Income Tax Act 1922

[Cites 507, Cited by 0]

Law Commission Report

Income Tax Act 1922

"CONFIDENTIAI."
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LAW COMMISSION  
OF INDIA  

N.

TWELFTH REPORT
(Income-"tax Act; 1922)

GOVERNMENT OF INDIA---MINISTRY OF LAW



CHAIRMAN
LAW CO SSION
New ELI-II,
September 26, 1958.

Shri. Ashok Kumar Sen ~
Minister of Law,

Government of India,
New Delhi.

My dear Minister,

I have great pleasure in~forwardi_1 herewith the Twelfth Report
of the Law Commission on the Income ax Act.

2. At the request of the Government of India, the Commission
agreed to take up the revision of the Income Tax Act and entrusted
the task to a Committee consisting of Shri P. Satyanarayana Rao, Shri
G. N. Ioshi and Shri N. A. Ralkhivala who was specially appointed a
Member for the purpose of the revision of this Act.

3. The Committee held more than nine meetings, some of which
were spread over several days'and formulated a scheme for the revision
of the Act. Some aspects of the work as well as the scheme wet' discuss-
ed at meetings 'of the Statute Revisio ' Section of the Commis on held
on the 22nd September, 1956 nd the 9th March, 1958. A dra Report
prepared by Shri P. Satyana _yana R q, the senior Member o the sec-
tion of the Commission, dealing with s te law revision, was culated
to all Members of the Comm' ion anditheir views invited ther . These
views together with the draft eport were discussed at a meeti g of the
Statute Revision Section held on the 23rd and 24th August. 19 8. Some
suggestions made by Members at this tneeting were accepted a' d it was
left to the Chairman and Shri:P. Satyﬁiarayana Rao to ﬁnally ettle the
Report in the light of the discussion.'

4. Shri G. S. Pathak, being outside India, is unable to sign the
Report. But he concurs in the recom endations and has auth sad the
Chairman to sign the Report on his ehalf. Dr. N. C. Sen G pta and
Shri-D. Narasa Raju are unable to c 'A edown to Delhi to si the Re-
port but similarly concur in e re A endations and have a thorised
the Chairman to sign the re rt on their behalzf. Dr. N. C. Gupta

while expressing his concurrence withjthe Report has added afseparate
note on certain points.

5. The Commission wishes to acknowledge the services ndered
by Shri S. A. L. Narayana Row, Commissioner of Income Igaex, Shri
N. Srinivasan, Deputy Secregry in the Ministry of Finance. ' d Shri
K. N.- Srivastava, Income T ' Oﬂicert in connection with the prepara-

' tion of this Report. ;  



ii

6. The Commission also wishes to place on record its appreciation
of the services of its Deputy Draftsman Shri P. M. Bakshi in preparing
the report and drafting the clauses. The assistance rendered by Shri M.
Bhujanga' Rao. Private Secretary to Shri P. Satyanarayana Ram in draw-

? ing the report also deserves mention.

Yours 'sincerely,
M. C. SETALVAD.



I in

Paragraph:

'*4
5-8

9
10-] x
12-13
14,-! 7
18-42
23-29
301°
41

no
III
H2
I13
I14

CONTENTS

INTRODUCTION

Need for simpliﬁcation and reference to the Law Commission .
Scheme of Simpliﬁcation , . . . .

Alteration of tax structure essential for simpliﬁcation
Analogous statutes . .- .

Changes proposed in the Act .

Chapter I. Preliminary.

Chapter II. Basis of charge . . . . I .
Chapter III. Incomes which do not form part of the total income
Chapter IV. Computation of total income /

Chapter V. Incomes of other persons, included in assessee's
total income. . . . .

Chapter VI. Aggregation of income, and set-off or carry forward
and set off of loss . . . . . . . .

Chapter VII. Incomes on which no income-tax is payable
Chapter VIII. Rebates and reliefs

Chapter IX. Double taxation relief '

Chapter X. Provisions against avoidance of tax.

Chapter XI. Super Tax 7 . . . . .
Chapter XII. Determination of tax in certain special cases
Procedural provisions - . . .

Chapter XIII. Income-tax authorities .

Chapter XIV. Procedure for assessment .

Chapter XV. Liability in special cases . .

Chapter XVI. Special provisions applicable to ﬁrms

Chapter XVII. Special provisions apqplicale to companies
Chapter XVIII. Collection and recovery of tax. . ..
Chapter XIX. Tax deemed to have been paid on dividends
Chapter XX. Refunds. . . . . . . :.
Chapter XXI. Appeals and revisions .. . . . .
Chapter XXII. Penalties imposable by Income-tax authorities

7 Chapter XXIII. Offences and prosecutions

Chapter XXIV. Recognised provident: funds
Chapter XXV. Approved superannuation funds
Chapter XXVI. Miscellaneous

Schedules . .

Scheme of 'notes on 'clauses.

Increase in number of sections .
Scheme of Appendices . . .

Lists appended.t.o the report . . . . . .
List 1 --List of changes . . . . . . .
List II-List of recommendations

APPENDICES

Appendix I.--Showing the proposals in the form of draft clausa.

Appendix II----Comparative tables.

(Detailed index is given at the beginning of the Appendix) .

o 4 o 0

NOTES ON ' LAUSES

Notes onclauses . . . . - . . . . . .

r

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INTRODUCTION
1. There is hardly any Act on the Indian Statute Book N?" "0' 'im-

which is so complicated, so illogical in, its arrangement, and

' in some respects so obscure as the Indian Income--tax Act, to the Law

1922. Courts and commentatprs have commented on the Commission.
illogical arrangement of the provisions of the Act. It has
been repeatedly pointed out=that the amendments made
from time to time to the Act, directed as they frequently
are at stopping an' exit through the net of taxation freshly
disclosed, are too often framed without sufficient regard to
the basic scheme upon which the Act originally rested. Pro-
visions dealing with the same topic or subject-matter are
scattered through the various Chapters of the Act, and only
a thorough knowledge of thewhole Act would enable any
one to ﬁnd out all the provisions bearing on a certain point.
Added to the illogicality of the arra ernent are two other
defects, inaccuracy in the use of Ian j e and a degree of
obscurity which make it difﬂpult to --e a glimpse of the
real intention of the legislature. As: Lord Wrenbur said
(with reference to the corr¢spond'j' \Act of the nited
Kingdom), "No reliance can be placl$:upon an assumption
of accuracy in the use of language in these Acts".'

2. The hopeless 'confusion into which the Income-tax
law has fallen is mainly due: to pre nitate and continuous (
tinkering with the Act by the legisla e. The amendments e
to the Income-tax Act havegbeen sq; short-sighted and so 
short-lived as to rob the 1a of tha modicum of stability f
which is essential to its h hy gr Before the provi- 
sions of the Act can be suﬂiqiently ariﬁed by the judicial 4
process,-new prqvisions are substituged in their place. In M
l;ae%islzi=1I1;ion'a'si  ot(li1J_ec1; ﬁeldosf 1;activi;yi_ith'1es weltlhg: f

r mm e um - con, i ;arry 1 , so

we maythmake an eng the sdpner." 'Stability is motslt essanc-i
tial to e proper a mimstrh' tion o gs taxing sta te, an

if the tax structure of this country i be put on a sound
footing, it is essential that (3 halt ' J (I be called-to the
making of i11--digested ameqdmentsiin a frenzy of hurry
which has characterised the? historyi; of income-tax law of :
the last few years. A . '

3. The Government hassasked up to revise the Income-
tax Act so as to make its visions More intelligible with-
out aﬁecting its basic tax ctural }The task is difﬁcult,
and, as the Codiﬁcation C t in England said, "to '
expect from us a codiﬁcat n of e law of income-tax ;
which the layman could y read-iatid understand was an
vain hope, which only the  could cherish".' It '

1 Rex v. Ifemington Income-tax Gnmnissioncr. ST. C. 613, 623 (H.L.) '

' Report of the U. K. Comm' tee on
Gmlfstgu, para 26, quoted in the report
the Taxation of Proﬁts and Income, /943;

  
  
 

"the Royal 'Cmnniuionm
330, para. 108:); -t



2

is perhaps possible to makethe provisions of the Act more
logical and clearer without affecting the tax structure; but
it is certainly not possible to make the Act simpler without
encroaching upon at least the fringe and verge of the tax
structure. However, we have made an attempt to arrange
the provisions of the Act in a more logical manner and also
to make them simpler and clearer. We have also codiﬁed
some of the principles well established by decisions but
not contained in the provisions of the present Act.

' 4. In November, 1956, we issued a press communique
and invited suggestions in this behalf. We received sugges-
tions from various individuals and bodies. We have con-
sidered these suggestions in redrafting the Act.

Scheme of 5. As the ﬁrst step in the simpliﬁcation of the Act,

simP1iﬁca- we have made a fairly logical rearrangement and re--group-

"°"- ing of the sections of the Income-tax Act. Each chapter
deals with a particular topic.

6. The next step was simpliﬁcation of the language of
the Act. This was done by splitting up the present sec-
tions, which run into several pages, into independent sec-
tions. Wherever possible, provisos were removed and were
converted into independent provisions of the Act. '

7. As our terms of reference implied the "restriction
that the tax structure should not be altered, no major
change affecting the substance of the law has been made
in the substantive provisions.

8. We, however, felt that a few minor changes in the
substantive parts and a few major changes in the present
procedural provisions would make for simpliﬁcation. These
changes have been made and will be indicated in the appro~
priate places. -

 9. We would like to say at the outset that there can
essential to be no real simpliﬁcation of the Income-tax law without a
make forsirn- simpliﬁcation of the tax structure. As this was beyond
p1iﬁcaﬁ°n- the purview of our work, our task of simpliﬁcation has
been greatly hampered. ~ A

10. We have examined the Income-tax Acts of other
countries to study the scheme of arrangement -of the sec-
tions and the manner in which analogous provisions have
been drafted in those Acts. We have derived considerable
help from them. We wish the Indian Legislature would

Analogous
statutes.

simplify the tax structure of this country on the lines ad- _

opted by some other progressive countries. a

.- .- 11. We may also add that in framing our proposals we
have not been unmindful of the recent taxing statutes
enacted in India, such as the Estate Duty Act, the Wealth
.Tax Act, the Expenditure Tax Act and the Gift Tax Act.

We have examined these statutes, and where we thought _

'desirable, drawn upon the provisions of these statutes gin
framing our proposals. A « - . ' . -- 2



3.

12. We now proceed to indicate the lines on which Char(1lg«;uPt°-
The Act has been redrafted and the important changes ﬁg' "1 'h°
effected by us. » '

13. The changes made by us fall into two catego-
ries : _ '
(1) changes of substance, and
(2) changes of form.

Changes of substance are discussed in the succeeding'
paragraphs; while changes of form or improvements in .
drafting will be explained in "Notes on clauses".

There are certain changes which have not been embo- (gcoommcn.

Vdied in the draft clauses in Appendix I, but which we dations not

regard as desirable. Our recommendations as to such :mb°S1é'?d Ii"
changes will be found either in the discussion in the body ppm "' )'
'of this Report or in the notes to the relevant clause in

"Notes on clauses", or, in the list of recommendations an-

inexed to this part of the Report. '

14. As in the present Act, the preliminary Chapter Chap," 1'

contains only two sections. One is ' the section head- Preliminauy.
ed 'Short title, extent and commencement' and the other
is the section containing deﬁnitions.

Several new deﬁnitions were found necessary and New d,ﬁ,,;_
have been inserted. Of these, .the following deserve notice---- tions.

A deﬁnition of assessment ;has been -added to make it «A,,,..m._m-,
clear that "assessment" includes reassessment. '

. This expression has been used by' decisions of courts "Assignment
and is well-understood as meaning thf ﬁnancial year for -
which the assessment is being ade at .-the rates prescribed

-by the Finance Act of the yea, concerned. A deﬁnition of
'assessment year' has therefore'been inserted in the Act.

These are two new deﬁnitions which were found neces- "Average of
sary. In respect of several incomes which are included in £3" e_Tu..
the total income, abatement of the tax is given at the "A m,'
average rate of income-tax. ' The present Act provides a of 2 Super
complicated process for the computation' of the abatement.'1'aX"-

in section 17, where the method of working the average

' rate of income-tax is referred to. 'It was found convenient

to give deﬁnitions of these two exprqssions and to refer
'to' them in the appropriate sections instead of repeating a
long clause every time.

The basis of charge, under '-the Act varies according as §§',',':.'2"°'§;nd

a person is a resident of India or a 'non-resident. The ex- uR¢.ad¢m»_--
pressions 'Resident' and 'Non-nesident' Ihave speciﬁc mean-
ings for the purpose of the ct» It ,was, therefore, felt
.Recessary to introduce these wo new , deﬁnitions in the
- ct. ; ' '7 '



"Tax"

Changes in
existing deﬁ-
nitions.
"Assessce"

.:g'a.pital as-

"Incomc".

' gains" in the substantive sections. Wherever

Scheme
substantive
provisions.

of

4

A deﬁnition of 'tax' has been introduced. Under this
deﬁnition, 'tax' means both income-tax and super-tax charge-
able under the provisions of this Act. The definition will
make it clear that where income-tax is referred to in any
provision of the Act only income-tax is meant, and where
super-tax is referred to in any provision of the Act, only
super-tax is meant. Where 'tax' is referred to, both income-
tax and super-tax are meant.

15. The deﬁnition of "assesses" has been ampliﬁed so
as to include all the various classes of persons who may
become liable for assessment or payment of tax or other
sum.' -

Item (iii) of existing section 2(4A), which excludes,
from the deﬁnition of "capital asset", land from which the
income derived is agricultural income has been redlrafted
by substituting the words "agricultural land in India'';. Land
lying fallow and yielding no income should, it is felt, be
excluded from this deﬁnition. Hence this change. '

The deﬁnition of "income" has been ampliﬁed so as to
include proﬁts and gains. This will obviate the necessity
of repeating the lengthy expression "income, profits and
actticable.
only the expression "income" has been used in t e substan-
tive sections. 1

16. The substantive provisions of the Act rela g to
one topic or subject matter we at present spread a over
the Act. This has naturall led to considerable di culty
in ascertaining a person's lia 'i1ity under the Act. For ,%exam-
ple, section 42 which' deemsjcertain incomes to acciue or
arise in India is separated from section 4 which d_ea with
the charge to tax of,incomes accruing or arising in India.
Similarly, while most incomes excluded from the to '
come are dealt with in section 4(3) of the Act, the e are
some provisions pertaining to exclusion in other
e.g. sections 14(1), 25(3) and 25(4) etc. We have, the efore,
in grouping the sections in various Chapters, taken dare to
see that all the provisions pertaining to a particular subject
or topic are placed in the same Chapter. 

  
 

17. The substantive provisions are at present co ained
mainly in Chapters I, III and.;IZX in the existing Act. hap-
ter III deals with several subjects. It deals with th bass
of charge, the compdtation df total income under rious
heads, the rebates on; life insiirance premia and othe mat-
ters and the provisions pertaining to salaries, wag and
other matters. In the' draft (if 'the Act which we havp pre-
pared, the substantive provisions pertaining to income-tax
and super-tax have been classiﬁed and grouped in eleven
Chapters which deal with the following subjects : '

The notes to clause

2 (QC, in the Notes on clauses, contain a iituilcd
discussion. a p :



5

(i) Basis of charge. (Chapter II)
(ii) Incomes which do not form part of the total in-
come. (Chapter III)
(iii) Computation of total income. (Chapter IV)

(iv) Incomes of other persons, included in the assessee's
total income. (Chapter V)

(v) Aggregation of income and set-of or carry-forward
of losses. (Chapter VI)

(vi) Incomes on which no income-tax is payable. (Chap-
ter VII)
(vii) Rebates and reliefs. (Chapter VIII)
(viii) Double taxation relief. (Chapter EX)
(ix) Provisions against avoidance of tax. (Chapter X)
(x) Super--tax. (Chapter XI)
(xi) Determination of tax in certain special cases.
(Chapter XII).
18. All the provisions which concem the charge of Chapter I
income-tax have been brought (together. in this Chapter. 3181895 Chat
The deﬁnition of 'previous year' is one of the essential 3°'

criteria for the basis of charge and has been included in
this Chapter. - - .

The .basis of charge has been expressed more generally
than in the present Act, by referrin tovevery "person" in

' the charging section.' This is in fcon omiity with the laws

of other countries'.

'[9. In the present Act the scope of total income is
given sometimes in relation to the nature of income and
sometimes in relation to the residence qf,the assessee. To
avoid any confusion, the scope of total in e of residents.
and non-residents has been put in two iﬁerent sub-sec-
tions.' .

20. Several provisions of the _.Act refdrto income which
is "deemed" to accrue in India, is de ed to be received
in the previous year. We have b ought 5these provisions
together and placed them in pr ' 'ty , ;each other'.

21. At present, there is no provisioniwhich determines Residence.
the residence of an artiﬁcial juridical rson. A new sub-
clause' has therefore been i,ntrod ced in" ;section relating

to '_Residence' roviding that pe ns 0 than those for
which a speci c provision has en ti. would be resi- A
dent in India, unless the controlfand agement of their

aifairs is situate wholly outside India. '

' See section 2(1), Canadian Incomeotax Act, 1948} section 5(1), Sou-
th African Income-tax Act, 194.1;-and section I7, Anstnalian Income-tax etc.
Act, xgé;fe--53.

' clause: 4 (1) and 4 (2), App. I.

' Sec clauses 7-I0, App. 1.

' See clause 6 (4), App. 1.



...,

22. The present Act (section 4) speaks. of three cafe-
gories of persons:

(i) Persons who are resident in India;

(ii) Persons who are not ordinarily resident in India;
and .

(iii) Persons who are not resident in Endia.

-So fay as the second category is concezjned, certain incmznee
rnenmoned in section 4 aocrumg outsxde India are not to

be included in their total incomes. This category is also
of importance for the purpose of certain transactions men~
tioned in sections 42(2) and 44D but is of nae importance
for any other purpose. The Taxation Enquiry Commission'
considered the question whether the category of "not
ordinarily resident persons" should be continued for the
purpose of assessment, and expressed the View that there
was no justiﬁcation for continuing the exemptions given
to this category of cases any longer. We are in entire agree-
ment with the View expressed by the Taxation Enquiry
Commission. Our primary recommendation is. therefore,
that this category shoulé. beﬂabelished. If, however, the
Government wishes to continue the exemptions, we would.
prefer to put, in Chapter III the items which are to be
exchxcied from the total incc-me in the case of persons not
ordinarily resident'. We would also mention the oﬁher lia-
bilities of persons not ordinarily resident at the appropriate

place. We have not. therefore, referred to persons" 'ot ordi-- --

narily resident' in the section "Scope of tot5a1_ ' come".
We would like the basis cf charge ta be determined oniy
with reference to «me question, namely, whether the per-
son is resicient. in India or not resident in Inciia.

The deﬁnition ef "ordinary residence" in setfon 1&3
is couched in a negative form, with the result '{ at the
section is ambiguous in its import. The View take by the
Madras and Travancore-Cochin High Ceurts' is t at resi-
dence in India for less than nine years -out of the preceding
ten wears is suiﬁcient to make: the assesses "not ariiinarily
resident". whereaethe View taken by the Bombay High
Court' is that in order to claim the status of "nut ordi-
narily residen " the requisite conditiorris that the 'assessee
should he non~resident in India in nine out of the ten years
immediately preceding the relevant acceuntmg year. Under
the Madras Vi€W non-residence in one of the saidnine
years would make the assessee "not ordinariiy resident",
even if he has been resident in the remaining ei years.
Under the Bombay View ndtzeresidence in each of 2 nine
years is required befare the assessee can be regard as "not
ordinarily residen ". We understand that the Centr Board

1 Vida T' E. C. Report (£953-£954.}, Vol. II, Chapter £1, 'para 1:
?agcs 28~29. ' ' _
* V:?a':c1ause :1 {4} (iv), App. I. . '
' Marimezthu Piifai vs. C. 1. 'IT, (1945) :2 I. T. R. :86, :88; Swanzinatfmx
gkgﬁg vsg (3.1. 71, :94'; I. T. R. 418, 4.24; Baum vs. C'. J. T." {;955_) 27
. . . 3. ;
'Magﬂibai Farsi vs. C. I. T, (1953) 23 I. T. R. 27.



7,

of Revenue. has approved of the Madras view in some cases
where the question arose for its consideration. If, contrary

_ to our recommendation, the concept of ordinary residence

is retained, it would be advisable to redraft the deﬁnition
of "ordinary residence" so as to make it clear which of

{the two conflicting views -is the one intended by the Legis-
ature.

'We would like to draw the attention. of the Govern-
ment to two provisions of the Income-tax Act which deserve
to be deleted. The ﬁrst is section 4(1)(b)(iii), taxing an
assessee in respect of the remittances by him into India
out of the income of past years (i;e., years prior to the rele-
vant accounting year). Such a provision has only the eﬁect
of preventing capital being brought intothis country at a
time when the country badly needs capital. It is true that
the effect of this provision has been to a large extent
counteracted down by the fourth and ﬁfth provisos' to
section 4(1), which were inserted by the Indian Income-tax
(Amendment) Act, 1953; but there is no reason why any tax
on remittances out of past year's proﬁtsshould be levied

-even in a modiﬁed form. ' To tax the aggregate of the

proﬁts of the past twenty years as the proﬁts of the year in
which they are remitted into India is unjustiﬁable on rin-
ciple, apart from the fact that, as noted above, it resu ts in
capital being kept out of the country. ' '

Another provision which we regard as still less sup-
portable is section 4(1), Explanation 4, Which rriakes an
assessee liable to tax if he moves his past profits from one
part of India into another, that is, from the erstwhile merged
territories or'Part B States, into another/part of the coun-
try. India is one country and it is wrong' on principle to
tax, the movement of money from one part of the country
to another. Besides, a fairly long period has already elaps-
ed since the integration of the former native States into
the Republic of India, and it would be anachronistic to re-
tain any longer provisions which were appropriate at a
time when the political map of India was different from
what it is today.

We recommend that these two provisions, namely, sec-
tion 4(1)(b)(iii) and section 4(1),'Explanation 4, should be
deleted. (We have not, however, given eﬁect to this recom-
mendation in the draft clauses in Appendix I, since this
would affect the tax structure). '

23. The exemptions in the Act are of several kinds. Chnptg III'

Some incomes are not liable tozinclusi in the total in- I"°°m Whi'~ '

com;e. Some incomes are liable'to incl sion in the total gm dp.m":}
income_but are not liable to, payﬁany tax'. It Was felt that the totap
this distinction should be brou ht out prominently by income. '
grouping together provisions pe aining to these two cate-
gories separately and putting them in diﬂerent Chapters.
Incomes which under the provisions of- the Act, are not

. to be included in the total income have been put together,

in Chapter «III.

1 See section 16 (i) (a). I 4 . '

I



Charity.

8

24. A few of the exemptions notiﬁed under section 60,
under which the income is to be excluded from the total
income, have been mentioned here', as it was felt that
such important notiﬁcations should be prominently brought
to the notice of the tax-payer, e.g., income of a University
or other educational institution, scholarships and others.

The exemptions have, wherever possible, been classiﬁ-
ed into well-deﬁned categories e.g., non-residents, foreign
residents, interest and others.

25. The provision in existing section 4(1) 2nd Proviso,
for incomes accruing outside India which are to be exclud-
ed from the total income of a person who is not ordinarily
resident, has been retained in the draft proposed'by us.
If the Government accepts our primary recommendation",
this provision' would have to be omitted.

The provision in section 4(3) (xiv), relatingcto the
exclusion of remuneration received by employees of foreign

enterprises, is sought to be conﬁned to foreigners, since ,

there is no reason why the exemption should be enjoyed
by Indian citizens'. .

The provision in section 4(3) (xiva), relating to salary
received by certain foreign technicians. is sought to be
slightly widened so as to cover salary received for work
done before the actual commencement of business'.'

26. The provisions of section 4(3) (i) and (ii) (income
of religious and charitable trusts) have been the si1bject-
matter of interpretation by" various courts. It app¢ars to
us that the'intention of the legislature is not clea from
the present language of the Act. It also appears to that
the distinction between a trust and an institution as not
been borne in mind in drafting section 4(3)(i). An stitu-
tion is something different from a trust. A trust jis not
necessarily an institution'. %

27. In our opiniqn' the intention of the legisla re in
framing section 4(3)(i) was ;to exempt three catego 'es of
income :-- - g

(i) Income from property held under trust forlchari
table or religious puiiposes. i '

or charitable purpo ,, subject to the con itions
mentioned in proviso (b) to section 4(3) (i

(ii) Income from ibusinesje' eld under trust for reﬁigious

Vi41e,clause II (17) and it (24), App. I. _
Sec para. 22, above. , 
Clause 1: (4) (iv), App. I. .
See clause II (8), App. I.
See clause 1 I (9), App. I.

' Minister of Natimtal Remm vs. Tmm and Guarantee: Ca. Ltd.,
(193?) 4. AER. 14-9, P. C. '

insulin

The notes to clause in may be poi-used for a detailed examinaﬁen of _

the position.
3 a ~ E



9

(iii) Incofne from a business carried on on behalf of a
religious or charitable institution, subject to the
f:c3>;iE:li_')tions mentioned in proviso (b) to section 4

1 . .

28. It appearsto us that in View of the decision of the
Supreme Court' it will be diﬂizult to exclude "business"
from "property" which is the subject of a trust. But, it is
also clear to our minds that income from business should
b exempted only if the conditions mentioned in proviso
(:3 are fulﬁlled. We have, thefefore, redrafted section 4
(3)(i) to make this position clear': '

29. We are of the opinion that the legislature intended
also to exempt the income from a business carried on by
a reli ious or charitable institution, if the conditions men- «
-tione in proviso (b) are satisﬁed. As the exemption of
the income from a business carried on on behalf of a
religious or charitable "institution" is not covered by the
category of income from business held 2 under "trust", we
have provided',.for' the exemption of such income of a
religious or charitable institution,

Chapter IV

Gom tation

_ _ _ _ , _ of to inco-
tion of total income. computation of mcpme under various me,

heads, and other matters are_ oontaindgin Chapter III of
the present Act along with other protrisions pertaining
to exemptions and other matt rs. We_.»o_onsider that' the
provisions pertaining to the co putati 'of income under
each head speciﬁed in section 63 should ,all 'be grouped to-
gether under the Chapter "Combutationf of tota income",

30. As stated above', the provisions negarding computa-

Though there are separate modes ctf computation un-
der each head, we ﬁnd a basic schenie underlying the
method of computation under ail the heads. The Act ﬁrst
provides for diﬁerent categories of incdme being assessed
under different heads of income. Ther V is, then, a provi-
sion for deducting from the ass ' ome under each
head expenditure incurred for ming '
is, again, a provision which prohibits c
computing the income' under , t head
this basic scheme of the Act, w have
head a section which deals wi the
or the nature of income wh'> ' able under that
E-ticular head. e.g.. under sal es, p ty, and business. '

ductions to be allowed or n ' in co sing the income
under each head are separately A rovid . {The sections per-'
taining to a head of income ' groupqd under sub-titles,
for example, A--Salaries, B----I.n§erest on Securities, C---In-

   
   
  
   
 

aving regard to
ojvided under each
'gories of income

 
 

come from house property and soeon.

' J. K'. Truu vs. Commmioner oflncarm-tax, (I957) 32,1. T. R. 535 (S.C.).
' Sec clauses 12 (2) and :2 (4), App. 1.: 'r s i
3 See clause 12 (3), App. 1. 'i ;

.3 '.7 I

I  ' 1 '"1'



Interest on
Securities.

Income from
property.

Proﬁts and
gains of busi-
ness profes-
sion or voca-
tion.

10

31. In the present Act the expression "tax shall not.
be payable" has been used, even in respect of deductions-.
in computing the income under each head. The language
has been criticised and has occasioned some confusion. In,
the scheme adopted by us deduction have been s arate-
1y listed and the expression _"tax shall not be pay ble." is
not used in regard to deductions'. -

Section 8 provides that the tax should be payable in,
respect of interest "receivable" by assessee. As the word_
"receivable" has been interpreted by courts as meaning' _
"received", we have adopted this interpretation and re-.
drafted the section accordingly". '

32. The income assessable under section 9 is more
appropriately described as "Income from house property";
we have adopted this phraseology. '

33. Section 10, which pertains to income from business
covers about fourteen printed pages of the Income Tax;
Manual. The section is divided into thirteen sub-sections,
and sub-section (2) has about ﬁfteen clauses and a large.
number of provisos. In the absence of any marginal notes:
appended to the sub-section and the clauses, it has been
found very diﬂicult to ﬁnd out whether any particular
deduction is admissible in the case of business income or-
not, or to trace a provision relating to any particular topic.
We have, _therefore, divided the provisions pertaining to
business, profession or 'vocation into a number of sections._
The important changes are mentioned below'. I

34. One provision which has caused a good deal of'
hardship in practice is that regarding bad debts. The allow-I
ance for a bad debt under section 10(2)(xi) is conditional
upon the Income-tax Officer, ﬁnding that the amount had
become bad in the relevant accounting year, and tliis has.
been found to bear hardly oprthe assessee in manyicases.
An assessee may write off and claim a debt as a ba debt
in a particular year, honestly thinking that it had come
bad in that year; the Income,-tax Ofﬁcer may disall the.
claim on the ground that the claim was premature d it
really become bad in a subsequent year; on appea, the
appellate authorities -may uphold the disallowance but on
the ground that the ;debt hadi actually become badgin an
earlier year. By thetime the claim is ﬁnally rejec ed, it
may be too late for the a essee to claim the ba debt
in any earlier or late!) year. 0: make the allowance pend
upon the chance of the as ,§ee's view as to the y at in
which the debt became 'bad? coinciding with the part».
ment's view of the matter, and to put the assessee ' peril
of completely losing the ' ht to the allowance ' the
absence 'of such coincidence, Ts not a very satisfacto , basis-T

' Sec clause 19, App. 1.
' See clause 18, App. I. :
' For other changes, see list of changes appended to this part of that

Report.



11

of allowance. We have therefore proposed an express pro-
vision' in the Act that if a bad debt  disallowed as being
claimed too late, the assess ent fora" the year in which,
according to the Income-tax ﬁicer, the debt became bad

can be reopened and the allowance niay _be given for that
year wherever possible. . I '

We have also proposed a provision' to meet the con-
verse case of a bad debt being claimed prematurely.

35. We have also enumerated in a separate section the
topics covered by these sections'. '

36. The proposed arrangement will make it conveni-
ent to ﬁnd the provision pertaining to a deduction or a
charge easily. "'

37. The provisions pertaining to. insurance business
have been placed in a Schedule, as at present.

38. Two changes that we have made in section 10 (2)
(vib), relating to development; rebate,imay be pointed out
here'. In the first place, we Have sli 1§1y altered the pro-
vision so as to allow the rebate in pect of the year in
which the machinery or plant :is ﬁrst gait to use by the as-
sessee, if the' machinery or plant is 0' used in the year
of acquisition. Under the existing ovision, the deduc-
tion is allowed only in the year of at pisition or installa-
tion, and the position regarding casglgwhere the machi-
nery or plant is not "used" in the yéar of acquisition or
installation is doubtful. This; has now been made clear.
In the second place, We have omitted sub-sections (2B)
and (2C) of section 10, relat' g to d psits or proﬁts by
companies. The proposed 0 ission ﬂ sub-sections (2B)
and (2C) of section has beer: made 11 view of the fact
that these sub-sections are nd; beingtienforced at present.
The omission is relevant also; for the}. 'urposes of clauses
(vi), (via) and (vii) of sub-section (2)  section 10.

39. Section 12B has beenicriticisefii as containing the

uni
largest number of provisos. ;It has iavso been criticised gs' .

on the ground that it is difficult to kngw, from the present
language of the section, the deduction a person is entitled
to on account of the cost of the asse S; We have felt it
necessary to coin an expressi , viz, " tatutory cost"? for
this purpose. We have made rovisi or the determina-
tion of the statutory cost se ately 'Iﬁ respect of depre-
ciable and non-depreciable' ssets'. gProvision has also
been made for determining the statutory cost in relation
to the mode of acquisition of the assets :by the assessee by

   
 

purchase, inheritance and other methods.

1 See clause I62 (6), App. I. _
See clause 36 (6), 2nd Proviso, App. I.
Clause 29, App. I.

Vida Clause 33, App. I.

Vida Clause 4.9, 50, 51, App. I. 
Vida Clause 50 and 51, App. I.
2-1 Law Com./58.

I

ovum?-1'9



12

3:32:32? 40. The provisions pertaining to the computation of
3' income from other sources have now been put after the

provisions pertaining to the computation of all other _

incomes including capital gains. The section is thus a resi-
duary section for computing the income from all sources
for which no provision has been made earlier.

We would like to draw the attention of the Govern-
ment to the fact that the present system of taxing divi-
dends creates a good deal oftdiﬂiculty. At present, com-
panies are taxed at a very heavy rate under the annual
Finance Act but section 18 (5) and 49B (1) of the Income-
tax Act treat income-tax paid by companies as paid on
behalf of. the shareholders and allow the shareholders
credit for the income-tax paid by the company. The'tax
to be so credited to the shareholder has to be arrived at
after an elaborate computation under the process known
as "grossing up" of dividends. _This process, dealt with
in section 16(2) of the Income-tax Act, is a complex one.
Moreover, difficult questions often arise in practice as to
whether dividends are declared out of the taxable proﬁts
of the companies or not, since money has no ear-mark and
it is not easy in practice to identify the fund out of which
a dividend has been declared. This difficulty has been
accentuated after the substitution of the present rule 14 of
the Income-tax rules prescribing the new form of certiﬁ-
cate to be furnished by the company to the s arehdlder
along with the dividend warrant. It would in e theglaw
much simpler and easier to administer if at least public
companies are taxed at a very low rate and the share-
holders are taxed at the normal rates without any credit
being given to them for the tax paid by the co"mpa' 'es.
We have not made any changes 'on this point in the igaft

clauses in Appendix I, since  such change would a ect '
e

the tax structure; but w eel that the Government
should consider the simpliﬁcation of the law on this point.
The notes to the relevant draft clause may also be perused
in this connection. '

chaptc, v 41. Income which belongs to other persons is. in goer-
Incomes of tain circumstances. liable to inclusion in the total income
?th¢TdP§'8°{'8 of the assessee, e.g., under sections 16 (1)(c) and 16 (3).
:::]"as:csse;,': These have been grouped together in this Chapter. {The
ma] ;ncom.,_ language of section 16(1) (c) lmds to some_ confusion. {The

provisions pertaining to settlement of income and tr' us-

fer of property have therefore been separately dealt W" h.

Chapter VI 42. The method of computation of the total incgme,
Aggregation the method of computing the loss and the right to c rry
of Income forward such loss to later years all pertain to the conipu-
andm °*7°' tation of total income after the income under each head
§f"1';§fe'S'"a'd has been separately computed. All these provisions have,
' therefore, been grouped together in this Chapter. '

Under section 24 as it stands at present, a loss urider
a head other than cap tal_ga s _is set oﬁ also again: a
loss under the head " apital ains". Since the rateT of

l



13

tax in the case of capital gains is lower than the rate for
other heads, this provision for the compulsory set off of
other losses against capital gains is unfair to the assessee.
The beneﬁt which he derives from the set off is smaller
than what he would have derived if. the loss were set off
against other income. We have, therefore altered the pro-
vision' by'barring the set off of a loss under any head
(other than capital gains) against income under capital
gains, so that for the purposes of set off. capital gains now
becomes a completely independent category.

43. The second proviso to section» 24(1) does not bring
out clearly the intention of the legislature. We have now
put the proviso in the form of an independent section" so
as to leave no doubt as to its meaning. The provisions
pertaining to set off and carry forward of the losses of
registered and unregistered ﬁrms in the assessment of the
ﬁrms and their partners have also been put in separate
sections'. -

44. It is now well settled by a series of decisions' that
a cash credit whose nature and source have not been ex-
plained is to be treated as.the income of the year in which
it occurs. There are similar decisions' regarding invest-

ments whose nature and source areinot explained. These- 1

decisions have been codiﬁed in two sections' of this

Chapter.

45. As stated at the outset. the present Act does not
make a clear distinction between the three categories of
exemptions:

(i) Incomes which do not formipart of the total in-
come and are altogether excluded from compu-
tation;

1 (ii) Incomes which form part ofjthe total income, but
which are exempt from tax:

(iii) Expenditure incurred by an assessee, on which
an abatement is given.

The present Act uses the words,"the tax shall not be
payable" in respect of all the three dategories; e.g.----

(a) Any sum received by a member of [a Hindu Undivi-
ded Family as a member of such family--S. 14(1).

(b) The taxed share of ti partner of an Unregistered
Firm--S. 14(2) (a).

(c) Payments made to effect insurance on the life of
the assessee or on the life of a wife or husband
of the assessee----S. 15(1).

Vida clauses 37 (1) and 75 (1) , App. I.
See clauses 78 (1) and 76 (1), App. I.

See clauses 76 to 79, App. I. -

Scc clause '70, App. I. and the mates there
See clause 71, App. I. and the nptes theretki ' '
Clauses 7o-71, App. 1. i 4

ORCHID"

Chapter VII
Incomes on
which no
Imomc-tax
is payable.



Chapter VIII
Rebates and
Reliefs.

14

' 46. It would be inappropriate to use the same language
in respect of the three categories. We consider that
the expression "tax shall not be payable by an
assessee" is inaccurate in respect of expenditure in-
curred by the assessee, as such expenditure is not part of
his "income". We have, therefore, separated these three
categories and put them into three different Chapters'.
We have already dealt with the ﬁrst category in the
Chapter" in which all the exclusions from total income
have been gathered together. The incomes which are in-
cluded in the total income but exempt from income-tax
have been gathered together in this Chapter. The pro-
visions of the Act which allow a rebate in respect of expen-
diture incurred by the assessee, e.g., sections 15(1), 15B.
etc., have been grouped together in the Chapter' headed
"Rebates and reliefs". '

47. In respect of several of the incomes referred to in
the Chapter under discussion the exemption is con ' d
to income-tax and is not applicable to super-tax. To av id
confusion, the expression "income-tax shall not be pa ab e"
has been used in this Chapter. 1 e exemptions app ica le
to super-tax have been speciﬁcally mentioned, in the Chap-
ter relating to Super-tax . 3

48. In view of the present gﬁtlaeme of taxation (under
the Finance Act, 1958) under W 'dh no deduction is a1l¢.$v1'-
ed for earned income, we consi er it unnecessary to c -
tinue section 15A in the Act. e have therefore omit d
the latter part of section '15A, leaving it to the Govemm t
to omit its earlier part also. i

49. We have discussed above? the unsuitability of t e
present language in regard to algfitement of tax on exp --
diture by the assessee. We hav, made the necessary v_r-
bal changes. '

50. This Chapter provides for a deduction, from t e
income-tax payable on. the tot income, of an amo
equal to the income-tax calcula ,d at the average rate if
income-tax on the amounts on which the assessee is
titled to a rebate, for example, life insurance premia,
contributions, to Provident Fund. The language of t is

 
 

Chapter has been borrowed from the U. .K. and Ceyl 11

Acts'.

