
GE
LE

Classification of Goods:
L
CO

a) Heading
b) Section Notes
c) Chapter notes.
N

As per the following factors;

EE

a. Incomplete or unassembled goods

AM

b. Unassembled finished goods.

c. Mixture or combinations.
d. Classification as per essential charater.
-

e. Classification of composite machines.

AL
 CCE v/s Shree Baidyanath Ayurved Bhawan (2009) 12 SCC 419.

RE
Held : Whether lal dant manjan (red tooth powder) is ayurvedic medicament.Lal
dant manjan is a toiletry? cosmetic and not Ayurvedic medicine.

O
Whether lal dant manjan is a toiletry or cosmetic medicine was the question for

AL
determination.

G
CTT v/s Parikh Gramodyog Samsthan (2010) 256 ELT 673 (SC).

AN
Whether voltage stabilizer is electrical goods or electronic goods is not electronic
goods.

,B
W
Held : Voltage stabilizer is Electronic goods is not electrical goods.

Following is broad grouping of goods in CETA : LA

OF

a) Animal products (Section I)

b) Vegetable products (Section II)
GE

c) Animal or vegetable fats (Section III)

d) Prepared food stuffs, beverages (Section IV)
e) Mineral Products (Section V)
LE

f) Chemical products, fertilizers, soap etc (Section VI)

g) Plastics and rubber and their Articles (Section VII)
L

h) Leather and articles (Section VIII)

CO

i) Wood, cork, straw and their articles (Section IX)., etc.

Trade parlance Theory:

N
EE

Trade parlance theory emerged out of case of Grenfell v/s IRC (1876), where Justice
Pollok held that a word in a statute should be interpreted in its popular sense in
which people understand it.
AM

According to this theory, a product is also classified on the basis of its end use, if
classification is related to the function of the goods.
-
AL

Conclusion :
 RE
Therefore the excisable goods are classified base on these patterns and are then
taxed.

O
AL
4. Explain the provisions relating to the valuation of goods under the Customs Act
1962

G
Introduction :

AN
The Customs Act, was enacted in the year 1962. The Act came into force on 13th
December, 1962.

,B
W
The main object of the Act is to “An Act to consolidate and amend the law relating to
customs”.

LA
Customs Act levies Customs duty on the import of goods into India and export of
goods outside India.
OF

The importer or the exporters have to pay required amount of customs duty to the
customs department.
GE

Levy of customs duty

LE

The ‘charging section’ of the Customs Act, 1962 is section 12 which provides
for levy of duty on imports as well as on exports at the rates which are prescribed
under the Customs Tariff Act, 1975 read along with the relevant exemption
L

notification. The taxable event to attract customs duty is import into or export from
CO

India. The export duties are applicable to a handful of commodities. In the case of
Apar India Ltd., the Hon’ble Supreme Court has held that rate of duty will be the rate
prevailing on the date of filing of bill of entry under section 46 or granting permission
for entry inwards whichever is later."
N

Types of duties:
EE

a. Basic duty
b. Additional customs duty
AM

c. Additional duty of customs in lieu of sales tax

d. Antidumping/safeguard duty
e. Education Cess.
-
AL

Valuation of goods
 The quantification of customs duty payable essentially requires the calculation
of the ‘value’ for customs purpose. As per the provisions, customs duty is payable as

RE
a percentage of ‘value’ often called ‘Assessable Value’ or ‘Customs Value’. The
value may either be (a) ‘Value’ as defined in section 14(1) of Customs Act, or (b)
‘Tariff Value’ prescribed under section 14(2) of Customs Act.

O
Tariff value

AL
Tariff value is the value that is fixed by Central Government for any class of
imported goods or exported goods. Government takes into consideration trends of

G
value of such or like goods while fixing tariff value. Once so fixed, duty is payable as

AN
percentage of this value.

Customs value

,B
Customs value as calculated as per section 14(1) is the ‘value’ normally used
for calculating customs duty payable. As per section 14(1) ‘value’ for the purpose of

W
customs duty is the

a) Price at which such or like goods are ordinarily sold or offered for sale and the

LA
b) Price is for delivery at the time and place of importation and such
c) Price is in course of international trade, where neither seller nor buyer has
interest in the business of the other or one of them has no interest in the
OF
business of the other and the,
d) Price is the sole consideration for sale or offer for sale.

The price mentioned above has to be computed for customs duty purpose at
GE

the rate of exchange, as on date of submission of bill of entry, as fixed by the Central
Government. As per the provisions contained in section 14(1A) of the Act, the ‘price’
referred to above, in case of imported goods has to be determined in accordance of the
LE

Customs Valuation Rules, 1988. Subject to three conditions laid down in section
14(1) of Customs Act, 1962, of time, place and special circumstances, price of
imported goods is to be determined in terms of provisions contained in section 14(1A)
L

and in accordance with the provisions contained in Valuation (Determination of Price

CO

of Imported Goods) Rules, 1988. The ‘Special Circumstances’ have been statutorily
provided in Rule 4(2) and in the absence of these exceptions it is mandatory for
customs authorities to accept the price actually paid or payable for the goods in a
particular transaction. Valuation Rule 4(2) deals with the extraordinary or special
N

circumstances under which the transaction value of the goods cannot be accepted.
They are as follows:
EE

(a) The sale is not in the ordinary course of trade under fully competitive conditions.
AM

(b) The sale involves any abnormal discount or reduction from the ordinary
competitive price.

(c) The sale involves special discount limited to exclusive agents.

-
AL

(d) Non-existence of objective and quantifiable data with regard to the adjustments
required to be made, under the provisions of rule 9, to the transaction value.
 (e) Restrictions of a non-statutory nature or non-commercial nature on the disposition
or use of the goods after import, which substantially affect the value of the goods.

RE
(f) Sale or price being subject to some condition or consideration for which a value
cannot be determined.

O
(g) There exists an additional consideration, direct or indirect.