We have slightly widened' the provision in secti 11
60(2), (relating to power of the; Central Government
grant appropriate relief ,where salary is paid in arre
and other matters), so as to covdr§"perquisites" also. '1' e
power will thus be available w ' re a perquisite, enjoy d
in the form of cash, is paid in H ars.

1 Chapters III, VII and VIII, App. 1.
' Chapter III, App. 1.

' Chapter VIII, App. I.

' Chapter XI,-App. I.

' Vida paragraph 45 and 46 above.

' See section 2x9 (1), U. K.§Income-tap Act, 1952, and section 14, (b)Iof

the Ceylon Income-tax Ordinancei 5 2
7 Sec clause 90, App. I.



.15

51. The provisions of the Act which pertain to double Chapter IX

taxation relief have been gathered together in this Chapter. D ° " b 1. °
T a x a t 1 0 n

Relief.

52. This Chapter deals with the provisions against Chapter X
avoidance of tax by means of transactions with non-resi- P*°'.'i-°*i°" .
dents and by dealings in securities-cum-dividends and in 3f:;:c"°f";'a";'
other ways. We have also dealt in this Chapter with the '
provision pertaining to avoidance of tax in the hands of
a resident principal.

53. As regards transactions in securities the present
law (section 44JF) deems the interest to accrue de die in
diem. As a tax avoidance provision it would be very ap-
propriate to tax the interest wholly in the hands of the
person transferring the securities before the due date of
maturity. We have altered,the provision' accordingly.

54. The provisions pertaining to super-tax, are contain- Chapter XI
ed in Chapter IX of the Act. There are a few other pro- SuP<=r-tIX-
visions not included in that Chapter which pertain to super- '
tax, e.g., section 23A which provides for the levy of addi-
tional super-tax in the case of certam companies. All the-
provisions relating to super-tax have been brought toge-

ther in this Chapter. In regard to super-tax, the basic pro-

vision that the total income for per-tax shall be the
same as the total income for income- asx has been retained',
but the provisions which exclude certain incomes from
computation of the total income have been made into se-
parate sections'. C

In connection with section 23A, we may draw atten-
tion to the latest pronounqement of the Privy Council'.
on an identical provision of a foreign statute. It decides
that if having regard to the smallness of proﬁts or past
losses or any other relevant factor' or circumstances the
payment of a dividend or a large dividend than that declar-
ed would be unreasonable, no order should be passed un-
der section 23A. We have not made any change in the
existing section on . this point; but we think that the
Income-tax Officer should ndt pass  order under section
23A where the declaration of a dividend or a larger divi-
dend would be unreasonable on aotoilmt of current busi-
ness requirements. .

We may also draw the gattenti A to the inconsistency
inherent in the present provisions L lating to tax on dis-
tributed and undistributed proﬁts.' Section 23A of the
Income-tax Act taxes undistzributed iproﬁts, while the pro-
vision usually inserted in the annual Finance Act has the
effect of increasing the tax on excessive distribution of

proﬁts. This inconsistency' must be removed. A detailed

Vida clause 97 (3), App. 1. '
Vida clause 99, App. 1. ii I
Vida clauses 104 to 108, App. ' 'f '

QCIIH

C.I.T. vs Williamson Diamond! _ ., I958  4.1 (P.C.).

?



Chapter XII
Determina-

16-

discussion of the subject appears in the notes to the rele-
vant draft clause. We have, of course, not made any
change in the existing section on this point; but we re-
coénmend that the Government should take steps as indica-
te .

-55. We have placed under a separate group provisions

_ relating to rebate on super-tax on, certain types of expen-

diture or reliefs in respect of certain incomes as-in the
case of newly established industrial undertakings'. The
Act is not clear as to whether certain incomes exempted
from super-tax are to be included in the total incomes for
purposes of rate or are to be excluded altogether; for
example, the exemption [in section 14(3)] in respect of co-
operative societies. In our draft we have borne in mind
the distinction between an item which is excluded from
the total income" and an item on which only a relief is
applicable at the average rate of super-tax'.

56. In this Chapter we have dealt with cases which

mm Ofmxin are not covered by thenormal rules regarding the com-
cmagn spa- putation of total income or the rate of tax applicable there-

cial cases.

Procedural
provisions.

to. The topics dealt with,here include the computation
of tax for income comprising exempt incomes, liability in
respect of compensation payable, the rate of income-tax
and super-tax applicable to non-residents, the mode of
computation of income-tax_ on capital gains, and to on.
We have made it clear' that in the case of compe ' tion
payable to and received by a registered ﬁrm, the ial
mode of computation mentioned in the Act applies to the
partners. The position is not clear in the Act. '

57. In respect of capital gains the provisions of the
present Act are not easily intelligible, and we have there-
fore clariﬁed the position by expressing the computation
of tax on capital gains in the form of a mathematical for-
mula'. ? '

58. The provisions pertaining to income-tax au hori-
ties and procedure are at present contained mai y in
Chapters II. IIA, IV. V and V-A. All these provisions'have
been brought together, with section 64 which perta' to
the place of assessment and section 54 which pertains to
disclosure of information by public servants. These; pro-
visions have been divided into 'the following Chapters:

(i) Income-tax authorities' (Chapter XIII).
(ii) Procedure for assessment (Chapter XIV).

1 Sec clauses 109 to 112, App. I.

' Contrast clauses 104-108, on the one hand, with clauses 109 to I12, on
the other, in App. I. ~ -

3 Vida clause :23 (2), App. I.
' Via': clause 125, App. I. Cf. section 6 (1) ofthc South African Income-

tax Act, I941 for the device ofgmathematicaj formula. . --

i
r



17

(iii) Liability in special cases (Chapter XV). '
(iv) )S{;%;:Ic)ial provisions applicable to ﬁrms (Chapter

(v) Special provisions applicable to companies (Chap-
ter XVII). ._

(vi) Collection and recovery of tax (Chapter XVIII).

(vii) Tax deemed to have been paid on dividends
(Chapter XIX).

(viii) Refunds (Chapter XX).
(ix) Appeals and Revisions (Chapter XXI).

(x) Penalties imposable by income--tax authorities
(Chapter XXII).

(xi) Offences and prosecutions (Chapter XXIII).

(xii) Recognised provident funds (Chapter XXIV). .
(xiii) Approved superannuation funds (Chapter XXV).

(xiv) Miscellaneous (Chapter XXVI).

59. The provisions pertaining to Income--tax authori- qhapte,-X111
ties are contained in sections 5, 54 and 64 of the present Income-tax
Act. The provisions contained in sections 37, 38 and 39 "»"h°""°*-
pertain to the powers of Income-tax authorities. We have.
therefore, grouped all these sections in this Chapter.

The present classiﬁcation of these provisions is not
very happy. We have. therefore. classiﬁed the provisigns
pertaining to Income~tax authorities as under:

(a) Appointment and control,

(b) Jurisdiction.

(c) Powers, and _

(cl) Disclosure of information. '

60. Effect has been given to the observation of the
Supreme Court in a recent case' by providing that the as-
sessee should be given an opportunity, wherever possible,:
of being heard before a caseis transferred from one Income-'
tax authority to another. . -

There is at present no provision in the Act as to the
Incorne--tax authority who should take proceedings where'
there has been a transfer of the case from one Income,-tax
authority to another. A doubt has been expressed as to;
which Commissioner is to exercise jurisdiction when a'
case has been transferred from an Income--tax Officer under
the jurisdiction of one Commissioner to an Income-tax'
Oﬂicer under the jurisdiction of another Commissioner.
We have provided speciﬁcally for such cases by inserting
a new section on the subject'. The new provision will also

1 Pannulal Binjmj and others vs. Union oflrzdia (1957), 31 LTR. 565, 589,
A.I.R. (1_g57) S.C. 397, 410. 1 .
' See clause [34, App. 1. "



18

meet cases of transfer of a c$e from one Income-tax Offi-
cer to another. A few minor changes made in the various
sections have been indicated in the Notes on clauses.

An important addtion to the provision relating to dis-
closure in section 54 (3) is the new provision' enabling the
Income-tax Officer to disclose the substance of the parti-
culars on which he relies (for the purpose of an assess-
ment) to the assessee with-out. of course. disclosing the
name of the person to whom the particulars pertain. This
is intended to give eﬁect to the decision of the Supreme
Court in the case of Dhakeshwari Cotton Mills Ltd}. f.One
other provision added to this section' enables the Incpme-
tax authority to disclose the facts necessar for the (pur-
pose of enabling an officer of the Central overnment to
levy or realise any tax imposed by it.

A provision has also been added' authorising the. dis-
closure to civil courts of certain documents (like balance-
sheets, proﬁt and loss accounts etc.) prepared by comp' ies
under 'the Companies 'Act, or documents of which c pies
can be obtained under the Registration Act. As no of
these are private documents, there is no harm in permi ting
their disclosure _in cases where the documents are relevant
in a proceeding before a civil court. Similarly, we haveialso
added a provision' authorising the disclosure of ace nts
ﬁled by the assessee before an Income-tax authority hen
the accounts are required by acjivil court for the pur ses
of proceedings to which the assessee is a party. We do not
see any reason why the mere fact that the accounts': are
lying with the Income-tax authorities should debar their
production in court. - g

One important change which we have made conce ing
section 5 may also be;noticed.2 $ection 5(8) provides hat
ofﬁcers and persons entployed n' the execution of the Act
shall observe the orders, inst tions and directions is ued
by the Central Board of Revenue. 

As some of the or ers and -instructions affect asse es
in general, we have a ded a provision' to the effect hat
orders and instructions of a general nature should be

published.

We have also added a clause providing for the re m
of documents producediby an assessee before any Inc e-
tax authority'. V '

1 Sec clause 14: (3) (c), App. 1. 3
' (I954) 26 I.'l'.R. 775. V

' Cause 141 (3) (:1), App. I.

4 c;auses 141(3) (0 (ii) and (iii), App. I.

5 Clause 141(3) (f) (i), App. 1.

' Clause 130 (1), 2nd Proviso, App. 1.

7 Sec clause I36 (4): App. 1.



61. In view of the fact that we havekrecommended the
abolition of the Appellate Tribunal, the provisions pertain-
ing to the Appellate Tribunal haive been omitted from this
Chapter.

62. The provisions pertaining to procedure for assess- Chapter xw
ment have been gathered together in this Chapter. Procedure

for assess-

The Chapter has been divided into sections so as to "'°'"'

bring out clearly and prominently the various stages of an
assessment. The principal chan es made by us in respect
of these provisions are given bepow :-

(1) The date by which the voluntary return is to be
ﬁled has been ﬁxed as the 30th day of June'. \

(2) A primary obligation to make a return of income
has been imposed without the necessity of a general notice
as under the existing section 22(1).

(3) The provisi-on has been 'extended to representative
assessees, e.g., agents of non-residents, trustees' and others.

(4) The person who is to sign the return is mentioned
at present in a footnote to the iorm of return of income.
We consider that this provision is so important that it
should be embodied as a part of the Act itself. We have, ac-
cordingly, added a section on the subject.' We have
made special provisions for the signing of returns in the
ease of mentally incapacitated persons, minors and persons

absent from India.

(5) The criteria for making a "best judgment assess-
ment" have been speciﬁcally mentioned.'

(6) The provisions which are now contained in section
13 have been transferred to this Chapter. The provision
has been so drafted' as to avoid any cqnﬂict between sec-
tions 13 and 23. It has been made clear that section 13
applies only where the accounts are correct and complete.
Section 23(4) will apply to cases where the accounts pro-
duced are not correct or are not compldte.

(7) The Act--section 34(1), 1-'st Proviso, (ii) enables with
the permission of the Central Board of Revenue, the re-
opening of assessments without limit of time in cases where
the aggregate income which has} éscapeg assessment is over
Rs. 1,00,000. We consider that in most: of the cases there
should be some ﬁnality as to an assess ent after the lapse
of. a certain period of time. While pro _ ting the interests
or revenue by providing' that "where income which has
escaped assessment in _a particular year is over Rs. 50.000

' See clause I43 (1), App. 1.

' See clause 144,, App. I.

3 See clauses 14,8. 149, App. 1.

' Sec clause 150, App. I.

' Sec clause I55 (I) (1) (i), App. I.



" 20

the proceedings can be re-opened without limit of time, we
have provided' for a limit of 16 years in all other cases
which are now covered by section' 34(1)(a) lst proviso, clause
_(ii). We would. further recommend that even where the
income escaping assessment in a particular year is over
Rs. 50,000, there should be no re-opening of the assessment
after the lapse of 16 years from the end of the assessment
year concerned. This last recommendation has not been
embodied in Appendix I.

(8) In the case of Parashar vs. Vasantsen Dwarkadas,'
the Bombay High Court held that the provisions of section
34(3) are invalid to the extent to which they allow the
assessment of a person other than the assessee to be re-
opened without limit of time. We have now provided' that
the person whose alleged income is included in the assess-
ment of the assessee, should be given an opportunity of
being heard, before the assessment is completed. This will
cure the invalidity of the provision.

(9) At present there is no time-limit for the completion

.of an assessment made under section 34(1)(a). We think

that the proceedings for such assessments should not go on

indeﬁnitely. We have accordingly provided' for it time-

limit of four years for the completion of the assessment.

The time limit will run from the end ofthe assessment year
in which the notice under section 34 is issued.

Similarly, we have provided' a time--limit of four years
in a case where a notice is issued under section 28(3) read
with section 28(l)(c) (i.e., notice for the imposition of a
penalty where the assessee has concealed the particulars of
his income or deliberately furnished inaccurate particulars).
Under section 34(3) there is no time-limit for the comple«
tion of such assessments.

(10) Section 35 has been split into two sections. The
rectiﬁcation of mistakes, strictly so called, is putlin one
section. Several rectiﬁcations which are permitted Kinder
section 35 are deemed to be mistakes apparent on the face
of the record. All such deeming provisions have been
gathered together in another section. A ~

fi1;_*;)1g;i=tryXi\; 63. All the provisions of the Act dealing with iability

special cam. in special cases have been gathered together in this =hapt_er. H

The following topics have been dealt with in this
Chapter :-- t '

Legal representatives;

Representative assessees (i.e. persons liable as trustees,
guardians. managers, agents of no'n-residents etc.);

Executors;

-

1 Sec clause I55 (1) (a) (ii), App. I. ' (1956) 29 I.T.R. 857 (Bombay H.C.). 3 Vida clause i6o, Expl. 3, App. 1.

' Vida clause 160(2) (81), App. I. ' Clause x6o(1) (b), I. It « 21! Succession and partition;

Shipping' business of non--residents; Persons leaving India;

Discontinuance of business .etc., or dissolution of asso- ciation;

Royalties;

Liability of State Governments.

64. The principal changes made in respect of these pro- , visions are as under :--

(i) The provision relating to legal representatives has been made more elaborate' so as to cover all possible situa-

, tions.

(ii) A new expression has been coined', namely "repre- sentative assessee", to cover all cases where a person is made responsible in an assessment for the income of ano- ther person under sections 40, 41 or 42 (as trustee, guardian, Administrator-General, Court of Wards, receiver, agent of non-resident and otherwise). This scheme has been adopted from the South African Act.' The adoption of this scheme has made for a considerable simpliﬁcation in drafting.

(iii) A new provision' has been inserted to make the representative assessee personally liable where he disposes of or parts with the assets in his possession after the tax has become payable.

Under the Act, a person liable as a representative assessee (particularly a guardian, trustee, or manager) can be assessed either under the special provisions applicable in such cases (sections 40, 41 and otherwise) or under the normal charging provision in section 3. We feel, however, that such persons should not be chargeable under section 3 when there are special provisions applicable to them. We have. accordingly, added a provision' for the purpose.

The position regarding the rate of tax applicable to income received by a trustee in cases where the shares of the beneﬁciaries are unknown or where the income is not received on behalf of a particular beneﬁciary, has been slightly amended' so as to provide that the tax on such income in the hands of the trustee and» otherwise will be at the rate applicable to an association ;o_f persons; a provi- sion has, however, been added to the affect that where the income is actually received by the beneﬁciary, the Income- tax Officer has the discretion to tax at the rate applicable 1 Vida clause 168, App. I. ' Vida clauses 169-I77, App. I. 3 See sections 69-75, South African Income-tax Act, 2941. ' Clause 172, App. 1.

5 Clause :70 (3), App. 1.

' Via': clause 174. (3.), App. 1.

Chapter XVI Special pro-

to the beneﬁciary. We feel that the existing provision in section 41(1), 1st proviso, authorising the levy of tax at the maximum rate (in cases where the beneﬁciary has other income) is not fair. The sheer accident that a beneﬁciary has income from other sources, should not be a ground for taxing him at the maximum rate. .

(iv) There is at present no provision in the Act for the assessment of executors. We have inserted a new provision' for the assessment of executors, based on the corresponding pr-ovision of the Ceylon Act.

(V) The provisions of section 25A, it is now well settled, apply only to cases of total partition of the family. There is no provision in the Act as to the enquiries to be made and the procedure to be adopted in the case of partial parti- tion of a Hindu undivided family. We think that some provision on the subject isdesirable. We have therefore ampliﬁed the section so as to cover cases of partial partition of Hindu undivided families.'

(vi) It has been made clear' that the rate at which a State Government is to pay the tax on its tax free securities should be laid down by the Finance Act.

65. All the provisions of the Act applicable to ﬁrms have been gathered together in this Chapter. This will: enable T to the partners' and others to ascertain the law from one Chapter instead of searching for provisions dispersed all over the Act. .

The principal changes made in this Chapter are given . below :

(1) The provisions contained at present in thi Rules, regarding the regisﬁation aild cancellation of regist ation of ﬁrms, have been incorporated in the Act.

(2) The provision for fresh application for_ reg stration every year has been delejged, as it entails hard hip. A declaration that there has been no change in the onstitu-

tion of the ﬁrm will suffice.' i (3) There was some fsdiﬁiculty in determini g when there is a change in the constitution of a ﬁrm d when there is a succession. Thegspeciﬁc circumstances hich re- Eult inda change in ?'the constitution of a ﬁrm have we been eﬁne ." - T (4) It has been noticed that Income-tax-OfIic s reject the applications for registration on the ground of echnical defects in the instrument of partnership. For xample, where the partnersiof ﬁrm A and ﬁrm B form a big er ﬁrm_----

1 Clause 178, App. I ' Sec clause 181, App. I. ' Vida clause 138, App. I. ' Sec clause 191(7),E App. I. ' See clause 194, App. 1.

ﬁrm C, the registration of ﬁrm C is refused if the instru- ment of partnership of ﬁrm C does not itself specify the in- dividual shares of the partners, but merely mentions the constituent ﬁrms as the partners. In such cases, the shares of the partners in ﬁrm C, we feel, should be ascertained with the help of the instruments of partnership relating to ﬁrms A and B. We have, therefore, proposed a change in section 26A, so that in considering the application for regis- tration, the Income-tax Officer will be required to have regard to the instruments of partnership of the connected ﬁrms also.

(5) A clause enumerating all other provisions rele- vant to ﬁrms has been added.

The provision for registration of firms (section 26A and the rules made thereunder) has worked great hardship in practice. Practical experience of the working of the Act shows that the department is astute to find technical defects on the strength of which registration may be refused. Such refusal can obviously work enormous hardship, since the result of such refusal would be that tax would be attracted at a much higher rate in most cas 's than if the income were apportioned among the various p tners and taxed separate- ly in their hands. The reports qt income-ltax cases afford many illustrations of how even égenuineii firms have been refused registration merely because of some technical defect. We have tried to alleviate the hardship by liberalising the provisions to some extent, as indicated a ' ve. But we feel that if the provision for registration is at ' ll to_ be retained, there should be a complete change in th' approach of the income-tax authorities, and the }provisio§=should not be administered in a hyper-technical' spiri , as is done at present. If the law is not admihisteredéi in a liberal and reasonable spirit, the old adage '-'the letlier ki1leth" would fully apply.

ernment to another provision rdating iﬁrms which we tion of regis- feel is totally unjust. We are referring t section 23(5)(a)(i) ""4 5- of the Act, which provides for the levy 0 tax on registered :

ﬁrms in addition to the tax leviedéon the dividual partners of registered ﬁrms. This is the lleast d' énsible provision of the present income-tax law. . Prior t the amendments made by the Finance Act,-1956,,a regis red ﬁrm did not pay any tax itself, but each ', tner's tire of the firm's proﬁts was added to his other in ome V jthe tax payable by each partner on the basis -of is total income (including h1S share of the ﬁrm's proﬁts) was determined and the levy was made on the partners individually.' Thus, there was We would also like to draw the attention of the Gov- Doub1Ei|:g,.

' no double taxation. But after the amendment made by the Finance Act, 1956, (see paragraph D of the First Schedule to that Act for the rates of tax), income-tax is now assessable on a registered ﬁrm, and. the par ers of be registered ﬁrm are again liable to be charged A their i dividual assess- ments to both income-tax and s r-taxi, respect of their ChaptcrXVII Special pro-

visions plicablc companies.

3P"

to Chapter XVIII Col-

lection and recovery EX.

shares of the ﬁrm's proﬁts. There is, thus, double taxation in the case of a registered ﬁrm so far as income-tax is concerned, (though not as regards super-tax), and only par- tial relief against such double taxation is afforded by section 14(2)(aa).

without precedent, so far as we have been able to gather, in the history of income~tax legislation, either in this coun- try or in the othercountries whose laws we have examined. To assess a ﬁrm in respect of its proﬁts and to assess the individual partners again in respect of their shares of the ﬁrm's proﬁts is virtually double assessment on the same individuals in respect of the same income. This type of legislation cannot be supported on any considerations of justice or fairness or any sound principle of taxation. It would work as a dangerous precedent. We appreciate that it,is a matter of legislative policy how high the incidence of taxation should be; but there is no reason why' resort should be had to pure and simple double taxation on the same individuals, in respect of the same income under the same Act, as a mode of raising the revenue. As alteration in the tax structure is not within the scope of our prdposals, we have not made any change on this point in the draft clause in Appendix I.- But we strongly recommend that this provision [the system of taxing a registered ﬁrm under section 23(5)(a)(i) read with the annual Finance Act] should be abolished.

66. We felt that it would be useful to enumerate in one place all the provisions of the Act which pertain to companies. The provisions themselves have been putin the relevant places, e.g., residence has been put in the Chap- ter on 'Basis of charge', the additional super-tax payable by a company has been put in the Chapter on super-tax. and so on. But all the provisions of the Act which pertain to the assessment of companies have been listed here, fof easy reference. .

67. The provisions pertaining to collection and re overv of tax are contained at present in Chapters IV a d VI.

of The provisions pertaining to deduction of tax, and advance payment of tax are really provisions pertaining to recovery of tax. Therefore, the provisions pertaining to ded 'ction, advance payment of tax and recovery of tax have a brought together in this Chapter.

68. The principal changes made in this Chapter are as under :-- 9

(i) Some doubt was felt .;as to whether the provisions pertaining to deduction. at source or advance payment of tax were valid in the absenceiof a charge of tax. We' have made it clear by adding suitable provisions' that there is a "charge" for deduction of tax, and advance payment of tax etc. ' Vida clause 199(1) readwith clause 3(2), App. I. I-

This provision for double taxation is been.

We have also made it clear' that advance tax on div).- «iends is conﬁned to advance super-tax. So far as income- tax is concerned, the question of advance payment does not arise in' View of the provisions of section 16(2) read with section 18(5) and 49B. V We have also made 'changes' in the 'rate of interest in connection with advance tax and the date from which the interest is to run, so asto secure uniformity. The notes on the relevant clauses indicates in detail 'the changes made in this respect.

(ii) In regard to the provisions for recovery of tax. the principal change made is that the provisions pertaining to the procedure for recovery of tax by the Collector to whom a certiﬁcate is issued have been incorporated in a separate Schedule to the Act, which will constitute a self- congained Code. In drafting this Schedule, we have exa- mined the provisions of the various Revenue Recovery Acts of the various States as also of the various Municipal Acts. The procedure to be followed by the Collector is not very clear and varies from State to State. This va- rianeein procedure has been commented upon by the Su- preme Court.' Whatever the position may be in regard to recovery of tax levied by States, we consider that there shoulci be a uniform procedure in regard to recovery of 'Ce.-ntral taxes. (See detaiied discussions below under "Revenue Lavcs".}

(iii) Provision' has been made for an Income-tax 0fﬁ~ oer to send a certiﬁcate to the Collector of any district in India in which theassessee possesses property or resides. At present, the Income-tax Officer can send a certiﬁcate only to the Collector of the district in which he functions, and where the certiﬁcate is to be sent toanother Coiiector, the Collector to whom the certiﬁcate has been sent has to forward it to the other Collector. This procedure re-- sults in delaying proceedings for recovery.

(iv) It is the departmental ractice and it is also con- venient from the point of View 0 assesse,es---that the power to grant payments in instalments should rest with the In-- come-'tax Oiﬁcer, and that the power should continue even after the issue of a certiﬁcate to the Collector. We have inserted the necessary provisions on the isubject'.

(V) The scope of sections 46 (3) and 46(4), under which, in areas notiﬁed by the Commissioner, 'arrears can be rea- lised in the manner provided by the Mxjnﬁcipai Act of the State, has been narrowed down. Of the various remedies r provigied by Municipal Acts. 'ch power of distrainf: and sale IS the only one that is rea y effecﬁve, and that has 1 Vida clause 25(3), App. 1.

' See App. I, clauses 22:, Proviso and 224 for rate, and 223(1) for date.

T I; £3-shoﬂam oa'm'mj2Ha1a£vs. Aidilicnal Collector cf 3omb:;r--~(:g55} 28 1. . I. ' See clause 239, App. I. ' See clauses 929(2) and 2348), App. 3.

been speciﬁcally dealt with in the draft'. It will be avail- able to any Income-tax Officer authorised for the p rpose by the Commissioner. The procedure to be adopted 1; the Income-tax Ofﬁcer. in the case of distraint of property has been dealt with in a separate Schedule.

Several Municipal Acts contain provisions for an ap- plication being made to a Magistrate having jurisdiction over the area and provide that the Magistrate will §there~ upon collect the tax in the manner provided for the reco~ very of fines or prosecute the defaulter for non-payrxient of the tax. These powers have in fact never been exercised, and we think it unnecessary to retain them'.

(vi) For expediting recovery, we think that it ould be desirable to have;a provision enabling the loco e-tax Officer to apply directly to a court (in whose custodyf; there is money belonging to the assessee) for payment of the mo-- may in its possession. This will save time, and dolaway with the necessity of proceedin through the Collector as at present. We have according y inserted a provisiop' for the purpose. g

(vii) One more mode of -' eovery is recovery by suit. This is implied under the p 'nt law, but we felt at it might be useful to ifnake a rspeciﬁc mention of it ' the Act, and have mentioned it aboordingly'.

(viii) At present one of Qhe modes of recovery imposition of a penalty under section 46 (1), the ,.- - penalty imposed not exceedin the tax payable. ject of this provision is to p am; the assessee from ing money which belongs to veroment without co pen-. sating the Government by a of interest for the elay-v ed payment. Under ﬁle ore' - , it may happen that while the ' where payment is delayed, ='t may not be --».=.~ in another case where 'also payment is delayed. It may also happen that 1111' the case of a particular the penalty imposed under safction 46 (1), is remitt appeal. This, we corlsider, would lead to discrim' tion between assessees who are V' tlarly situated. The sion in the Australiari Act in. behalf has appea us as being more equitable. We 'have, therefore, pro ' for interest at 10 per ent beitg payable by every ~- - who is 'in default in pent V the amount outst from the date on whiizh the mount falls due. (We that the rate of interest shou d be sufficiently high a as to induce assessees to-_ make prompt payment of arr are.) 2

2. 1 Sccclause 235(5), App. I. -r ' Detailed discussion below under the head "Municipal laws" may bf: seen, 5 Vida clause 235(4), App, I. _ i * Sec clause Q43 (la), A3: I. ' ' Soc clause 230 (x), I. . 27_ We have also provided' for the interest being waived in cases where the tax is paid within three months of the default.

The corresponding provisions in the Canadian, U.K. and Australian Acts may be compared'.

(ix) The position 'regarding the action to be taken for the correction or cancellation of a recovery certiﬁcate issued by the Income-tax Oﬁicer to the Collector is very uncertain at present. If after the issue of a. certiﬁcate some mistake is detected or the amount is reduced or in- creased or the Income-tax Oﬁicer desires to- withdraw the certiﬁcate for some reason, the action to be taken is not easily ascertainable from the Act. _We have. therefore, ad- ded a provision' to make the position clear. Under the pro- vision proposed by us, the "assessee cannot challenge the correctness of a certiﬁcate before the Collector; but he will have the right to move the Income-tax Officer (who issued the certiﬁcate) in appropriate cases. We have also provid- ed for an appeal against an order of an Income-tax Ofﬁcer rejecting an application of the assessee raising objection to the certiﬁcate.

(x) Regarding section 46 (5), which confers on the Income-tax Oﬂicer a power to require the employer of an assessee to withhold the assessee's sala and remit the amount to the Income-tax Ofﬁcer towaxtrlls payment of the assessee's arrears, we feel that the power should not be available in respect of that portion of the salary which exempt from attachment under the Civil Procedure Code. We have changed the provision accordingly'.

69. As regards recovery under revenue Laws, a detail- Revenue ed discussion of the position appears to be desirable. Sub- Laws- section (2) of section 46 contains, the fprocedure to be fol- lowed by the Collector after receipt 0 the certiﬁcate from the Income-tax Ofﬁcer. The procedure is the same as that laid down for the recovery of arrears of land revenue in his State.

The proviso to sub-section (2) of section 46 confers upon the Collector all the powers which a court under the Code of Civil Procedure, 1908, exercises for the purpose of recovery of an amount due under a decree. This, of course, is without prejudice to any other powers of the Collector in that behalf.

[The provisions of sections 46 (3) and 46 (4) will be discussed later.] 1 See clause 230 (2), App. I. ' Cf section 54, Canadian 1. T. Act, 194.8 (where the rate is 6 p. c.) and section 495, U.K.l.T. Act,1g52 (the rate being 3 p. c. and Section 270, Australian Income-tax etc. Act, 1936-1953 (where t c rate is 10 p. c.).

3 Clause 233, App. I. ' Sec clause 235 (2), App. I. 3----1 Law Com. 58.

. 70. The powers of the Collector are to be gathered from the laws relating to the realisation of land revenue obtaining in the appropriate State, supplemented by the powers exercisable under,the Code .of Civil Procedure. An examination of the revenue laws obtaining in the States now forming' part of India shows that under these laws the following processes for realization of arrears of revenue are available.

(a) distraint and sale of moveable property of the de- faulter; '

(b) attachment and sale of immoveable property of the defaulter;

(d) arrest and detention of the defaulter in civil pri- son.

All these modes of recovery do not obtain in all the States. Further, in the same State, there are variations depending upon the place of accrual of the revenue ar- rearsa according as the arrears arose in the capital city or outsi e.

71. Section 51 of the Code of Civil Procedure 1908, lays down the modes of execution and it contains as. many as ﬁve -methods of execution of a decree of Civil Court. Sub- clauses (b), (c) and (d) of that section are alone relevant for the purpose of income-tax law, and they are :---

(i) attachment and sale. orsale without attachment of any property (the word property is here used so as to include moveable and immoveable property);

(ii) arrest and detention in prison, and

(iii) appointment of a' receiver.

72. It will be seen by a comparison of the modes. avail- able under the revenue laws with those under the; Civil Procedure Code that the only additional power which the Code of Civil Procedure confers is the power to appoint .a receiver in execution of a decree. The Code of Civil Procedure lays down in Order XXI the procedure to be followed in respect of these modes. Revenue laws Aof the States also lay down the detailed procedure to be allow-

-ed by the Collector for realising arrears of land revenue.

73. The revenue laws relevant are :-- _ [Owing to the distribution of States before and after the S. R. C. Act it has not been possible to attempt a ' lassi- | ﬁcation oﬁ these Acts on the basis of the States a they now exist. Some of these Acts apply in one or more States. The list is also not exhaustive.]

1.'Madras City Land Revenue Act (XII of 1851), read with the Madras City Land Revenue (Amend- ment Act (W of 1863?).

as 01.:-«ago Q

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20. 29 Madras Revenue Recovery Act (II of 1864).

. Bombay City Land Revenue Act (II of 1876). . Bombay Land Revenue Code (V of 1879). . Bengal Land--Revenue Sales Act (XI of 1859) read Witgl the Bengal Land revenue Sales Act (VII of 186 ).

. Bengal Public Demands Recovery Act (III of 1913). . Calcutta Land revenue. Act (XXIII of 1850).

Uttar Pradesh Zamindari Abolition and Land Re- forms Act, 1950 (I of 1951).

Assam Land Revenue Regulation, 1886 (I of 1886).

Bihar and Orissa Public Demands Recovery Act (IV of 1914).

Punjab Land Revenue Act (XVII of 1887).

Madhya Pradesh Land Revenue Code, 1954 (II of 1955). ' Hyderabad_ Land Revenue Act (VIII of 1317 Fasli). Mysore Land Revenue Code, 1888 (IV of 1888).

Madhya Bharat Revenue Administration and Ryotwari Land Revenue and Tenancy Act (66 of 1950).

Rajasthan Public Demands Recovery' Act (V of 1952). -

Rajasthan Land Revenue Act (XV of 1956).

Travancore-Cochin Revenue Recovery Act (VII of 1951). ' Cogrg) Land and Revenue Regulation, 1899 (I of 1 99 .

Vindhya Pradesh Land Revenue and Tenancy Act 1953 (III of 1955).

'74. The following analysis gives a summary of the re- medies available for realisation of arrears of revenue in each of the States :

-I. Madras Acts.

1.

Madras Revenue Recovery Act. (II of 1864).

(i) Distress and sale of moveable property.

(ii) Attachment and sale of immoveable property or management of it.

(iii) Arrest and detenticin.

2. Madras City Land Revenue Act (XII of 1851) read with Madras City Land Revenue (Amendment) Act (VI of 1867).

(i) Distress and sale of moveable property.

(ii) Attachment and sale of immoveable property..

II. Bombay Acts.

1. Bombay Land Revenue Code -(V of 1879)

(i) Attachment and management of land.

(ii) Eorfeiture of the occupancy or alienated hold- ing. 1

(iii) Distress and sale of moveable property.

(iv) Sale of immoveable property.

(v) Arrest and imprisonment of the defaulter.

2. Bombay City Land Revenue Act (II of 1876).

(i) Distress and sale of moveable property.

(ii) Attachment and sale of immoveable property.

(iii) Arrest and detention.

III. West Bengal Acts V .

1. Bengal Public Demands Recovery Act (III of 1913)

(i) Attachment 'and sale of moveable property.

(ii) Attachment and sale or sale only of immoveable property.

(iii) Attachment of a decree.

(iv) Arrest and detention.

IV. Bihar Acts.

1. Bihar and Orissa Public. Demands Recovery Act (IV of 1914). '

(i) Attachment and sale of moveable property.

(ii) Attachment and sale or sale alone of immove- able property. ' .

(iii) Arrest and Detention.

V. Orissa Acts.

1. Bihar and Orissa Public Demands Recovery Act (IV of 1914). .

As in Bihar.

2. Madras Revenue Recovery Act (II of 1864). As in Madras 1.

3. Central Provinces and Revenue Act (II of 1917).

(i) Arrest and detention.

(ii) Attachment and sale of moveable property.

' (iii) Attachment of estate, mahal or land and taking it under direct management.

(iv) Transferring the share of land to another- co- Sharer.

(v) Annuling the settlement of the estate, mahal or land. '

(vi) Selling estate, mahal or land.

(vii) Attaching and selling other immoveable pro- perty.

VI. Madhya Pradesh Acts. --

1. Madhya Pradesh Land Revenue Code, 1954 (II 0 1955).

(i) Attach-ment and sa1e_of moveable property.

(ii) Attachment and sale of holding.

(iii) Attachment and sale of other immoveable pro-

perty.

VII. Punjab Acts.

1. Punjab Land Revenue Act "(XVII of 1887). '

(i) Arrest and imprisonment.

(ii) Distress and sale of moveable property.

(iii) Transferring the holding.

(iv) Attachment of the estate or holding.

(v) Annulment of the assessment.

(vi) Sale of the estate or holding.

(vii) Proceeding against other immoveable property.

VIII. Uttar Pradesh Acts.

1. Uttar Pradesh Zamindari Abolition and Land Re- forms Act, 1950 (I of 1951) Sections 58 to 188 (chapters V to VIII) of the United Provinces Land Eevenue Act, 1901 have been repealed by this ct. .

(i) Arrest and detention.

(ii) Attachment and sale of moveable property.

(iii) Attachment 'and sale of the holding.

(iv) Attachment and of other' immoveable pro-. perty- J -1 . .

at 32 IX. Assam Acts. .

1. Assam Land Revenue Regulation (I of 1886).

(i) Sale of moveables.

(ii) Attachment of estate and management thereof.

(iii) Sale of estate.

(iv) Annulment of settlement.

(v) Attachment and sale of other immoveable pro- perty.

X. Mysore Acts.

1. Mysore Land Revenue Code 1888 (IV of 1888). '

(i) Forfeiture of the occupancy or alienated hold- mg.

(ii) Distraint and sale of moveable property.

(iii) Sale of immoveable property.

(iv) Arrest and imprisonment.

(V) Attachment of holding (consistin _of entire vil- lages or shares of villages) , management thereof. ' XI. Madhya Bharat Acts.

1. Madhya Bharat Revenue Administration and. Kyot- wari Land Revenue and Tenancy Act (66 of 1950).

(i) Attachment and sale of moveable property.

(ii) Attachment and sale of immoveable ﬁrogéerty (other than the land in respect of w ic the arrears have accrued). '

(iii) Attachment and sale of the land.

(iv) Taking the land under direct management or letting it in farm. ' XII. Travancore-Cochin Acts.

1. Travancore-Cochin Revenue Recovery)' Act (V11 of 1951). ' ' _ (i) Distraint and sale of moveable property.

(ii) Attachment and saleof immoveable property.

XIII. Rajasthan Acts.

1. Rajasthan Land Revenue Act (15 of 1956).

(i) Attachment and sale of. moveable property.

(ii) Attachment of the land.

(iii) Transfer of such attached land to ya co-sharler.

(iv) Sale of such attached land. I

(v) Sale of other immoveable property.

2. Ralxjazthan Public Demands Recovery Act (V of 95 ).

The same modes as in the Rajasthan Land Revenue (I Act (15 of 1956).

XIV. Hyderabad Acts.

1. Hyderabad Land Revenue Act 'No. VIII of 1317 F.

(i) Distraint and sale of moveable property.

(ii) Distraint and sale of immoveable property.

(iii) Arrest and imprisonment.

(iv) Forfeiture of the occupancy.

(v) Temporary attachment of village or share of a village.

XV. Vindhya Pradesh. Acts. _

1. Vindhya Pradesh Land Revenue and Tenancy Act, 1953 (III of 1955). '

(i) Attachment and sale of moveable property.

(ii) Attachment and sale of the land in arrears.

(iii) Attachment and sale of other Iand. I

(iv) Attachment and sale of other imrnoveable pro- perty.

XVI. Coorg Acts.

1. Coorg Land and Revenue Regulation, 1899 (I of 1899)..

(i) Arrest and imprisonment.

(ii) Distraint and sale of moveable property.

(iii) Attachment and sale of immoveable property.

75. The following revenue laws do not provide for arrest and detention of the defaulter in civil prison when the amount of revenue due is not paid---

1. Calcutta Land Revenue Act (XXIII of 1850).

2. Madras City Land Revenue Act (XII -of 1851) read with Madras City Land Revenue (Amendment) Act (VI of 1867). \

3. Assam Land Revenue.Regu1ation, 1886 (1 015.1886).

4. Madhya Pradesh Land Revenue Code, 1954 (II of 1955). _

5. Madhya Bharat Revenue Administration and' Ryot- . - _ wari Land Revenue *nd Tengutcy Act (66 of. 1950).

8. Municipal laws.

Rajasthan Land Revenue Act (15 of 1956).

Tiiagxgzlaricore-Cochin Revenue Recovery Act (VII of Vindhya Pradesh Land Revenue and Tenancy Act, 1953, (III of 1955).

. 76. For the purpose of sub-sections (3) and (4) of sec- tion 46 it 1s also necessary to have an analysis of the laws obtaining in the various States for recovery of arrears of municipal tax or local is also given below :--

pa 'ox-dO3U'|I§

15.

16.

rates. An analysis of these Acts Bombay District Municipal Act (III of 1901).

. Bombay Municipal Corporation Act (III of 1888). ' . Bombay Provincial Municipal Corporations Act (LIX of 1949). « . Bombay Municipal Boroughs Act (XVIII of 1925). ' . Madras City Municipal Act (IV of 1919).

. Madras District Municipalities Act (V of 1920).

. Bengal Municipal Act (XV of 1932).

. Calcutta Municipal Act (XXXIII of 1951).

. Punjab Municipal Act (III of 1911). '

10. . Bihar and Orissa Municipal Act (VII of 1922).

12.

13.

14. Orissa Municipal Act (XXIII of 1950).

Assam Municipal Act (I of 1923).

United Provinces Municipalities Act (II of 1916).

Central Provinces and Berar Municipalities Act (II of 1922).

City of Nagpur Corporation Act 1948 (II of 1950). City 0())f Jabbalpore Corporation Act 1948 (III of 195 . .

17. Hyderabad Municipal Corporations Act (XJQKVI of 1950)

18. Hyderabad Municipal and Town Committees Act

19.

20. . Mysore Town Municipalities Act (XXII of 1951).

22.

23.

24. (XXVII of 1951).

Bangalore City Municipal Corporation Act (LXIX of 1949).

Mysore City Municipalities Act (VII of 1933).

Rajasthan Town Municipalities Act (XXIII of 1951). Rewa State Municipalities Act 1946. United Provinces District Boards Act (X of:1922).

i 35

25. Bombay Local Boards,Act (VI of 1923).

26. Madras District Boards Act (XIV of 1920).

27. Rajasthan District Boards Act. (II of 1954).

28.'Mysore Village'Panchayats and District Boards Act (IV of 1952).

' 29. Punjab District Boards Act (Xx of 1883).

~77. The various remedies available under Municipal Remedies Acts' are as follows : f°" '°°°'f°'.'Y of Munici-

)

1.' West Bengal. P31 d'""' ~ 1. The Bengal Municipal Act (xv of 1932).

(i) Distress and sale of moveable property.

(ii) If unsuccessful in collecting the_ amount of arrear by the employment of the ﬁrst mode, recovery may be made by certiﬁcate under the Bengal . Public Demands Recovery Act (III of 1913).

(iii) Instead of or in the case of failure to realise the amount by adopting the ﬁrst two modes, the ar- - rears may be recovered by bringing a suit in a court of competent jurisdiction against the person liable for the arrears.

2. The Calcutta Municipal Act (XXXIII of 1951).

(i) Distress and sale of moveable property.

(ii) If unsuccessful by adopting the first mode, the arrears may be recovered by a certiﬁcate under the B§i)1gal Public Demands Recovery Act (III of 191 .

(iii) Instead of or in the case of failure to realise the amount by adopting the ﬁrst two modes, the ar- rears may be recovered by bringing a suit in a court of competent jurisdiction.

(iv) If any tax (other than the consolidated rate) is due the Commissioner may either prosecute the defaulter or proceed to realise the amount by distraint and sale of the moveables.

' II. Madras.

1. The Madras City Municipal Act (IV of 1919).

(i) Distress and sale of the moveable property.

(ii) If distraint or sufficient' distraint is impracticable the defaulter is prosecuted before a Magistrate.

(iii) If the defaulter has heft India or cannot be found the amount may be; recoveijed as if it were an arrear of land revenue. _ 36

2. The Madras District Municipalities Act (V of 1920).

(i) Distress and sale of moveable' property.

(ii) If distraint or suﬁicient distraint is impracticable Ehe defaulter may be prosecuted before a Magis- rate.

(iii) If the defaulter has left India or cannot be found the amount may be recovered as if it were an arrear of land revenue.

3. The Madras District Boards Act (XIV of 1920). .

(i) Distraint and sale of moveable property.

(ii) If distraint or sufficient distraint is impracticable the defaulter may be prosecuted before a Magis- trate.

III. Bombay.

1. Bombay District Municipal Act (III of 1901).

(i) Distress and sale of moveable property.

(ii) Attachment and sale of immoveableproperty.

(iii) If the above mentioned powers have been sus- pended by the State Government, sums due may be recovered on application to a Magistrate (by distress and sale of moveable property within the limits of the jurisdiction of such Magis- trate).

(iv) If the person liable for payment of any sum (other than octroi or toll) is residing outside the State or has not sufficient property in the State then the amount may be recovere as if it were an arrear of land revenue under the provisions of the Revenue Recovery Act, 1890.

2. The Bombay Municipal Corporation Act (III of 1888). 4 I -

(i) Distress and sale of moveable property.

(ii) Attachment and sales of immoveable property.

(iii) Suit in a court of competent jurisdiction.

3. The Bombay Provincial Municipal Corporations Act (LIX of 1949). \

(i) Distress and sale of moveable property.

(ii) Attachment and sale of immoveable property.

(iii) Attachment of rent. '

(iv) Suit in a dnurt of fompetent jurisdiction.

33?

4. The gombay Municipal Boroughs Act (XVIII of 192 ).

(i) Distress and sale of moveable property.

(ii) Attachment and sale of immbveable property.

(iii) Recovery as arrears of land revenue (if the per- son liable is residing outside the State and has no property in the State).

5. Bombay Local Boards Act (VI of 1923).

(i) Distress and sale of moveable property.

(ii) Ap lication to a Magistrate for recovery (distress an sale of moveable property).

IV. Bihar.

1. The Bihar and Orissa Municipal Act (VII of 1922).

(i) Distress and sale of the moveable property.

(ii) Recovery as a public demand payable to the Chairman under the Bihar and Orissa Public Demands Recovery Act (IV of 1914).

(iii) Suit. ' i V. Orissa.

1. The Orissa (Municipal Act (XXIII of 1950).

(i) Distress and sale of the moveable property.

(ii) As an arrear of land revenue.

(iii) Suit.

VI. Punjab. .

1. The Punjab Municipal Act (III of 1911).

(i) Property tax may be recovered as an arrear of land revenue (without the power of arrest of the defaulter).

(ii) Application to the Magistrate (by distress and sale of moveable property).

2. The Punjab District Boards Act (XX of 1883).

(i) Application to a Magistrate (by distress apd sale of moveable property). ' A

(ii) As arrears of land revenue. » VII. Uttar Pradesh. .--

1. United Provinces Municipalities Act (II of 1916).

(i) Distress and sale of moveable property.

(ii) Bringing a suit in a 'court of competent jurisdic-

tion.

2. United Provinces District Boards Act (X of 1922).

(i) Distress and sale of moveable property.

(ii) Bringing a suit in a Court of a competent juris- diction.

VIII. Assam.

1. Assam Municipal Act (I of 19 )3.

(i) Attachment and sale of movable property. ' S é 38

(ii) liringing a suit in a court of competent jurisdic- 1011. .

IX. M adhya Pradesh.

1. The Central Provinces and Berar Municipalities Act (II of 1922).

(i) R_.ecove_ry_ on application to a Magistrate having ]uI'1Sd1Cl'.10n (by distress and sale of moveable property). -

(ii) Application to the Deputy Commissioner to re- cover arrears (of property tax only) as if they were an arrear of land revenue.

X. Hyderabad.

1. The Hyderabad Municipal Corporations Act (XXXVI of 1950).

(i) Distraint and sale of moveable property.

(ii) Attachment and sale of immoveable property.

(iii) Attachment of rent (for property tax only).

(iv) Suit. ' . 2. Hyderabad Municipal and Town Committees Act (XXVII of 1951).

(i) Distress and sale of moveable property.

XI. Mysore.

1. Mysore Town Municipalities Act (XXII of 1951).

(i) Distress and sale of moveable property.

(ii) Prosecution before a Magistrate.

(iii) Application to a Magistrate (Distress and ' sale I of moveable property).

2. Mysore Village Panchayats and District Boards Act (IV of 1952). '

(i) Distraint and sale of moveable property.

(ii) Suit. ' .

3. Mysore City Municipalities Act (VII .of 1933),

(i) Distress and sale of moveable property.

4. City of Bangalore Municipal Corporation Act (LXIX of 1949). --

(i) Distress and sale of the moveable property.

(ii) Prosecution before a Magistrate.

(iii) Recovery as an arrear of land revenue (if the person liable has left Mysore and cannot be found). ' . -

XII. Rajasthan.

1. Rajasthan Town Municipalities Act (XXIII of 1951).

(i) Distress and sale of moveable property.

(ii) Application to a Magistrate (distress and sale of moveable property).

2. Rajasthan District Boards Act (II of 1954).' v

(i) Distress and sale of moveable property.

(ii) Bringing a suit.

XIII. Vtndhya Pradesh.

1. Rewa State Municipalities Act, 1946.

(i) Distress and sale of moveable property.

(ii) Bringing a suit.

78. From the foregoing analysis it is clear that the re- medies available in the different States under the revenue laws are not uniform and the procedure also varies in some details.

79. In Purshottam Govindjfs case' the Supreme Court Ne_ed . for.

held that section 46(2) is valid and does not offend articles "_mf°'m"Y'. 21, 22 and 14 cf the Constitution. Chandrasekhara Iyer J ., though he agreed with the majority view, observed that "for the enforcement of the levy of a Central Tax like the income--tax there should be uniformity of procedure and identity of consequences from non-payment". The learned Chief Justice in his judgment compared the Provisions of different laws adopted by the different States for the reco- very of land revenue and observed that even in "the same State there were two procedures to which defaulting assessees could be subjected according as they were in or outside the city of Bombay". The learned Chief Justice also pointed out the variation in the terms of imprisonment provided in the State Acts and that in some State (e.g. Assam) there was no provision for imprisonment. Though section -46(2) was upheld as valid, a perusal of the judg- ment convinces one that uniformity is desirable and that the observations of Chandrasekhara Iyer J. are justiﬁed.

80. We have therefore thought it incumbent upon us to Action - codify the law in this respect and include it in a separatepoﬂd R¢V°'; Schedule. The judgment ()f the Supreme Court also gives ""°1""'.')' an authoritative interpretation of the proviso to section 46(2). The meaning of the proviso maybe stated, in the words of the Supreme Court, as fo11ows:-- -

"On a_ proper reading, that sub-section does not pres- cribe two alternative modes of procedure at all. All that the sub-section directs the Collector to do is to proceed to recover the amount as if it were an arrear of land revenue, that is to say, he is to adopt the procedure prescribed by the appropriate law of his State for the recovery of land revenue, ' (1955) 28 I. T. R. 891.

and that in this proceeding he is, under the pro- viso, to have all the powers a Civil Court has under the Code. The sub-section,does not prescribe two separate procedures. The statement to the con- trary in the judgment of the Bombay High Court in Sat Ali Ahmed v. Collector of Bombay', does not appear to us to be correct. In 'our opinion, the pro- viso does not indicate a different and alternative mode of recovery of the certiﬁed amount of the tax but only confers additional powers on the Col- lector for the better and more effective application of the only mode of recovery authorised by the body of sub-section (2) of section 46".

81. A power is distinct from the procedure for the exer- cise of the power. The procedure laid down by the Code for the exercise of the powers enumerated in section 51 is contained in Order 21 of the Code. The revenue laws of each state lay down the powers as well as the procedure. As held by the Supreme Court, the Proviso confers only additional powers on the Collector for the better

-and more effective application of the only mode of Action Pro-

posed (Muni-

.<:ipal laws).

recovery authorised by the body of sub-section (2) of sec- tion 46. The only additional power contained in section 51, C.P.C. is the power to appoint a receiver in execu- tion of a decree. In some of the Revenue Acts, the Collector possesses the power to attach an estate or a village or a part of it and mana e such attached property through his agent. Section 51 o the Civil Procedure Code is not res- tricted in its scope and a receiver may be appointed in any case even without attachment of the property. This addi- tional power is also now included by us in the proposed draft.

82. The process enforceable for the recovery of an arrear of municipal tax and'local rate, referred to in sub- sections (3) and (4)_of section 46, has nothing to 'db with the Collector. Distraint and sale of moveable property (and in some states attachment and sale of immovea e pro- perty also) or prosecution before a magistrate treat'. .the default in payment of the tax or the rate as an ence and imposing a ﬁne and recovery of the arrear and t e ﬁne under the provisions of the Criminal Procedure C e (S.

386) or recovery of the arrear as if it were a ﬁne i posed by a criminal court, are the modes laid down. The Acts which contain provisions for prosecution before a imagis- trate or recovery of the arrears by application to the Magis- trate for distraint and sale of moveable property are de- tailed below :-- -

1. Rajasthan Town Municipalities Act (XXTII of 1951) S. 97 (Only if there is suspension of the other powers by the Government). ' 1 I. L. R. 1950 Born. 350,155.

.41

2. Calcutta Municipal Act (33 of 1951).

3. Punjab Municipal Act (III of 1911), (S. 81 applica- tion to Magistrate).

4. Madras City Municipal Act (IV of 1919) Rules 21(2) and 29--B of Schedule IV to the -Act.

5. Madras District Municipalities Act (V of 1920), Rules 21(2) and 36 of Schedule IV.

6. City of Bangalore Municipal Corporation Act (LXIX of 1949) [Rules 30(2) and 39 of Schedule III].

'.7. Mysore Town Municipalities Act (XXII of 1951) Section 96.

8. Bombay'District Municipal Act_ (III of 1901) S. 88 (Only if there is suspension of the.other powers of recovery by the Government).

9. Bombay I...oca1 Boards Act (VI of 1923) S. 115 (Only if the other powers of recovery are suspended by the State Government).

10. Madras District Boards Act (XIV of 1920), Rules 33(2) and 39 of Schedule IV.

11. Punjab District Boards Act (XX of 1883) S. 58-B [Only in the case of other sums (other than local rates and taxes) due].

12. Central Provinces and Berar Municipalities Act (II of 1922). Section 77.

83. All the processes are enforceable by the Income- tax Ofﬁcer if the requirements of sub-sections (3) and (4)

-of section 46 are satisﬁed.

84. In the draft we have restricted the power of the Income--tax Officer to the mode of recovery by distraintyand sale of moveable property. Even this power is, we are told, seldom invoked except in a few places. We have omitted the power to approach the magistrate either to recover the arrears as a fine or to prosecute the defaulter, as such a power is never in practice exercised. The procedure is cir-

-cumlocutory and is not suited to modern conditions of .society. The existing power of the Income-tax Officer to make a gamishee order is retained.

85. It may be of interest in this connection to mention 3' edge. in that in other countries the remedies for/recovery of In. at «Coun- come-tax are very simple as could be seerf from the follow- "1"-

ing analysis :---

United Kingdom--U. K. Income-tax Act 1952.

(a) Distraint by Collector is. 76).

(b) Recovery of small amounts of tax in court of Sum- 'r7iéz)1ry Jurisdiction as if it were' a civil debt (Sec.

Chapter XIX Tax deemed to have been . di ._ paxdon 9

(Internal Revenue Code 1954) Chapter 64--Collection Sec. 6331--Levy and distraint and sale of property whether real, or personal; tangible or in- tangible.

Commonwealth of Australia.

Income-tax and Social Services Contribution Assessment Act 1936-53

(a) Section S. 209--Suit. _

(b) Gamishee Order by the Commissioner----S. 218. Canada. A ' Income-(tax Act 1948 (Secs. 118 to 121)

(a) Certiﬁcate by the Minister is registered in the Ex- -

chequer Court and such registration has the force

- of decree and is executable by the Court (S. 119).

(b) Garnishment (Sec. 120).

(a) Statement by the Commissioner of the tax duly ﬁled with a clerk or registrar of a court is treated as a judgment and enforced by the Court as such. _

(b) Proceedings by the Commissioner for the seques. tration of the estate of the tax-payer.

Ceylon.

' The Income-tax Ordinance Sec. 79

(a) Commissioner issues a certiﬁcate and is enforced by seizure and sale of moveable property. A

(b) Certiﬁcate' to the District Court who would en. force it by way of execution against the moveable and immoveable property of the defaulter.

(d) Gamishee Order.

86. A portion of the tax paid by the company is deem. ed to have been paid by the shareholder under sections 18(5) and 49B. The tax paid by the company in res ect of dividends is thus given a ,sp"e¢ia1 treatment in the 4 ct in J i 43 the assessment of the shareholder. We felt that it Would be useful and convenient to bring together the various pro- visions of the Act pertaining to such treatment. The pro- visions of the Act pertaining to the tax deemed to have been paid in dividends have, therefore, been gathered to- gether in this chapter.

87. The funds, have To avoid delay in refunds. We have inserted a provi- sion' [on the analogy of section 57(3) of the Canadian Act] that where the refund order is made more than three months after the application for refund, the Central Gov- ernment shall pay interest at the. rate of 2%. A similar recommendation was made by the Income-tax Investiga- tion Commission". We have also made it clear' that where refund is due as a result of an appellate order or as a result of decision by the High Court, no separate applica- tion is necessary. .

provisions of thepresent Act pertaining to re- been grouped together in this Chapter.

88. All the provisions pertaining to appeals have been brought together in this Chapter.

89. On principle, it may appear objectionable that an agency which is under the direct control of the Central Board of Revenue should be vested with jurisdiction to hear appeals from the orders of the Income-tax Oﬁicer. Justice should not only be done, but should appear to be done and should inspire conﬁdence in the persons concem- ed. - It is an elementary principle of the law that a person should not be a judge in his own cause. The Appellate Assistant Commissioner, being under the direct control of the Central Board of Revenue, a satisfactory authority to hear and dispose of appeals against the orders of the Income-tax Oﬁicer. One sugges- tion that was made long ago was that the Appellate Assis- tant Commissioner should be placed under the control of the Income-tax Appellate Tribunal, so as to make him in-

dependent of the authority and inﬂuence of the Central Board of Revenue. This question was examined by the Income-tax Investigation Commission, and that Commis- sion observed' that there Was no reason to think that by reason of' the subordination of the Appellate Assistant Commissioners to the Central Board of Revenue, they were inﬂuenced by the Central Board of Revenue in their deci- sions or that they were in any manner partial in the dis- charge of their duties, or that their judgments were affected by any considerations irrelevant to the decisions of the appeal. No doubt, in spite of this conclusion the Commission did make a recommendation that there should 'Vida clause 2 52, App. 1.

"Para. 279, pages 125, 126, I. T. I. C. Report, 'Vida clause 250, App. 1. . ,, , 'P31'38T8Ph 319, Pages_142, 14.3, I. T. II. C..Rcpc§-t; 194.8.

4-----I Law Com. /58 1 948.

Chapter XX Refunds.

Chapter XXI Appeals and Revisions.

Desi:-ability of . appeals being heard by Appellate Assistant Commission-

611..

may not be considered as-

be an alteration in the then existing system and that Ap- pellate Assistant Commissioners should be removed from the control of the Central Board of Revenue and placed under the Appellate Tribunal. But this recommendation was not accepted by the Select Committee constituted in connection with the Income-tax Amendment Bill of 1952, which examined the question in the light of the recom- mendations made by the Income-tax Investigation Commis- sion. The Select Committee was not in favour of any change in the existing system. The Taxation Enquiry Commission' again examined the question in greater de.tail and also came to the conclusion that no change was neces- sary. In support of their conclusion, the Taxation Enquiry Commission gave figures to Show that in nearly 90%: of the appeals disposed of by the Appellate Assistant Commis- sioners the orders of the Appellate Assistant Commi sioner were either accepted by the assessee or conﬁrmed y the Tribunal. We have examined the further ﬁgures r the years 1953-54, 1954-55 and 1955-1956 furnished to us y the Central Board of Revenue and they establish that 2% of the orders of the Appellate Assistant Commissioner have either been accepted by the assessee or conﬁrmed yr the Tribunal. From this it follows that only about 8% 'of the appeals disposed of by the Appellate Assistant C' mis- sioners are reversed on appeal to the Appellate Tr' unal. The value of the ﬁltration made by the Appellate As istant Commissioners cannot be ignored, and if the decisi ns in 92% of the appeals disposed? of by them are accep d by the assessee or conﬁrmed by the Appellate Tribunal, at fol- lows that the disposals are not affected or vitiated any extraneous inﬂuence and give satisfaction to the asggssees concerned. Though we feel the force of the principl that appeals should be disposed qf by an independent a . ncy other than the one which is subordinate to the C ntral Board of Revenue, the ﬁgures 'furnished to us do n jus- tify any alteration in the existing system. We the efore agree with the conclusion of the Taxationx Enquiry Com- mission that a change in this behalf is neither nec ssary nor justiﬁed. We consider therefore that the Ap llate Assistant Commissioners should continue to functi n as _ at present. 9 f APDelIate 90. The position, however, of the appeals to the» Ap-

T"b""3'- pellate Tribunal and the disposals made by them is entirely different. We feel that the egxistin system of appe Is to the Appellate Tribunal and tgiereater a reference t the High Court on a question of raw either under section 6(1) or under section 66(2), is very; cumbersome and cause un- necessary delay in disposing of the appeals so as to ﬁ alise the assessments. We have obtained State-wise ﬁgurejs re- garding the institution of the appeals before the Appellate Tribunal and of the Reference Applications under s tion 66(1) and section 66(2) for the years 1955-56 and 19 -57.

6 6161'. E. C.Report(1953-19154.). Vol.5 ll, pages 232 to 234., Palvhfkaihs 2_ _ .

45 .

During the year 1955-56 the total number of appeals insti- tuted in the Appellate Tribunal was 8,553. The State-wise ﬁgures are given below :--

Andhra . . . . . . , . . 290 Ajmer . . . . . . . . 55 Assam . . . . . . . . 106 Bhopal . . . . . . . . 39 Bihar . . . .. ~ . . . . 572 Bengal . - . . . . . ' . 972 Bombay . . . . . . ' . . 1912 Coorg . . . . . . . . . .

Delhi . . . . . . . - 283 Hyderabad . . . . . . . 205 Himachal Pradesh . . . . . . 8 Jammu and Kashmir . . . . . . . 129 Kutch . . . . . . . . .

Madhya Pradesh . . . . . . . 206 Madhya Bharat . . . . . . . 30 Madras . . . . . . . . I 74.6 Mysore . . . . . . . . 1 10 Orissa . . . . . . . . _ 1 15 Punjab . . . . . . . - 324, PEPSU . . . . . . . . 1 1 1 Rajasthan - . . . . . . . 86 Saurashtra . . . . . . . . 37 Travancore-Cochin . . . . . . I I 5 Tripura . . . . . . . . x Uttar pradesh , . . . . . ' . . 1047 Vindhya Pradcsh . . . . . . . 54 TOTAL . 8553 The number of Reference 'Applications under section 66 (1) during the year 1955-1956 was 1,080 as per statement below:--

High Courts Order Refere ce a lica ion .

Uns 66 pp t U/S 66 (2) 1n respect I (I) - .

- of ref. apphcatxons u no ' Eu --'-2-' _5 E No. d1s'.'posed Ea 1; E 'gin .. H g ° '13 ..4Q_-: :1:

"' g 1: §"5 8 2 States go 5 in Total 5 M 9.' 3 3 §_--,_*;:' 45.3 1: :1 3 as w s C.' "" '" 1 o no 2% .§ 2 «E2, :2 go as 73 E 3 be 'J: .. -c -u 33 ° '*4: 8 'EE 5''' : as 0 o n... no ,6! O o C.' --- U 1: 3 -to =- 0 o ho--- s...: .5; >~ '.9 =5 8 °.«:. .. .83 ° gﬁg . . ..., . .. . ._ .

£3 £% £28 £2 .%*a§2%%28c'3 1 2 3 4 5 6 7 8 9 Bombay . . 91 275 201 u 21 2o Madhya Pradesh, 8 x4 20 4 7 8 ggropal . - . 1 .. ax' ..

urashtra . 2 3 K ch . . no .. '£7: .. 1 ,, ut . . . .. .. .. ,.i .. .. ..

I 2 3 4 5 6 7 8 9 Andhra 32' 34 50 17 38 86 Hyderabad 53 1 2 30 5 1 5 Uuar Pradesh . 31 . 5o 58 3 7 Vindhya Ptadesh . . 4 4 1 , , , _ Madras 71 286 214, 5 66. 108 9;

Travancore-Cochin 2 23 5 5 9 1 ; Mysore 3 59 57 . . 3 . .

Coorg 2 2 . .

West Bengal x 1 85 76 18 [2 Assam . . 20 19 . . 1 Delhi 4. 58 48 2 4. 6 Punjab I 2 55 36 . .

Rajasthan . 2 7 6 2 Madaya Bharat . . . 4. 4, Pcpsu . . 4. 4- .. . .

Himachal Pradesh . . . . . .

Ajmer 2 5 6 . . . . .

Bihar 5 44 49 13 17 I9 Orissa . 13 30 39 2 2 3 Jammu &. Kashmir 3 . .

TOTAL 347 i080 3x3 623 936 134 ' 232 218 1V0-rE.---Figures in Orders u/s 66 ( columns 7, 8 and 9 include cases in which High Courts, cases u/s 66 (3) and 66 (4.) is quite small.

[In cases in which the refe rejected by the Ap matter came up to the number of such was 232].

3) and 66 (4) were received. However, the number of rence applications were pellate Tribunal under section 66(1), the the High Court under section 66( ) and applications during the year 19 5 1956

91. A statement of the appeals instituted during the ear 1956-57 is given below (State-wise ﬁgures are not available) 2-

1956-57 ° Appeals' instituted inthe year 1956-57 APPCRI by Appeal by asscssee depgnmgm Bombay Bench A . . 2,636 ,38o Bench B . . . . - ' . , Bench C - - . .

Allahabad Bench I , I93 55 Madras Bench 1,823 75 Calcutta Bench I:185 I43 ' Delhi-Bench 908 9:

Patna Bench 529 3 Hyderabad Bench 419 ' 52 TOTAL 3,594 " 799 V TOTAL £493 .

These ﬁgures comprise appeals by the assessees and 3180 by the Department. The appeals instituted by the assessee-S were 8,694 and by the Department 799, in all 9,493.

The number of Reference applications under section 66(1) ﬁled during the year (1956-1957) was 1,014, ~35 P91' statement below :--

State-wise statement showing institution, disposal and Pen' dency of Reference Applications_befare the 1716077194133 Appellate Tribunal Bombay, during the year 1956-57- Reference application u/s 6(1) High Court's orders u/s 66(2) in rcs_pcc_t of reference applications 31.5 No.d.1fsposed b€°§.Lb'ED._8£ 2: a 2 3B%§:e 52¢ States 'E E g Toml '<=>_g ,_, 'g-S 3, 8-?' .€._.~_'5». Sg §«---E§uo£ ago 333-38 -50 -u g'¢€"5 N-S" 8':.§ 8"D>"">' 8 3 L.-«50bn:?:7Em""Q':

a.>a.:.So 1..-$0 u O_GgC'Uo:°E° 5'55 5'5 "EE 'E' cs'5'E o"o~'-'E,' 0'89 z z :14 :2. z§.5z';so Zen I 2 3 4 5 6 7 8 9 Bombay . 165 332 286 12 19 24, Madhya Pradesh 2 19 2 3 x 3 Bhopal . . . . . . . .

Saurashtra 5 2 4. 1 . . 1 Hyderabad 35 2 2 1 . . 1 Iéndhﬁa 15 37 31 19 16 20 me . . . . . . . . . . . .

Uttar Pradesh 23 8 66 1 2 Vindhya Pradcsh -- ---- 4 . . I .

Madras 143 157 243 83 82 :35 T ravancore-Cochin 20 24 28 3 [0 I I Mysore 5 10 9 3 3 . , gcpsu ---- 3 . . . . . .

oorg --- --- . . . . . .

West Bengal 20 162 160 6 18 22 Assam 1 1 1 12 I 1 1 Tripura -- --- . . . .

Delhi 4 31 28 . . . .

Punjab 7,1 42 40 . . .

Jammu & Kashmir 3 2 3 . . . .

Rajasthan 3 13 9 2 . . 2 Madhya Bharat ---- ---- _ 1 . . . .

Himachal Pradesh ---- 1 1 . . . .

Ajmcr 1 16 3 3 3 Bihar --- 57 48 1 1 7 18 Orissa 4 9 9 6 6 TorrAL 491 1014 360 625 985 148 205 282 Non-z.--Figures in columns 7, 8 & 9 elude Orders u/s 66(3) & 66(4) Were received. ever, 66 (3) and 66 (4,) is quite small.

. 'sin which High Courts €111: number of cases u/s 48 [Out of the applications rejected by the Tribunal, 205.

cases were taken up to the High Court under section 66(2)].

92. The average, _therefore, of the appeals instituted before the Tribunal may be taken up roughl at 10,000 per year. The largest number of appeals is rom Bombay. Madras, Uttar Pradesh and Bengal also contribute a large number of appeals. In other States, except in Bihar where the number is nearly 600 per year, the number of appeals instituted is comparatively small.

93. The Tribunal is constituted the ﬁnal fact--ﬁnding authority for four taxes,--income-tax, wealth-tax, expendi- ture-tax and gift-tax, and it is also proposed to make it the ﬁnal fact-ﬁnding authority under the Estate Dut Act. We are constrained to observe that men of the re§uisite calibre and independence are not being recruitedf r dis- charging so heavy a responsibility as that of the ﬁnal fact- ﬁding authority under the new pattern of taxation. ;There are many complaints that the disposal of appealsby the Appellate Tribunal is very unsatisfactory for a variety of reasons. Often, the judicial and independent app roach which is necessary in the ﬁnal fact-ﬁnding authority, is not displayed by the Tribunal. In several cases the determina- tion of complicated questions of fact and law is done! in a very perfunctory manner. Very often, the Tribunal does not clearly record its ﬁndings of fact or its reasons for arriv-

ing at its ﬁndings. In a number of cases, factual or legal"

contentions raised by the parties are not dealt with 'at all, resulting in applications for rectiﬁcation being mad sub- sequently to the Tribunal for considering the points 0 itted to be dealt with in the original order of the Tri unal.

While dealing with the references under section 66( ) and.

section 66(2), High Courts had occasion to comment'; upon the unsatisfactory nature of the orders passed by the ppel- late Tribunal and also on the unsatisfactory stateme ts of case drawn up by them in the references under sect' n 66. The High Courts had to remit the cases to the" Ap Tribunal for a further. and better statement of the cas with fuller particulars. To give satisfaction to the large n mber of assessees, a decision of an independent and good ap llate authority is an undoubted necessity, if justice is to b done to them. There is considerable delay" in disposing f the appeals 'and very often it is said that they, the Trib nals, spare very little time for the appellate work with hich alone they are concerned. Very often the Members f the Tribunals attend the sittings at any time they choose, here- by not conforming to regular office hours, for the di posal of the work. A Bench of two members of the Tri, unal hears the appeals, but in practice the contribution to the decision of the case by one of the members is often not appreciable. i I 1 'Sec extracts given in 4:: next

94. The following extracts from the decisions of courts Fixtftclsﬁom will show how unsatisfactorily the Appdlate Tribunals have -'"dg"'°'""

been functioning :--

Hanumantram Ramnath vs. C.I.T., i*Bombiay'.

"This reference must go back to the Appellate Tribunal for the ﬁnding of further facts. As this is the second refer- ence we have been constrained to send back out of the last ten which have come before us. and as in these cases not only is public time and money wasted, but there is also obviously a hardship cast upon the assessee, it is in my opinion necessary that certain matters should be stated for the guidance of the Appellate Tribunal in preparing fur- ther cases ............................... .."

Hira Mills Ltd. Cawnpore vs. I. T. 0., Cawnpore'.

"Those, as we understand them, are the facts to be gathered from the statement of the case and the accompany- ing judgments and orders. Perhaps we may properly ob- serve that it would be a practice more in conformity with section 66(1) of the Act and with general convenience, if the statement of the case itself had contained all the rele- vant facts, rather than that they should have had to be sought for in the judgments".

Badar Shoe Stores, In re.' "We deprecate the practice, which is becoming too common, of omitting a sufficient statement of facts from the statement of the case and of referring this Court to a miscellany of other documents for the collection of the full facts necessary for determination of the question of law submitted, and we shall take the op Vrtunity of referring to the unfortunate consequences -of th s practice at a later stage .......... .." ' P. M. Huthee Singh & Sons Ltd. vs. C.I.T.' "I must point out here that both in the statement of case and in the judgment there are certain inaccuracies. When a fact-ﬁnding authority is in the position of the Tribunal (whose ﬁndings of fact are considered conclusive), it is always very desirable forthem to. be accurate in their statement of facts. I would like to jdfm', _the learned Chief Justice in emphasizing the duty castiiipon the Ap ellate Tribunal with regard to ﬁndings of ficts. Under t e Act it is the ﬁnal fact-ﬁnding authority and I think it is the duty of the Tribunal when they submit a statement of case to the High Court to state the facts clearly, carefully '(ig45) 13 I. T. R. 203 at 206.

K1946) 14 I. T. R. 417 at 427.

'(x94.6) I4. I.T.R. 431 at 4.33.

*(i946) 14. I.T.R. 653 at 659.

and precisely. After all the High Court only exercises an advisory jurisdiction. Its jurisdiction is to advise the Tri- bunal on questions of law submitted to it and that advisory jurisdiction cannot be exercised usefully unless the fact- ﬁnding authority submits the facts carefully, clearly and accurately. I am sorry to say that in the reference with which we are dealing both in the statement of case and in the judgment there are several inaccuracies which in some cases are patent. A little more care would have been sufﬁcient to make the Tribunal realise that the state- ment of facts prepared by them was not as correct and as satisfactory as it should have been. I hope that in future the Tribunal will bear this in mind when preparing the statement of case".

Messrs. Gobindaram Bros. Ltd. vs. C.I.T.' "The supplemental case returned to us by the Tribunal, and which is now before us is highly unsatisfactory. The Tribunal appears to be ,far more concerned with excusing the statements of factlin the ﬁrst case, which are unques- tionably contradictory, than with complying with the direc- tioni of this Court given under Section 66(4) of the Income- tax ct. -

"The matter was referred back to the Tribunal to record its ﬁndingof fact more clearly, and implicit in that direction is the takingof further evidence, if there is no otherway of determining facts in order that the Tribunal may make its ﬁnding clear. For the Tribunal to say that because a fact was not before it when they disposed of the asses_see's appeal "We are unable to include it in the case at this stage of the proceedings", is a most surprising statement and is one which indicates that the Tribunal does not appre- ciate the duties cast upon it when this Court refers a matter back under section 66(4). The reference back to the Tribu- nal was to record its ﬁnding more clearly and after a lapse of one year and ten months the matter now comes back with nothing new except the affidavit of Mr. Pralhadrai Brijlal, which is annexed to the supplemental case".

Bikaner Trading Company, Calcutta vs. C.I.T.' "We have so far endured with patience the type of statements of cases which have been submitted to 'this Court in connection with the references that have come up this session, but we think that the limit has been passed and we ought to make some observations.' One common feature -of these statements of cases is that the appeal was' heard by two members, whereas the statement of the case in almost every case was drawn up by different members. In drawing up the statement, they do not seem to have 10946) :4. I.T.R. 764, at 770.

'(1953) 24 I.T.R. 410 at 422.

51' always considered it necessary to refer to the appellate order, nor necessary to be exact in the statements they made, n9r necessary to make a full statement of the rele- vant facts.'. Most of the statements of cases are sketchy in the extreme and, were one to rely upon them alone, it would be impossible to answer any question at all. It has been 'a frequent experience this session to ﬁnd two members of a Tribunal deciding a particular case in a particular manner and one of those members, acting with a third member, stating a case for this Court which differed materially from the case made and found at the hearing of the appeal. We shall not say, out of respect for the Tribunal, that_ the members have acted in a careless manner, but we feel bound to say that the manner in which they have dischar- ged their duty of drawing up statements of cases for this Court can only be called carefree".