AL
The CEGAT laid down in the Hydro Krimp case that comparable goods
should be of same quality and specification and from same manufacturer and country

G
of production. They should be roughly in the same quantity. The imports should

AN
belong to the same commercial world.

Rule 7 of the Valuation Rules allows the value to be determined on the basis
of deductive method in cases where there are no contemporaneous imports. Here also

,B
the decision of the CEGAT is relevant. The deductive value is based on the unit price
at which the imported goods or identical goods or similar imported goods are sold in

W
the greatest aggregate quantity to unrelated persons in India. The following
deductions are available:

LA
(i) the commission usually paid or agreed to be paid or the additions usually made for
profits and general expenses in connection with sales in India of imported goods of
the same class or kind.
OF
(ii) usual costs of transport and insurance and associated costs incurred within India.

(iii) the customs duties and other taxes payable in India by reason of importation or
GE

sale of goods. Alternatively, transaction/assessable value may be determined under

rule 7A. It consists of the following:
LE

(a) the cost or value of material and fabrication or other processing employed in
producing the imported goods;
L

(b) an amount for profit and general expenses equal to that usually reflected in sales
CO

of goods of the same class or kind as the goods being valued which are made by
producers in the country of exportation for export to India;

(c) the cost or value of all other relevant expenses.

N

In a case, where the value cannot be determined by any of the aforesaid rules, then
EE

resort will be made to Rule 8, Residual Method, under which the value shall be
determined using reasonable means consistent with the principles and the general
provisions of the rule.
AM

Rate of duty and valuation and time of levy/incidence

The rate of duty and tariff valuation shall be as applicable on

-
AL

(a) In the case of goods directly cleared for home consumption the date of the
presentation of the bill of entry.
 (b) In case of goods cleared from warehouse, the date when bill of entry is presented
for home clearance of such goods from the warehouse. In case, bill of entry is

RE
submitted prior to arrival of the vessel or the aircraft, the date would be the later of the
date of submission of the bill of entry and the grant of entry inward to the vessel.

O
Advance rulings

AL
The provisions relating to advance rulings are covered in Chapter VB of the
Act. Advance rulings can be sought by a residents and/ or non-residents in case of
joint ventures in India, and by wholly owned subsidiaries of foreign companies

G
proposing to undertake business activity in India. The Advance Ruling can be sought

AN
on matters regarding classification and valuation of goods, notifications having a
bearing on rate of duty and notifications issued under the Customs Tariff Act and any
other duty chargeable in the manner as duty of customs, under any other law for the
time being in force.

,B
The advance ruling authority created under section 245(O) of the Income-tax

W
Act, 1961 will be considered as advance ruling authority under the Central Excise Act
and the Customs Act also.

LA
5. Explain the provisions relating to “Goods of National Importance “under The
Central Sales Tax Act.
OF

Introduction:
GE

Central sales tax Act was enacted in the year 1956. This act came in to force on 21st
December, 1956. One of the salient features of this act is to declare certain goods as
LE

Goods of National importance.

L

Definition
CO

Section 2 (c) of the Act defines Declared Goods. They are as follows;

Declared goods means goods declared under Section 14 to be of special importance

N

in inter-state or commerce”.
EE

As per Section 14 of the Act, Certain goods to be of special importance in inter-state

AM

trade or commerce. Section 14 reads as follows ;

“It is hereby declared that the following goods are of special importance in
-
AL

inter-State trade or commence:-

[(i) Cereals, that is to say,

 (i) Paddy (Oryza sativa L);

RE
(ii) rice (Oryza sativa L);

O
(ii) what (Triticum vulgar, T.Compactum, T.sphaerococcum, T.durum, T.Aestivum L.t.

AL
dicoccum);

(iv) jowar or milo (Sorghum vulgare Pers);

G
AN
(v) bajra (Pennisetum typholdeum L);

(vi) maize (Zea mays D.);

,B
(vii) ragi (eleusine coracona Gaertn);

W
(viii) kodon (paspalum scrobiulatum L.);

(ix) kutki (Panicum miliare L);

(x) barley (Hordeum vulgare L);

LA
OF

[(ia)] coal, including coke in all its forms, but excluding charcoal;
GE

Provided that during the period commencing on the 23rd day of February, 1967 and
ending with the date of commencement of section 11 of the Central Sales Tax
LE

(Amendment) Act, 1972, (6) of 1972), this clause shall have effect subject to the
modification that the words “but excluding charcoal” shall be omitted;]
L
CO

(ii) cotton, that sis to say all kinds of cotton (indigenous or imported) in its
unmanufactured state, whether ginned or unginned, baled, pressed or otherwise,
but not including cotton waste;
N
EE

(iib) cotton yarn, but not including cotton yarn waste;]

[(iic) crude oil, that is to say, crude petroleum oils and crude oils obtained from
AM

bituminous minerals (such as shale, calcareous rock, sand), whatever their

composition, whether obtained from normal or condensation oil-deposits or by the
-

destructive distillation of bituminous minerals and whther or not subject to all or any
AL

of the following processes:

 RE
(1) Decantation;
(2) De-salting;

O
(3) Dehydration;

AL
(4) Stabilisation in order to normalize the vapour pressure;
(5) Elimination of very light fractions with a view to returning them to the oil-

G
deposits in order to improve the drainage and maintain the pressure;

AN
(6) The addition of only those hydrocarbons previously recovered by physical
methods during the course of the above mentioned processes;

,B
(7) Any other minor process (including addition of pour point depressants or flow
improvers) which does not change the essential character of the substance;]

W
(iii) hides and skins, whether in a raw or dressed state;

[(iv)

(i)
iron and steel, that is to say:-
LA
Pig iron and cast iron including [ingot moulds, bottom plates], iron scrap, cost
OF
iron scrap, runner scrap and iron skull scrap;
(ii) Steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes);
(iii) Skelp bars, tin bars, sheet bars, hoe-bar and sleeper bars;]
GE

(iv) Steel bars (rounds, rods, squares, flat, octagons and hexagons, plain and ribbed
or twisted, in coil form as well as straight lengths);
LE

(v) Steel structurals (angles, joists, channels, tees, sheet pilling sections, Z-
sections or any other rolled sectiosn);
L

(vi) Sheets, hoops, strips and skelp, both black and galvanized, hot and cold rolled
CO

plain and corrugated, in all qualities, in straight lengths and in coil form, as rolled
and in reverted condition:
N

[(iva) Pulses, that is to say:-

EE

(i) Gram or gulab gram (Cicerarietinum L.);

(ii) Turr or arhar (Carjanus cajan);
AM

(iii) Moong or green gram (Phaseolus aureus);

(iv) Masur or lentil (Lens escculemta Moench, Lens culinarie Medic);
-

(v) Urad or black gram (Phaseolus mungo);

AL

(vi) Moth (Phaseolus aconitifolius Jacq);

 (vii) Lakh or khesari (Lathyrus sativus L.)

RE
(viii) Discs, rings, forgings and steel castings;
(ix) Tool, alloy and special steels of any of the above categories;

O
(x) Steel melting scrap in all forms including steel skull, turnings and borings;
(xi) Steel tubes, both welded and seamless, of all diameters and lengths, including

AL
tube fittings;
(xii) Tin-plates, both hot dipped and electrolyte and tin free plates;

G
(xiii) Fish plate bars, bearing plate bars, crossing sleeper bars fish plates, bearing

AN
plates, crossing sleepers and pressed steel sleepers – heavy and light crane rails;
(xiv) Wheels, tyres, axles, and wheels sets;

,B
(xv) Wire rods and wires – rolled, drawn, galvanized, immunized, aluminized,
tinned or coated such as by copper;

W
(xvi) Defectives, rejects, cuttings, or end piece and any of the above categories;
[(v)
LA
jute, that is to say, the fibre extracted from plants belonging to the species
Corchorrus capsularies and Corchorus olitorius and the fibre known as mesta or bimli
extracted from plants of the species Hibiscus cannabinus and Hibiscus sabdariff –
OF

Varaltissima and the fibre known as Sunn or Sunn-hemp extracts from plants of the
species Crotalaria juncea whether baled or otherwise;]
GE

[(vi) Oilseeds, that is to say, -

LE

(i) Groundnut or Peanut (Arachis hypogaea);

(ii) Sesamum or Til (Sesamum orientale);
L

(iii) Cotton seed (Gossypium Spp);

CO

(iv) Soyabean (Glyine seja);

(v) Rapeseed and Mustard –
N

(1) Torta (Brassica campestrisvar toria);

(2) Rai (Brassica juncea);
EE

(3) Jamba – Taramira (Eruca Satiya);

AM

(4) Sarson, yellow and brown (Brassica campestris var sarson);

(5) Banarsi Rai or True Mustard (Brassica nigra);
(vi) Linseed (Linum usitatissimum);
-

(vii) Castor (Ricinus communis);

AL

(viii) Coconut (i.e., copra excluding tender coconuts) (cocosnucifera);

 (ix) Sunflower (Helianthus annus);’

RE
(x) Nigar seed (Guizotia abyssinica);
(xi) Neem, vepa (Azadirachta indica);

O
(xii) Mahua, illupal, Ippe (Madhuca indica M. Latifolia, Bassia, Latifolia and
Madhuca longifolia syn. M.Longifolia);

AL
(xiii) Karanja, Pongam, Honga (Pongamia pinnata syn. P.Glabra);
(xiv) Kusum (Schleichera oleosa, syn. S.Triyuga);

G
(xv) Punna, Undi (Calophyllum inophyllum);

AN
(xvi) Kokum (Carcinia indica);
(xvii) Sal (Shorea rebusta);

,B
(xviii) Tung (Alecurites fordii and A. Montana);
(xix) Red palm (Elaeis guinensis);

W
(xx) Safflower (Carthanum tinctorious);]
[(vii)
LA
man-made fabrics covered under heading Nos.54.08, 54.09, 54.11, 54.12,
55.07, 55.09, 55.10, 55.11, 55.12, 58.01, 58.02, 58.03, 58.04, 58.05, [58.06,]
59.02, 59.03, 59.05, 59.06, and 60.01 of the Schedule to the Central Excise
OF

Tariff Act, 1985 (5 of 1986);

GE

(viii) sugar covered under sub-beading Nos. 1701.20, 1701.31, 11701.39, and
1702.11 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
LE

(ix) unmanufactured tobacco and tobacco refuse covered under sub-heading

No.s 2401.00, cigars and cheroots of tobacco covered under heading
L

No.24.02, cigarettes and cigarillos of tobacco covered under sub-heading

CO

Nos.2403.11, 2403.21 and other manufactured tobacco covered under sub-

heading Nos.2404.39, 2404.41, [2404.13, 2404.60] of the Schedule to the
N

Central Excise Traffic Act, 1985 (5 of 1986);

EE

(x) woven fabrics of wool covered under heading Nos. 51.06, 51.07, 58.01,
58.02, 58.03 and 58.05 of the Schedule to the Central Excise Traffic Act, 1985
AM

(5 of 1985)]”.
-

Goods declared as of national Importance have certain restrictions on their tax and
AL

sale. Restrictions are laid down under Section 15 of the said Act. They are as
follows ;
 Section 15. Restrictions and conditions in regard to tax on sale or purchase of

RE
declared goods within a State – Every sales tax law of a State shall, in so
purchase of declared goods, be subject to the following restrictions and

O
conditions, namely:-

AL
(a) the tax payable under that law in respect of any sale or purchase of such goods
inside the State shall not exceed [four percent.] of the sale or purchase price thereof,

G
and such tax shall not be levied at more than one stage;

AN
(b) where a tax has been levied under that law in respect of the sale or purchase
inside the State of any declared goods and such goods are sold in the course of inter-

,B
State trade or commerce, [and tax has been paid under this Act in respect of the sale
of such goods in the course of inter-State trade or commerce, the tax levied under

W
such law] [shall be reimbursed to the person making such sale in the course of inter-
State trade or commerce] in such manner and subject to such conditions as may be
provided in any law in force in that State;]
(c)
LA
where a tax has been levied under that law in respect of the sale or purchase
OF
inside the State of any paddy referred to in sub-clause (i) of clause (i) of section 14,
the tax leviable on the rice procured out of such paddy shall be reduced by the
GE

amount of tax levied on such paddy;

[(ca) where a tax on sale or purchase of paddy referred to in sub-clause (i) of
clause (i) of section 14 is leviable under the law and the rice procured out of such
LE

paddy is exported out of India, then, for the purposes of sub-section (3) of section 5,
L

the paddy and rice shall be treated as a single commodity;]

CO

(d) each of the pulses referred to in clause (via) of section 14, whether whole or
separated, and whether with or without husk, shall be treated as a single commodity
N

for the purposes of levy of tax under that law.]