Calcutta Co. Ltd _vs. C.I.T.'.

"Unfortunately, the treatment of the question by the authorities below has been of a somewhat summary charac- ter presumably because it was raised and argued before them in a superﬁcial form. But even if such was the case, there is hardly any justiﬁcation for the Tribunal failing to realise at least what facts were required to be found and stated. The statement of the case is sketchy and bare and like most of the statements we have had to deal with dur- ing this session has hardly any appearance of a case seri- ously stated".

C.I.T. West Bengal vs. Hanwman Prasad Bagria'.

"In our opinion, the statement in the case referred are clearly insufiicient to enable us' to determine the question raised. The appellate order passed in the case is a striking example of what appellate orders should not be and the- statement of the case itself is an example of the con- sequences that must sometimes follow when the appeal is heard by two particular members of the Tribunal and the reference is made by two other members".

"This ﬁnding of the Income-tax Oﬂicer and the Appel- late Assistant Commissioner was reversed by the Appel- late Tribunal by an order which reads like an order pas- sed by Honorary Magistrates at summary trials".

(Italics are ours).

Dhirajilal Giridharilal vs. C.I.T., Bombay', "It is apparent from the following quotation from the judgment of the Tribunal that not only was its approach to the question raised before it tainted with suspicion, but it took into consideration a number of circumstances based purely on conjectures and surmises and for which there was not a scintilla of evidence on the record".

30953) 24 1»-T-R- 454 at 459- '(I953) 24 I-T~R- 495 at 497, 493;

1(x_o54.) 26 I. T. R. 7:16 at 739 (S. ¢.).

i 52 Shantikumar Namtham Morarji vs. C.I.T.' "There is a ﬁnding given by the Accountant Member in the following words : "We understand that -no part of the borrowings were-utilised in the agency ﬁrm business and therefore the interest paid was not incurred for the purposes of the business". Mr. Palkhivala has rightly quarelled with the nature of this ﬁnding. With res ct to the learned Accountant Member. it is difﬁcult to nder- stand how a judicial tribunal' can record a ﬁnding the language in which this so-called ﬁnding has been rec rded. The duty of a fact-ﬁnding tribunal is to ﬁnd facts, and not to understand that certain faqts may exist or may have been established". ' Indian Steel and Wire Product Ltd. vs. C.I.T."

"Before parting with this case, I ﬁnd necess ry, to repeat once again what I had occasion to say duri g the last sittings of this Bench ..... .. ............ ..If this Court dannot depend on the Tribunal even for the accuracy of the sum- mary of the orders passed by itself, it becomes difﬁcult to deal with these references, particularly as this Court is bound by the statements contained in the stateme t of the case and should not be put to the necessity of ver fying and if necessary correcting the summaries given of the vari- ous orders. What makes the inaccuracy strange inf. the present case is that one of the members who was r'spon- sible for the statement of the case was himself a m mber of the Bench which had passed the appellate order ;relat- ing to the ﬁrst of the two chargeable accomting periods".

The Bhopal Trading Co., Kanpur vs. C.I.T.' "We are not undertaking the responsibility of fr" ming the questions ourselves as the statement of the case also the appellate orders are. as 75 too frequently the case, wholly unsatisfactory". -- _! C.l.T. vs. Malchand Surana'.

"I confess I do not feel altogether happy the wlay in which the facts have been found in this case or the:man- ner in which the case has been stated".

"Before I take up the question on the merits, I ould say a word in passing as r' ards the appellate or er of the Tribunal. The Whole of it appears to be based upon a misconception of both fact (land, law .......... .."

i "It is perfectly clear that the Tribunal failed to Eapply themselves to the real question before them and " deed their order, one regrets to ﬁnd, does not indicate tha they had any appreciation of what' the real question was..', .... .. ' 1(1g55) 27 I. T. R. 69, at 80 (Bombay H. C.). '(1955) 27 I. T. R. 43(j*at p. 445 14.46 (Calcutta H. C.).

'(1955) 28 I. T. R. 4.7 q , at p. 4.8. ( lahabad H. C.). r 95 (Calcutta H. C.).

95. The present procedure leads to delay also. If the Tribunal refuses to make a reference to the High Court where it should have done so, the asesisee or the depart- ment have had to go to the High Count under section 66(2) and this has led to considerable delay in giving a ﬁnality to the assessment. The extracts given above would also show that the statements of cases submitted by the Tribu- nals to the High Court are scrappy, with the result that the High Court has had to ask for a supplementary state-

ment in several cases.

96. For these reasons we are strongly of the opinion Ab§liti°n 01' A that the Appellate Tribunal should be abolished and that a 'h°*'APP°"""° direct appeal should be provided both on questions of fact :;:E$'alpr°' as well as of law to the High Court fmm the orders of the Appellate Assistant Commissioner. The assessee should have the satisfaction that the facts of the case and the law applicable to it have been examined b a competent autho- rity. It would also save the time ol, the High Court, as it would avoid the necessity -for a reference to the High Court on a question of law either under section 66(1) or under section 66(2). We have therefore, provided' an ap- peal to the High Court from the decisions of the Appellate Assistant Commissioner. Where the amount in dispute is Rs. 7,500 or more, the appeal" will be on fact as well as 0? law. In other cases the appeal will be only on questions 0 law. « It is stated that the disposal by the High Courts may cause delay, particularly as the rules of the High Courts require printing in ﬁrst appeagls. To obviate this difficulty, we suggest that by a rule made by the appropriate autho- rity the printing of records inésuch cases may be dispensed with, and the Department and the assessee may be allowed to furnish typed copies of papers on which they intend to rely at the time of the hearing of the appeal before the High Court.

97. We have also examined the ﬁnancial implications of the proposal and we are satisﬁed that it does not involve the States in any extra expenditure, as all expenditure. necessitated by the appointment of more Judges in the High Court and the necessary' staff can be met by the fee. that will be levied on the appeals instituted in the High Court. At present the fee is Rs. 100 in case of appeals to the Appellate Tribunal and, the ariiount realised in the year 1955-56 by the Tribunal. is Rs. 8,46,390 which, of course, includes also fees for Reference Applications. (The department does not pay any fee when it ﬁles an appeal or asks for a reference). The expenditure incurred' in that year for the Appellate Tribunal. is Rs. 8,7-4.684. We have not got the ﬁgures for 1956-57. Even if the fee is res-. tricted to Rs. 100 per appeal and if 10,000 appeals are ﬁled, all the States will get an ingome }Rs\ 10,00,000. If 20 ' Wide c1a'usc 260, App. I. Appointment and training of Appellate Assistant Co-

mmissioners.

Judges are appointed for all the High Courts, the total salary payable per year will be Rs. 8.40,000 leaving a sur- plus for the expenditure on the additional staff that would be required by the appointment of additional Judges.

_ If we consider the position State-wise, the highest ins- titution of appeals is in Bombay and may be taken rough- ly at 2,000 appeals per year. The Bombay State will get a fee of Rs. 2,00,000. Even if four more Judges are appointed their total salary per year will be Rs. 1,68,000, leaving a surplus for the additional staff. Similarly, Madras may re- quire three Judges. Bengal may require two Judges and Uttar Pradesh may require two or three Judges. In other States like Bihar and Punjab an addi- tional Judge may be required. It will, therefore, not en- tail any additional .expenditure from State funds which could not be met from the fee leviable on the appeals ins- tituted in the respective State High Courts. As observed already, the work in which the High Courts are now enga- ged namely disposing of references either under section 66(1) or under section 66(2) will pro tanto be reduced, and this is an additional advantage for the High Courts.

98. Rules will necessarily have to be made to regulate the procedure for the disposal of the appeals expeditious- ly. Delay is occasioned by the printing of records which will not be necessary. If the rule making power is confer- red on the various High Courts there may not be uniformi- ty in that behalf. We, therefore, think that it will be more appropriate to confer the rule making power upon -the Supreme Court' as was done in the case of the Companies Act, 1956. As regards the levy of the fees and the scales which are to be prescribed, it may not be possible for the Centre to prescribe the fee. Some method should be adopt- ed to make the Court-fee payable on the memorandft) of appeal presented to the High Court in such matters uni rm in all the States. We have not therefore made any deﬁinite proposal in this behalf. .

99. In view of the recommendation made by us for-the abolition of the Appellate Tribunal, and as appeals would henceforth lie to the High Court from the Appellate 'As- sistant Commissioners' orders, We consider that Gov rn- ment should ensure that the posts of Appellate Assis ant Commissioners are held by experienced and senior oiﬁders.

100. It will be more satisfactory if experienced :and senior oiﬁcers of the Department hear appeals. ;

101. The Appellate Assistant Commissioner shduld also, in our opinion, be given some training in judicial practice and procedure by being attached to a Judge of a Civil Court, z'.e., a District Judge, for a period of, say, three months. This will be very necessary because the order, of the Appellate Assistant Commissioner should be writﬂen, 'Sec-.. clause 277, App. 1. ' 55 more or less, like a judgment'and should make mention of the points for determination, and the ﬁndings thereon. We' consider that if Appellate Assistant Commissioners are given this type of training, it will inspire greater conﬁ- dence in the litigant public.

102. It may be recalled in this connection that when the Appellate Tribunal was notgin existence, i.e., prior to 1939, the reference to the High Court, though directed against the order of the Assistant Commissioner, was made by the Commissioner of Income-tax himself. Though an officer of the status of Commissioner of Income-tax may not hear all appeals, it would be desirable if appeals ' ' against assessments of incomes in excess of rupees one lakh were heard by the Commissioner of Income-tax or by an officer of equal status. If this recommendation is ac- cepted, the necessary amendments may be made in the Act. Other appeals should be heard by senior oﬁicers Whose scale of pay is attractive. We would recommend for Appellate Assistant Commissioners a «scale of pay inter- mediate between the present Appellate Assistant Commis- sioner's scale and the present Commissioner's scale.

103. As second appeals would lie (if our proposal isC°mmis5i°n-

accepted) to the High Court and as the smaller assessees "'5' may not be able to afford the expense involved in such an appeal, we would recommend the free use by commission-

ers of Income-tax of their judicial powers to give relief to the smaller assessees. In the case of smaller assessees the Commissioner should treat an application in revision as an appeal. Administrative instructions to this effect may be given by the Central Board of Revenue. '

104. The.other important change which has been made other chan-

in this Chapter is the provision' for appeals against all 868- orders of the Income-tax Ofﬁcers which are prejudicial to the assessee, e.g., an order under section 35, the levy of interest under section 18A (6), an order refusing to correct a recovery certiﬁcate, an order refusing to treat the asses-

see as not in default and other similar orders.

105. The provisions of the existing Act relating to pen- C b a p t c r alties have been grouped together in this Chapter. Pm§t'gsI°im:

No change has been made in the substance of these §':f'o'!'111:_taxbV provisions. V au,ho,iﬁes_ _ 106. The provisions of the existing Act relating tochapter offences and prosecutions have been grouped together in XXIII. this Chapter. No change of substance has been made. Oﬁenc", and V_ prosecutions.

107. The provisions of Chapter IXA, Recognised provi- Chapter dent funds, have been incorporated in this Chapter, with XXW, , suitable modiﬁcations explained in the notes to the rele-S P ° °'-" -1 pro vi s i o n vant clauses. ,5 ting to

- 3 3 ' ._ c tain Provi-

1See clause 254.,sub-clauses (d), 1j ), (k) +11), App. I. - d t Fund"

. 1 Z Z 56 §)*(1'§§"'3_ '1 108. Provisions relating to approved superannuation pmvisi°§°;:_ funds, contained in Chapter IX B, have been reproduced 1a,ing.,, c,,,_ in this chapter with suitable modiﬁcations explained in tain Superan- the notes to the relevant clauses. n u a t i o n 3;"?-P W , 109. All the other provisions of the Act which are not xxvy covered by the earlier Chapters have been grouped, toge- Misccllan- ther in this Chapter. V g '"'°"'' The important changes made in this Chapter are as under :-- i (1) -Authorised representatives.--'We consider thatthere is no justiﬁcation for permitting a person who is not a lawyer or a chartered accountant to appear in the i ome-

tax proceedings. The Income-tax Officer exercises wers which are often far more_ responsible than the powers'simi- larly exercised by a civil court or a criminal court. hen persons other than lawyers are not allowed to appear fore the civil court and the criminal court, there is no reason why persons who are not entitled to appear beforeYsuch courts should be permitted to appear in an income-tax, pro- ceeding. An exception should however be made in favour of chartered accountants as they assist companies in the maintenance of accounts. Moreover, they have certain obli- gations under the Companies Act in relation to the prE}>ara- tion of the accounts of companies. We have therefor pro- vided that appearance in income-tax proceedings be confined to lawyers and chartered accoilntants. 1 In order to protect the interests of those personsgwho are, under the provisions of the present Act entitl d to appear in the income-tax proceedings, we have provide for the continuance of their right to appear in the incom tax proceedings. We have however, provided that they s ould be registered as Income-tax Practitioners. We are al 0 of the opinion that there should be a disciplinary bo to control such Income-tax practirtibners. We have ther f-ore made suitable changesin the provisions of sections 59 and 61 ' ' (2) Service of notices.--We have provided for the ode of service of notice under the Act in the assessmen of dissolved ﬁrms, dissolved associations and dis ted H.U.Fs. also.

(3) Rules.'--We have added a provision authorisin the Central Board of Revenue to make rules relating to the issue of tax verification certiﬁcates. Such certiﬁcates ave been found useful in practice ' d it is desirable to ace them on a statutory footing. e have also added a p ovi- _ sion for making rules relating to the constitution of an authority to take disciplinary -action against Incom tax practitioners (other than lawyers and Chartered Accoun-' tants).

110. The Schedules which we propose to annex to» the Act are as under :-- L First Schedule--re1ptes to iisurance business.' { 'Sec clause 324, App. I,; d clause 9, ibid. I 'See notes on the Sched , for the , ngcs made. . l ' Schedules.

Second Schedule.--Brings together in one place the pro- visions pertaining to the procedure to be adopted by the Collector for the recovery of tax on a "certiﬁcate issued to him. 1 Third Schedule.--Deals with the procedure to be adopt- ed by the Income-tax Officer who is empowered by the Commissioner to recover tax by distraint and sale of mov- able property.

111. In the preparation of notes on clauses we have Scheme of departed from the method adopted by us in our previous "OW! 011 reports. In the previous reparts we have followed the ""'°s' order of the sections in the Act under rwision and wherever new provisions were suggested, they were dealt with in appropriate places. This method could not be followed in revising this Act (Income-tax Act) as 'we have reshuﬂied all the sections and sub-sections of the Act. Hence the order of the clauses in the proposed draft has-been followed in preparing the Notes on clauses.

112. A word may be said about the increased number Incr asc in of the sections in the draft.' The U.K. Act of 1952 contains nu"? ' °f 532 sections and 25 Schedules. The existing Income-tax5°°"°""

Act has 67 sections and one Schedule. One section (Sec- tion 10) of the existing Act however, covers 14 printed pages in the Income-tax Manual, and some of the sections in the Act, though bearing one number have the letters A to V added e.g., sections 58A, and 58B. The 67 sections of the Act cover 186 printed pages in the Income-tax Manual.

The actual number of sections in the' existing Act is not 67, but "about 120. The number of sections in the draft is thus only two and a half times the number in the ex- isting Act. The increase in the number of sections is due to the fact that the existing sections have been split into a number of sections. It is h-oped that the_total cover- age of the draft in printed pages Will not show any appre- ciable increase.

113. Appendix I contains our proposals in the form of Sch¢mc_ of draft clauses. APFl°nd1°¢5- Appendix II contains comparative, tables showing the existing provision and the corresponding provision in the draft in Appendix I. Nptes en clauses have been appended at the end. These explain, with reference to each clause in '\ppendix I, chan-

ges made by us in the form or substance of the existing provision. I '

114. For convenience of reference, we have given at the Li"! appen- end of this part of the report two lists, the ﬁrst containing d°di"°'h° ""

a summary of changes of importance proposed by us which ' have been embodied in the draft in Appendix I, and the second containing a list of recommendations made by us which have not been embodied in thefidfaft in Appendix I. ' 'The draft proposed by us contains can clniuisiand Three Schedules.

Existing Sec.

-2 Draft Cl. 2(5) Existing Sec.

2. Draft Cl. 2 Existing Sec.

Existing Sec.

2. (8) Draft Cl. 2.

(25)-

Existing. Sec.

3. Draft C1.

(1).

3. Existing Sec.

4l5raftf?t) (81. 12 I(:)E4)f2 (3) Existing Sec.

) ( ') I)rEt3"t CIT'! I (15)-

Existing Sec.

4 (3) (x) para. (b) & (d):

u (7) iv .

LIST I Summary of important changes proposed in the Income- tax Act and embodied in the Draft Clauses in Appendix I. The deﬁnition of "assessee" has been ampliﬁed to cover all -the situations in which a person becomes assessable for, or liable for the payment of, tax or other sum.

Several new deﬁnitions have been added, important amongst them being "assessment", "assessment year", "ave- rage rate of income-tax and super-tax" and "tax".

Item (iii) of the existing deﬁnition of Capital asset, ex- cluding land from which the income derived is agricultural ' income, has been redrafted and replaced by the words "any agricultural land in India".

The existing deﬁnition of "Magistrate", which includes a Second Class Magistrate empowered by the Central Gov- ernment (or in the State of Jammu and Kashmir by the State Government) to try oﬁences under the Act. has been altered so as to conﬁne the power to First Class Magistrates throughout India. -

The present enumeration of the chargeable entities that is, "individual, Hindu undivided family" etc. has been replaced by the word "person". This will cover all entities having legal personality besides the entities enumerated in the General Clauses Act. ' With reference to the exemption for income d ' ived from property held under trust etc. for religious or c arit- able purposes, the following changes have been made ﬁz-

(i) it has been made clear that the exemption is ';avail-

able in the case of a business, held on trust, stbject to the conditions given in the existing proviso (b);

(ii) it has also been made clear that the exemptibn is available to business carried on by institutions not subject to trust. = ' With reference to the exemption for special allowances or beneﬁts granted to an employee to meet expenses wholly and necessarily incurred in the performance of the ties of an office or employment, the words "who1ly and ces-

sarily" have been replaced by the words "wholly an ex- clusively".

The requirement of necessity has been om tted.

The exemption for income received by a Consul Gene- ral, Consul or Trade Commissioner etc. is at present avail-

able to Indian citizens also. A requirement that the person_ ' Draft C1. u so exempted should not be an Indian citizen has been added, (7) (ii)(_ )and on the lines of e sting section §(3)(x) (c) and (e). , 59 The exemption in respect of -salaries of members of Existing 5°'.-I Nepalese military forces sewing with the _armed forces of d (*3 India or of members of Indian State forces, has been omitted the d,aﬂ)_ as obsolete.

The exemption in respect of income received by an Existing Sec. employee of foreign enterprise is at present available to 4 (3) (""0 Indian citizens. Under the draft it has been conﬁned to Rfag) 01- foreigners. f The exemption in respect of salaries received by foreig- Existing,S6C- ners for services rendered as technicians has. been 4 (3) "ml extended to services rendered before the actual commnce-- ggaﬁ 1' "

ment of the business. - Eacplanation I. ' Certain exemptions enjoyed at present by virtue of Existing Sec-5 notiﬁcations under section 60 have been added in the Act. 4 (3)' These relate to scholarship, and income of Universities or Draft Ci other educational institutions not 'established for proﬁt. SL3"

The condition for residence in the case of a person who Existing 35?- has been"'1'n India within four preceding years, at present, fﬁaféaél ('*2 requires the presence of that person in India "otherwise ' ' than by an occasional or casual visit". This condition has been made more speciﬁc, by requiring the person - to be present for at least 30 days in the 'previous year concerned.

The existing provision authorising the Income-tax Ofﬁ. Exittiilg Sep- cer to treat a person as a resident if "he is satisﬁed that 4A 4") ("') 'the person is likely-to remain in India for not less than Dr?" 01- '5- three years has been omitted. ' ' A provision has been made to the effect that a person Existing Sec- who is resident in respect of one source of income is to be ﬁéft Cl 6 treated as resident for all other sources. ' ' A new provision regardin transfer of cases from one E ?('i;'3 3"' Appellate Assistant Commissgoner to another has been CL ,3} added. (3). (b).

With reference to the power of the Board or the Com- Existing Sec- missioner to transfer cases from one Income-tax Officer to ii) ?(f7*'gl another, a provision has been added requiring opportunity (ft ' I32 to be given to the assessee before the transfer is ordered 3 (except in special cases).

It is proposed to abolish the Ap _e11ate Tribunal. Ap- Existing 366'- peals from the Appellate Assistant gommissioner will lie 53? . 'd' ' to the High Court. . . ( mu' ) .

Salary received from foreign Government has been Existing 560'; speciﬁcally made taxable under the head "Salary". 7 (0 (I):

Speciﬁc provision has been made in respect of salaries Existing paid in arrears. - 7 1). e ' -' {I5 (0) I' ' I 5-----l Law Com.I59 Draft 01. :7 ' 60 Existing The allowance for expenses incurred by an employee l7)m§,f)CL("l'()5 in the performance of his duties has been redrafted by (i,,)_ omitting the words "necessarily from the requirement that the employee should be required to spend the amount "wholly, necessarily and exclusively" in the performance of his duties.

Existing Sec- Income assessable under the head "Interest on securi- graft C] V18 ties" is at present chargeable if it is "receivable". This has ' ' been replaced by a provision charging such interest when "received". The receipt basis has thus been substituted in place of the present provision.

Existing Sec. Sums expended for realising interest on tax-free secu- gr f Cl rities have been disallowed as a deduction in computing the (ﬁ)'_" ' 2' income chargeable under the head "Interest on securities".

Existing Sec- Interest paid on moneys borrowed for the purpose of graft Cl 2' investment in tax-free securities has been made inadmissible

(m)_ ' as a deduction in computing income under the head "Interest on securities".

Existing Sec. Reasonable sums spent on realising interest on ta '-free :3) at, C1 securities are proposed to be allowed to be deducte , for ' ' "°" the purpose of super-tax, in computing income char able under the head "Interest on Securities". If money has; been borrowed for investment in such securities, then in erest paid on the money so borrowed is also proposed to e al-

lowed to be similarly deducted. ;

Existing Sm Rules for furnishing guidance to the Income-tax Qfﬁcer W in determining the annual value of tenanted property; have 9 .

2')" C1' 23 been added.

Existmg scc. Irrecoverable rent has been made an admissible due- 9 tion for computing income chargeable under the hea "In- griiilft CL 24 come from. property"; (At present the deduction is-

) sible by virtue of a notiﬁcation only).

Existing sec. The provision relating to development rebate has been 3>m(f';') éinbga changed as regards the year in respect of which the bate i::°i1:'§:°::e:i aissiziaztanﬁsisgsiiziizié ELi%:$'°?' 21:1':

vision as proposed, it will be available in ihe next K ar, if t Z mis-

the ship or machinery is actxially put to use for first time in the next year. ' Existing Sc¢_ If the bad debtspwritten; qif in an earlier acco' ting B)ra'(t2%:l (x2 yltlear al'§1i1(E: allﬁwedtny tire Inyt:¢n1i)e-tax Officer for ttlha year,

-3 . ey W1 e a owa e _or a su sequen accoun 'ng year, $25 2"' pm' if the Incometax Ofﬁcer is thansatisﬁed about the irr ver-

° ability of the debt. .(As to the converse case, see elow under existing section 35.) .

Exﬁ ' . v u - -

z:c:(;1;i); Sscnd beenTl.El1(:Z'nif:;I1':glS10nS for deposit of proﬁts by companies have (omitted in 61 A new provision has been added _.-whereunder in com- Existing Sec- puting income from business, profession or vocation, bonus ]')"r§t)Cl 36 paid in pursuance of the award of an industrial Tribunal (2) W.' will be allowed as a deduction, even if the amount of the a bonus is not reasonable. ' A new provision has been added whereunder contribu- Ex' tins Sec. tions made by an employer to funds estab..ished for the bene-- 8;' {£21 6 ﬁt of his employees have been listed as -aclmissible deductions (4)V(b)_ ' 3 for computing income from business etc., even if the fund is not a recognised provident .fund or an approved super- annuation fund, under certain conditions.

A new provision has been added to the eﬁect that Existing Sec-

buildings constructed by an employer for the residences of gift CL 43.

his employees should be treated as buildings used for the purpose of the employer's business, if the occupation by the employees of the buildings is subservient to and neces- sary for the purpose of the employees' duties.

A new provision has been added laying down rules for EXWDS 56°- estimating the value of the consideration received in a 3", C1 3 transaction of exchange. (This is with reference to charg- . '5 ' ing of tax under 'Capital gains'.) The scope of the existing; provision, relating to power Ex ting Sec. of the Income--tax Officer to treat thelfair market value of '2. ,(2)» M a capital asset as the value of the consideration for which ,'gIfff;"a1 the sale etc. of the asset is made (where the sale is effected v '54' with the object of avoidance etc. of" the liability of the 3 assessee to tax under capital gains), has been narrowed down i by conﬁning the power to a case where the actual considera- tion is not correctly recited in_ the deed 'of sale etc. On the ' other hand, the scope has been widened by deleting the re- quirement that the transaction must have been entered into with a person directly or indirectly connected with the assessee. ' It has been made clear that where the accounts of the Extsting sec. assessee are not correct and eomplet ' the assessment will :3; be a best judgment under section (4). The power to ' .c1_e5o compute the income "upon such basis' and in such manner (1 as the Income-tax Officer may determine" (existing section . 13, Proviso) will be conﬁned to a case where the accounts ' are correct and complete. K A new provision has been added ' , rein interest paid tingscc. by an assessee on money borrowed f investing his capital '5 (I) 8;) in a ﬁrm has been listed as an admissible. deduction in(D -69 congauting his income comprising his share in the ﬁrm's 3.' pro ts. ' ~ It has been made clear that section 16(1)(c), 3rd Pro- Existing Sec. viso, which removes from the scope or the section income :62 (I) (0) arising by virtue of a settlement etc. which is not revokable Diiaft C1. 64. for a period of more than six years etc, does not apply in a case where the assets re ' the' perty of the settler § etc. In other words, where' ere. is 'transfer of the »col'- 3 pus, the proviso will have n appli j , . - _ \ 62 Existing Sec- The existing provision, whereunder income arising from ;)'5ra(,.3t)((:1,') 67 assets transferred to any person etc. for the beneﬁt of_ a

(v)_ ' minor child of the assessee is regarded as the assessee's in-

come in certain cases, has been modiﬁed so as to exclude cases where the minor child is a married daughter.

Existing 366- It has been made clear that the rate applicable for de-

l')8m(f.'*tA()3l(3:3gI duction of super-tax is one in force for a company which (1,) and .204 has not made the arrangements for deduction of super-tax

(x) (b). referred to in section 18(3D). Exisling See» A new provision has been made imposing a ﬁrst charge B"m(fZ)Cl upon the assets of a person who, after deducting tax under 2°9' the Act, fails tolpay it into the Qovernment Treasury. Existing Sec. A general provision has been made to the effect that ' '3 (7) and 7 where tax is deductible at source, the assessee shall not be $,'i;'o'''"d 1"" called upon to pay the tax himself unless he has received D;-a_f[C|_ 2,3. the income without such deduction. (The existing provision is conﬁned to salary.) ' Existing see. A provision has been added to the effect that advance 18A (1) payment of tax will not apply in respect of income-tax on ggaft Cl. 215 Existing Sm The rate of interest to be paid by an assessee who 18A (4) pro- does not pay advance tax on commission receipt within viso ﬁfteen days of the date on which the income is received, D''''" C!' 2*" has been reduced from 6 per' cent. to 4 per cent.

Existing Sec- Interest payable by an assessee in a case where the 33r":ft(5():l 22 tax estimated by him falls short of 80 per cent. of the tax (,)_ ' 3 regularly assessed, is made to run not from the 1st day of January of the year of payment but from the 1st day of April of the next ﬁnancial year.

Existing Sec. The rate of interest payable by an assessee in cases of 18A (7) under-estimate of advance tax has been reduced from 6 per Dmf' C1324' cent. to 4 per cent. ' ' .

Existing Sec_ Instead of the general notice requiring all persons to 22(1) submit a return of income, a provision has been made for DIM'-)0" '43 the compulsory submission of the return by every person ( Ha ' ~ who is assessable in respect of his income or in respect of any other person's income. The return will have to be submitted by the 30th June, each year.

Existing Sec. A provision has been added to the eﬁect where a return 22 (I) of income is sent to an Income»-tax Ofﬁcer who has no juris- g§3(f,'))C1' '43 diction over the assessee, he shall forward it to the Income-

' tax Officer having such jurisdiction. » ' Existing Sec» A new provision has been added clarifying the power gmﬁ C, X46 of the Income-tax Oﬂicer to make such inquiries as he may (2)_ ' think necessary for the purpose of assessment.

Existing 560- A new. provision has been added requiring the Income-

gaft C, [46 tax Oﬁicer to give the assessee an opportunity of rebutting (3). ' any material which isvproposed to be used for the purpose

-of assessment. (An exception has however been made for , "best judgment"_asses¢ment.) ;;

» produced in the case) for the purposes of assessment, has (8) 63 The power of the Income-tax Officer to take into ac- Existinx 59¢- count material gathered by him (in addition to the evidence ffmﬂ CL "'7 1 een clariﬁed.

It has been made clear that a "best judgment" assess- Existing 560 ment is to be made after consideration of the material f)i';a§.§)C] I 3 which the Income-tax Ofﬁcer has gathered. ' 4 An indication of the material which the Income-tax Existing Sec. Ofﬁcer may use in an assessment under section 23(3) or 23- 23(4), has been given. - DmﬁCl"49' A speciﬁc provision has been added laying down the Existing see. right of set oif of loss from one business against proﬁts in 24(1) any other business. ' D"'ﬂ CL72' The provision relating to set OE of losses has been Existing Scc. modiﬁed in respect of set off against capital gains. A loss 24 (1) sustained under any head other than capital gains cannot be set olf against capital gains, under 'the provision as proposed.

In respect of the assessment of a person about to leave Existing Sec. India, it has been-provided that the period of notice to be 24A given by the Income-tax Oiﬁcer may be shortened even in %'"f' C" '34 respect of the assessments for earlier previous years. )'

- 7 (I) and 75- Fpr the assessment of a person about' to leave India, a Existing 56¢- time- imit of three months has been provided for complet- gmf Cl 18 mg the assessment, where the assessment is made under the m_ t ' ' special procedure given in existing section" 24A.

The section relating to partition of a Hindu undivided Existing Sec. family has been made applicable in respect of partial parti- 2 , tion also. 134335' CL '3' A new rovision has been added laying down which 'sting Sec. Income-tax fﬁcer is entitled to assess a Hindu family after 2 A 5 its partition. . C' '8' The provision relating to assessment after partition has Existing 560- been extended to penalties and other sums._ Dar'

1. 181 (8).

A deﬁnition of partition has been added.

Existing Sec.' gift Cl. 181 ' Expln.

it has been made clear that an application for the regis- Existing Sec. tration of a firm may be made even after the dissolution of GA Draft the ﬁrm. - '9' <2)' The provision (at present contained in the rules) re1at- Existing sec. ing to the time Within which -a ﬁrm should be registered ESA has been modiﬁed. It has been provided that the applica-'D'3f' 0* '9' tion should ordinarily be made before the expiry of the 4}' prevliloﬁus year in respect of which registration is being soug .

The provision requiring that the individual shares of Existing Sec- the partners should be "s ciﬁed in the partnership deed" W" 25A has been altered, so as to ow regi nation where the shares; 1,)9'fff,)fla"'° Existing Sec. 26A.

Draft Cl.

:91 (7).

Existing Sec. 26A Draft Cl. :92 (2).

Existing Sec. 26A Draft Cl. 192 (4.).

Existing Sec. 26A Draft Cl. 193 (1).

Existing Sec. 26A Draft C1- 193(5)-

Existing Sec. 30 (1) Draft Cl. 254..

Existing Sec. 31 Draft Cl.

259, Expl.

though not speciﬁed in the instrument, can be ascertained from that instrument dr from the partnership deeds of any A connected ﬁrms.

The provision (at present contained in the rules) re- lating to renewal every year of the registration of a ﬁrm has been modiﬁed. So long as there is no change in the constitution of the ﬁrm or the shares of the partners, a formal application for renewal will not be necessary and it would suffice if the ﬁrm ﬁles a declaration, with' the return of the income. to the effect that there has been no change as aforesaid.

A provision prohibiting the Income-tax Oﬁicer from rejecting an application for registration of a ﬁrm on tech- nical grounds has been added.

A time-limit has been provided within which an appli- cation for registration of a ﬁrm must be disposed of by' the Income-tax Ofﬁcer.

It has been made clear that the only ground on which the registration of a ﬁrm can becancelled is misrepresenta- e tion. It has also been provided that the ﬁrm must have an opportunity of being heard before cancellation, andsthat cancellation can be ordered only with the previous appro- val of the Inspecting Assistant Commissioner. .

A time limit has been laid down within which regis- tration of a ﬁrm can be cancelled. .

It has been made clear that an objection as the status under which the assessee is assessed can be raised by way of appeal. 9 A new provision authorising appeals in resp ; t of orders passed under existing 'section 35 (rectiﬁcati of mistakes etc.) has been added. f Various orders relating to - interest passed undei sec-

tion 18A (advance payment of tax) have been mad ap- pealable in appropriate cases.

The following orders have been made iappealable :-

(*1) An order passed by the Income-tax Ofﬁcer cn an assessee's application 'for withdrawal or can[:el1a- tion of a recovery certiﬁcate issued to the Obllec- tor;

(2) An order passed by the Income-tax Oﬁicer reﬂllsing an assessee's irequestfto treat him as not 11!! de-

fault in view of an appeal.

It has been made clear that an Appellate Ass stant Commissioner, in disposing of an appeal is not con d to the grounds raised by the appellant in the appeal an may redvetermine any matter which fell to be decided b the Income-tax Officer inithe coufﬁ of the proceedings hich led to the order in appeal. r ' i 1 3 65' Appeal to the Appellate Tribunal -is replaced by _a -1s?J_<I=ting peal to the High Court, and the Tribunal is to be abolis - "°' 33' ~D af ed» 2t6o (1).

It has been made clear that an order passed by the gifting Appellate Assistant Commissioner rejecting or refusing an D5333' appeal without a decision on merits is appealable. c1_g;.,(,)_ The power to reopen an assessment any time, where the Existing income that has escaped assessment in the. past amounts Sec-P34 (I)- to one lakh of rupees or more, has been modiﬁed. 3" '9."f'°' Only the incomes for the sixteen assessment years ( (' prior to the year in which a notice under section 34 is '55 ') 3) issued will, it is proposed, be taken into account in arriv-

ing at the ﬁgure of one lakh of rupees or more. It has, however, been added that where the income which escap-

ed assessment in a single assessment ear is at least ﬁfty thousand rupees, the assessment for at year can be re-

opened at any time.

A new provision has been added prescribing a time; liaxiptins sec- limit of four years for the completion of an assessment in 'l')°'!f341(3) the case of a notice under section 28(3) read with 28(1) ,6', E3

It is proposed to allow the Department a period of at Eximnﬁ 5"' least one year for the completion' of an assessment in atf)'::f§t1§?gc case where an assessee ﬁles a return or revised return 155(1) re), under section 22(3). ' A new provision has been added 'prescribing a time- Exﬁsying limit of four years for the completion of an assessment D ;{'"34(3) under section 34(1) (a) (i.e., assessment for income whichc use ",0 escaped assessment by reason of the assessee's omis- (2.

sion or failure to disclose the material facts). The tiIne- s limit will be counted from the end,'of the ﬁnancial year in which the notice was iss ed.

A provision has been added to the effect that while Fgxistins 5°C- computing the period of limitation laid down by the Act "°"f§41(3) C for the completion of assessments, any period during , 0 , which assessment proceedin§ were stayed by an order of ' a court will be excluded.

A new provision has been added empowering the re- 'ﬁng sec. vision of the assessment of a member of an association in: 35 a case where the assessment of the association itself is re- "R °"*""

vised. I , , 'E (2)-

(Existing Section 35(5) mayfbe compared.) ; V With reference to the provision that where a' re-assess- Vxisaing Sec- ment etc. has to be made in consequence of an order passed 00 34 (3) on appeal or other proceedi gs in respect of the assessee or 6'3" c'"l"'° any other person, the time-_imit for assessment would not ;a,i',,}:';q;"

apply, two Explanations have been added explaining the and 3. scope of the provision. A ' With reference to the provision that if a company does E''i''i"3 5"' I not pay the tax on its pro ts with g ree years after de- (9) _ 6 claring the dividend the will?" irecovered from the a (4).

Existing Sec-

tion 35 Draft Clause :62 (6).

Existing Section 37 Draft Cl. 136 (2).

Existing Section 37.

Draft Cl. x 36 (4).

Existing Sec. 40,41 and 42.

Draft Cl.

169, etc. Existing Sec. 40,41 and 42 Draft Cl.

'I70 (2).

Existing Sec. 4o,4i,42.

Draft Cl. 170 (3).

Existing Sccs.4o,4i,42 Draf

-Cl. 17: (1).

Existing Secs.4o,4r,-4*:

Draft Cl.i72.

Existing 380- 41 (I), 13: proviso.

Draft Cl.

1 74-: Para' graphs (a) and (b).

share-holders, it has been of the company itsel year should have ela th provided that if the assessment f is delayed, a period of at least one psed after the end of the year in which e company is assessed.

A new provision has been added ex come-tax Ofﬁcer to reopen an assessme of allowing bad debts, where the assess for a particular previous year but the Income-tax Officer is of opinion that the deduction should have been claimed for an earlier previous year. (As to the converse case, see under 'existing section 8).

npowering the In-

nt, for the purpose ee claims deduction It has been made clear that while ex of the court with reference to the d and examination of witnesses, should follow the same procedu ercising the power iscovery of documents the Income-tax authority re as a civil court.

A new provision for return of documents produced by any person before an Income-tax authority has been added.