EE

Conclusion:
AM

Therefore these are some of the provisions which deal with the declared
goods and their inter- state sale.
-
AL
 The appropriate authority shall, after making such inquiry or calling for such

RE
information as it may deem fit, notify to the liquidator within three months from the
date on which he receives notice of the appointment of the liquidator the amount

O
which, in the opinion of the appropriate authority would be sufficient to provide for

AL
any tax which is then, or is likely thereafter to become, payable by the company.

The liquidator shall not part with any of the assets of the company or the

G
properties in his hands until he has been notified by the appropriate authority under

AN
sub-section (2) and on being so notified, shall set aside an amount equal to the
amount notified and, until he so sets aside such amount, shall not part with any of

,B
the assets of the company or the properties in his hands;

W
Provided that nothing contained in this sub-section shall debar the liquidator
from parting with such assets or properties in compliance with any order of a court

LA
or for the purpose of the payment of the tax payable by the company under this Act
or for making any payment to secured creditors whose debts are entitled under law
OF
to priority of payment over debts due to Government on the date of liquidation or
for meeting such costs and expenses of the winding up of the company as are in the
GE

opinion of the appropriate authority reasonable.

LE

6. Explain the various Wealth Tax Authorities and their powers.

L

The income-tax authorities specified in Section 116 of the Income-Tax Act

CO

shall be the Wealth-tax authorities for the purpose of this Act and every such
authority shall exercise the powers and perform the functions of a wealth-tax
N

authority under this Act.

EE

The Central Government may appoint as many Valuation Officers as it thinks

AM

fit. Subject to the rules and orders of the Central Government regulating the
conditions of service of persons in public service and posts, a wealth tax authority
may appoint as many overseers, surveyors and assessors as may be necessary to
-
AL

assist the valuation officers in performance of their functions.

 Return of Wealth

RE
Every person is required to file with the wealth tax officer a return of net
wealth in Form BA, if his net wealth or net wealth of any other person in respect of

O
which he is assessable under the Act on the valuation date is of such an amount as to

AL
render him liable to wealth tax.

G
Return can be filed on or before the ‘due date’ specified under Section 139 of

AN
the Income-tax Act.

In case of any person who, in the opinion of wealth-tax officer, is assessable

,B
to tax, the wealth-tax officer may, before end of the relevant assessment year, issue
a notice requiring him to furnish, within 30 days from the date of service of such

W
notice, a return of net wealth in the prescribed form.

Assessment
LA
Where any tax is payable on the basis of any return furnished under section
OF

14 or section 15 or in response to a notice under clause (i) of sub-section (4) of

section 16 or under section17, after taking into account the amount of tax, if any,
GE

already paid under any provision of this Act, the assessee shall be liable to pay such
tax, together with interest payable under any provision of this Act, for any delay in
LE

furnishing the return ,before furnishing and the return shall be accompanied by
proof of payment of such tax and interest.
L
CO

If the Assessing Officer has reason to believe that the net wealth chargeable
to tax in respect of which any person is assessable under this Act has escaped
assessment for any assessment year, serve on such person a notice requiring him to
N

furnish within such period, not being less than thirty days, a return in the prescribed
EE

form and verified in the prescribed manner setting forth the net wealth in respect of
AM

which such person is assessable as on valuation date and may proceed to assess or
reassess such net wealth which has escaped assessment.
-

Penalties
AL
 For the failure to pay tax or interest payable on self-assessment, the assessee

RE
is liable for penalty by deeming assessee to be in default not exceeding 100 percent
of tax in arrears.

O
For failure to comply with notice under section 16(2) or (4) without

AL
reasonable cause, penalty may be levied from Rs.1.000 to Rs.25.000 for each failure
case.

G
AN
For the concealment of wealth, penalty may be levied from 100% to 500% of
tax sought to be avoided.

,B
For the failure to answer question (i) legally bound, or (ii) sign statements
legally required, or (iii) comply with summons under section 37(1) without

W
reasonable cause, penalty of Rs. 500 to Rs. 10.000 for each failure or default can be
levied.
LA
For failure to furnish in due time statement, or information required under
OF
section 38 without reasonable cause, penalty of Rs.100 to Rs.200 for everyday of
default may be levied.
GE

For committing default in payment of tax, penalty may be levied not

exceeding 100 per cent of tax in arrears.
LE

Prosecutions
L

If a person willfully attempts to evade tax, penalty or interest, be punishable,

CO

in case amount sought to be evaded exceeds Rs.1, 00,000 with rigorous

imprisonment for a term of 6 months which may extend to 7 years and fine.
N

If a person willfully attempts to evade payment of tax, penalty or interest

EE

under this Act, be punishable with rigorous imprisonment for a term which shall not
be less than three months, but which may extend to three years and shall also be
AM

liable to fine.
-

If a person willfully makes failure to furnish in due time return of wealth in

AL

terms of section 14(1) or 14(2) or 17(1), he shall be punishable. In case where tax
 sought to be evaded exceeds Rs. 1, 00,000 with rigorous imprisonment for a term of

RE
3 months, which may extend to 3 years and fine.