\The provisions relating to assessment of guardians, trustees, managers, Court of wards, Administrator-general, agent of a non-resident etc. have been combined under one topic, under the group of sections relating to "Representa- tive assessees". --

A new provision has been adde of all "representative assessees" (12. agents of non-residents etc.) to the their possession. (S tain representative (1 limiting the liability e.. guardians, trustees.

extent of the assets in pecial remedies available against cer- assessees have, of course, been saved).

en added to the effect that a d as a representative as ssee (i.e., trustees, guardians, agents of non-residents etc.) ould not be assessed under the .general charging section (section

3) in respect of the income concerned.

A new provision has be sentative assessee to recove son represented by him.

A new provision has be person liable to be assesse en adde_d empowering a repre-

r tax paid by him from theg per-

I een made to the effect sentative assessee who parts with the assets ment of tax, is liable personally.

The provision for mode of computing tax for income received by a Court of wards, trustee appointed under a a deed in writing, Administrator-general etc., in cases where the income is not speciﬁcally receivable on behalf of any one person or by where the individual shares are not known has been altered in two respects :--

tax, it has been provided that it d as the income of an association the income is received by a bene-

the rate. applicable to the bene-

come-taj: «Officer so directs ; ', A provision has b without pay-

(1) regarding income-

should be charge of persons, or, if ﬁciary, then at ﬁciary if the In I i E that .a repre-

(2) as regards super-tax, it has been provided that it should be charged in all cases as if the income were the income of an association of persons.

A new provision has been added allowing the Income-- Existing tax Oiﬁcer to continue assessment proceedings, started be- gift -I fore the dissolution etc. of a ﬁrm or association or the dis- 185(2) 2nd continuance of its business; against the persons who were 196 (2).

partners or members.

With reference to the provisions for charging tax in Existing the case of shipping business, it has been made clear that Sec} 3 (3)- . the rate applicable is one in force for a company which has D" ' ' The provision regarding income arising to a non-resi- Existing dent from a transfer etc. governed by section 44D has been 360- MD (I)-

slightly widened. Under the present provision, only in- D"'f'C'- come arising from the transfer is taxable under this section. 96 M W' Under the provision as proposed, any income of a non-resi-

'dent which the transferor has power to enjoy will be co-

vered by this section, (if the power to enjoy itself arises from the transfer).

The existing provision, whereunder a sale of securities Eximng is disregarded where there is agreement to buy back such sec.44E (1).

securities by the owner of the securities, has been widened gfm by removing the requirement of an agreement to buy those '. 97 (')' securities. The provision as propose will be applicable to all cases where the transaction of sale and repurchase of "securities results in advoidance of tax. '(The provision will not. of course, aply if there was no avoidance or if the avoidance was not systematic).

Under the existing provision, where a person transfers Existing ' securities before the declaration of the dividend, the in- Scc-,44F- come attributable to the period upto the transfer is deem- mar' ed to be the transferor's income. Under the provision as Cl' 97 (3)' proposed, however, the income for the whole year will be deemed to be the transferor's income if there is avoid-

ance of tax. It has also been provided that the avoidance need not be of more than ten per cent. of« the amount of the income-tax. ' A new provision authorising the Income-tax Ofﬁcer EXMHB to extend the time for payment of tax or to allow payment 322431 by instalments has been added. Consequential provision 229(2) gm, for failure to pay instalments etc. has also been added. 14).

The present provision regarding the imposition of a Existing penalty on an asseessee in default has been modiﬁed. S°°' 46(')' Penalty has been replaced by penal interest at the rate of ;',';'§ff'A' tax Officer will be 'necessary. In consequence existing sub- section (A) has been omitted. ' ' .

Existingaz Sec. 4.6 ).

Draft Cl.

231 read with the sc-

cond Sche-

dule.

Existing Sec. 46 (2).

Draft Cl. 232.

Existing Sec. 46 (2).

Draft Cl. 233.

Existing Sec. 46 (3).

Draft CL 235 (5)-

Existing Sec. 46 (5).

Draft Cl.

235 (2) se-

cond para-

graph.

Existing Sec. 46.

Draft Cl.

235 (4)-

Existing Sec. 46A.

Draft Cl. 241 (4) and (5)-

Existing Sec. 48.

Draft Cl. 249 (1).

Existing Sec. 48.

Draft Existing Sec. 52.

Draft Cl. 286.

Existing Sec. 54. (2).

Draft Cl.

I41 (3) (C).

The various modes of recovery which a Collector cam adopt when the Income-tax Oﬁicer sends a certificate to him have been listed in the draft clause, and detailed pro- cedure to be followed by the Collector is sought to be em-4 bodied in the Schedule which will be a self-contained Code. A uniform system will thus be substituted in place- of the existing procedure which applies the Revenue laws of each State.

It has been made clear that the Income-tax Oﬁicer can send a recovery certiﬁcate to the Collector within whose jurisdiction the assessee resides or carries on business etc. or has property. Further, it has been made clear that. the certiﬁcate can be sent to the Collector of any district. in any part of India.

A provision debarring an assessee from challenging before the Collector the assessment which led to the issue of the recovery certiﬁcate has been added. Proced re for withdrawal or correction of the certiﬁcate by the I come- tax Officer has been laid down.

The provision authorising the Income-tax Ofﬁcer. to re-

cover tax by any process contained in any municipal law .

has been narrowed down, by limiting it to only one mode, namely, distraint and sale of movable property.

The power of an Income-tax Officer to attach kala is sought to be limited to that portion.of the salary lwhic _ can be attached by a civil court. A _' A new provision has been added empowering t e In- come-tax Officer to apply to any court-in which any oney of the assessee is lying, for payment of the money ,0 dis- charge tax due from the assessee. \ ' A new provision has been added requiring the bwner of ships or aircraft carrying' gassengers for desti tions beyond India to submit perio ically "lists of such sseri- gers.

A new provision has been added to the eﬁect t at a claim for refund should be made in the prescribed for and l veriﬁed in the prescribed manner. p A new provision has been added to the effect at if the Income-tax Oﬂicer does not dispose of a refund a plica- tion within three months, the Government shall p y in-. terest at the rate of 2 per cent. per annumon the a cunt that is ultimately found to be refundable.

The provision penalising a person who makes false statement in a veriﬁcation is. sought. to be extendedgso as X) be applicable to veriﬁcation under any provision of the ct. .

-A new provision has been added authorising t dis- closure by the Income-tax Officer of the substance f the material gathered by'§h'im for'; he purpose of' a "best judg- ment" assessment. ' = 1 69 A new provision authorising the disclosure by an In.- Exiltins come-tax Officer of accounts of assestees which are lying 36°' 33")' with him and are required by a court, has been added. Sim1- ,4, (3) (g-)_7 larly, a provision allowing the disclosure of registered documents of which copies can be obtained under the Re- gistration Act, or of documents like balance sheet, audit report etc. prepared under the Companies Act, has been added.

A new provision authorising the disclosure of informa- Existing' tion required in connection with levy or realization of S°°'t54- W' other Central taxes (for example Wealth Tax, Estate Duty ,4, (3) (,'l)__ Tax etc.) has been added. ' It has been made clear that the privilege conferred Existing -' by existing section 54 can be waived by the assessee. %=r¢a~'ﬁ54- . Cl. 142.

With reference to the exemption in respect of super- Existin ;_ tax on dividends received from an Indian company en-- Sec. 5 A- gaged in certain industries, the conditions to be satisﬁed D"'f1'08 by the Indian Company paying the dividend have been set ' : ' out in extenso, unlike the existing section which merely makes a cryptic reference to section 15C.

A new provision has been added authorising the Com- §3""'.l"é% missioner to relax the conditions for the recognition of aDe°' _(')' provident fund, in the case of >providei1t funds established (:1_ 39 m under the Employees' Provident Funds Act, 1952 and ex- Pro .(a). empted from the operation of the scheme under section 17 of that Act.

A new provision" allowing" the deduction of contribu- Exi-'*¢ingA tions paid by an employer towards a recognised provident 53°13-" '° \fund has been added. Drag? C1393 l It has been made clear that an approved super--annua- Existing tion fund should satisfy not only the conditions set out in 560- *53N *0 the Act, but also the conditions to be "imposed by rules 1531'"; C1 0 made by the Central Government. m_ 2 ' 3 7 A new provision has beeng added to the effect that E" 8 where there is a repugnancy between {the rules of an ap- sf' Dmﬁ proved superannuation fund and any provision of the Act, 313- (5)_. the latter shall prevail. ' A , » It has been made clear that. the proyision for deduction Exist of income-tax on contributions repaid to an employee from 5°°- (I) an approved superannuation fund applies not only to the Cf um employee's contributions but also to the employer's contri- ' 3 ' butions. It has also been made clear that payment of con- tributions to an employee on death or termination of em- ployment does not come within the scope of this section.

A new provision has been added laying down elabo- F-xiltl rately the power of the Centr Gover I nt to make rules Sgfv N '° in relation to approved super uatioxifflﬁhds. aft GL3"

:§?3 G .

.

ii is 70 E-xistins A new provision has been added authorising the Cen- D°r°a;f§9' tral Board of Revenue to make rules relating to :--

"Cl. 329 (2),

(i) registration of income-tax practitioners who are not lawyers or accountants; _

(ii) constitution of an authority to take disciplinary action against such income-tax practitioners;

(iii) issue of income-tax veriﬁcation certiﬁcates.

Existing Scc_,6o (1) Provisions relating to exemptions for tax etc. to be and 60 (3) granted by notiﬁcation by the Central Government are pro- (omitted in posed to be deleted as obsolete.

the draft). _ Existing The power to grant relief in cases where salary is paid 566- 60 (2) in arrears or in advance etc., which is at present conﬁned Dfaf' C1'V9°' to salary or proﬁt in' lieu of salary, has been extended to perquisites also.

'Existing The right of any lawyer to appear before an Income- S_§c- 6! (2) tax authority is sought to be conﬁned to legal practitioners D'°'(:f)' entitled to appear in a civil court. (Persons actually in (iii:)?f4 practice at present will not be affected.) ~Is'3::"g;g(2) It is proposed to exclude persons who are not Char- _(iii) (iv) Draft tered Accountants or authorised to audit the_ accounts of Cl. 324 (2), companies under section 226(2) of the Companies Act, 1956, E312?-<3?" from the category of "accountants" entitled to appear be-

tice at present will not be aﬁected.) The category "Income-tax practitioner" is to be abolish-

ed for the future, except as. regards persons already in practice.

Existing Sec. The power to take disciplinary action against income- 6' (3)- D"'" tax practitioners other than lawyers and .accou}itants.

C" 32* W' which is vested in the Commissioner at present, is proposed to be transferred to an authority whose constitution would _ be laid down in the rules. ' Exisﬁng (RC-' -Consequent on the proposed abolition of the Appellate .£g'_""°° pgevﬁ; Tribunal, provisions relating to references to the High 'sions)omittcd Court have been omitted.

injthc draft. V Exisiting a With regard to the assessment of persons carrying on Schedule, general insurance business, it has been made clear. that "116 5- Draft deductions for depreciation must be allowed as entered in S!_:l};°dEg§' the accounts prepared under the Insurance Act, and can- 5 ' not be questioned by the Income-tax Officer. (NCW) Draft Unexplained cash credits, appearing in the books of C1' 7°' accounts of the assessee, have been made assessable as his income.

Draft Investments-not appearin in the books ')1'? the assessee and not explained s tisfactori y have been made assessable for the ﬁnancial ye in which the investments were made.

i fore an Income-tax authority. (Persons actually in prac- .

.71 A new provision has been' added laying down the (New) Draft-._ position regarding liability of an executor to pay tax in res- CL '73- pect of the income accruing after the death of the person whose estate is being administered.

It has been made clear that in cases where tax is de- (New) Draft. ductible at source or payable in advance, some kind of 01-199-

"charge" of tax is implied.

Power has been conferred on the Supreme Court to (New) Drafte make rules regulating the procedure to be followed by the 01477- High Court in disposing of appeals under the Act.

A new provision has been added providing that income (New) Draft once charged to tax shall not be charged to tax again in C1-3'9 the hands of the same person.

A new provision for the service of notices after the (New) Draft partition of a Hindu family has been added. 01'3" W' A new provision has been added requiring every In- (New) Dram come-tax authority to endorse documents placed on the Cl. 323- ﬁle and to refer to the documents in any order which is based on the document.

' Existing Sec-

tion 4. (1) (b)

(iii).

Existing Sec-

tions s. 4. (1).

2nd Prov.

4B, s. 4.2 (2) . andds. 4.4 D. Existing Sec-

tion 4. (1), Exp]. 4..

Existing Sec-

tion 4 (3)(i)-

Existing Sec-

tion 5 (8).

Existing Sec-

tion 7(1), tst Prov.

LIST II Changes recommended in the Income-tax Act but not embodied in Appendix 1.

Besides the changes already embodied in the draft proposals in Appendix I, the following changes are recom-

mended in the Act, (These have not been embodied in the draft proposals in Appendix I). - The reasons in support of these changes have been stated below, or, in the body of the report or the notes to the relevant draft clauses :--

(1) The provisions for taxing the income of a resident which accrued outside India in past years and is brought into India in the accounting year, should be deleted'.

(2) The category "not ordinarily resident" may be totally deleted'.

If the provisions relating to persons not ordinarily re- .

sident are retained, some clariﬁcation of the existing deﬁ- nition is necessary, so as to settle the conﬂict of decisions mentioned in the body of the report'.

(3) The provision relating to income which accrued in a Part B State or a merged territory before the exten- sion of the Income-tax Act thereto and which is brought into any other part of India thereafter, should be omitted, as obsolute'. ~ (4) The existing words "subject to the provisions of clause (c) of sub-section (1) of section 16", conta' ed in existing section 4(3) (i), opening line, should be de; ted'.

(5) Whether the provision authorising the Director of Inspection, the Commissioner etc. to issue instructidns to subordinate officers should be retained, may be consider- ed'. -

(6) The limit of one-ﬁfth of the salary laid down at present in respect of rebate for sums deducted from "salary for deferred amunities etc.. should be raised to one- ourth. on the lines of section 15(3) as amended by the anoe (No. 2) Act, 1957'. ' 1 Vida para. 22 of the body of this Report; this relates to draft clatlsc 4, (I).

(d)-

' Vida para. 22 of the body of this Report, and para. (1) of notes to draft clause 6 and also para. (3) of notes to draft clause 4,.

* See para. 22 of the body of this Report.

' Vida para. 22 of the body of this Report and notes to draft clause 4., para. (1 I ). second sub-paragraph. ' 5 Vida notes to draft clause 12, p . ,9 (b).

' Vida the second para. of notes to t clause :30. ' " Vida the second parnggaph of the notes to draft clause 88 (I) (c);

(7) In existing section 7(2) (iii), the words "wholly, 1?-xistins necessarily and exclusively in the perfnrmance of his du-"°" 7(9) 0") ties" may be replaced by suitable words connoting expen- ses reasonably incurred in the performance of duties'.

(8) The deduction of one-half of the taxes levied by a Fgdating See- local authority is at present allowed only in respect of pro- "On 1;!) (2)- perty occupied by a tenant. No such deduction is allowed 3' °"' where the property is occupied by the owner himself. There is, however, no reason why this deduction should not be available in the case of property occupied by the owner.

There is no apparent justification for making a distinction between the two classes of properties'.

(9) Certain special statutes lay down the rates of de-Existing sec-

preciation for undertakings governed by those statutes. It tiqn 10 (2) has been suggested that the rates of depreciation allowed (")- .by such statutes for the purposes of those statutes should be made applicable for purposes of income-tax also, in re- lation to those undertakings. If the same rates are adopt- ed, the assessees owning such undertakings would be saved ,a lot of trouble and duplication of labour.

This question requires consideration by the Govem- ment'. ' (10) Where machinery, plant or furniture is let on hire Existing Sec- and the income from hire is assessed under head "Income tion; I2 (3) from other sources". the Act allows the assessee certain ""d--""' (4)- deductions on the lines of. income from business. The . list of deductions so allowed, as given in existing sections 12 (3) and 12(4), does not mention the deductions referred to in existing sections 10(2) (via) and 10(2) (vib) i.e., the additional depreciation egllowed for new building, machi- nery etc. and the development rebate allowed for new ma- chinery etc. These should be:added '11 sections 12(3) and 12(4) as they stand on the same footing as normal deprecia- tion'. -

(11) The question of making a provision for the spread- Iaf-xiytins Sec- over of income in the case of patents on the lines of exist- "°" *2 AA- ing section 12AA should be considered'. a q, (12) The method of calculating the cost of acquisition ting Sec- of an asset in the case of capital gains. may be simpliﬁed ti "1 3'(=) .by substituting the fair mar et value or the actual cost,."' " B (3)' in place of the present comp cated provisions'. i (13) The Income-tax Oﬂiqer (or, ' teferably, the Ins- do "~8B5°=~ pecting Assistant Commissioner shogsf : '5 ' 41 issue a certiﬁcate ' K to an institution qualifying under e ting section 15B, so 1 Vida notes to draft clause 16 (iv), in paragraph 6 of the notes to draft clauses : 5 to :7.

' This relates to draft clause 24 (1) (i).

3 This relates to draft clause 32 (1) (i) and (ii), ' This relates to draft clause 60 (ii).

' Vida note: to draft clause :87, lastipara.

' Via': notes to_draft clause 51. ' I ( I .

s: 9 5 1 i 74 that assessees making donations to such institution need not prove, in each individual case, that the institution falls within the section'.

Existing Sc(;- (14) The provision for grossing up of 'dividends should tion 16 (2). be simpliﬁed'. ' The question of requiring companies to deduct tax. from dividends may be considered'.

Existing Sec- (15) Regarding grossing up of dividends, it is further tion I6 (2)- recommended that where a dividend is declared out of pro- ﬁts taxed in earlier years, and there are no taxable proﬁts of the company in the year of declaration of the dividend, the grossing up should be allowed at the rate which would have been applicable to the company in the year of decla- ration if the company had got any taxable income. This would clarify the position'.

Existing SW (16) Under existing section 16(3), the income arising mm ,5 (3)_ to a wife from her membership of a ﬁrm in which her hus- band is a partner, is included in the total income of the hus- band. In modern times, however, a large number of' partnerships have come into existence, in which the wife contributes substantial capital, or renders active assistance by virtue of her professional qualiﬁcations. It is recom- mended that the provision in question should notapply to professional partnerships in such cases. (The case of a wife working in partnership with her husband as a doctor or lawyer may be cited as a typical example.) It may be noted that the provision in question was enacted at a time when women had no resources of their own and had not joined the learned professions. With the changes in economic and social conditions that have taken place in modern times, the provision must be modiﬁed. This will also be in accordance with the s irit of article 15 of the Constitution, since it will place hus ands and wives on an equal footing'. -

Existing Sw (17) Capital gains should be completely excluded from tions 17 (6) the total income of the assessee for the purposes of: super- and :7 (7)- tax'. ,2 .

Exming sec- (18) The correct construction of existing section 18A tion l8A (5), (5) and its second PI'0V1S0 should be examined, with refer-

gnd its 2nd ence to the alternative draft given in the notes'. ' l'0VlS0.

1 Vide the last paragraph of notes to draft clause 89. . I Vida para. 4,0 of the body of this Report and also notes to draft clause 59(2). ' Vida notes to draft clause 59 (2).

' This relates to draft clause 59 (2).

- 5 This relates to draft clause 67 (i). ' Vida notes to dratt clause 125, last para. 7 Vida notes to draft clause 222 (1).

(19) A separate form of return should be prescribed Ijlxitting Sec- for losses incurred by an assessee, which the assessee "°" 92 (M)- wishes to carry forward'.

(15 (20) The existing provision regarding assessment of F_.xisting Sec- registered ﬁrms, resulting in double taxation of' the same "PH 23 (5) 3 income to some extent, should be deleted'. 0)' The provisions for registration of ﬁrms should not be administered in a hyper technical manner'. ' (21) The present anomalous position regarding assess- Exming sec- ment- of companies in respect of distributed and undistri- tion 23 A. buted proﬁts should be removed. The anomaly arises from the fact that existing section 23A of the Income-tax Act encourages the maximum distribution of proﬁts, while the provision in the Finance Act aims at the minimum distri- bution of proﬁts'.

(22) It is further recommended that a provision should Existing 566- be added to the effect that in passing an order under exist- "°' 23A- (1) ing Section 23A(1), the Income-tax Oﬂicers should also take into account the current business requirements of the company. He should not pass an order under the section if he is satisﬁed that having regard to current busi- ness requirements, the declaration of a larger dividend would have been unreasonable'. ' I (23) An assessee should, along with his return of Eyﬁsting sec- income, pay tax on the basis of his return. An order of tion 233(1). provisional assessment by the Income-tax Ofﬁcer should ' not be necessary. Such a system of voluntary payment of tax by the assessee will save considerable time of the Department'. , (24) It should be considered whether it is necessary to Eldsting Sec- retain the concessions allowed by existing sections 25(3) 'W3 95 (3) and 25(4), relating to discontinuance of or succession to a '"9 25 W' business assessed under the 1918 Act. The lapse of time 2 since the 1918 Act would seem to render this provision un- i necessary'. 5 1 This relates to draft clause 14.3 (3). 3 ( ) ' Vida para 65 of the body of this Report and notes to draft clause 189 3 .

3 Vida para 65 of the body of this "Report. This relates mainly to draft clauses 189 and 190. , ' Vida the last three paragraphs of the notes to draft clause 1 13. _ (' )Vida para. .54 of the body of this Report. This relates to draft clause 1 13 2 .

' This relates to draft clause 14.5. ' Vida the last paragraph of notes clause 91; -- 1--1 Law Com.I58. § =-

Existing Sec- (25) Appeals against assessments of income-tax in ex tion 31. cess of rupees one lakh should be heard by the Commis- sioner and not by the Appellate Assistant Commissioner as at present'. Other appeals should be heard by senior oﬂicers whose scale of pay is attractive'.

Exiting Sec-

_ (26) It is recommended that a notice under section 34 $3" '~';*m£i'S)(; should not be issued in any case after the expiry of six-

(;;)_ teen years from the end of the assessment year in which the income was ﬁrst assessable'.

Existing Sec-

tion 400) (27) Existing section 40(1) should not make a men-

tion of trustees. It should be conﬁned to guardians of minors and committees and managers of lunatics and idiots.

M. C. SETALVAD, (Chairman) 'M. C. CH,AGLA, K. N. WANCHOO,

- P. SATYANARAYANA RAO, N. C. SEN GUPTA,"

V. K. T. CHARI,' D. NARASA RAJU,* S. M. SIKRI,* G. S. PATHAK,* G. N. J OSHI, N. A. PALKHIVALA.

'K. SRINIVASAN, DURGA DAS BASU, Joint Secretaries.

NEW DELHI;

The 26th September, 1953.

'Besides Dr. Sen Gupta and Shri Narasa Raju and Pathak, who are mentioned in the forwarding letter, Shri Chan and Shri Sikri have also authorised the Chairman to sign the report on their behalf.

1 See paragraph :02 above.

' Vida para. 62 (7) above. , ' Vida notes to draft clause :69 (1) (ii).

4 Dr. Sen Guptahassigned the report, subject to the Note/appended at the end. ' .

I N D E X Clause Subject matter , Existing section C H A P T E R I PRELIMINARY

1. Short title, extent and commencenment Sec. 1

2. Deﬁnitions Sec. 2 C H A P T E R 11 BASIS OF CHARGE Charge of Income-tax . . . . . . Sec. 3 Scope of total income . Sec. 4, Previous year . Sec. 2(11) Residence in India . . . . . . Secs. 4A & 4B Income deemed to be received . . . . New Dividend Income . . . . Sec. 16(2), part Income deemed to accrue or arise in India _Secs. 4.231), 42(3) & Sec. 4.

(1), 2n & 3rd Expls.

Sec. 4(2) 'P.°°'.'.°'"."'§"?' I0. Remittance by a non-resident husband C H A P T E R III INCOMES WHICH DO NOT FORM PART OF THE TOTAL INCOME

11. Agricultural income, Income received as members of Sec.

, Hindu Undivided family, Casual receipts, etc. 4(1), 2nd to 5th ' provisos.

Sec. 4(3) (ii) to (xxii) Sec. 7(1), proviso Sec. 7(1), Explanation 2, prov. V Sec. 14(1) and New.

12. Income from property held for religious or charitable Sec. 4 ( ) (i), (ii) and purposes, and income of religious or charitable institu- conclu mg part. tions.

13. Business assessed under the Income-tax Act, 19185 See. 2 5(3),(4) part. ~ C H A P T E R IV COMPUTATION or TOTAL INCOME Head: qf incornc

14. Heads of income . . . . . Sec. 6 A. Salaries

15. Salaries . . . Sec. 7 ( 1) part

16. Deductions . . . . . . Sec. 7 (2) ' :7. Interpretation . . '. . . Sec. 7 ( 1) part - d Expls. 1 81,2. ,v m Clause

18.

19. 2o.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32. 33- 34--

35-

36. 37-

38. 39-

40. 4.1.

42. 4-3- \ .78 Subject matter Existing section B. Interest on Securities Interest on Securities . . . . . Sec. 8 (1) main part and New.

Deductions . . . . . Sec. 8, 1st proviso part. Banking Company Sec. 8, Exp1_ Amounts not deductible Sec, 3, [st provigo Pam C. Inoomefram house property See. 9(1) Sec. 9(2), part & New.

9(2) part & Sec. 9(1) part Sec. 9(1), (iv), proviso Income from house property Annual value Deductions . . .

Amounts not deductible .

Property owned by co-owners Sec. 9(3) Interpretation . . . Sec. 9(4), Sec. 9(1), (vii) Expl. &. New.

D. Proﬁts and gains of business, profession or voration Sec. 10(1), and Sec. 10 (54%) part. Sec. 1o(6),New.

an Sec. 24(1)£xpl.

Proﬁts and gains of business, profession or vocation New.

See. 1o(2)(i) and (ii) ('v)

(v) & (ix) parts. ' 1 Repairs and' Insurance of machinery, plant and furniture Sec.' 10(2) (iv) and (v) parts.

Sec. 10(2), (vi) (via) & (vii) parts.

. Sec. 10(2) (vib) part.

Provisions applicable . . . . .

Rent, repairs and insurance for buildings Depreciation Development rebate Conditions for depreciation allowance and developinent Sec. 1o(2)(vi), (via) and rebate. (vib) parts, sec. 10 ( and New. 43) Expenditure on Scientiﬁc research. Sec. )1o(2) (xii),; (xiii) and XIV .

Other deductions. . . . Sec. 10 (2) (ii , (iv), part

(viii), (x) and General . . . . Sec. 10 (2) (xv).

Buildings etc. partly used for business etc. or not exclu- Secs. 10 (2) (i), prov, I0 (2) sively so used (ii) rov. 10 (2), latter part an 10(3).

Sec. 12A.

Secs. 10(2) (iii) part, to (4.), 1o(4.A) and ' Sec. 8 Exp. part.

Secs. 10(2) (vii) part, no (2) (xiv) part to p (2) (xi) 1>r°v- pm 10 (2A)-

Secs. 10 (5), rp (2) (xiv) Sec.12B (1) 2nd prov. part Managing agency .

Amounts not deductible .

Proﬁts chargeable to tax. . .

Interpretation . . .

Residence of employees . '. _ ._ . . New. 1

i) & New."

Sec.24 (1)Expl.§2 and New.

a .7! -12- Clause 45-

46. 47~

48. 4-9-

50.

51.

52. 53- 54- 55- 57-

58. 59-

60. 61 .

62. Subject matter Insurance business.

Capital gains .

Previous year . .

Insurance business .79 E. Capital Gain:

Transactions not regarded as sale etc. Mode of Computation and deductions . Statutory cost with reference to modes of acquisition .

Determination of statutory cost in the case or non-

depreciable assets.

Determination of statutory cost in the case of depreci-

able assets.

Option money received Consideration for exchange unders atement.

Capital gains exempt from tax . .

Proﬁt on sale of property used for residence Interpretation F. Incorru_ from other sources Income from other sources Grossing up of dividends .

Deductions . .

Amounts not deductible .

Proﬁts chargeable to tax.

CHAPTER V Consideration for sale etc. how determined in case of q Existing section Sec. 10 (7) and Sch. rule 9 Sec. 12B (1) part.

Sec. 12B (1) part.

Sec. 1213 (1), 1st prov.

part.

Sec. 1213 (2) part.

New. ' Secs. 12B (2) part and 12B (3) part-

Secs. 12B (2) part and 1213 (3) part-

Sec. 12B (2) 4th prov.

New.

See. 12B (2) 1st prov.

Sec. 12B (4,) (a) See. 12B (4.) (b) New and Sec. 12B (2) (ii) pa t.

See. 12 (r) (IA) and: New Sec. 16 (2) part ' Sec. 12 (2) part -- .

Sec. 12 (2) prov. and 12 (5) part : ' Sec» :2 (5) part. I: (3) and (4.) .

INCOMES OF OTHER PERSONS INCLUDED IN ASSESSEE'S TOTAL INCOME

63.

64..

65.

66.

67. Transfer of incomes .

Revocable Transfer of property-

lrrevocable Transfers Deﬁnition of revocable transfer-

Husband, wife and minor children .

CHAPTER VI Sec. 16 (1) (c) part 3 Sec. 16 (1) (c) part Sec. 16 (1) (c) part .

Sec. 16 (1) (c) part Sec. 16 (3) AGGREGATION OF INCOME AND SET OFF OR CARRY FORWARD OF IDSSES

68.

69.

70. 7:.

Total income . - -

Method of computing a partner of the ﬁrm.

Cash credits Un-explained investments.

's share in the income Sec. 16 (1) (a) part Sec. 16(1) (1)) New.

New.

Clause

72. 73~ 74--

75-

76. 77-

78. 79-

81.

82.

83. .84-

85.

86.

87.

88.

89. go.

91.

92. 93- 94- 95-

96. 97- 80 Subject matter Existing Section Set off of loss from one business to loss from another New.

(1) Set off of losses from one head to another (2) Carry forward & set off of business losses Losses in speculative business. .

See. 24 (1) part Sec. 24 (2) part Secs. 24 (1) part, 24 (2) part.

Losses under the head 'capital gains'. Sec. 24 (2A) & (2B) Losses of registered ﬁrms . . . . Sec. 24(1) part & (2) Losses of unregistered ﬁrms assessed as registered ﬁrms Sec. 24(2) part Losses sustained by partners of unregistered ﬁrms Secs. 24(1) part, 24(2) part Set off of losses in case of change in constitution of ﬁrm See. 24 (2) part. Submission of return of losses Sec. 22 (2A) part.

part C H A P T E R VII INCOME ON WHICH NO INCOME-TAX IS PAYABLE Earned income . . . . Sec. 15A.

Co-operative Society . . . . Sec. 14(3) Dividends from Co-operative Society . . Sec. 14(4) \ Marketing Society . . . Sec. 14(5) Newly established industrial undertakings Sec. 15C part. Dividend from new industrial undertaking See. 15C (4) Other income Sec. 8, 2nd and 3rd provisos (S35 §£id(2 e(:)}4s '(t)(.2) C H A. P T E R VIII REBATES AND RELIEFS Rebate on life insurance premia, annuities and contribution to Provident Fund etc. Donations for charitable purposes Sec. 15 Sec. 15B part.

Relief} for Income-tax Salary paid for more than one year Business assessed under the Income-tax Act, 1918 See. 60 (2) part Sec. 25 (3) & (4) parts.

C H A P T E R IX DOUBLE TAXATION RELIEF Agreement with countries . . Sec. 49A Countries with which no agreement exists S60. 49D Relief to company to be regarded as relief to share-

holder . . . . . . . SCC. 49C C H A P T E R X PROVISIONS AGAINST AVOIDANCE OF TAX Certain transactions with non-residents See. 42(2) Avoidance of income--tax by transctions resulting in transfer of income to non-residents . Sec. 44D.

Avoidance of tax by certain transactions in securities Sees. 44B and 44F

*7 81 Clause Subject matter Existing section CHAPTERXI. ' ° SUPER-TAX Primipal Provisions

98. Charge of Super-tax . . - I. . Sec. 55 part

99. Total income from Super tax . . . . . Sec. 56.

100. Business, Profession or vocation charged under 1918 Act . . . . . . . . Sec. 25(4) prov.

101. Deductions under interest on securities . . . New

102. Applicability of provisions to super-tax . . . Sec. 58 (1)

103. Avoidance of super-tax . . . . . New. ' Incomes which do not form part of Mal income for super-tax

104. Share in unregistered ﬁrm or association of persons l. Sec. 55, 2nd prov.

105. Co-operative Society . . . . . . Sec. 14. (3) part.

106. Dividends from co-operative Society . . . Sec. 14(4) part

107. Marketing Society . . . . . . Sec. 15 (5) part

108. Dividends from certain companies . . . . Sec. 56A. Rebate of Super~'1'ax

109. Donations for charitable purposes . . . . Sec. 15B part.

110. Newly established industrial undertakings . . Sec. 15C part and I See. 17(3) part.

111. Share from registered ﬁrm. . . . ' . . Sec. 14(2)(aa), part 1 12. Relief for salary received in arrear etc. . . . Sec. 60(2) part a Additional Super-Tax on undislribuled Proﬁt:

1 13. Super-tax on undistributed income of certain companies Sec. 23A(1) 1 14. Special provisions for certain companies . . . Sec. 23A(2)' 1 15. Approval of "Inspecting Assistant Commissioner . . Sec. 23A(8) 1 16. Saving for company in which public are interested . Sec. 23A(9)

117. Company in which the public are substantially . interested . . . . . . . Sec. 23A Expl. 1. 1 18. Distributable Income . . . . . . Sec. 23A(1) part.

119. Investment Company . . . . . . New

120. Statutory percentage . . . . . . Sec. 23A, Expl. 2. -

\ / » _ CHAPTER XH DETERMINATION OF TAX IN CERTAIN SPECIAL CASES

121. Determination of Income-tax . . . . . Sec. 17(2) part.

122. Tax on accumulated balance of Recognised Provident Fund . ' . . . . , . . . . New.

123. Tax on compensation. . . . . . . Sec. 1o(5A) part and New.

124.. Tax in the case of non-residents . . . . Sec. 17(1).

125. Tax on capital gains in cases of assessees other than . companies . . . . . . A . . Sec: 17(6).

126. Tax on capital gains in case of companies . . Sec. 17(7).

Clause Subject matter Existing section C H A P T E R XIII INCOME-TAX AUTHORP1 IES.

A ppoinlmcnt and Ctmtrol

127. Income-tax Authorities. . . . . . . Sec. 5(1).

128. Appointment of Income-tax Authorities. . . . Sec. 5 part.

129. Control of Income-tax Authorities. . . . . Sec. 5 part.

130. Instructions to subordinate Authorities . . . Sec. 5 part.

131. Jurisidiction of Income-tax Authorities . . . Sec. 5 part. '

132. Transfer of case from one Income-tax officer to another Sec. 5(7A) & New

133. Change of Incumbent of an oﬂice . . . . Sec. 5(7C)

134.. Authority competent to take or continue certain pro- ceedings . . . . . . . . New

135. Incomeétax oﬂicer entitled to assess. . . . . Sec. 64.

Powers

136. Power regarding discovery, production of evidence etc. See. 37 part.

137. Power of search and seizure. . . . . . . Sec. 37 part.

138. Power to call for information. . . . . . Sec. 38.

139. Power to inspect registers of companies . . . Sec. 39. :40. Powers of Directors of Inspection and Inspecting Assistant Commissioners . . . . . . Sec. 5(7B) part.

Disclosure qf Irgformalion

141. Disclosure of information prohibited . . . .. Sec. 54..

14.2. Savings regarding voluntary disclosure by person mak-

ing the statement etc. New.

C H A P T E R XIV PROCEDURE FOR ASSESSMENT :43. Return ofincome . . . . . . . Sec. 22(1), (2), (2A) part, (3) & (5)-

144. Return by whom to be signed . . . . . New.

145. Provisional assessment ' . . . . . . Sec. 23B part.

14.6. Enquiry before assessment . . . . . Sec 22(4) & New. , :47. Assessment . . . . . . » . . Sec. 23(1), (2) and (3) '

148. Best judgment assessment . . . . . . Sec. 23(4) part

149. Relevant material . . . . . . . _ New.

150. Method of accounting . . . . . . Sec. 13.

151. Reopening of assessment at the instance of the assessee Sec. 27.

152. Income escaping assessment. . . . . . Sec. 34(1) part.

I 53. "Income which has escaped assessmcn " . . . Sec. 34 (1) part.

154.. Issue of notice where income has escaped assessment . Sec. 34, (1) part.

155. Time limit for issue of notice . . . . . Sec. 34. (1) part, (3) part.

155. Provision for cases where notice of assessment is issued Sec. 34. (3) part. :

after appeal etc. . . . . . . .

I 57. - Sanction for issue of notice . . . . . Sec. 34, (1) part.

158. Other provision . . . . . . . Sec. 34. (1) part 34 (2).

159. Saving regarding time limit for completion . . New.

I60. Time limit for completion of assessment and lc-assess- ments. . .~ . . . . . . : . ' Sec. 34. (3).

*-\ 83 Clause Subject matter Existing section

161. Rectiﬁcation of mistake. 560- 35 (1) (2) (3) 8' (4-)- '

162. Other amendments . Sec. 35 (5), (8) & (9).

163. Notice of demand Sec. 29.

164.. Intimation of loss . Sec. 24 (3).

165. Intimation of assessment of ﬁrm Sec. 23 (6).

166. Information and Return. . . . - . Segsf 20A, 21, 19A and Sec.

1 5 ~

167. Certiﬁcate by company to share holders receiving dividends. . . . . . . . ~. Sec. 20.

C H A P T E R XV LIABILITY IN SPECIAL CASES A. Legal Representatives

158. Legal representatives . . . . Sec. 24B. B. Representative a::e.tsee.t--Geueral provisions X69. Representative assessee . Sec. 4.2 (1),'4.o (1), 41(1).

170. Liability of representative assessee Secs. 40 part 41 part and '7X- Right of representative assessee to recover tax paid Nlgvcvwand Sec. 42(1) part.

172. When representative assessee personally liable. - . New.

0. Representative' assessees--:peeial cases

173. Who may be regarded as agent . . . Sec. 4.3.

174- Charge of tax where shares of beneﬁciaries unknown Sec. 4.1 (1), 1st prov.