In any other case with 3 months rigorous imprisonment which may extend to

O
3years and fine. For second and subsequent offences under section 35A(1), 35B, 35D

AL
or 35F, he shall be punishable with 6 months rigorous imprisonment which may
extend to 7 years and with fine.

G
AN
7. Define Agricultural Income. Explain its Characteristics.

,B
Definition

W
According to section 2(1A) of Income Tax Act, 1961, ‘agricultural income’ means:

LA
-

Any rent or revenue derived from land which is situated in India and is used for
OF
agricultural purposes, any income from derived from such land by agriculture, the
performance by a cultivator or receiver of rent-in-kind of any process ordinarily
employed by a cultivator or receiver of rent-in-kind to render the produce raised or
GE

received by him fit to be taken to market.

LE

The sale by a cultivator or receiver or rent-in-kind of the produce raised or

received by him, in respect of which no process has been performed other than a
L

process of the nature described in paragraph (ii) of this sub clause,

CO

Any income derived from any building owned and occupied by the receiver of
rent or revenue of any such land, or occupied by the cultivator or the receiver of
N

rent-in-kind, of any land with respect to which, or the produce of which, any process
EE

mentioned in paragraph (ii) and (iii) of sub-clause (b) is carried on.

AM

Instance of Agricultural Income

The following are held as agricultural income based on judicial decisions

-
AL

a. Income from growing flowers and creepers in cultivated gardens.

 b. Rent for agricultural land received from sub-tenants by mortgagee in possession

RE
[Mustafa Ali Khan v. CIT, (1948) 16 ITR 330(PC)].
c. The fees collected from owners of cattle normally used for agricultural purposes

O
for allowing them to graze on forest lands covered by jungle and grass grown
spontaneously.[CIT v. R.B.Rai Shamsherjang Bahadur, (1953) 24 ITR 1 (All)]

AL
d. When denuded parts of the forest are replaced and subsequent operations in
forestry carried out, the income arising from the sale of replanted trees.[CIT v.

G
Benoy Kumar Sahas Roy, (1957) 32 ITR 466 (SC)]

AN
e. Interest on capital received by a partner from the firm engaged in agricultural
operation. [CIT v.M.I.Mahindra, (1978) 112 ITR 323 (Gauhati)]

,B
f. Share of profits of a partner from engaged in agricultural operations (similarly,
salary received by him for rendering services is agricultural income as salary is

W
only a mode of adjustment of the firm’s income). [CIT v. R.M.Chidambaram

LA
pillai, (1970) 771 TR 494 (Mad)].

Non-Agricultural Income
OF
The following are not agricultural income based on judicial decisions: -

a) Income from fisheries.

GE

b) Royalty income of mines.

c) Income from butter and cheese-making.
LE

d) Income from poultry farming.

e) Dividend paid by company out of its agricultural income.
L

f) Interest received by a money-lender in the form of agricultural produce.

CO

Computation of Net Agricultural Income

N

For the purpose of computing tax in the case of individuals, Hindu Undivided
EE

families, etc. having net agricultural income in addition to the non-agricultural

income, the net agricultural income will be computed as follows: -
AM

1. Agricultural income of the nature referred in section 2(1A)(a) will be

computed on the same basis as is adopted for the computation of income
-

chargeable under the head ‘Income from other sources’ under section 56 to 59.
AL
 2. Agricultural income of the nature referred in section 2(1A)(b) will broadly be

RE
computed as if it were income chargeable to tax under the head “Profits and
Gains of Business or Profession” and provisions of section 30 to 32, 36, 37,

O
40, 40A, 41, 43, 43A, 43B and 43C will apply accordingly.
3. Agricultural income of the nature referred in section 2(1A)© will be computed

AL
as if it were income chargeable under the head “Income from House Property”
under section 23 to 27.

G
4. Where an assessee derives income from sale of tea grown and manufactured

AN
by him in India, 60 per cent of the total income from such business, as
computed in accordance with the rule 8 of the Income-Tax Rules, will be

,B
regarded as agricultural income.
5. Loss incurred in agriculture will be allowed to be set off against gains from

W
agriculture. No set off will, however, be allowed in respect of an assessee’s

LA
share in agricultural loss of an unregistered firm which is not assessed as
registered firm or in the agricultural loss of an association of persons or a body
of individuals.
OF
6. Any tax levied by a State Government on agricultural income will be allowed
as deduction.
GE

7. The unabsorbed loss from agricultural activities during the previous seven
years will be set off against the agricultural income of the assessment year in
LE

chronological order as indicated in Financial Act of that particular year.

8. Where the net result of computation of agricultural income from various
L

sources is a loss, the loss will be disregarded and the net agricultural income
CO

of the assessee shall be taken as nil.

9. The net agricultural income of the assessee will be rounded off to the nearest
multiple of Rs.10.
N
EE

Conclusion

The above mentioned things are the income from agriculture and according to
AM

that the computation of Net Agricultural income will be considered.

8. Explain the various Tax Authorities under CGST.

-
AL

Introduction
 Section 3. The Government shall, by notification, appoint the following classes of
officers for the purposes of this Act, namely:––

RE
(a) Principal Chief Commissioners of Central Tax or Principal Directors General
ofCentral Tax,

O
(b) Chief Commissioners of Central Tax or Directors General of Central Tax,
(c) Principal Commissioners of Central Tax or Principal Additional Directors

AL
General of Central Tax,
(d) Commissioners of Central Tax or Additional Directors General of Central Tax,

G
(e) Additional Commissioners of Central Tax or Additional Directors of Central

AN
Tax,

(f) Joint Commissioners of Central Tax or Joint Directors of Central Tax,

,B
(g) Deputy Commissioners of Central Tax or Deputy Directors of Central Tax,

(h) Assistant Commissioners of Central Tax or Assistant Directors of

W
Central Tax, and

LA
(i) Any other class of officers as it may deem fit:

Provided that the officers appointed under the Central Excise Act, 1944 shall be
OF
deemed to be the officers appointed under the provisions of this Act.
GE

Appointment of officers.
LE

Section 4. (1) The Board may, in addition to the officers as may be notified by the
L

Government under section 3, appoint such persons as it may think fit to be the
officers under this Act.
CO

(2) Without prejudice to the provisions of sub-section (1), the Board may, by order,
authorise any officer referred to in clauses (a) to (h) of section 3 to appoint officers
N

of Central tax below the rank of Assistant Commissioner of central tax for the
administration of this Act.
EE
AM
-
AL

Powers of Officers.
 Section5. (1) Subject to such conditions and limitations as the Board may impose, an
officer of central tax may exercise the powers and discharge the duties conferred or

RE
imposed on him under this Act.

O
(2) An officer of central tax may exercise the powers and discharge the duties
conferred

AL
or imposed under this Act on any other officer of central tax who is subordinate to
him.

G
(3) The Commissioner may, subject to such conditions and limitations as may be

AN
specified in this behalf by him, delegate his powers to any other officer who is
subordinate to him.

,B
(4) Notwithstanding anything contained in this section, an Appellate Authority shall
not exercise the powers and discharge the duties conferred or imposed on any other

W
officer of central tax.

LA
6. (1) Without prejudice to the provisions of this Act, the officers appointed under
the State Goods and Services Tax Act or the Union Territory Goods and Services Tax
OF
Act are authorised to be the proper officers for the purposes of this Act, subject to
such conditions as the Government shall, on the recommendations of the Council,
by notification, specify. Subject to the conditions specified in the notification issued
GE

under sub-section (1),––

(a) where any proper officer issues an order under this Act, he shall also issue an
LE

order under the State Goods and Services Tax Act or the Union Territory Goods and
Services Tax Act, as authorised by the State Goods and Services Tax Act or the Union
L

Territory Goods and Services Tax Act, as the case may be, under intimation to the
CO

jurisdictional officer of State tax or Union territory tax;

(b) Where a proper officer under the State Goods and Services Tax Act or the Union
Territory Goods and Services Tax Act has initiated any proceedings on a subject
N

matter, no proceedings shall be initiated by the proper officer under this Act on the
EE

same subject matter.

AM

(3) Any proceedings for rectification, appeal and revision, wherever applicable, of
any order passed by an officer appointed under this Act shall not lie before an officer
appointed under the State Goods and Services Tax Act or the Union Territory Goods
-
AL

and Services Tax Act.

 Conclusion.

RE
The above mentioned officers are the various tax authorities under central
goods and service act.

O
AL
9. Explain the Appeal provisions and procedures under SGST.

Section 107. Appeals to Appellate Authority.- (1) Any person aggrieved by

G
any decision or order passed under this Act or the Central Goods and Services Tax

AN
Act by an adjudicating authority may appeal to such Appellate Authority as may be
prescribed within three months from the date on which the said decision or order is
communicated to such person.

,B
(2) The Commissioner may, on his own motion, or upon request from the
Commissioner of central tax, call for and examine the record of any proceeding in

W
which an adjudicating authority has passed any decision or order under this Act or

LA
the Central Goods and Services Tax Act, for the purpose of satisfying himself as to
the legality or propriety of the said decision or order and may, by order, direct any
officer subordinate to him to apply to the Appellate Authority within six months 49
OF
from the date of communication of the said decision or order for the determination
of such points arising out of the said decision or order as may be specified by the
Commissioner in his order.
GE

(3) Where, in pursuance of an order under sub-section (2), the authorised officer
LE

makes an application to the Appellate Authority, such application shall be dealt with
by the Appellate Authority as if it were an appeal made against the decision or order
L

of the adjudicating authority and such authorised officer were an appellant and the
provisions of this Act relating to appeals shall apply to such application.
CO

(4) The Appellate Authority may, if he is satisfied that the appellant was prevented
by sufficient cause from presenting the appeal within the aforesaid period of three
N

months or six months, as the case may be, allow it to be presented within a further
period of one month.
EE
AM

(5) Every appeal under this section shall be in such form and shall be verified in such
manner as may be prescribed.
-
AL
 (6) No appeal shall be filed under sub-section (1), unless the appellant has paid – (a)
in full, such part of the amount of tax, interest, fine, fee and penalty arising from the

RE
impugned order, as is admitted by him; and

O
AL
(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising
from the said order, in relation to which the appeal has been filed.

G
AN
(7) Where the appellant has paid the amount under sub-section (6), the recovery
proceedings for the balance amount shall be deemed to be stayed.

,B
(8) The Appellate Authority shall give an opportunity to the appellant of being heard.

W
LA
(9) The Appellate Authority may, if sufficient cause is shown at any stage of hearing
of an appeal, grant time to the parties or any of them and adjourn the hearing of the
appeal for reasons to be recorded in writing:
OF
GE

(10) The Appellate Authority may, at the time of hearing of an appeal, allow an
appellant to add any ground of appeal not specified in the grounds of appeal, if it is
satisfied that the omission of that ground from the grounds of appeal was not willful
LE

or unreasonable.
L
CO

(11) The Appellate Authority shall, after making such further inquiry as may be
necessary, pass such order, as it thinks just and proper, confirming, modifying or
annulling the decision or order appealed against but shall not refer the case back to
N

the adjudicating authority that passed the said decision or order:

EE

Provided that an order enhancing any fee or penalty or fine in lieu of confiscation or
AM

confiscating goods of greater value or reducing the amount of refund or input tax
credit shall not be passed unless the appellant has been given a reasonable
opportunity of showing cause against the proposed order:
-
AL
 Provided further that where the Appellate Authority is of the opinion that any tax has
not

RE
been paid or short-paid or erroneously refunded, or where input tax credit has been

O
wrongly availed or utilised, no order requiring the appellant to pay such tax or input
tax credit shall be passed unless the appellant is given notice to show cause against

AL
the proposed order and the order is passed within the time limit specified under
section 73 or section 74.

G
AN
(12) The order of the Appellate Authority disposing of the appeal shall be in writing
and shall state the points for determination, the decision thereon and the reasons

,B
for such decision.