175- Case Where part of trust income is" chargeable Sec. 41 (1), 2nd prov.

D. Rfpresentative assessee:----'General I76. Remedies against Property in cases of representative as- New. sessces. . . . . . , . .

1 77. Direct assessment not barred. Sec. 41 (2) and Sec. 42(1), parts.

E. Executor:

178. Executors. . . . - . . . New.

I 79. Right of executor to recover tax paid. . . . . New. F. Succession to business, profession or vacation.

180. Succession to business. . ., . . - . Sec. 26 (2). G. Partition

181. Assessment after partition of a Hindu undivided family. Sec. 25A and New. 5 H. Shipping business of non-residents '

182. Shipping business of non-residents. . . Secs. 4.4.A, 44.13 andI'4.4C.

1. Recovery qftax in respect 151' non-residents l-

183. Recovery of tax in respect of non-resident from his assets Sec. 42 (1), 1st Putt. J. Person: leaving India V

184.. Assessment of person leaving India. Sec. 24A. 3 K. Discontinuance of business or dissolutipn V ' Z

185. Discontinued business. . ' . . . Sec. 25 (1).

186. Dissolved association of persons. . . Sec. 44. part. L. Special provisions for certain kinds of income

187. Royalties or copyright fees for literary or artistic work and fees for patents. . - . . . Sec. 12AA. M. Liabilip of State Gowrnmmu :88.

Interest on income-tax free sccuriiics of a Stite Govern- ment . . . ' . .é ' . ' . ' Sec. 8, 3rd prov.

'¢........-..;.. .., . ..._._ . .. , Clause

189.

190.

191.

192.

193.

194. I95.

196.

198. I 99.

200.

201.

202.

203.

204..

205.

206.

207.

208. v 209.

210.

211.

212.

213.

214.. ' 84 Subject matter C H A P T E R XVI SPECIAL PROVISIONS APPLICABLE TO FIRMS Asxessnzent Existing section Assessment of registered ﬁrms Assessment of unregistered ﬁrms Sec. 23 (5) (a).

See. 23 (5) (b).

Registration Sec. 26A. part.

Sec. 26A. (2) part Sec. 23 (4.) part, and New.

New and Sec. 23 (4) part.

Application for registration Procedure on receipt of application Cancellation of registration Changes in constitution, Succession and dissolution Change in constitution of a ﬁrm. 560- 25 (1)- Succession of one ﬁrm by another ﬁrm New. Firm dissolved or business discontinued Sec. 44. part- Other provision:

Other provisions New.

C H A P T E R XVII SPECIAL PROVISION RELATING TO COMPANIES List of provisions applicable to companies NEW-

CHAPTER XVIII COLLECTION AND RECOVERY OF TAX A--Geneml~ Deduction at source and advance payment . . - New- Direct payment . . . . S€C- I9- B--Deduction at source Sec. 18 (2), (2A) 8: (213) . (Sec. 18 (3) part, (3A) P3"-

Salary .

Interest on Securities .

Sec. 18 (3D) part.

Sec. 18 (3B), (3C) parts.

Sec. 18. (3), (3A). (313) (30), (3D), partso Dividenps Other sums . . .

Certiﬁcate for deduction at lower rate Tax deducted is income received Sec. 18(4). Credit for Tax deducted . .* . ' Sec. 18(5) part. Duty of person deducting tax . . 360- 13(6)- Consequences of failure to deduct or pay Sec. 18(7). Deduction only one mode of recovery Sec. 18(3)- Certiﬁcate for tax deducted Sec. 18(9). ' Persons responsible for paying . . Sec. 18, Expl.

Bar against direct demand on assessee Sec. 7(1), 2nd prov.

Savin regarding tax deemed to have been paid on clivi ends . . . New .

I 85 Clause Subject matter Existing section C--Advanoe payment qf tax

215. Advance tax and income subject to advance tax . Sec. 18A (1) (a) part. I

216. Condition of liability to pay advance tax . . . Sec. 18A(1) (a) part.

217. Computation of advance tax . . . . . Sec. 18A (1) (a) part and New.

218. Order by Income-tax Officer . . . _ . . Sec. r8A(1) (a) part

219. Instalments of advance tax . . . , . . Sec(. )1g:').(1) (a) part and 1 . -

220. Estimate by assessee . . . . . . Sec. r8A(2) &_ (3)

221. Commission receipts . . . . . . Section 18A(4)

222. Interest payable by Government 7 . . ' . . Sec. 18A (5) part

223. Interest payable by assessec . . . . . Sec. 18A (6)

224. Interest payable by assessee in cases of underestimate etc. Sec. 18A (7)

225. Interest where no estimate made . . . . Sec. 18A (8) ,

226. When assessee deemed to be in default . . . Sec. 18A (10)

227. Credit for advance tax . 1 . . '. . . Sec. 18A (11)

228. Exclusion of capital gains . . . . . Sec. 18A (12).

D--ColIection and Recovery

229. When tax payable and when assessee deemed in default Sec. 45.

230. Interest payable when tax in default . . . Sec. 46(1).

231. Certiﬁcate to Collector . . . . . . Sec. 46 (2) &. 46 (7) Expl- _ part.

232. Collector to whom certiﬁcate is to be issued. . . New.

233. Validity of certificate and amendment thereof . . New.

234. Amendment, cancellation or withdrawal of certiﬁcate New.

235. Other modes of recovery . . . . . Sec. 46 (7) Expl. part Sec- ' 46 (5): (5A)! (3): (4)

236. Recovery through State Government . . . Sec. 46 (6).

237. Recovery through Collector in Pakistan . . . Sec. 46 (8)

238. Recovery of Pakistan tax . . . . . Sec. 46 (9)

239. Condition for recovery of Indian tax in Pakistan or of Pakistan tax' in India . . . . . Sec. 46 (10)

240. Recovery of Penalties . . . . . . Sec. 47.

241. Tax Clearance Certiﬁcate . . . . . Sec. 46

242. Period for commencing recovery proceedings . . Sec. 46 (7).

243. Recovery by suit or under other law 7 . . . Sec. 46 (7) Expl. part.

E--Tax payable imder provisional assessment

244. 'Recovery of tax payable under provisional assessment Sec. 23 B (5).

245. Tax paid by deduction or advance payment 4 . . Sec. 23 B (6).

C H A P T E R XIX TAX DEEMED TO HAVE BEEN PAID ON DIVIDENDS

246. Tax deemed to have been paid on dividends . . 'Secs. 18 (5) part and 49 B C H A P T E R XX ' REFUNDS

247. Refunds . . . Sec. 48 (1)

248. Person entitled to claim refund in certain special cases See. 49 F. Clause

249.

250.

251.

252.

253.

254.

255. 256 Q57'.

258.

259.

260.

261.

262.

263.

264..

265.

266.

267.

268.

269.

270.

271.

272.

274..

86. Subject matter Form of claim for refund, and limitation. Refund on appeal etc. ( . .

Correctness of assessment not to be questioned Interest Set-off of refunds against tax remaining payable CHAPTER xx:

APPEALS AND REVISIONS Existing section New.

See. 48 (2) Sec. 48 (4.) New.

See. 49 E. A--Appeal.t to the Appellate Assixtpnt Commissioner Appealable orders. . . . . .

Appeal by partner. . . . .

Appeal by person denying liability to deduct tax Form of appeal, and limitation Procedure in appeal Powers of the Assistant Appellate Commissioner B--Appeals to High Court Appealable orders . .

Limitation Form of appeal Powers and Procedure . . .

Hearing by Bench . . .

Communication of order in appeal .

Costs . . . . . .

Refund consequential on appeal C--Appeal.s to Supreme Court Appealable _] udgment Procedure Sec. 30 (1) part Sec. 30 (1) 2nd prov.

Sec. 30 (1A) Sec- 30 (3). 30 (2) Part Sec. 30 (1) part, 3! (3), 3' (2A). 31 (3) M41 P1'°"-» 3' (5) and New.

Sec. 31 (3) part & NCW.

S -° ()part- 33 (2) part c°33°i3 (33) part 5!. New.

See. 33 (1) part, 33 (2) part 33 B (3) part. 33 (2A) and 66 (7A).

Sec- 33 (3) and 33 B (4) part Sec. 66 (5) part Sec. 66A (1) part Sec. 66 (5) part Sec. 66 (6).

Sec. 66 (7) prov. and New.

\ Sec. 66A (2) Sec. 66A (3) part, New and 66A (4).

D--/ippeals tn the Central Board afkmm Appeals to the Central Board of Revenue E----Rwi.\'ion by Cammistioner Revision of order prejudicial to Revenue . Revision of other orders . . . .

F--'--General Tax to be paid notwithstanding appeal . .

Execution for costs awarded by Supreme Court

275. Amendment of assessment on appeal . 4; t . New.

sec. 2.313(1) & 333(2) Sec. 33 A (1) part,§Sec.

33A(2) part» 366- 3354(3) Sec. 66(7) part & 66A(3) xst prov. part.

Sec. 66 A (3) 2nd prov.

Scc- 31 (4) & 33 (5) modiﬁed-

Clause

276. 277:

278.

279.

280.

281.

282.

283.

284.

285.

286.

287.

288.

289.

290.

29x.

292.

293.

294..

295.

296.

297.

298.

299. 87 S11bJ'€<'-t matte!' Existing section Exclusion of time taken for copy . . , sec, 57A.

Rules by the Supreme Court . . . . . Ncw, Deﬁnitions . . . . . . . Sec. 66 (8) & New, C H A P T E R XXII PENALTIES IMPOSABLE BY INCOME-TAX AUTHORII IES Failure to furnish information regarding securities etc. . Sec. 44. E (6) part Concealment of income or improper distribution of proﬁts Failure to give notice of discontinuance . . False estimate of or failure to pay advance tax: . . Procedure . . . C . . . . .

Bar against prosecution . . . . .

CHAPTER XXIII OFFENCES AND PROSECUTIONS Failure to make payments or deliver returns or statements or allow inspection . . . . .

False statement in declaration. . . . . .

Prosecution to be at instance of Inspecting Assistant Commissioner . . . . . . . .

Disclosure of particulars by public servants -

CHAPTER XXIV RECOGNISED PROVIDENT FUNDS.

Recognition According and withdrawal of recognition ' - a .

Conditions to be satisﬁed by recognised provident 'unds Relaxation of conditions . . .

Repugnancy in regulations . . .

Treatment of contribution: and balances Employer's contributions when deducted in assessing his income . . . .' . . ' . .

Employer's annual contributions when 'deemed to be income received by employee . _ .. . . . Employer's contributions exempt Exclusion of accumulated balance and total income . . .

Exclusions from Tax on accumulated balance . .

Deduction at source ofincome-tax payable on accumu- lated balance . - ' Treatment of balance in newly in-ecogxiisedlfrrovident Funds Sec. 28 (I), (2).

Sec. 25 (2) pan Sec. 18 A (9).

Sec. 28 (3), (6) and (5) Sec. 28 (4).

Sec. 51.

Sec. 52.

Sec. 53.

Sec. 54 (2) part, Sec.

54 (5)-

Sec 583 (xi. (2), 3 & (3A) f () Sec. 58 C (I)'pa,tt.

566- 580) (I)';par.t. 58D 58 S (4 Sec. 58C (2)?

New.

Sec. 58E Sec. 58F.

Sec. 58G (2) Sec. 7 (1) ' Expl. 2, P 'v. part Sec- 53G(3)&«.58G(r)part Sec. 58H. I Sec- 58.10). ( Ha) I:.(;).

"-

Clause Subject matter Existing section Other Provision:

300. Account of Recognised Provident Funds - - '. Sec. 58 I V

301. Appeals . . . . . . . - . Sec. 58B (4)

302. Treatment of fund transferred by employer to trustee - Sec. 58K

303. Provision relating to rules . . . - - . Sec. 58L

304. Application of this Chapter . . . - , . s¢c_ 53M_

305. Deﬁnitions . - . . - - . . Sec. 58 A C H A P T E R XXV APPROVED SUPERANNUATION FUNDS Approval t

306. Approval and withdrawal of approval . . . . Sec. 58 O. _

307. Conditions for approval . . . . . . Sec. 58P part & New.

308. Application for approval . . . . . . Sec. 58Q.

. Treatment qf Investment and Contribution:

309. Income from investment . . . . . . Sec. 58 R part

310. Employer's contribution--deduction for _. . . . Sec. 58 R part 31 1. Employee's contribution when exempt . . . Sec. 58 R part

312. Contributions paid to employee when deemed 'to be income/ . . . . . Sec. 58S (1)

313. Deduction of tax on contribution paid to an employee . . . . . . . . . Sec. 58$ (2) Other Provisions

314. Deduction from _pa,y of and contributions on behalf of employee to be included in return . . . . Sec. 58T

315. Liabilities of trustees on cessation of approval of funds Sec. 58U

316. Particulars to be furnished in respect of Superannuation Funds . . . . Sec. 58V

-3:7. Provisions relating to rules . . . . . New

318. Deﬁnitions . . . . . . . . . Sec. 58N C H A P T E R XXVI MISCELLANEOUS A--Miscellaneou.r Provision:

319. Bar of double taxation under the Act . ' . . . New

320. Service of .notice--general . . . . . Sec. 63

321. Service of notice where family is disrupted or ﬁrm, etc., is dissolved . . . . . . New

322. Service of notice in the case of discontinued business . . Sec. 25 (6)

323. Marking of exhibits . . . . . . New

324. ' Appearance by authorised representative '. . . Sec. 6: part. and New.

'I';

Clause Subject matter

325. Receipt to be given . . . ; . h . .

326. Indemnity . . .

327. Bar of suits in Civil Court.

328. Act to have effect pending legislative provision for charge of tax . . . ._ . . :' B----Rule.t

329. Power to make rules .

First Schedule Insurance business . .

Second Schedule Procedure regarding recovery under vari- ous modes mentioned in section 24.2 (1) Manner of recovery by distraint and sale of moveablc property under section 246 (6) . . . .> .

Third Schedule Existing section Sec. 62 Sec. 65 Sec. 67 Sec. 67B Sec. 59 Schedule.

New New Clauses 1-2 APPENDIX I Proposals as inserted in_the __body of the existing Act'.

(This is, however. not to be treated as a Draft Bill.) _ [Corresponding sections of the existing Act are noted in the margin, and additions to -the provisions of the exist- ing Act are shown in the text in italics', wherever pos-

sible.] THE INCOME-TAX ACT, 19---

CHAPTER I S . PREL'.[MINARY s§f,';;'" mg; 1. (1) This Act may be called the ............. ..Income- extent and tax Act, 19 .

commence-

(2) It extends to the whole of India.

(3) It shall come into force on the 1st day of April, om 9' 2. In this Act, unless there is anything repugnant izn "Ag,;c,,1tuL the subject or context,-- ral income" I [s. 2(1)]. (1) "agricultural income" means--

(a) any rent or revenue derived from land which is used for agricultural purposes, and is either asses- sed to land revenue in India or subject to a local rate assessed and collected by oﬁicers of the Gov- ernment as such; '

(b) any income derived from such land by-

(i) agriculture, or

(ii) 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 ren- der the produce raised or received by him ﬁt to be taken to market; or ' -

(iii) the sale by a cultivator or receiver of rent-in- kind of the produce raised or received by him in respect of which no process has been perform- ed other than a pmcess of the nature described in paragraph (ii) of this sub-clause; :

'In the draft clauses, references to any other draft clause have been put in a condensed form. For example, if section 161 (b) is to be referred to, it is referred to only as ":61 (b)" and not as "clause (b), of s. 161". The object is to CCOIIOIIIISC space.

References within rectangular brackets are to sections of the existing Act (or, in some cases to the topic dealt with in the section referred to).

90 91

Clause' 2

(c) any income derived from any building owned and occupied by the receiver of the rent or revenue ~ of any such land, or occupied by the cultivator, or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any operation mentioned in paragraphs (ii) and. (iii) of sub-clause (b) is carried on :

»..

- Provided that the building is on or in the immediate It"? (I) (C) vicinity of the land, and is a building which the receiver P'°""° of the rent or revenue or the cultivator or the receiver of 'the rent-in-kind, by reason of his connection with the land, requires asa 'dwelling house, or as a store--house, or other out-building;

' 0 (2) "annual value", in relation to any property, means "Annual its annual value as determined under section .......... .. 23... Value"

[Section re: determination of annual value for income [N''"] from house property]; .

(3) "Appellate Assistant Commissioner" means a person ".Appellate appointed to be an Appellate Assistant Commissioner of Asilm-D' _ . _ . com ' ' - V lgcﬁme tax under section . . . . . . . .. 128(1) . . . . .. [Sect1on 5 er.._ E;'_";"(';)] (4) "approved superannuation fund" and "recognised "AI>P1'°V°d provident fund" have the meanings assigned to them in '"1*'"''"'"''' section . . . . . . . .. 318 . . . . . . . .. [58N] and section 305 $3" "1{::::

['58A], respectively ; nis ( provi-

dert fun "

[N€5W]' .

(5) "assessee" means a person by whom income-tax or "A$cssce" .

super-tax or any other sum of money is payable under [5-1 (2)1 this Act. and includes-

(a) every person in res act of whom any proceeding under this Act has sen taken for the assessment of his income or of the income of any other per- son in respect of which he is" assessable, or of the loss sustained by him' or by such other person or of the amount of refund due. to him or to such other person; '

(b) every person who is deemed 1;) be an assessee un- V, _ der any provision of this Act; T . .

(c) every person who is deemed id be an assessee in i default under any provision bf this Act; (6) "assessment" includes re-assessment; ' '['§'::v°i'""°"'"

(7) "assessment year" means the period of twelve-"Asltessment months commencing on the 1st day of April every year;

(8 "avera e rate 0 income-tax" means the rate arriv-.. 9 Average rate

- ed at by dividing the amount of income-tax calculated on ofiilcoxne-tax the total income, at the rate on rates applicable to the total and; average income, by the total income: '.1 ' 7-1 Law Com./58 a I .

Clauez ratcofsupen "average rate of super-tam" means the rate arrived at tax" by dividing the amount of 'super-tax calculated on the [NW] total income on which super-tax is chargeable, at the rate or rates applicable to such total income, by such total in- . come; = "Business" (9) "business" includes any tlade, commerce or manu- ['- 9 (4)1 facture or any adventure or concern in the nature of trade, commerce or manufacture;

"Capital (10) "capital asset" means property of any kindyheld a8=€t"- by an assessee, whether or not connected with his business, [s- 2 (4A)] profession or vocation, but does not include-

(i) any stock-in-trade, consumable stores or raw ;mate-

o rials held for the purposes of his business, profes-

sion or vocation:

(ii) personal effeqts, that is to say, moveable pr perty (including wearing apparel, jewellery and urni- ture) held for personal use by the assessee or any member of his family dependent on him;

(iii) agricultural land in India; ' "Central (11) "the Central Board of Revenue" means th Cen-

303" ,,°f tral Board of Revenue constituted under the Central card R°"°'_'"° ' of Revenue Act, 1924: 1 [S-2 (43)) , 4 of 1924 , § ''Commission- (12) "Commissioner" means a person appointed t be a (5)) Commissioner of Income-tax under section 128(1), [5 )];

"Company" 13 "com an " eans--- ' ts.2 (5A)] (_ ) p_ y *1" t 1 (1) any Indian company, or ;

(ii) any association, whether incorporated or no and whether Indian or n _ <}Indian, which is or w s as-

sessable or was assess dd as a compan for the sess-

H 01.1922 ment year 1947-1948 {ider the In ian Inc -tax Act, 1922. or %which is declared by general 0 spe- cial order of the Central Board of Revenue 0 be a company for the pimposes of this Act; E "Co-opc:a.- (14) "co-operative,society?'»'; eans a co-operative s iety tiV¢=s0°i°tv"- registered under the§Co-ope? ive Societies .Act,. 19 2, or {Sf (533 under any other law,for the,t_ime being in force in any 2 ° 19"' State for the registration of ogoioperative societies;

«D;,e.;to,v= (15) "director", "manager? and "managing agen ", in "Manager", relation to a company, have meanings respective as-

.& "M3,'}a8' signed to them in the' Companies Act, 1956; 1 mg agent . i - , g [s. 2 (8A)] I of 1956.

"Director of Inspection". ed to be a Director of Insp ibn under section 128( . ). [5 15- 2 (6)1 (1)], and includes a qerson a' pointed to be an Addi A' (16) "Director of Inspection" means a person apv int-

onal 93 Clause' 2 Director of Inspection, a Deputy Director of Inspection or an Assistant Director of Inspection:

(17) "dividend" inc1udes7-- "Dividend".

(a) any distribution by a company of accumulated Is' 2 (6A)] proﬁts whether capitalised or not, if such distribu-

tion entails the release by the company to its share-holders of all or any part of the assets of the, company; V

(b) any distribution by a compa of debentures, de- benture-stock or deposit certi cates in any form, whether with or without interest, to the extent to which the company possesses accumulated proﬁts, whether capitalised or not ;

(c) any distribution made to the _share-holders of a company on its liquidation, tor the extent to which the distribution is attributable to the accumulated proﬁts of the company immediately before its li- quidation, whether capitalised or not ';

.(d) any distribution by a company on the reduction of its capital to the extent to which the company possesses accumulated proﬁts which arose after the end of the previous year, ending next before the 1st day of April, 1933, whether such accumu- lated proﬁts have been capitalised or not;

(e) any payment by a company, not being a company a in which the public are substantially interested within the meaning of section 117 [23A Expl. 1], of any sum (whether as representing a part of = the assets of the company or otherwise) by way of advance or loan to a shareh lder or any payment by any such company; on beh L1'. or for the indivi- dual beneﬁt of a sh eholde, ,to the extent to which the company ' either? case possesses accu- mulated proﬁts; but 'fﬂividen ""'idoes not include-

(i) a distribution made in accor. ahce with sub-clause

(c) or sub-clause (d) in res dt of any share issu- ed for full cash colisiderati n where the holder of the share is not entitled ,n the event of liqui- dation to participate in the tstirplus assets;

(ii) any advance or loa made t' }a shareholder by a company in the oifdinary _ 'rse of its business where the lending §of mo _ is a substantial part of the busines of the company;

(iii), any dividend paid by a company which is set off i by the company against the .whole or any part f of any sum previously paid by it and treated as .. a dividend within the meaning of sub-clause

(e), to the extent to which it is so set off.

Explanation l.--The exp ssion 'T wherever it occurs in this cl , sh gains arising before the 1st d y of 'cumulated proﬁts".

not include capital ,3 1946, or after the 94 Clause 2 day of March, 1948, and before_ the 1st day of April, Explanation 2.--The expression "accumulated proﬁts", in sub-clauses (a), (b), (d) and (e), shall include all pro- fits of the company up to the date of distribution or pay- ment referred to in those sub--clauses.

"Earned in- (18) "earned income" means any income of an asses-

c°m¢"- see who is an individual, Hindu undivided family, un- [" 2 (GAAH registered ﬁrm or other association of persons not being a company, a local authority, a registered ﬁrm or a ﬁrm as- sessed under section 190(b) [clause (b) of sub-section (5) of section 23]-- '

(a) which is chargeable under the head "Salaries"; or

(b) which is chargeable under the head "Profits and gains of business, profession or vocation" where the business, profession or vocation is carried on by the assessee; or

(c) which represents the share in the proﬁts and .gains of a firm, where the assessee is a partner actively engaged in the conduct of the business, profession or vocation of the ﬁrm; or

(d) which is chargeable under the head 'Other sour-

ces' if it is immediately derived from personal exertion or represents a pension or superarmuation or other allowance given to the assessee in respect of his past services or the past services of any de-

. ceased person;

but does not include any such income on which no income--ta.r. is payable under section 87(iii) (iv) and (v) [sub-section (2) of section 14.] ............. 4i Explanation.----Wh.ere any such income is, though it is the income of another person, .... ..included in th as-

, sessee's total income under the provisions of this ct, it shall be regarded as earned income in the hands of the \ assessee;"... ............ ..

"Firm", (19) "ﬁrm" "partner" and "partnership" have th I same ':P"'"°' and meanings respectively as in the Indian Partnershi Act, £35-t_"°r' 1932: provided that the expression 'partner' include any [s. 2 (6B)] person who being a minor has been admitted to the; bene-

9°f I932, ﬁts of partnership: ' "In<=°m°"- (20) "income" includes---'- - f [s. 2 (6C)] _ .

(i) proﬁts and gains:

(ii) dividend: '

(iii) the value of any petquisite or proﬁt in li u of salary tax ble under section 17, clauses ( ) and (4) [7, Ex 'Is. 1 & ,2];

E 3 Q E 95 Clause 2

(iv) the value of any beneﬁt or perquisite, whether convert_i_ble into money or not, obtained from a company either by a director or by any other person who has 'a substantial interest in the company, .......... .. and any sum paid by any such company in respect of any obligation which but for such payment would have been payable by the director or other person aforesaid;

(V) any sum chargeable to income-tax under section 41(2) [second and fourth provisos to clause (vii) of s. 10(2)] or under section 41 (3), [the second proviso to clause (xiv) of sub-section (2) of sec- tion 10] and any sum chargeable to income-tax under section 41(1) [sub-section (2A) of s. 10] or under section 62(1) [sub-section (5) of sec- tion 12];

any sum chargeable to income--taai' under section 28(ii) .... ..[sub-section (5A) of s. 10] or under sec- tion 28(iii) [sub-section (6) of section 10];

(vii) .any capital gains chargeable under section 45 .... .. [section 12B(1), main para, part dealing with charge]; '

(vi)

(viii) the proﬁts and gains of any business of insurance

- carried on by a mutual insurance association or by a co-operative society, computed in accord- ance with section 44 [Rule 9 in the Schedule] or any surplus taken to be such proﬁts and gains by virtue of that provision:

(ix) any contributions and interest thereon, paid to [New] an employee by an approved superannuation fund, to the extent provided in section 312 [58S ' (1)] ; . .

Explanation.--In this clause, the expression "person who has a substantial interest in the company" means a person who is concerned in the management of the busi- ness of the company, being the beneﬁcial owner of shares, not being shares entitled to a ﬁxed rate of dividend whe- ther with or without a right to partiéipate in profits, car- rying not less than twenty per cent. of the voting-power.

(21) "Income-tax Officer" means a person appointed "Intome-tax to be an Income-tax Ofﬁcer under section 128(1) or 128(2) 0536"'- |'5(3)]; [s. 2 (7)) (22) "Indian company" means a company formed and sqnagan com- registered under the Companies Act, 1956, and 1nc1udes-- pany".

. A

(i) a company formed and registered under any Eso?x(g;5(i).] previous companies slaw for; the time bein in force in any part 0 India (bﬂher than the tate of Jammu and Kas V ir);

.'9.'4« 96 Clause 2

(ii) in the case of the State of Jammu and K ir, a company formed and registered und r any other law for the time being in force in that State;

Provided ...................... ..the registered office of the "Inspecting company in all cases is in India. é-"5""a."' (23) "Inspecting Assistant Commissioner" means a Sig':e':','.5_' person appointed to be an Inspecting Assistant Commis- [s. 2 (6D)] sioner of Income-tax under section 128(1) [5(3)]; (24) "Inspector of Income-tax" means a person ap- 6E ' pointed to be an Inspector of Income-tax under section 128 M' )1 (2) [5(3)]-

'['sM:g(§§)'ia'°"' (25) "Magistrate" means a Presidency Magistrate, or ' a Magistrate of the ﬁrst class ....... .. :i'N°{*;'°Si' (26) "non-resident" means a person who is not a,"1'esi- dent".; .

"Person". (27) "person" inciudes----- " 2 (9)1 I (1) an individual

(ii) a Hindu undivided family.

(iii) a company, . V

(iv) a firm or other association of persons, w ether incorporated or not, or the-partners of th ﬁrm or the members of the association indivi 2 lly,

(v) a body of individuals, whether incorporated or not. I

(vi) a local authority, and

(vii) every artiﬁcial juridical person, not falling §with-

in sub-clauses (i) to (vi). I . I 5 ':'(°I'$']"d"'.der ;;%rescribed" means prescribed by rules ma un-

"Previous (29) "previous year" means previous year as A ned vear"- in section 5 [section deﬁning {previous year, placed ' ' the [New] draft after section 4};

;;:'ci(:1r°,§I?*'1 (30) "principal oﬁiqer", used with reference to a local [s_ 2 (an authority or a company or other public: body 0 any association, means-- 1

(a) the secretary, treasurer, manager or agent (if the authority, company, body or association, or:

(b) any person connected with the authority, '*com-

pany, body, or association upon Whom the In- come-tax cer h .,served a notice of s in- tention of eating ﬁlm as the principal cer thereof; % j e R qr 97

- Clauses 2-3 (31) "public servant" has the same meaning as in the "P"'3_1i° W- Indian Penal Code, 1860; . ([391 4.5 of 1&0. -

(32) "registered ﬁrm" means a ﬁrm registered under "Registered the provisions of section 192 (a) or under that provision 5'm'- p read with section 191 (7) [26A embodied in sections in the [" 2 ('91 chapter on ﬁrms dealing with registration];

' (33) "regular assessment" meansithe assessment ....... .. "Regular "

made under section 147 or 148 [23(1) to (5)]; 'f:':'§g'°"E5§ maixlr para:

part (34) "resident" means a_ person who is resident in "Rcsidcnt".

India within the meaning of section 6 [4Al; [New] (35) "tax" means income-tax and super-tazc chargeable "Tax". under the provisions of this Act; [New] (36) "total income'? means total amount of in- ,"1'°ta1"

come .......... .. referred to in section 4. [4(1)] computed in '[;"°':° '05) the manner laid down in this Act; g pain] (37) "total world income" includes all income, .......... .. ;n::)';';l:.3f'°'ld wherever accruing or arising, except incomes which are not [s.§ ., 2(x5).

included in the total income under a of the provisions of part] Chapter III [Incomes which do not rm part of total in- ' come] and except any capital gain which is not includi-

ble in the total income of an assessee;

(38) "unregistered ﬁrm" means a zﬁrm which is not a ;}i!'1irl'eﬁg)i,s'tcr-

registered ﬁrm. 4 . [s_ & ('ﬁn \ CHAPTER II BASIS OF CHARGE ; x (1) Where any Central Act enacts gxtliat income-tax shall Sc ' ion 3_ be charged for any assessment year ﬁn any rate or rates, 0 '8' °""' income-tar at that rate or those ratesishall be charged for °° °"""' that year in accordance with, and sub ept to the provisions [' 31 of, this Act in respect of the total in me of every person of the previous year or years,-(as the qase may be, for that ' assessment year : 1 ' i i Provided that where by virtue of any provision of this Act income-tax is to be chargeid in respect of the income of a period other than the previous year, income-tax shall be charged accordingly.

(2) In respect of income chargeable under sub-section (1), income-tax shall be ded ed at source or paid in advance, where it is so ded ' le yable under: any provision of this Act. = ' 98 Clause 4 -

§£i°"'f*t ml (1) Subject to the provisions of this Act, the total in- incgslg ° come of any previous year 'of a person who is a resident Rcsidems, includes all income ......................... ..from whatever source derived which-

[3-4 (I) (3), (a) is received or is deemed to be received in India in 93"] such year by or on behalf of such person; or [s.4-(i)(b)(i)] (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or [s.4(i)(b)(ii)] (c) accrues or arises to him without India during such year; or [324 ('l (b) (01) having accrued or arisen to him without India he- '")] fore the beginning of such year and after the 1st day of April, 1933, is brought into or received in India during such year by him or on his behalf; or gt 4 (I) Expl (e) having accrued or arisen to him in a merged terri-

s'4'("l"5'%b)"gi'i})' tory other than Cooch-Behar after the 1st day of a'nd,_,(,4A)] April, 1933, and before the commencement 0 the previous yearfor the assessment year 1949-19 0. is brought into or received in any part of India lther than that merged territory during such year by him or on his behalf; or ' [Do.] (f) having accrued or arisen to him in a territory which, immediately before the 1st day of November, 1956, was comprised in a Part B State other than J ammu and Kashmir, or in the merged terri-

tory of Cooch-Behar, after the 1st day of April; 1933 and before the commencement of the previousgyear for the assessment year 1950-1951, is brought into «or received in any part of India other than; that territory or merged territory during such year by him or on his behalf; or . :

[D0-J (8) having accrued or arisen to him in the Stat of Jammu and Kashmir after the 1st day of pril, 1933, and before the commencement of the prenious year for the assessment year 1954-:1955, is brdught into or received in an part of India other tha' the State of Jammu and ashmir during such ye r by him or on his behalf. ' Nommidem (2) Subject to the provisions of this Act, the total in- [s_ 4 M (3) 5 come of any previous year of a person who is a non-re ent ,¢, a,,d,,,'4 includes all income .................................. .. from whatever

1) (c)] source derived which-- .

(a) is received or is deemed to be received in India in such year by or on behalf of such person; or i

(b) accrues or arises or is gdeemed to accrue or arise to him in India during such year.

3 99

Clauses 4-5 (3) Income ................... .. accruing or arising without [S-4(1):

India shall not be deemed to be received in or brought into '"" '] India within the meaning of this section by reason only of , the fact that it is taken into account in a balance sheet pre- pared in India.

(1) For the purposes of this Act, "previous year" Section 5.

meanS_ Previous year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. [3:2.(")(i)(a)

(a) the ﬁnancial year immediately preceding the as- gjﬁzfggft] sessment year; or [S 2(").(i)(a)

(b) if the accounts of the assessee have been made up mainpara, to a date within the said ﬁnancial year, ................ .. latter part] then, at tlie option 0% tihe assessee, the twelve months en ing on suc ate; or

-(-c) in the case of any person. business or company or [s- 2 (H) (i) class of person, business or company, such period as may be determined by the Central Board of Re- venue or by any authority authorised by the Board in this behalf; or

(d) in the case of a business, profession or vocation .... .. [S- 9 (II) (0 ....... ..newly set up_ in the said ﬁnancial year, the £,°a);']"-W"

period beginning with the date of the setting up of the business, profession or vocation and-

(i) ending with the said ﬁnancial year, or

(ii) if the accounts of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, ending on that date, or

(iii) ending with the period, if any, determined under clause (c), i As the case may -be; or

(e) in the case of a business, profession or vocation Es. 3 (it) (i) newly set up in the twelve months immediatelyl°)*§P""'-r preceding the said ﬁnancial year--- an" Pm] '

(i) if the accounts of the assessee have been made up to a date within the said ﬁnancial year and the period from the date of the setting up of the business, professionor vocation to such date does not exceed twelve months, then, at the option of the assessee, such period, or

(ii) if any period has been determined under clause

(c), then the period beginning with the date of the setting up of the business, profession or voca-

tion and ending with that period.

As the case may be;

(1') where the assessee is a partner in a firm and the [s_ 2(.,)(1,)] firm has been assessed as such, then, in respect of the assessee's share of the income ................... ..of the ﬁrm, ...................... ..the riod determined as previous year for the essmlazt of the income .... .. ................ ..oftheﬁ,;

100

, Clauses 5-6

(g) in respect of proﬁts and'gains from life insurance business, the year for whlch annual accounts are re- 4 of1938 quired to be prepared under the Insurance Act, 1938, or under that Act as read with section 43 a the 31 of 1956 Life Insurance Corporation Act, 1956, imme ' tely preceding the assessment year ......................... .. E, 2 (H) (1) (2) Where an assessee has newly set up a business, pro-

c), _Prov., fession or vocation in the said ﬁnancial year and his accounts' earlier Part] are made up to a date in the assessment year in respect of' a period not exceeding twelve months from the date of such setting up, then the assessee shall, in respect of that busi- ness, profession or vocation, at his option, be deemed ta have- no previous year for the said assessment year under sub- clause (i) of clause (d) «of sub-section (1); and such option shall, in relation to the immediately succeeding assessment. year, have effect as an option exercised under sub-clause

(i) of clause (e) of sub-section (1).

Es. 2_(r 1) (i). (3) "Subject to the other provisions of this section, an lifligﬁng assessee may have diﬁerent previous years in respqct of ' separate sources «of his income. E (4) ................ ..

Where in respect of a particular s urce of income .......... ..or ................... ..in respect of a bus ness,. profession or vocation newly set up, an assessee hasionce exercised the option under clause (b) or sub-clause ( i) of clause (cl) «or sub-clause (i) of clause (e) of sub-secti (1) or has once been assessed, than he shall not, in resp t of that source, or, as the- case y be, business. Drofessi n or vocation, be entitled to varyuﬁxe meaning of the expr ion; 'previous year' as then applicable to him, except wit the ' consent of the Income-tax Oﬂiﬁler and upon such cond ions.

as the Income-tax Oﬂicer may . ink ﬁt to impose. ...... ..... ..

Section 6 _ 'For the purposes of this Act---- ﬁfdigence In (1) any individual is resident in India in any previous year. if he--

[s.-1A (a)(i)] (a) is in India in that year for a period amounti' g in. all to one hundred and eighty-two days or mo ; or [s. 4A(a)(ii)] (b) maintains or causes t6 be maintained for h' dwelling place in India for a period or amounting in 'all to due hundred and eight};-two days or more in that year and has been in pndia for any time in that year; or 3 [5- 4A(1)("i)3 (c) having within the four years preceding that I ear, been in,.India for a pe iod or periods amounti g in all to three h dred sixty-ﬁve days or mo e, is in India for a eriod amounting in ll to thirty days or more t year; ' I _ 5 101 Clauses 6-8 (2) a Hindu undivided family, ﬁrm or other associa- 5- 'A (")1 tion of persons is resident in jlndia in any previous year, unless during that year the control and management of its aﬁairs is situated wholly without India; ......................... ..

. . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) a company is resident in India in any previous year, [s. 4A (c)] 1 --.-

(i) it is an Indian company; or

(ii) during that year the control and management of its affairs is situated wholly in India;

(4) every other person is resident in India in any pre-- [New] vious year, unless during that gear the 'control and manage- ment of his affairs is situate '' wholly without India;

(5) if a person is residentin India in a previous year [N¢w] relevant to an assessment year in respect of any source of income, he shall be deemed to be residenlt in India in the previous year relevant to the assessment year in respect of each of his other sources of income;

(6) a person is "not ordinarily resident" in India in [5-4{B(")(b)] any previous year if such person is-- -

(a) an individual .......... .., who has not_ been resident ; in India in nine out oi the tens previous years pre- ;_ ceding that year. or .......... .. «has not during the seven years preceding that ye ' ,been in India for a period of, or periodﬁ amoun ing in all to, seven hundred and thirty days or moie; or

(b) a Hindu undivided faniily ..... whose manager has not been resident in nine outiof the ten previous ' years preceding that year, or has not dun the ; seven years preceding ithat ye, r7 been in In ia for a period of, or period! amoun ing in all to, seven ; hundred and thirty days or : é;

The following incomes shall be dedmed to be received §°°' -7 in the previous year---- . 6:: efho be

(i) the annual accretion in the previous year t6 the 'em' ed' balance at the credit of an e ' loyee participating [Ne 3 in a recognised provid nt furm to the extent pro- i vided in section 294 [ ,E];

(ii) the transferred balance in a recognised provident fund, to the extent provided in section 299(3) For the purposes of inclusion in the total income of an gghzndl assessee, any dividend shall deem ,to be income of [8 2) the previous year in which it is 'cl, crh ted or distributed mu or deemed to have been paid, Eited-V distributed....;..... carli pa;

102

Clauses 9-11 §;§3ir';';9 _ The following incomes shall be deemed to accrue or deemed") arise in India--

ac,cru9 or , (i) all income ...................... .. accruing or arising, 3"-5° "' Ind" whether directly or indirectly, through or from any I'-.42 (1)- business connection in India, or through or from any property in India, or through or from any asset _ or source of income in India, or through or from any money lent at interest and brought into India in cash or in kind or through or from the sale, ex-

change ............. .. transfer or relinquishment of a capital asset situate in India.

{s- 42 (3) ] Explanation.---In the case of a 'business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to ............. .. the operations carried out in India. ' E'-pf (211): (ii) income which falls under the head "Salaries" ....... ..

..................... .., if it is earned in India:

Provided that any pension payable Outside Indiato a person residing permanently outside India shall not be deemed to accrue or arise in India, if the pension is payable to a person referred to in article 314 of the Constitution or to a person who, having beenappointed before the 15th day of August, 1947, to be a Judge of the Federal Court or of a High Court within the meaning of the Government of India Act, 1935, continues to serve on or after the commence- ment of the Constitution as a Judge in India;

IF? 41%)' (iii) a dividend paid by an Indian company without 'P' 1 India, ................ .. to the extent to which it; has been paid out of proﬁts subjected to income-tax in India. :

gfntniﬁfagges For the purposes of section 4(1)(b) [4(1) (b) (i)], where"

by an0n_mi_ a husband is not resident in India. remittances receivgd by den. husband or on behalf of his_wi£e resident in India Ollt of any p _rt of {s_ 4 (2)] his income which 1S not included in his total income shall be deemed to be income accruing in India to the wife.§ r i I CHAPTER III , INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME 5°°ti°n 11 In computing the total income of a previous year of _1nC0mcs n_ot any person, any income falling within any of the following '"°'"'?°d 1" clauses shall not be included therein- total IHCOIIIC -

agricultural (1) agricultural income; Jncomc. _ _ _ _ [s. 4(3)(viii)] (2) any sum received by an individual as a member xncomc R. of a Hindu undivided family, where such sum has ;been eeivcd as paid out of the income of family, or, in the case of n . 103 Clause '11 ms=mb°r 91' Hindu undi-

any impartible estate, where such sum has been paid out vxdod fanulv of the income of the holder of the estate belonging to the [s. 14(1)] family; » (3) any receipts which are of a casual and non-recur- Casual recei-

ring nature, unless they are--- P'5~ ~

(i) capital gains, chargeable under the provisions of [s' 4(3)(vﬁ)1 section 45 [12B, part re: charge]; or

(ii) receipts arising from business or the 'exercise of a profession, vocation or occupation; or

(iii) receipts by way of addition to the remuneration of an employee;

(4) in the case of a resident-- , ' Foreign

(i) the unremitted foreign income chargeable to in- [ come-taac under clause (c) of sub-section (1) of section 4 [section 4 (b) (ii)], subject to the follow- ing limit, that is to say,-

(a) the amount not to be included in the total income by virtue of this sub-clause shall not exceed four thousand ﬁve hundred rupees; and

(b) where any part of such unremitted foreign income consists of salaries paid by the Government, a lo- cal authority or a corporation' established by a Central, State or Provincial Act, the amount of such salaries not to be included as aforesaid shall be further limited to a sum calculated at the rate of one thousand rupees for each month of service in respect of which the salaries are received ab- road;

(ii) any income accruing or arising outside India and [5, W , 4:1, ................ ..chargeable to incolme-tax by virtue of proviso' clause (d) of sub-section (1) of section 4 [4 (1) (b) '

(iii)], if he was a non-resident in two out of the three years immediately preceding the previous [s. 4. (1), 3rd:

Prom] 2 year; , ii

(iii) where the case does 't fall under sub-clause (ii), [s. (1), 5th.

income accruing or a ' 'ng ou ' ' India and char- P1'° geable to income-tax y virt (of section 4(1) (d) ' [4(1) (b) (iii)], if within threei months of the date of receipt in India of uch indome .......... .. the ass ' ; sessee makes paymenlp of the: dmount of income- i tax, interest 1 or penalty or other' sum, if any, due from him on such date;

(iv) if such person is not ordinarily resident in India [S-46(1). nndi during the previous year, income ....... .. which ac- P'°""°] crues or arises to him without India .......... .. and is neither derived from a business controlled in or a profession or a vgocation 3 1; up in India nor ' brought into or received in I17. in by him during the previous year;. § 3 1 -

i l04 ' Claue ll Non-residents (5) in the case 013' a non«resident--- .{s- 4(3)(Xvi)] (i) any income from interest on, or from premium on the redemption of, any bonds issued by the Central Government under a loan agreement between the Central Government and the International Bank for Reconstruction and Development, or by any industrial -undertaking or ﬁnancial corporation in India under a loan agreement with the said' Bank which is guaranteed by the Central Government' . . . . . . . . . . .., 19- 4(3)(XX)] (ii) any income from interest payable without India on a loan issued for gzublic subscription before the 1st day of April, 193 : -

Provided that .............. ..,....income .......... ..'refer'ned to in sub-clause (ii) above shall be included in the total world income of the non-resident:

'T'aY*=1 ¢°n' (6) subject to such conditions as the Central Govern- f°' ment may prescribe, the value of any travel concession or {Sec (')(via) assistance received by or due to any person, being a citi- ' '4 3 zen of India, from his employer for himself, his wife and Pam (W children, in connection with his proceeding on leave lto his home-town or village in India; 3 Foreign (7) in the case of an individual who is not a citizen nationals ' Of India--

"§',;,';(?;)§Via)' (i) subject to such conditions as the Central G§vern- " ment may prescribe, Lgpassage moneys or the - alue of any free or concessional passage received y or due to such individ from his employer fo him- self, his wife and chjclren, in connection wi h his proceeding on home Eleave out of India; i .,_4(3)(,,)(b)] (ii) the remuneration by a Consul Gel eral,

- Consul. .V ice Consul or Consular Agent of a f reign ' State ............. .. fromssuch State for service ' such capacity; 3 ~s.4(3)(x)(c)] (iii) the remuneration received by an employee the consulate of a forei State .......... .. from such State for service in su M {capacity ;

, ,_ X d (iv) the oﬂicial s ry of a ,?Trade Commissioner or ther I "BX )( )1 official repre ntativegin India of a -foreign tate, if the official salary of the corresponding ofﬁc al, if any, of the Central Government resident forssimi- lar purposes in the country concerned is si larly exempted from payment of income-tax or , per- tax -or any corresponding tax in that country;

';[s.4(3)(x)(e)] (v) the oﬁicial salary of aomember of the staff bf a " ' red to in su clause iv), when such memb r is a subject of the coun represented, if the o ial t « A t Trade Commi sioner or official representative ﬁer-

' 105 Clause ~_11 salary of the members to' the staﬁ of the correspon- ding oﬂicials of the Cqntral Government is simi- larly exempted from payment of irwome-tax or super tax or any corresponding tax in that country;

(8) the remuneration received by an employee of a Employee of foreign enterprise for services rendered by him during his fdtjcian enter-

stay in India, provided the following conditions are ;fulﬁl- P"'°' . 1ed_ [S- 4(3) (XW)l

(i) the foreign enterprise is not engaged in any trade' or busmess in India;-

(ii) the employee is not a citizen of India;

(iii) his stay in India does not exceed in the aggregate a period of ninety days in such previous year;

(iv) his stay in India did nbt exceodyin the aggregate a period of ninety days in any ﬁnancial year prior to the previous year; and (V) such remuneration is not liabie to be deducted from the income, .......... .. of the employer charge- able under this Act;

(9) the remuneration, char able under the head "Sala- Foreign tech- ries", ............. .. for services'r ndered Ibgy an individual. niCiaF|3- _ who is not a citizen of India, as a te pician in the emp- [5- .4[3)(""") loyment of Government or of: a local :authority or of any ma"? Paul' . corporation set up under any special law or in any busi- ness carried on in India, if he-was not resident in any of the four ﬁnancial years imm y iately preceding the ﬁnan- cial year in which he arrived India,,--: to the extent men- tioned below-- '

(i) .......... "where? a contract of . ice was approved [:3 )(xi_va). by the Central Gove ent bzore the commence-2 '°""°] ment of his service .... .._.su hij remuneration due If to or received by h in. idual during the ﬁgin India and the two ﬁnancial years n t foll ,

(ii) in other cases, such \ unerat due to or receiv- [s.4. )(xiva), ed by such individual or the riod of three hu.n- 3'' ""°1 dred and sixty ﬁve d ys in a l, commencing from i the date of his arriva, ......... ..a 1 . ; Explanation 1 :--For the ipurpos of this clause, ser- [Nor] vices rendered by an individiul in ation to a business in India before its commencement sh l be deemed to be '

-a-rried on in India.

s a person having [s.4. )(xiva) constructional or E 11-] specialised knowledge and ex rience; ' manufacturing operations, or min'y or in the genera- ' tion or distribution of electri ity or _ other form of ; power, who is employed in I dia in f 3 capacity in which 3 such specialised knowledge and experience are actually utilized: j , E Provided that, in relation to-- [CL .x3(l),

(a) a person to whom sub-clause (i) of this clause ap- Fin We Act» plies and whose cont t of Tgiife was approved :95 2 which ti 9 3 by the Central Gov men ore the 1st day C" M" an of March, 1958, or by the Finance Act, 1 958, for certain cases .] Persons wor-

king under Technical Assistance Programmes [=- 4(3) (")1 Death-cum-

retirement gratuity.

[5'7(1)> Expl-

2 ,-Prov. ,pa.rt] Payment from a Provi-

dent Fund.

19 of 1925 [s.7(I), Expl-

2 prov., part] Accumulated balance in recognised provident fund.

[New] Payment from approved superannua-

tion fund.

[s-7(_I).Exp1n.

2, prov-. part] 106 Clause 11

(b) any other person who arrived in India before the 1st day of April, 1958, "technician" means a, per- son having specialised knowledge in industrial arts and sciences and having experience in indus- trial practice who is employed in India in a capa- city in which such specialised knowledge and ex- perience are actually utilized. ' (10) (i) in the case of an individual who is assigned to duties in India in connection with any co-operative te- chnical assistance programmes and projects in accordance with an agreement entered into by the Central Govem- ment and the Government of a foreign State (the terms whereof provide for the exemption given by this clause)-

(a) the remuneration received directly or indirectly from the Government of that foreign State for such duties, and

(b) any other income of such individual which accrues or arises outside India, and is not deemed to ac- crue or arise in India, in respect of which such individual is required to pay any income or social security tax to the-'Government of that foreign State;

(ii) any income of the members of the family of such individual accompanying him to India, which ac- crues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such member is required to pay any income or social security tax to the Government of that foreign State;

.death-cum-retirement gratuity received under the revised Pension Rules of the Central (lovem- ment or under any similar scheme of a State Government, a local authority or a corporation established by a Clentral, State or Provincial Act;

(11) any ...... ., (12) any payment from a provident fund to which the Provident Funds Act, 1925, applies';

(13) the accumulated balance due and becomi g pay-. able to an employee participating in a recognise g:81):]i-

dent fund, to the extent provided in section ' 96 [ V (14) any payment from an approved superannuation fund made on the death of a beneﬁciary or in lieu of or in commutation of an annuity, or by way of ref d of contributions on the death of a beneficiary or on s leav- ing the employment in connection with which the fund is established; ' 107 Clause 11 (15) any special allowance or beneﬁt, not being in Allowance the nature of an entertainment allowance or other perqui- for expenses site within the meaning of section 17, clause (3) [7(1)], [s. 4(3)(vi)] speciﬁcally granted to meet expenses wholly and exclu- sively incurred in the performance of the duties of an office or employment of proﬁt, to the extent to which such expenses are actually incurred for that' purpose;

(16) (i) interest on the 10 year Treasury Savings De- Interest. __ posits Certiﬁcates or the monthly payments on the 15 year [5-4(3)(¥Vu)] 'Annuity Certiﬁcates issued by or under the authority of the Central Government for an amount not exceeding the maximum amount which is permitted to be invested therein; .

(ii) interest on deposits in Post Office Savings Bank. [3_4(3)(xvia.)] Post Office Cash Certiﬁcates, Post Office National Savings Certiﬁcates and Post 'Office National Plan Certiﬁcates for amounts not exceeding in each case the maximum amount which is permitted to' be deposited or invested therein; '

(iii) interest on securities held by the Issue Depart- [s.4.(3)(xviii)] ment of the Central "Bank of Ceylon constituted under the Ceylon Monetary Law Act, 1949;

(iv) interest payable-- E:-3i(3)))]

(a) by Government or a local authority on moneys borrowed by it from sources outside India from any non-resident or from any institution estab- 5 lished outside India;

(b) by an industrial undertaking in India on moneys borrowed by it under a loan agreement entered into with any such ﬁnancial institution in a foreign country as may be approved in this be- half by the Central Government by general or special order;

(c) by an industrial undertaking in India on any moneys borrowed or debt incurred by it in a foreign country in respect of the purchase out- side India of capital plant and machinery in any case where the loan or debt is approved by the Central Government, having regard to its terms generally and in particular to the terms of its repayment; _ ti (17) scholarships, granted to meet the cost of educa- Scholarships 0"" . [New] [Sceitcm5of (18) any income chargeable under the head "Income notification from house property" in respect of a building the erection No. 878F(In- of which is begun and completed between the 1st day °°m'¢-tax) th- of April, 1946, and the 31st day of March, 1956, (both dates f" '9""3"m inclusive), for a period of two years morn the date of such nnc completion; . : [,4 8--l Law C0m.I58.

building ) (xii)! 108 Clause 11 ' 1l3c:l;Yo?1!1I';;"I:: (19) any daily allowance received by any person by hm ofPar"a_ reason of his membership of Parliament or of any State me," and Legislature or of any Committee thereof;

LCSM3' (20) any payment made, whether in cash or in kind, [M(,',)(x;x)] by the Central Government or any State Government in Gallantry pursuance of gallantry awards instituted or approved by awards- the Central Government;

Ef;;*,';°"'§i§Z§,. (21) any amount received by the Ruler of an Indian E8514 (3) (x) State as privy purse under article 291 of the Constitu- 3 tion;

Local autho- I (22) (i) income of a local authority chargeable under 'iS'i°5- the head "Interest on securities", "Income from house Spro- ga'r;*](3) ('")' perty", "Capital gains" or "Income from other source '; [s. 4 (3) (iii) (ii) income from a trade- or business carried on 4 by a Part] local authority which accrues or arises from the supply of a commodity or service within its own Jurisdictional area;

Scientiﬁc Re. _(23) any income of a scientiﬁc research assbciation for search Asso- the time being approved for the purposes of section 35(1) f§3"'Z")-(Kim (ii) [10 (2)_(xiii)] which is applied solely to the purposes of '4 3 that association; 1 Educational (24) any income of a University or other educafional {1'\'§':i"'°"5- institution, existing solely for educational purpose, and [See item ,2 not for purposes of proﬁt; . oi Notiﬁca-

tion No.878F I -1 éartiggme ax) . "

2,-3-22] (25) any income chargeable under the head Initerest certain mm- on securities", "Income fro house property" and! "In- mes of Trade come from other sources" or a registered trade union U'"°"S- . within the meaning of the Indian Trade Unions Act,§1926, [S'4(3)(""")l formed primarily for the purpose of regulating the? rela- '6 °f'9"'6 tions between workmen and employers or between Work- men and workmen;

I come I, (26) (i) interest on securities which are held by, or pfovidcnt ° are the property of, any provident fund to which ' the and superan- Provident Funds Act, 1925,' applies, and any capital E ains nuation funds of the fund arising from the sale, exchange or trans'er of 5- 4(3)(i'')] such securities;

19 of 192 5 [s. 4(3)(ix)] (ii) any income received by trustees on behalf of a recognised provident fund; ' [New] ' (iii) income_of an approved superannuation fund, to the extent provided in section 309 [s. 58R, main para]; (27) any income. of a member of a Scheduled ribe, .Sl.°r'i',')'(':1s"l°d as deﬁned in clause (25) of article 366 of the Constit, tion, [5, 4(3')(xx;)] residing in any area speciﬁed in Part A or Part B of the table appended to paragraphl20 of the Sixth Sched le to the Constitution, or in,the Uni n Territories of Manip and Tripura, provided .... su member is not in th ser-

vice of Government. ' I 109 Clause 12 (1) Subject to the provisions of sections 63 to 66, [16 ?°"i°" f *9- (1) (c)], the following income shall not be included in the '''°""' '°"' total income of the previous year of the person in receipt E;-°p°,:,?i'g};'§:,(:

of the income-- or charitable;

~ purposes an

(i) (a) so much of the income derived from property l';'g'if')":'s°0;'fd';:

held under trust .......... ., wholly for charitable or mablc insti_ religious purposes as is applied or accumulated tution. for application to such .......... .. purposes in India; [s. _4 (3) (i), and mun para]

(b) in the case of property so held in part only for such purposes, so much of the income derived from the property as is applied or ﬁnally set apart for application to such purposes in India:

Provided that so much of any income referred to in [s.4_(3) (i). sub-clause (a) or (b) of this clause as is applied to purposes '}"'°"'.5° ff'):

other than charitable or religious purposes as aforesaid, or :§f1"'"§mv'i';f, ceases to be accumulated or set apart for application there- (")1 to, ............. ..shall be deemed to be the income of such per- I son of the previous year in which it is so applied or ceases to be so accumulated or set apart;

(ii) (a) income from property held under trust....._ ..... .. [:. 4(3) (i), created on or after the 1st day of April, 1952, P'.°'"'° (3) for charitable purposes which tend to promote (.--

international welfare in which India is interest- § ed, applied to such purposes outside India, and for charitable or religious purposes created be- "i5° "(W fore the 1st day of April, 1952, applied to such purposes outside India, '

(b) income from property held under trust ................ .. R04 (3) (1) if the Central Board of Revenue by general or special order directs in either case that it shall not be included in i the total income of the person in receipt of such income. ' Explanation.----In this sub-section, "property" does not ' include business. ' _ (2) Subject to the provisions of sections 63 to 66 [16(1) 54 (3) 53).

(c)], any income derived from businqst»: carried on by or on '°"' ( )' behalf of a'trust_ ﬁor charittﬂﬂe or rblhgious purposes shall 1 not be included in the total income of the previous yearpof ' the trustees, if the conditions speciﬁed in sub-section (4) are satisfied.

(3) Any income derived from business carried. on by 4 (3) (i) or on behalf of a religious or charitable institutionshall not . °" (b):

be included in the total inc e of 3 previous year of the "M1 tn:l:1tﬁl.t&On, if the conditionsyslpeciﬁ . elin sub-section (4) are 5 sa is e . .i ' E 4 E 110 Clauses 12-13 [s. 4 (3) (i), (4) The provisions of sub-section (2) or sub-section (3) P'°V- (5): shall a l onl i the ollowin conditions are satisfied- pm] PP 21 y 9

(a) the income is applied Wholly for the purposes of the trust or institution, as the case may be; and

(b) either the business is carried on in the course of the actual carrying out of a primary purpose of the trust or institution, or the Work in connection with the business is mainly carried on by bene-

ﬁciaries of the trust or institution.

4(3) (ii)] (5) Any income of a trust ﬁor charitable or religious purposes or a religious or charitable institution, derived from voluntary contributions and applicablesolely to charitable or religious purposes shall not be included in the total income of a previous year of the trustees or the insti- tution, as the case may be. .

[5, 4(3), last (6) Nothing contained in this section shall operate to para. part] exempt from the provisions of this Act that part of the income from property held under a trust ............. ..for pri-

vate religious purposes, which does not enure for the bene- fit of the public.

[s. 4(3). last E:r'planation------In this section,-

Pam pm] (a) "charitaﬁole purpose" includes relief of the poor, education, medical relief and 'advancement of any other object of general public utility;

[New] (b) "trust" includes any other legal obligation.

[Cf. s. 4(3) '

(i), main para.

5- 4 (3) (i), §L'°Y.-) (3) (0 (1) Where any business, profession or vocation _on s_ (;'(3;')' last which income-tax was at any time charged under the pro-

para] visions of the Indian Income-tax Act, 1918, is discontinued, section ,3, then, unless the provisions of sub-section (2) have been Business as- rendered applicable by virtue of there having been a sac- Sesscd under cession, the income, .......... .. of the period from the date AIC':,°':';'I°é of commencement of the previous year in which the busi-

[s, 25(3), ness was discontinued to the date of ................ .. disconti-

part] nuance, shall not be_included in the total income of the 7 Of 1913 person who was carrying on the business, profession or voca- tion. ' gm] 25(4)» (2) Where the person who was on the 1st day of April, 1939, carrying on any business, profession or vocationzon which inoome-tax was at any time charged under the pro- .V1SiOnS of the Indian Income-tax Act, 1918, is succeeded in such capacity by another person, the change not merely being a change in the constitution of a firm, the income ........ ..of such business, profession or vocation of the period from the date of commencement of the previous year in which the su-ccession took place to the date of ......... succession shall not be includedtin the total income of the first mentioned person. a ' 7of 1918 111 Clauses 13-16 (3) The provisions of sub-sections (1) and (2) shall not E} . '-'5%)] apply to a business, profession or vocation on which in- '°'"'° ( )' come-tax was at any time charged in the hands of a com- pany under the Indian Income-tax Act, 1886, or on which 2 "I336 income-tax would have been charged in the hands of a company for the assessment year ending ' n the 31st day of March, 1918, if the company, having een in existence in that year, had also been in existence in the year ending on the 31st day of March, 1917.

CHAPTER IV COMPUTATION OF TOTAL INCOME Heads of income Save as otherwise provided by this Act, all income ﬁfgnof ﬁg; shall, for the purposes of charge of income-tax and co_m- cmm, putation of total income, be 'classiﬁed under the following [s. 6] heads of income-

A--Sa1aries.

B----Interest on securities.

C----Income from house property.

D---Proﬁts and gains of business, profession or voca- tion.

E--Capita1 gains.

F--Income from other sources.

A--Salaries Section I 5 The following income shall be chargeable to income- Salaries. tax under the head "Sa1aries"---- [ ( ) 3- 7 I 2

(a) any salary .......... ..due from an employer or former main para. employer to an assessee in the previous year, whe- Part] ther paid or not;

(b) any salary paid or allowed to him in the previous year by or on behalf of the employer or former employer though not' due or before it became due to him; _

(c) any arrears of sala paid to him in the previous year by or on behgf of the employer or former ~ employer, if not charged to income-tax for any . earlier previous year. Section '16 The income chargeable under the 'head "Salaries" shall be clomputed after making the following deductions, name y---

(i) any amount not exceeding ﬁve hundred rupees, expended by the assessee cm the purchase of books l and other publicatitns necdssary for the purpose ; of his duties; E A -

' . 3 d , 112 Clauses 16-17 [s. 7 (2) (ii)] (ii) in respect of any allowance in the nature of an entertainment allowance speciﬁcally granted to the assessee by his employer-

(a) in the case of an assessee who is in receipt of a salary from the Government, a sum equal to one-ﬁfth of his salary (exclusive of any'spe- cial allowance, beneﬁt or. other perquisites) or ﬁve thousand rupees, whichever is less; and

(b) in the case of any other assessee who is in receipt of such entertainment allowance and was in receipt of such entertainment allowance regularly from his present employer before the 1st day of April, 1955, the amount of such entertainment allowance regularly received by the assessee from his present employer in any previous year ending before the 1st- da of April, 1955, or a sum equal to one-ﬁfth or his salary (exclusive of any special allowance, beneﬁt or other perquisites) or seven thousand ﬁve hundred rupees, whichever is the least;.....

1r::5,Z;(,:) (Ha) (iii) .......... ..where the assessee is not in receipt of a conveyance allowance whether as such or as paift of [s_ 7 (2) (;;a) his salary, and owns a conveyance which is {used main para] for the purposes of his employment, such sum as the Income-tax Oﬂicer may estimate in respect of such use as representing the expenditure incurred by him in its maintenance and as representing its normal wear and tear;

[s. 7(2) (iii)] (iv) any amount actually expended by the assessee,._not being an amount expended on the purchase of books or other publications, or on,entertainmen'1: or on the maintenance of a conveyance, which, by? the conditions of his service, he is required to s nd out of his remuneration wholly ............. ..and e lu- sively in the performance of his duties. _ ;

Section 17- For the purposes of sections 15 and 16 [preceding pec- Im" Pma' tions re: salary] and of this section,------- . E tion. ' "Employer" (1) "employer" means an em loyer, who is the Central [-3- 7(I)aPa"l Government, a State overnment, any forfign Government, a local authority, a company, any;..... .......... ..public body or' association, or any private employer; ' _' "Sa1ary"- (2) "salary" includes-

[S- 7(I)»part] (i) any salary or wages;

(ii) any annuity or pension;

(iii) any gratuity;_

(iv) any fees, commissi l perquisites or proﬁt' in , lieu of or in iadditio to any salary or wag ;

i 113 Clause 17

(v) advances by way of loan or otherwiseof the amounts enumerated in sub-clauses (i), (ii), (iii) and (iv) above;

(vi) the annual accretion to the balance at the credit [New] of an employee participating in a recognised pro- vident fund, to the extent to which it is charge- able to tax under section 294' [58E];

(vii) the aggregate of all sums that are comprised in [New] the transferred balance, as referred to in section. 299(2) [58J (2)] of an empio ee participating in a recognised provident fun , to the extent to which it is chargeable to tax under section 299(3) [58-T (3)1;

"Perquisite"

(3) "perquisite" includes---- E'-:pln'l]7(I)

(i) the value of rent free accommodation .......... ..pro- [mam (i) vided to the assessee by his employer; Daft]

(ii) the value of any concessi9n'in the matter of rent 6) respecting any accommodation provided to the assessee by his employer;

(iii) the value of any beneﬁt or amenity granted or provided ............. ..ﬁree of cost or at concessional rate in any of the following cases :-- _ '

(a) by a company to an employee who is a direc- [Wm (ii) tor thereof .......... .. pap]

(b) by a company to an employee who is a share- [Wm (ii)- holder concerned in the management of the 5:" 8 2('§E')! company and is the beneficial owner of shares, (ﬁgi ' not being shares entitled to a fixed rate of ? dividend whether with or without a right to ' participate in proﬁts, carrying twenty per cent or more of the voting power;

(c) by any employer,(including a company) to an [mm » (iﬁn employee to whom th provlsions of para- f graphs (a). and (b) of is sub-clause do not apply and whbse incdme under the head 2 "Salaries" exclusive of the value of all bene- g ﬁts or amenities not 'provided by way of ; ' monetary payment exceeds eighteen thousand 9 rupees; '

(iv)\any_ sum paid by the emplqyer in respect of any (iv)] obligation which but for such payment would ' have been payable by the assessee; and

(v) any sum payable by the employer, whether directly or through 'a fund other than a recognised provident fund or an appnoved superannuation fund to effect an assurance on the life of the assessee or to effec a conti-'got for an annuity on the life of the assa e; * 5 l 114 Clauses 17-20 'l'i1;fl°ﬁ" (4) "proﬁts in lieu of salary" includes-- \ salary" _ [s. 7 (I), (i) the amount of any compensation due to or received Explm 2 by an assessee from his employer or former em-

'"31" Pm] ployer at or in connection with, the termination of his employment, whether solely as compensation for loss of employment, or for any other consideration;

(ii) the amount of any contributions to an approved superannuation, fund (including interest on such contributions) paid to an employee, to the extent to which such amount is deemed to be the income of the employee under section 312 [58-5(1)];

(iii) without prejudice to the provisions of sub-clause (ii) of this clause, any payment due to or received by an assessee from an employer or former employer or from a provident or other fund, (not being an approved superannuation fund), to the extent to which it does not consist of contributions by the assessee or interest on such contributions.

B. Interest on securities Section 18.. The following amounts received by an assessee. in the 1m°r°,8t 0" previous year shall be chargeable to income-tax under the securities. :4 - - ,- n __ {L8, m Pam] head Interest on securities .......... ..

(i) interest ............. ..on any security of the Central Government;

(ii) interest on any security of a State Government;

(iii) interest on debentures or other securitiespfor mo- ney issued by or on behalf of a local authority or a company.

section ,9_ Subject to the provisions of section 21 [section regarding-

Deductions. amounts not deductible], the income chargeable undelr the is 8 m m_ head "Interest on securities" shall be computed after mak-

,,i',,,,, earfcr ing the following deductions-

Part] (i) any reasonable sum expended by the assessee for the purpose of realising such interest; ............. ..

(ii) any interest payable on moneys borrowed for the purpose of investment in the securities by the as-

sessee.

Section 20.

Banking (1) In the case of a banking company---- , C°mpa"V' (i) the sum to be regarded as a sum reasonabl ex- [s. 8, Expln. pended for the purpose referred to in clause i) of

(a) Part] section 19 [section regarding deductions] shal be an amount bearing to the aggregate of its expen- ses as are admissible under the provisions of sec- tions 30, 31, 36 and 37, other than clauses (3), (5) and (6) of section 36, [sub-section (2) of secti n 10 (other than clauses 4=(iii), (vi), (via), (vib), vii),

(viii), (xi), (xii), (xii): and (xiv) thereof)]§ the 3

(ii) 115 Clauses 20-21 same proportion as the gross recei ts from interest on securities (inclusive of tax de ucted at source) chargeable to income-tax under section 18 [main section re: Interest on Securities] bear to the gross receipts of the company from all sources which are included in the proﬁt and loss account of the company ; ............. ..

....... ..the amount to be regarded as interest paya- [s. 8. Expln.

ble on moneys borrowed for the purpose referred (b) Part] to in clause (ii) of section 19 [section regarding deductions] shall be an amount which bears to the amount of interest payable on all moneys borrow- ed by the company the same proportion as the gross receipts from interest on securities (inclu- sive of tax deducted at source) chargeable to in- come-tax under section 18 [main Section for in- terest] bear to the gross receipts from all sources which are included in the proﬁt and loss account of the company;

(2) The expenses deducted under clauses (i) and (ii) of sub-section (1) shall not again form 3pa'rt of the,deduc-

tions admissible under sections 30 to of section 10] for the purposes of the company under the head 7 [sub-section (2) computing the income of "Proﬁts and gains of business, profession or vocation".

Explanation :----For the purposes of this section, [s. 8, Expln.

(a) and (b) last lines] "rno- [s. 8, Expln.

neys borrowed" includes moneys received by way of de-(b)5m1in=] posits.

Notwithstanding anything contained and 20 pany] , computing the income chargeable under the head on securities"--

(i)

(ii) I (iii) [sections regarding the following amounts shall not be deducted in interest chargeable under this Act which is paya-

in sections 19 S°°"°n 9' Amounts not Part] ble outside India (not. being interest on a loan .

issued for public subscription before the 1st day of April, 1938) on which tax has not been paid or deducted under section 202 or 204 [section 18] and in respect of which there is_ no person in India who may be treated as an agent under section 173 [section 43] ; « su/rns expended by the assessee for the purpose of realising interest on securities on which no income- tax is payable under section 87 (i) or 87 (ii) [s. 8 provisos 2 and 3]; . ' interest payable on money borrowed for the pur-

pose of investment in securities, being securities, on the interest on w ' h no under section 87(1) oi 87(ii) irqome-tax is payable and 3]. \ section 8, provisos 2 deductions and banking com- deductiblm "Interest l',- 3» '3' PN-

viso, lat ler Section 22.

Income from house pro-

perty.

s. 9 (1) open-

mg para] Section 23.

Annual value s. 9 (2), 1st para] [New] [s. 9'(2), Ist proviso] [s. 9. (2), 2nd proviso, ex-

cept last line] 116 Clauses 22-23 C. Income from: house property The .. . . . . . . annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any busi- ness, profession or vocation carried on by him the proﬁts of which are assessable to income-tax, shall be chargeable to income-tax under the head "Income from house property".

(1) For the purposes of section 22 [chargeability of income from house property], the annual value of any pro- perty shall be deemed to be the sum for which'the pro- perty might reasonably be expected to let from year to year.

(2) In determining the sum for which the property might reasonably be expected to let from year to year, due regard may be had, where the property is let to a tenant, to the following factors, besides others, namely-

(i) the annual rent agreed to be paid by the tenant;

(ii) the other obligations, if any, undertaken by the te- ' nant on behalf of the owner, including the y- ment of taxes due to the Government or a? ocal authority ; ~ the annual value of the property, if any, fixed by the local authority for the purposes of any tax on property levied by it; and , the rents of properties in the neighbourhood' simi-

larly situated and with similar advantages.

(3) . . . . . Where the property is in the occupation of the owner for the purposes of his own residence; the annual value of the property . . . . . . shall be the annual value of the property determined in the same manner as if the property had been let, reduced by the lower of the following---- *

(iii)

(iv)

(i) one half of such annual value, or

(ii) oneithcusand eight hundred rupees ;

but shall in no case exceed eleven per cent. of all i V ome of the assessee, other than the annual value of such pro- perty, liable to inclusion in his total income under this Act. i (4) . . . . . Where the property referred to in su sec- tion (3) consists of one residential house only and i can- not actually be occupied by the owner by reason the fact that owing to his employment, business, professibn or vocation carried on at any other place, he has to reside at that other place in a building not belonging to? him, ................ ..the annual value of such house shall-

(a) if the house was not gactually occupied by the owner durin .the wl$>1e of the previous ye , be taken to be l, or '~ ' l 1 17 Clauses 23-24

(b) if the house was actually occupied by the owner for a fraction of the previous year, be taken to be that fraction of the annual value determined un- der sub-section (3);

provided the following conditions are in either case fulﬁl- led:--

(i) the house is not actually let, and

(ii) no other beneﬁt therefrom is derived by the owner.

(1) Income chargeable under the head "Income from _ house property" shall, subject to the provisions of sub- ]S):'c{'°"_ 24 section (2), be computed after making the following deduc- "°"°""

tions, namely-

(i) ................ ..where the property is in the occupation of a tenant, ...................... .. one half of the total [3- 9 (2): 3"! amount of the taxes levied by any local authority "'°"

in respect of the property ....... ....... ..

(ii) in respect of repairs,--- [5 gm (0

(a) where the property is in the occupation of the part] ' ' owner, ......................... ..a sum equal to one-sixth of the annual value ;

(b) where the property is let to a tenant and the V . owner has undertaken to bear the cost of re- ["3]3(') 0)' pairs, a sum equal to one-sixth of the reduced . annual value;

(iii) where the property is in the occupation of a te- , ,, nant who has undertaken to bear the cost of re- §l'a]§"(') 0') pairs--- "Paul

(a) the diﬁerence between the reduced annual value and the amount of rent payable for a year by the tenant, or

(b) one-sixth of such value, whichever is less;

(iv) the amount of any_- annual premium paid to insure [" 9K')(i")] the property against I'lSk of damage or destruc- tion;

(v) where the 'property is subject to -a mortgage or other $531!') (W) capital charge, the amount of any interest on ; such mortgage or charge; 3 _

(vi) where the property is subject 1: an annual charge, r[,:,',?]:(') W)' not being a capital charge, I e amount of such i charge ; ,. _

(vii) where the property is subject to a ground rent, §,;r?](') (W) the amount of such ground rent ;

(viii) where the property has been acquired, construct- [S- 9(1) (iv)- ed, repaired, renewed r reco_ s ructed with bor- 93"]; rowed capital, the arn;unt_o£3 y interest paya- ' ble on such capital ; ' ' 118 Clauses 24-21 It 9 (1) M] (ix) any sums paid on account of land revenue in res- pect of the property;

9-90) (''01 (x) amounts spent to_ collect the rents from the pro- perty, not exceeding six per cent. of the reduced annual value of the property; I [s. 9 (x)(vii)] (xi) where the property is let and was vacant during a part of the year, that part of the reduced annual value which is proportionate to the period during which the property is wholly unoccupied or, where the property is let out in parts, that portion of the reduced annual value appropriate to any vacant part, which is proportionate to the period during which such part is wholly unoccupied;

t[:'3°";}f*':§;i_ (xii) such amount, in respect of rent from property l'et ﬁcation No. to a tenant which the assessee cannot realise, as 878F dated may be prescribed.

?tlei'?1-13%)?' Escplanation.--In this sub-section, "reduced annual value" means the annual value as reduced by one-half of the total amount of taxes levied by any local authority in respect of the property.

(2) The totaliamount deductible under sub-section (1) [S 9 (2) 2nd in respect of property of the nature referred to in section p,'m,iso'1ast 23(4) [sub_--section in section deﬁning annual value, relat- um] ing to residential house not occupied] shall not exceed the annual value of the property as determined under section 23 [section for annual value]. ' Section 25. Notwithstanding anything contained in section 24 Amourats not ':[section regarding deductions], the following amounts d°d"°"b'°- shall not be deducted in computing the income chargeable Er-ogigg (iv): under the head "Income from house property"-

any annual charge or interest .......... ..chargeable under this Act which is payable outside India (not being interest on a loan issued for public subscription before the 1st day of April, 1938), ...................... ..on which tax has not been paid or ................... ..deducted under section 202 or 204 [18] and in respect of which there is no person in India who may be treated as an agent under' section 173 [43].