W
(13) The Appellate Authority shall, where it is possible to do so, hear and decide

LA
every appeal within a period of one year from the date on which it is filed:
OF
Provided that where the issuance of order is stayed by an order of a court or
Tribunal, the

Period of such stay shall be excluded in computing the period of one year.
GE
LE

(14) On disposal of the appeal, the Appellate Authority shall communicate the order
passed by it to the appellant, respondent and to the adjudicating authority.
L
CO

(15) A copy of the order passed by the Appellate Authority shall also be sent to the
Commissioner or the authority designated by him in this behalf and the jurisdictional
N

Commissioner of central tax or an authority designated by him in this behalf.

EE

(16) Every order passed under this section shall, subject to the provisions of section
AM

108 or section 113 or section 117 or section 118 is final and binding on the parties.
-

Conclusion:-
AL
 The above mentioned are the provisions and procedure for appeal under
SGST.

O RE
G AL
AN
,B
W
Write any two Short Notes.

a. Distinguish features of “Tax” and ‘Fees’

LA
OF
Characteristic of “Taxes”:- From the above definitions, the following elements of
taxes are visible:
GE

1. Taxes are imposed by the government only.

2. A tax is a compulsory contribution of the tax-payer.
3. In the payment of a tax, the element of sacrifice is involved.
LE

4. Payment of a tax is the personal obligation of the tax-payer.

5. The aim of taxation is the welfare of the community as a whole.
L

6. A tax is a legal collection.

7. An element of force is there.
CO

8. A tax is not imposed to realize the cost of benefits provided.

9. Taxes may be assessed on income or capital, but they are actually paid out of
income.
N

10. A tax may be imposed upon property or occupation or commodities, but they
EE

are actually paid by individuals.

11. Taxes do not involve quid pro quo between the tax-payer and the public
authority.
AM

12. The purpose of the tax is raising public revenue.

13. Tax is used for public purpose or common benefit of all.
14. Tax involves appropriation of private property.
-

15. Taxes are paid in cash, but not in kind.

AL

Fees
 Fee is another source of revenue of the State and it differs from tax. Fee is
defined by Prof. Seligman as ‘a payment to defray the cost of each recurring service

RE
undertaken by the government, primarily in the public interest, but conferring a
measurable special advantage on the fee-payer.

O
Taylor states that fees are characterized by more or less free choice on the part of

AL
the payer as to whether or not should he pay more or less for direct benefit
conferred upon him.

G
In Corporation of Calcutta v. Liberty Cinema Theatre, (AIR 1965 SC 117)

AN
Justice Mukerjee said that the term ‘fee’ is referred to a charge imposed by some
Governmental agency for special service rendered to individuals.

,B
There are two categories of fee, viz., fee for licence and fee for service
rendered. The former is to cover the expenses of regulation and the latter to
respond the service rendered, Quid pro quo of service is the only criterion. The

W
money raised by fee must be set apart and appropriated specifically for the

LA
performance of the service for which it has been collected and it must not be
merged in the general revenue of the Government.
OF

Distinguish features of “Tax” and ‘Fees’ are as follows:-

GE

1. Tax is compulsory levy and is enforced by law. A fee is not always

compulsory.
LE

2. The tax collections are routed to the Consolidated Fund. But the amount
collected by way of fees is not merged with the Consolidated Fund.
L

3. It is left to the discretion of the Government to use the tax for any public
benefit. But fee collections are set apart only to cover the expenses for which it is
CO

collected.
4. There is no element of quid pro quo between the tax payment and the public
authority. In the case of fee, quid pro quo is an essential element. The fee is charged
N

according to the magnitude of the benefits received by the citizens.

EE

5. Tax may be expropriatory in nature. Fee cannot be discriminatory.

6. The ultimate object of tax in a welfare State is to bring about social order. The
ultimate object of fee can at the most only for the regulation of social order.
AM

7. Taxes change when base of tax changes and the capacity to pay principle is
followed. Fees are uniform and the capacity to pay does not form the basis.
8. The principle that no tax can be levied or collected without the authority of
-

law, applies only in respect of taxes. This prohibition does not apply in respect of a
AL

fee.
 9. A tax is a common burden and the only return the tax-payer gets is the
participation in the common benefit of the State. A fee is a payment for service

RE
rendered, benefit provided or privilege conferred. If one who is liable to pay fee,
receives general benefit from the authority levying the fee, the element of service

O
required for collecting fee is satisfied.

AL
b. CAPITAL RECEIPTS AND REVENUE RECEIPTS.

G
Generally, taxes are also levied on receipts. Receipts may be distinguished as

AN
capital receipts and revenue receipts. Capital receipts means return from
accumulated wealth employed reproductively and revenue receipts means returns
from property or possession. The difference between capital and revenue is that

,B
capital is a fund; revenue is a flow. Capital receipts are exempted from tax unless
they are expressly taxable like capital gains. ( for example, Sec 45 of Income tax Act).

W
But revenue receipts are taxable unless they are expressly exempted from tax. (for
example, Sec 10 to 13 of Income tax Act).

LA
Few Instances of Revenue Receipts.
OF
GE

1. Where the assessee has sold his land in consideration of the purchaser paying
him an annuity for his life, the annuity so received is revenue receipt.[CIT v. Gopal
sharan Narain Singh, (1934) 2 ITR 264 (Pat)].
LE

2. If the assessee himself has treated the payment in his account book as
compensation for consideration received or loss of earning or profits, it is revenue
receipt. And , if it is found that a contract is entered into in the ordinary course of
L

business, any compensation received for its termination would be a revenue receipt.
CO

3. Whereas godowns used for storing business goods are requisitioned by

Government and despite requisition, the assessee continue to carry on business though
at a reduced scale, compensation received by the assessee for loss of earning is a
N

revenue receipt. [CIT v. Manna Ramji & Co., (1972) 86 ITR 29 (SC)].
4. Compensation received by the assessee-company (a dealer in land) from the
EE

Government on account of requisition of land belonging to the assessee was held to be

a revenue receipt. [Nawn Estates (P) Ltd. v. CIT, (1982) 10 Taxman 292 (Cal.)].
AM

5. Statutory interest received under section 34 of the Land Acquisition Act is

interest for delayed payment of compensation and is, therefore, a revenue receipt
liable to tax. [Shamalal Narula v. CIT, (1964) 53 ITR 151 (SC)]
-

FEW INSTANCES OF CAPITAL RECEIPT

AL
 1. Consideration received by an assessee for vacating business premises taken on
rent, where the assessee’s business does not consist of leasing and surrendering

RE
properties, is a capital receipt. [CIT v. Merchandizes (p). Ltd., (1990) 49 Taxman 68
(Ker.)].

O
2. Compensation received by a partner from another partner for relinquishing all
his partnership was held to be a capital receipt. [A.K. Sharfuddin v. CIT, (1960) 39

AL
ITR 333 (Mad)].
3. Where the assessee’s insured building , plant and machinery were partly

G
damaged and it received compensation which was partly utilized for restoring the
damaged assets to working conditions, it was held that unutilized portion of the

AN
compensation was a capital receipt. [CIT v. Sirpur Paper Mills Ltd., (1978) 112 ITR
776 (SC)].
4. Receipt on account of sale of sum surplus loom hours is a capital receipt. [CIT

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v. Maheswari Devi Mills Ltd., (1965) 57 ITR 36 (SC)].
5. Capital sum payable in instalments is treated as capital receipt. [CIT v.

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Kunwar Trivikram Narain Sing, (1965) 57 ITR 29 (SC)].
6. Compensation paid for agreeing to refrain from carrying on competitive

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business in commodities in respect of which an agency was terminated or for loss of
goodwill will prima facie be of the nature of a capital receipt. [Gillanders Arbuthnot
& Co, Ltd. v. CIT, (1964) 53 ITR 283 (SC). Similarly, compensation for restraint on
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exercise of profession is a capital receipt.
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c. Dealer

As per Section 2 (d) of the Central sales tax Act, dealer means and includes;
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a) A local authority a body – corporate, a company, co-operative society, or other

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society, club, firm, Hindu undivided family or association of persons which carry on
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such business:
b) A factory, broker, commission agent, delcredere agent etc., who carries on the
business of buying, selling or distributing goods belonging to any principal whether
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disclosed or not:
c) An auctioneer:
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d) In respect of a dealer outside the state, every person who within the state (i)
buys, sells or distribute goods, an agent (ii) handles goods or documents of title
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relating to goods or
e) Who collects or make payments of or guarantees such collections or payment
of sale price or
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f) Every local office or branch within state of such an outside state dealer.
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Any government which buys sells or distribute goods directly or otherwise

the valuable consideration is deemed to be a dealer. But this will not apply to any
 transaction of the government in respect of sale, suppl, or distribution of (a) Surplus
(b) unserviceable (c) old stories, (d) materials (e) waste products (f) obsolete or

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discarded machinery or parts of accessories thereof.

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Conclusion:

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Therefore, a person can be a dealer under this Act. If he falls under any of the

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clauses of the definition. A dealer who gets himself registered is called as a
registered dealer.

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Solve any two problems
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a. Give a format determing the taxable income from salary.

Following is the procedure for the calculation of taxable income on salary:

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1. Gather your salary slips along with Form 16 for the current fiscal year and add
every emolument such as basic salary, HRA, TA, DA, DA on TA, and other
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reimbursements and allowances that are mentioned in your Form 16 (Part B) and
salary slips.
2. The bonus received during the financial year must be added for the income that is
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being calculated.
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3. The total is your gross salary, from which you will have to deduct the exempted
portion of House Rent Allowance, Transport Allowance (for which the maximum
exemption is Rs.19,200 per year), Medical reimbursement (for which the
maximum exemption is Rs.15,000), and all other reimbursements provided the
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actual bills in respect of the expenses incurred.

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4. The result is your net income from salary.

Once your net income has been calculated, the following tax slabs will be applicable:
For individuals who are under 60 years of age:
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Up to Rs.2.5 lakhs Nil Nil Nil

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Rs.2.5 lakhs to Rs.5 5% of (Total income – Rs.2.5 2% of income 1% of income tax

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lakhs lakhs) tax

Rs.5 lakhs to Rs.10 Rs.25,000 + 20% of (Total 2% of income 1% of income tax
lakhs income – Rs.5 lakhs) tax
 Above Rs.10 lakhs Rs.1,12,500 + 30% of (Total 2% of income 1% of income tax
income – Rs.10 lakhs) tax

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b. Give a format determing the taxable income from other sources.

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Any income which does not fall under any other head of income i.e. Income from
business/profession, Income from salary, capital gains and house property then it

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will be called as income from other sources.

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Illustration:

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Compute the income from other sources of Mr. X as per the details given below for

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Financial Year 2016-17:-

Interest received on debentures

Interest received from taxable bonds
Interest received from Public Provident Fund
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20000/=
30000/=
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Dividend received from mutual funds 10000/=
Interest received on Fix Deposits With Bank 12000/=
Accrued Interest on Kisan Vikas Patra 8000/=
Accrued Interest on National Saving Certificates 5000/=
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Interest received on Income Tax refund 4000/=

Gift received from a friend 60000/=
Winning from Television Shows 100000/=
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Solution:
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Interest received on debentures 15000/=

Interest received from taxable bonds 20000/=
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Interest received from Public Provident Fund (Exempted) 0

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30000/=
Dividend on Mutual Fund (Exempted) 10000/= 0
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Interest received on Fix Deposits with Bank 12000/=

Accrued Interest on Kisan Vikas Patra 8000/=
Accrued Interest on National Saving Certificates 5000/=
Interest on Income Tax Refund 4000/=
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Gift received from a friend (exempted if amount is 50000/= or 60000/=

less)
 Winning from Television shows 100000/=
TAXABLE INCOME FROM OTHER SOURCES 224000/=

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Clarification:- Since the gift received during the year is more than Rs.50000/= that is
why it will be included in taxable income from other source.

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