Section 26. Where property consisting of buildings or buildings Propcrw and lands appurtenant therwo is owned by two or more gxgfvien Y persons and their respective shares are deﬁnite and ;ascer- ' tainable, such persons shall not in respect of such property I" 9 (3)1 be assessed as an association of persons, but the share of each such person in the income from the property as com- puted in accordance with sections 22 to 25 [section re: com-

putation] shall be included in his total income.

scct.-0,. ,7, For the purposes of sections 22 to 26 [sections regard- I_n:crprc:a- ing income from house property] (4) (3)1 (i) the holder of: an im rtible estate shall be deemed to be the individua ;owner of all the properties comprised in the estate;

i 119 Clauses 27-28

(ii) a member of a co--operative society to whom a [8-9(4)(b)] building or part thereof built by the society is allotted or leased under --a house building scheme of the society shall be deemed to be the owner of that building or part thereof,' ' (n1) .......... .."annua1 charge" means a charge to secure [s- 9 (I).

an annual liability, but does not include any tax in E"P"!: "°'°W, respect of property or income from property impos- ' ed by a local authority, or a State Government or the Central Government ; l

(iv) "capital charge" means a charge to secure the dis-. [New] charge of a liability of a capital nature;

(v) taxes levied by a local authority in respect of any [S- 9 (4) (0)1 property shall be deemed to include service taxes levied by the local authority in respect of the property.

D--Proﬁts and gains of business, profession or vocation The following income shall be chargeable to income- S°°'t=,li°n 23- taa: under the head "Proﬁts and gains of business, profes--- P'9m" and . . gal of sion or vocat1on"-- busmas'

(i) the proﬁts and gains of any business, profession or ggffgzn 0' vocation which was carried on by the assessee at ' any time during the previous year; 0)'

(ii) any compensation or other payment due to or re-- ls' "° (54)?

. opening line celved by:-' and last para, earlict half]

(a) a managing agent of an Indian company, at or [s.1o(sA)(a)] in connection with the termination or modiﬁca- tion of his managing agency agreement with the company;

(b) a manager of an Indian company at or in con- [s_,o(5A)(1,)1 nection with the termination of his office or modiﬁcation of the terms and conditions relat-

) ing thereto; 11 d (c any person, by whatever name ca e , managing . C K the whole or substantially the Whole affairs of [8 w(5A)( )1 'any other company in India, at or in connection with the termination of his oﬁice or the modi- ﬁcation of the terms' and conditions relating thereto;

(d) any person, by whatever name called, hold- [,_,o(5A)(d)} ' ing an agency in India for any part of the activities relating to the business of any other person, at or in connection with the termination of the agency or the modiﬁcation of the terms and conditions relating thereto ;

(iii) income derived by a trade, professional or similar [s. 10(6)] association from specific; service ferformed for its members for remuneration degipitely related to those services ............. ...... .. : -

120

Clauses 28-30 [New] Explanation 1.-----The proﬁts and gains of business shall include the proﬁts and gains of managing agency.

[s. 24(1), Ex-- Explanation 2.---Where .......... ..speculative transactions -

P1n- 1] carried on by an assessee are of such a nature as to con- stitute a business, the business (hereinafter referred to as "speculation business") shall be deemed to be distinct and separate from any other business.

Scctipr} 29- The income of an assessee referred to in section 28 P'°'1'.'5"g}5 [section 10(1), part embodied in main section for income 't'1{'Ig:,3" °' from business] shall be computed in accordance with the provisions of the following sections-

Section 30--Rent, repairs and insurance for buildings. Section 31--Repairs and insurance of machinery, plant and furniture.

Section 32----Depreciation.

Section 33--Development rebate.-

Section 34--Conditions for depreciation allowance and development rebate.

Section 35--Expenditure on scientiﬁc research.

Section 36--Other deductions-

Insurance of stocks or stores.

Bonus or commission to employees.

Interest.

Contributions to certain funds for employees' beneﬁt.

Animals.

Bad debts.

Section 37--General. _ Section 38----Bui1din etc. partly used for business etc. or not exc usively so used. .

Section 39--Managing agency.

Section 40--Amounts not deductible.

Section 41--Proﬁts chargeable to tax. . Section 42-Interpretation. » Section 43---Residences of employees.

Section 30 In respect of rent, repairs and insurance for buildings, Rent, repairs the frollowing deductions shabl be allowed- and insu-

rax_1ce.for (a) in respect of any premises used_ for the purposes of b"'1d"'g"' the business, profession or vocation,-

[s._1o(2)(i), (i) where the, premises are occupied by the assessee without the as a tena:,"'_. , ' , p 4 promo] (a) the rent}? paid fa} gsuch premises; and E E , E 121 Clauses 30-32 -

(b) if he has undertaken to bear the cost of.._ ..... .. [s.1o(2)(ii), repairs to the permises, the amount paid on without the account of such repairs; P'°"3°l

(ii) where the premises, being a building, are occu- [s.10(2)(v), pied by the assessee otherwise than as a tenant, part, for the amount paid by him on account of current b""d'"3'5] repairs to the premises;

(b) any sums paid on account of land revenue, local [s.1o(2)(ix), rates or municipal taxes; ............. .. Caflicr Part]

(c) ............. .. the amount of any premium paid in res- [s.x¢(2)(iv), pect of insurance agairst risk of damage or destruc- £"f1'a.f°' tion of the premises, being a building ................ .. " '"91 In respect of machinery, plant or furniture used for Section 3i.

the purposes of the business, profession or vocation the fol- .R°P""= and lowing deductions shall be allowed-- plant and.

urrﬁture.

(i) the amount paid on account of current repairs [3-"°(2)(")» thereto ' P""f9' ' macliuncry ' etc.

(ii) .......... .. _the amount 0 any_premium paid in res- [5, no (Q)(iv), pect of Insurance agamst ms]! of damage or des- part; for ma- truction thereof. °h"*=FY etc-] (1) In respect of depreciation of buildings, machinery, Section 32. plant or furniture owned by the assessee and used for the Depfreciation. purposes of the business, profession or" vacation, the fol- lowing deductions shall, subject to the provisions of sec-

tion 34 [section re: conditions' for depreciation], be allow- ed-- ' '(i) in the case of ships other than ships ordinarily s.1Q(2)(vi), plying on inland waters, such percentage (for tstipam, each completed month of user) on the original Pm"

cost thereof to the assessee as may in any case or class of cases be prescribed;

(ii) in the case of building', machinery, plant or ;furni- §.1?(2)(vi), ture, other than shipsé covered by clause (i), such rst~Pa?a'.

percentage (for each. completed month of user) P' on the written down value therieof as may in any 1 case or class of cases be prescribed;

I ,

(iii) in the case of buildirfs newgl erected or machi- [s.1 (2)(via), nery or plant being n w whi has been installed, P t after the 31st day of March, 1948, a further sum... ' equal to the amount deductible under clause (i) or

(ii), allowable for five consecutive previous years, including the previous year of erection or installa- tion.

Explanation.--F-or the purposes of clause (iii), any [s.xp(2)(via), extra deduction for double 0 multi :3 shift working of the machinery or plant adm' 'ble ,' er clause (ii) shall .1 be ignored.

122

Clauses 32-33 s.io(2)(vii), (iv) in the case of any ............. ..building, machinery or 'Patel plant which is sold or discarded or demolished or destroyed in the previous year, the amount by which the moneys received in respect of such [s.1o(2) building, machinery, or plant, together with the (Vii). Ist amount of scrap value, if any, fall short of the writ- P'°"'-] ten down value thereof, provided such deﬁciency is actually written of in the books of the assessee.

Explanation.--For the purposes of this clause, the "moneys received" in respect of any building, machinery or plant shall include----

[s.1o(2)(vii), (a) any insurance, salvage or compensation moneys 3rd P'°"i'°» received in respect thereof;

modiﬁed] [New] (b) where the building, machinery or plant is sold, the price for which it is sold, whether such price has been actually realised or not.

[s.10(2)(vi), (2) Where, in the assessment of the assessee, (or, if the Pm"-2 (b): assessee is a registered ﬁrm or an unregistered ﬁrm assess- pm] ed as a registered ﬁrm, in the assessment of its partners) full effect cannot be given to any ....... .. allowance under clause (i) or (ii) of sub-section (1) [10(2)(vi), main para] in any previous year owing to there being no proﬁts or gains chargeable for that previous year, or owing to the proﬁts or gains chargeable being less than the allowance, then, sub- ject to the provisions of sections 73(3) and 74(3) [Sub-sec-

tion' (3) of main Section rezset off in business], the allow-

ance or part of the allowance to which eﬁect has not been given as the case may he, shall be added to the amount of the allowance for de reciation for the following previous year and deemed to e part of that allowance, or if 'athere is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for suc- ceeding previous years ................ ..

Section 33- In respect of a new ship acquired or new machinery D°V°1°Pm°"' or plant installed after the 31st day of March 1954 ' hich '°ba'°' - is wholl used for th ' ur oses of the business on [s.r_o(2)(v1b) , Y , 9 P P mam para] by the assessee, a sum by way of development rebate.

....... ..equivalent to,-

(i) in the case of a ship acquired after the 31st y of December, 1957, forty per cent. of the-actua cost, of the ship to the assessee, and -- at

(ii) in the case of a ship acquired before the 1st y of January, 1958, and in the case of any mac ery or plant, twenty-ﬁve per cent. of the actual cost of the ship or machinery or plant to the assessee shall, subject to the revisions of section 34 [sec- tion re 2 conditions or depreciation], be allow- ed as a deduction in respect of the previouszyear in which the ship was" acquired' or the mach ery on plant was iristalledgor, if the ship, machin or E 123 Clause 33 plant is first put to use in the immediately suc- ceeding previous year, then. in respect of that pre- vious year.

Explanation 1.--In the case of a ship acquired or ma- _chinery or plant installed after the 31st day of December, 1557, where the total income of the assessee assessable for the assessment year relevant to the previous year in which the ship was acquired or the machinery or plant installed (the total income for this purpose being computed without making any allowance under this section) is nil or is less than the full amount of the development rebate calculated at the rate applicable thereto under this section,---

(i) the sum to be allowed by way of, development re- bate for that assessment year under this section shall be only such amount as sufficient to reduce the said total income to nil ; and

(ii) the amount of the development rebate, to the ex- tent to which it has not been allowed as aforesaid, shall be carried forward to the following assess- ment year, and the development rebate to be al- lowed for the following assessment year shall,be such amount as is sufﬁcient to reduce the total income of the assessee assessable for that assess- ment year, computed in the manner aforesaid, to nil, and the balance of the development rebate, if any, still outstanding shall be carried forward to the following assessment year and so on, so however that no portion of the development re- bate shall be carried forward for more than eight assessment years immediately succeeding the as- sessment year for which the development rebate was first allowable.

Explanation 2.--Where for' any assessment year deve- lopment rebate is to be allowed in accordance with the pro- visions of Explanation 1, in respect of ships acquired or machinery or plant installed in more than one previous year, and the total income of the assessee assessable or the assessment year relevant to that previous year (t e total income for this purpose being computed without mak- ing any allowance under this section) is less than the aggre- gate of the amounts due to be allowed in respect of the assets aforesaid for that assessment year, the following pro- cedure shall be followed, namely :-- "

(i) the allowance under paragraph (ii) of Explanation 1 shall be made before any allowance under para-

graph (1) of that Explanation is made; and

(ii) where an allowance has to be made under para- graph (ii) of Explanation 1 in respect of amounts carried forward from more than one assessment year, the amount carried forw d from an earlier assessment year shall bd allow before any amount carried forward from later fsessrnent year.

9-1 Law Com. 58 § 2 3 V latter half] 124 scctiém 34 Clause 34 C " .

fa':-ndl(§,(:-zzia. (1) The deductions referred to in sub-section (1) of tion all0wan- section 32 .......... ..[s. 10(2)(v1) 10(2) (via), and (vii)] shall 03 and d°V¢' be allowed only if the prescribed particulars have been fur- ]r';1§')';'t:"' nished; and the deduction referred to in section 33 .......... .. I ' .. [s. 10(2)(vib)] shall be allowed only if the particulars pres- lesiovo (:3; cribed for the purpose of clauses (i) and (ii) of sub-section ,_ I022) (vib), (1) of section 32' [S. 10(2)(vi)]- have been furnished by the Prov.para(a)] assessee in respect of the ship or machinery or plant.

[New] H (2) For the purposes of section 32 [10(2)(vi), (via) and [see rule 8] (V")]-- =

(i) if the buildings, machinery,- plant or furniture have been used by the assessee for the purposes of his business, profession or vocation for more than a month, the deduction under section 32(1), clhuses

(i)_ (ii) and (iii), [10(2) (vi), (via)] shall be deter- mined proportionately with reference to the5com- plete months of user thereof by the assessee 2 Provided, however, that if the total period of user is less than one month, it shall be deemed to be one-com- plete month for computing the deduction propor- tionately.

Explanat'i0n.----In the case of a seasonal factory worked by the assessee during all the working seasons of the pre- vious year, the buildings, machinery, plant or furniture shall be deemed to have been used by the assessee throughout the period he was the owner thereof during the previous year.

[s. Io(2)(via), (ii) the deduction provided for by section 32(1), clause part] (iii) .......... ..[10(2)(via)] shall be allowed 'only in respect of a previous year relevant for the assess- ment year 1958-1959; ' [s. 10(2) (vi) (iii) the aggregate of all deductions in respect of depre-

proviso(c)] ciation made under section 32(1), [10(2) (vi), (via) H of 1922 and (vii)] or under the Indian Income-taxi Act. 1922, or under any Act repealed by that Act or , under the Indian Income-tax Act. 1886, shall, in 2 of 1886 no case, exceed the original cost to the asse$ee of the buildings, machinery, plant or furniture, as the case may be;

_[s.xo(4B). (iv) nothing in section 32(1)(i) or (ii) [1o(2)(vi)] or mscrtedbv 32(1)(111) [section 10(2)(v1a)] shall be deemed to the Finance Am X958] authorise the allowance for any previous y' at of any sum in respect of any building, mac pinery, plant or furniture sold, discarded, demolished or destroyed, in that year;

(3 )' (a) The deduction referred to in section 33 [S. 10(2) [§- I0(2)(Vib) (vib), main para.] shall not be allowed unless- l-rov. (b), an amount eqagi'{e.'ﬁg;;¢;;itg;;tiy;;';s;;£'.;;s;;t.";;i'the d ve1op- ment rebate to be a ually a lowed is debited to th proﬁt and loss account of t e rele previous year and c dited I 125 Clauses 34-35 to a reserve account to be utilised by the assessee during a period of ten years next following for the purposes of the business of the undertaking, except-

(i) for distribution by way of dividends or proﬁts; or

(ii) for remittance outside India as proﬁts or for the creation of any asset outside India.

E:cception.--The provisions of clause (a) shall not ap- [s- I0(2)(Vib) ply where the assessee is a company, being a licensee with-5:31;-ullglzilfl in the meaning of the Electricity (Supply) Act, 1948, 54 "I943 where the ship has been acquired or the machinery or 8plant .. has been installed before the 1st day of January, 195 .

(b) ....... .. If any ....... .. ship, machinery or plant is sold [an xo(2)(vib) or otherwise transferred by the assessee to any person other lP"°"--

than the Government" at any time before the expiry of ten as' mm] years from the end of the previous year in which it was ac-

quired or installed, any allowance made under section 33...

.... ..[s. 10(2) (vib), main para] in respect of that shi , machinery or plant shall be deemed to have been wrong y made for the purposes of this Act.

(1) In respect of expenditure on scientiﬁc research, the Se°ti°n 35 following deductions shall be allowed-- §§§3;§;;;-;_.°

(i) any expenditure (not being in the nature of capital ""°"°h __ expenditure) laid out or expended on scientiﬁc re- [5- '°('~')("")] search related to the business;

(ii) any sum paid to a scientiﬁc rtsearch association [s. 1o(2)(xiii) which has as its objects'the undertaking of scienti- Pm] ﬁc research related to the class of business carried on, and which is approved for the purposes of this clause by the prescribed authority;

(iii) any sum paid to a university, college or other in- [s. 1o(2)(xiii) stitution to be used for scientiﬁc research, research Part] ' in social science or statistical research related to the class of business carried on, bein a ............. .. university, college or institution which is for the time being approved for the purposes of this clause by the prescribed authority;

(iv) in respect of any expenditure of 'a capital nature on Er.s1o(}2)(xiv) ' scientiﬁc research related to the' business carried on t,p a. by the assessee, such deduction as may be admis- ea"'° Pm] sible under the provisions of subsection (2).

(2) For the purposes of clause (iv) of sub-section (1),-

(i) one--fifth of the capital expenditure incurred in any 3. 1o(2)(xiv) previous year shall be deducted for that previous' '5tP"a:

year; and the balance 0 the e iture shall be m" {'""] deducted in equal insta nts 1' each of the fou immediately succeeding, revio ' ears. ' 126 Clause 35 '[15. xo(2)(xiv) _ E9cplanation.--Where any capital expenditure has been rst PY0V1S°] incurred before the commencement of the business, the ag-

gregate of the expenditure so incurred within three years immediately preceding the commencement of the business shall be deemed to have been incurred in the previous year in which the business is commenced;

[S- !0(2)(_xiv) (ii) notwithstanding anything contained in clause (i), ?':)d :;:;i':° where an asset representing .......... ..expenditure of hugs] g a capital nature ceases to be used in a previous year for scientiﬁc research related to the business and the value of the asset at the time of the cessation. together with the aggregate of deductions already allowed under clause (i), falls short of»the said 'expenditure, then-- A d'°(r"'ol'§"'("al)' (a) ................ .. there shall ............. .. be allowed (1 ~- P ' deduction for that previous year of an amount equal to such deﬁciency, and [s.1o(2)(;<iv), (b) no deductionshall be allowed under that clause g1)d(Sr°$:3,i_ for that previous year or for any subsequent pre-

ﬁcd] vious year; ...................... .. ,

(iii) if the asset mentioned in clause (ii) is sold, Without [S- I0(2)(§<iV), having been used for other purposes, in the ear of (1%? P'°""° cessation, the sale price shall be taken to _ e the value of the asset at the tirne of the cessation; and if the asset is sold, without having been used for other purposes, in a previous year subsequent to the year of cessation. and the sale price falls short of the value of the asset taken into account at the time of cessation, an amount equal to the deﬁciency shall be allowed as a deduction for the previous year in which the sale took place;

[8- I0(2)(XiV), (iv) where a deduction is allowed for any previous year '*'"d P"°"'(d)] under this section in respect of expenditure repre- sented wholly or partly by an asset, no deduction shall be allowed under section 32(1) clauses (i) (ii) and (iv) [10(2)(Vi) or (vii) i.e., section authorising depreciation allowance] for the same previous year in respect of that asset;

[s- I0(2)(3=iv), (V) where the asset is used in the business after it 2nd P'°'."5° ceases to be used for scientiﬁc research related to _ I(,:)r't]"a'1'°' that business, depreciation shall be admissible under section 32(1), clauses (i) (ii) and (iv), j;10(2)

(vi) and (vii) i.e., section authorising depreqiation allowance]. l ~ [s. xo(2)(3:iv), (3) If any question arises under this section as to '-'"d P'°""'° whether, and if so, to what extent, any activity constitutes

(g)] or constituted or any asset is or was being used for scientiﬁc research, the Central Board of Revenue shall refer the question to the prescribed authority, whose decision shall be ﬁnal. i ' [s.1o(2)(g:iv), (4) Theiprovisions of sub-section (2) of secti 32 end Pr0V1s° [Section re : depreci lion] s _'l1 apply in relation to edu"- U) 93"] ' tions allowable under? clause iv) of sub-section (1) as; they 127 Clauses 35-36 apply in relation to deductions allowable in respect of dep- reciation. ' The deductions provided for in the following clauses section 36 shall also be allowed in respect of the matters dealt with other deduo therein, in computing the income referred to in section 28 tions. [mam section for income from business]----- Insurance of (1) the amount of any premium paid in respect of in-- stocks or surance against risk of damage or destruction of ............. .. st0r¢s- _ stocks or stores used for the purposes of the business, pro- [5' '°(')("')' ;.

. . r k fession or vocation ............. .., . pa" °"t°° -

etc.] (2) any sum paid to an employee as bonus or commis- Bonus or co.- sion for services rendered, where such sum would not have mmission to been payable to him as proﬁts or dividend if it had not been ¢mP1°Y°°5- paid as bonus or commission, in either of the following [S- _I°(2)(x), cases, namely-- mam P"'"']

(i) ................ ..where the amount of the bonus or com- [s. 1o(2)(x), mission is .......... .. reasonable .......... .. with refer- Proviso] ence to-

(a) the pay of the employee and the conditions of his service;

(b) the proﬁts of the business, profession or vocation for the previous year in question, and

(ii) where such payment is in pursuance of the award [Now] of an industrial or other tribunal constituted under any law for the settlement of industrial disputes;

(3) ...... ....... .. the amount of the interest paid in res- '"'°'°"

pect of capital borrowed for the purposes of the business, [5-'.°('*')('")» profession or vocation. "Hm Pm] Explanation.----Recurring subscriptions paid periodically [s. 1o(2)(iii), by shareholders or subscribers in such Mutual Beneﬁt So-- E"Pl"-1 cieties which fulfil such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause.

(4) (a) any sum paid by the assessee as an employer by Contributions .way of contribution towards a recognised provident fund '° °°'"*i" f"' or an approved superannuation fund, to the extent provided f:)dy'c§"{,:,',':§;

in section 293 [New Section in chapter on Recognised Pro-- [New] vident Funds re : allowing deduction for employer's contri-

bution] or section 310 [58R, main para, part re 2 deduction for employer's contribution] as the case may be:

(b) any sum. paid by the assessee as employer by way of contribution towards any other fund created by him for the exclusive beneﬁt of his employees under an irrevocable trust;

(5) in respect of animals which have been used for the 'a"Ii;'E:;'(vm)] purposes of the business, profession a' -'vocation otherwise ' r than as stock-in-trade and havj died or ?come permanently 128 Clauses 36-38 useless for such purposes, the difference between the origi-

nal cost to the assessee of the animals and the amount, if any, realised in respect of the carcasses or animals; Bad deb'-S-i) (6) ....... .. debts, or parts thereof, that are established to ' have become bad debts in the previous year, provided-

(i) such debts or parts of debts-

(a) have been taken into account in computing the income of the assessee of that previous year or of an earlier previous year, or

(b) represent money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee; and [Last W0I;ds of (ii) such debts or partsof debts have been written 011' as 5~"?(2)("2' irrecoverable in the accounts of the assessee for "W" P" 1 that previous year :

["r'O:,'i'g(o2)1(a"tit)e'r Provided that if the amount ultimately recovered on any Ea"-]' ' such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deﬁciency shall be deductible for the previous year in which the ulti- mate recovery is made :

Provided further that an such debt or part of debt as is referred to in sub--clause i) may be deducted if it has already been written 01)' as irrecoverable in the accounts of an earlier previous year but the Income-tax Officer had not allowed it to be deducted on the ground that it had noit been established to have become a bad debt in that year.

Section 37 Any expenditure (not being expenditure of the nature General described in sections 30 to 36 [all other sections re : deduc- [s. 1o(2)(xv)] tions] and not being in the nature of capital expenditbre or personal expenses of the assessee), laid out or ex nded wholly and exclusively for the purpose of the busine , pro- fession or vocation shall be allowed in computing incmne chargeable under the head "Proﬁts and gains of business, profession or vocation". ' 5°?'-i9" 38 (1) Where any substantial part of- any premises is used B§;';""5s§g°- as a dwelling house by the assessee, the deduction lunder garbzsincss secticm 30(a)(i) [10(2)(i) and (ii)] shall be such sum hs the etc. or not Income-tax Oﬁicer may determine, having regard----' exclusively so "'°d- (a) in a case under section 30(a)(i)(a) [10(2)(i)] to the [s- r§>(2)(i), proportionate annual value of the part used for the P'°'"'°] purposes of the business, profession or vocation, or [s. 1o(2)(ii) (b) in a case under section 30(a)(i)(b) [10(2)(ii ], to proviso] the part of e pre es used for the purpo s of the business. rofes " or vacation.

129

Clauses 38-40 (2) Where only a part of any premises is used for the [s- I0(2')(i,x):

purposes of the business, profession or vocation, the deduc- 1m""'°'"°"] tion under section 30, clause (b) [10(2)(ix), earlier portion] shall be such sum as the Income-tax Oﬂicer may determine having regard to the part so used.

(3) Where any building, machinery, plant or furniture [s. 10(3)] ...................... .. is not exclusively used for the purposes of the business, profession or vocation, the deductions under section 30(a)(ii), 30(c), 31(i) and 31(ii),-32(1), clauses (i) (ii) and (iv) and 36 clause (1) [S. 10(2) (iv), (v), (vi) or (vii)] shall be restricted to a fair proportional part thereof which the Income-tax Oyfﬁcer may determine having regard to the user of such building, machinery, plant or furniture for the purposes of the business, profession or vocation. ' Where a managing agent of a company is liable under 5°°Fi°". 39, an agreement made for adequate consideration to share Gym' managing agency commission with a third party or parties, commission the said agent and the said party or partiesshall ﬁle a [s.'x2A] declaration showing the proportion in which such commis-

. sion is shared between them, and on proof to the satisfac-

tion of the Income-tax Officer of the facts contained in such declaration such agent and each such party shall be charge- able only on the share to which such agent or party is en- titled unde-r the agreement.

Notwithstanding anything to the contrary in sections Sccttion 4° 30 to 39, [10(2)], the following amounts shall not be de- g3°":¥§l"°' ducted in computing the income chargeable under the ,"°' °' head "Proﬁts and gains of business, profession or vocation"

(a) in the case of any assessee-- 5. 10(2) (iii) proviso, part

(i) ....... ..any interest chargeable under this Act which is payable outside India (not being interest on a { loan issued for public subscliption before the 1st ' day of April, 1938), ....... .. on which tax has not been paid or deducted under section 202 or 204 [18]and in respect of which there is no person in India who may be treated as an agent under sec-

tion 173 [43];

(ii) .......... ..any sum paid on account of any cess, rate or 5- 210(4) 5'8 tax levied on the proﬁts or gains of any business, P"?"' profession or vocation or assessed at a proportion of or otherwise on the basis of, any such proﬁts or gains;

(iii) any .......... .. payment which is chargeable under [5, 10(4) (a)] the head "Salaries", if it is payable without India and if the tax has n , been 'd thereon on assess- ment nor deducted erefro der section 201. [s.18] nor recovered, nder ( on 209 [s.8(7)];

130

Clause: 40-41 [s- 10(4) (CH (iv) any; ......... .. payment to a provident or other fund established for the beneﬁt of employees of the assessee, unless the assessee has made effective ar- rangements to secure that tax shall be deducted at source from any payments made from the fund which are chargeable to tax under the head "Sala- ries";

[S-1°(4)(b)-] (b) in the case of any ﬁrm, any ............. ..payment of interest, salary, commission or remuneration, made by the ﬁrm to any partner of the ﬁrm;

.j..,o(,,A)(a),; (c) in the case of any company-

(i) any .......... .. expenditure which results directly or indirectly in the provision of any remuneration or beneﬁt or amenity to a director or a person who has a substantial interest in the company within the meaning of section 2 clause (20), Explanation [s. 2(6C) (iii)];

(ii) any expenditure or allowance in respect of any [5"°(4A)(b)] assets of the company used by any person refer- red to in sub-clause (i) either wholly or partly for his own_ purposes or beneﬁt, if in the opinion of the Income-tax Officer any such expenditure or allowance as is mentioned in sub- clauses (i) and (ii) is excessive or unreasonable having regard to the legitimate business needs of the company and the beneﬁt derived by or accru- ing to it therefrom. a E,§;"f'] (M) Explanation: The provisions of this clause .......... .. P' [Section 10(4A)] shall apply notwithstanding that any amount disallowed under this clause is included in the total income of any person referred to in sub-clause (i).

1[i'I'le':F3"fP'c'l1;':f (d) in the case of a banking company, the amounts ,6, (3) & (b)] which have been allowed as a deduction in com- puting its income chargeable to income-taac under the head "Interest on securities" under the provi- sions of section 20(1) [8 Expln(1) (b)] 5°C?" 41 --(1) Where for the purposes of computing income un- gcrgbfz der the head "Proﬁts and gains business, profession or Amount, M- vocation an allowance or deduction has been made in the civcd in res- assessment for any year in res ect of any loss, expenditure Pcct of 1053 or trading liability incurred y 'the assessee and, subse- °'°' quently during any previous. year, the assessee has re- 3- '°('*'A)]- ceived, whether in cash or in any other manner whatso- ever, any amount in respect of such loss or expenditure or has obtained some beneﬁt in respect of such trading liability by way of remission or cessation thereof, the amount received by him or the value of the. beneﬁt ac- cruing to him shall be chargeable to income-tar asg the» income of the business.' profession or vacation of that ;pre-- ziious year. = * 131 Clause 41 (2) ....... .. Where any building, machinery or plant Proﬁts on sale which is owned by the assessee and which was or has °fd$7P'°¢i3b1¢ been used for the purposes of business, profession or voca- 353°" _, ticm, is sold, discarded, demolished or destroyed in the [5-d1°(*)(".")= previous year, and the moneys received in respect of suc :2", ggﬂvﬁi' building, machinery or plant, as the case may be, together p,o,,,so_ pm with the amount of scrap value, if any, exceed the written simpliﬁed] down value, so much of the excess as does not exceed the diﬁerence between the original cost and the written down value .......... ..shall be chargeable to income-tax as income of the business, profession or vocation of the previous year in which the moneys are received.

Explanation 1--For the purposes of this sub-section, [5' '°(')(".") . , . . . 4th proviso the expression 'moneys received" in respect of any build- Pam] ing, machinery or plant has the same meaning as in sec- tioln]32(1) (iv) [sec. re : depreciation-clause for loss on sa e Explanation 2.--The provisions of this sub-section shall [s- I0(2)(Vi_i)» apply notwithstanding that the business, profession, or 120- §v':ﬁds"."§,':f,:'_' cation for the purposes of which the building, machinery or the, ____ __ plant was being used is no longer in existence at the time thc1eof"] when the building, machinery or plant is sold, discarded, demolished or destroyed.

Explanation 3.--For the purposes of this sub-section, [s. x0(2)(vii) the original cost of a building, the written down value of sthiproviw-l 'which is determined in accordance with section 42 clause (7) (b), proviso [Section 10(5) (b), 1st proviso] shall be deemed to be the written down value so determined as at the date of its being brought into use for the purposes of the business, profession or vocation i (3) Where an asset representing expenditure of a capi- Proﬁts onsalc tal nature on scientific research within the meaning of sec- 0' Scicntiﬁc tion 35(1) (iv) read with section 42 clause.(5) [Section 10 3*' (2) _(xiv)] is sold whether during the continuance of the ' X.) business or after the cessation thereof without having been £",'u'1°(";2,,Evi',','° used for other purposes and the proceeds of the sale toge- (c)_]' ther with the total amount of: the deductions made under ' Section 35(2) (i) [s. 10(2) (xiv) ﬁrst para, latter part] ex-

-ceed the amount of the capital expenditure, the excess or the amount of the deductions so made, whichever is the less. shall be chargeable to income-ta,7c as income of the business, profession or vocation of the previous year in which the sale took place.

(4) Where a deduction has been allowed in respect of [s.xo_(2) (xi). «a bad debt or part of debt under the provisions of section F?'°""'°f °"' '36 clause (6) [s. 10(2) (xi) ﬁrst para] then if the amount"°"'=*' -1 ultimately recovered on any such debt or part is greater than the difference between the debt or part of debt and the amount so allowed, the excess shhlal be chargeable to income-tax as income of the business'; rvofession or voca- tion of the previous year in which it'; i? recovered.

132

Clause 42 S°°"°" t$'~'- In sections 28 to 41 [all sections incorporating any part ""°"p'°m'°" of section 10]and in this section, unless the context'other- wise requires,-

Asctual cost (1) ....... .."actual cost" means the actual cost of the as- gipln sets to the assessee reduced by that portion of the cost end, "Came, thereof, if any, as has been met directly or indirectly by dart.] Government or by any public or local authority ....... ..

5- 10(2) (xiy)' Explanation 1.--Where an asset is used in the business ad P'l°'t'::° after it ceases to be used for scientiﬁc research related to par" 3 ' that business, and a deduction has to be made under. sec- tion 32(1), clause (1) (11) or (iv) [Section 10(2) (V1) or (v11)] in respect of that asset, the actual cost of the asset to the assessee shall be the actual cost to the assessee as reduced by the amount of any deduction allowed .under section 35(1) (iv) [10(2) (xiv)] or under any corresponding 11 or 1922. provision of the Indian Income-tax Act, 1922. ' [S- 10(5) (<=)-] Explanation 2.--Where an asset is acquired by the as- sessee by way of gift or inheritance, the actual cost of the asset to the assessee shall be the written down value there-' of as in the case of the previous owner for the previous year in which the asset is so acquired or the marketgvalue thereof on the date of such acquisition, whichever is the less. ' E: Explanation 3.-- .......... ..Where, before the date §of ac- P ' quisition by the assessee, the assets were at any time used by any other person for the urposes of his business, pro-

fession or vocation and the ncome-tax Oﬂicer is satisﬁed that the main purpose of the transfer of such assets, direct-

ly or indirectly to the assessee,' was the reduction ofia lia-

bility to income-tax (by claiming depreciation with lrefer-

ence to an enhanced cost), the actual cost to the assessee shall be such an amount as the Income-tax Ofﬁceri may, with the previous approval of the Inspectin 'stant Commissioner, determine having regard to al the c' cum-

stances of the case. r L [S- I0(5),(a), Explanation 4---- .... .. Where .... .. assets which had once ""1 P'°"'5°] belonged to the assessee and had been used by him for the purposes of his business, profession or vocation and thereafter ceased to be his pro rty by reason of transfer' or otherwise, are re-acquired him, the actual c¢st to the assessee shall be the actual cost to him when h first acquired the assets less all depreciation actually ﬂowed 11 of 1922- to him under this Act or under the Indian Income- Act, 1922, or under any Act repealed by that Act or under exe-

2 of 1886- cutive orders issued when the Indian Income-tax Act, 1886, was in force.

[s.m_B(I),2nd Explanation 5.----When any capital asset is transferred P'°'"5° lam?" by a company to its subsidiary company, then, if the condi- hilf' pm] tions of section 47 (iii) [sectio;1,12B(1), 2nd proviso, earlier half] are satisﬁed, t actualicbst . . . . . . . .. of the transfer- red capital asset to ﬁe subsidiary company shall be taken 133 Clause 42 to be the same as it would have been if the parent com- pany had continued to hold the capital. asset for the pur- poses of its business.

' aid' (2) "paid" means actually paid or incurred according [s.p 10(5) to the method of accounting upon' the basis of which the First Para. proﬁts or gains are computed under the head "Profits and P""'] gains of business, profession or vocation";

(3) "plant" includes ships, vehicles, books, scientiﬁc [s_ ]am,o(5) apparatus and surgical equipment purchased for the pur- First para. poses of the business, profession or vocation; part.] ' (4) "received" means received according to the method "Received" of accounting upon the basis of which the proﬁts or gains [Ndw.] are computed under the head "Proﬁts and gains of business, profession or vocation";

(5) (i) "scientiﬁc research" means any activities in the "Scientiﬁc ﬁelds of natural or applied science for the extension of '§5°'"° . knowledge; _ [ "OM ('M Expln. (i).]

(ii) references to expenditure incurred on scientiﬁc re- [S.'xo(2)_(3<iv) search .......... ..include all expenditure incurred for the pro- E"P1"- ("H secution of, or the provision of facilities for the prosecu- tion of, scientiﬁc research, but do not include any expen- diture incurred in the acquisition of rights in, or arising out of, scientific research;

(iii) references to scientiﬁc research related to a busi- E'-"f(*)(.'.'.i") ness or class of business include-- xp"' 0""

(a) any scientiﬁc research which may lead to or faci-

litate an extension of that business or, as the case may be, all businesses -of that class;

(b) any scientiﬁc research of a medical nature which has a special relation to the welfare of Workers « employed in that business or, as the case may be, all businesses of that class;

(6) .......... .."speculative transaction" -means a transac- [S. 24(x) tion in which a contract' for purchase and sale of any EXP1n- (2)-1 commodity, including stocks and shares, is periodically or 1 ' ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips:

Provided that for the purposes of this clause-

(a) a contract in respect of raw materials or merchan-

dise entered into by a person in the course of his manufacturing or merchanting business to guard & against loss through future price ﬂuctuations in respect of his contr cts for actual delivery of goods manufactured y himgdr merchandise sold by him; or 134 Clause 42

(b) a contract in respect of stocks and shares entered 1nto_ by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or ' (C) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordi- nary course of his business as such member;

shall not be deemed to be a speculative transaction;

"Written " (7) "written down value" means--

'[i:w:'-0'(':)1"(';), (a) in the case of assets acquired in the previous year, main part.] the actual cost to the assessee;

* * C [s-V_r0(5) (b), (b) in the case of assets acquired before the previous mam pan-t.] year, the actual cost to the assessee less all depre- ciation actually allowed to him under this Act, or under the Indian Income-tax Act, 1922, or any Act repealed. by that Act, or under executive orders issued when the Indian Income-tax Act, 1886 was in force: ' [s. 10(5) (b), Provided that in the case of a building previously the Ist proviso-] property of the assessee and brought into use for the pur- poses of the business, profession or vocation after,the' 28th day of February, 1946, "written down value" means the actual cost to the assessee reduced by an amount equal to the depreciation calculated at the rate in force on that date that would have been allowable had the building been used for the aforesaid purposes since the date of its ac- quisition by the assessee and had the provisions of this Act relating to the allowance for depreciation been in force on and from the date of acquisition.

[s. 10(5) (b), Explanation 1.--When in a case of succession in busi- 2nd Proviso] ness, profession or vocation, an assessment is made on the successor under section 180(2) [Section 26(2) proviso], the written down value of any asset shall be the amount which would have been tdken as its written down value if the assessment had been made directly on the person succeed- , ed to.

[s- 123(1), Explanation 2.--When any capital asset is transferred l"';'t'tlerP'°V}'l5a';;_ by_a company_to its subsidiary company, then, if the; con-

pam] ditions of section 47(u1) [section 12B(1), 2nd proviso, ear- lier half] are satisﬁed, the .......... ..written down value ....... .. of the transferred capital asset to the subsidiary company shall be taken to be the same as it would have been if the parent company had continued to hold the capital asset for the purposes of its business.

[=- 10(5) Explanation 3.--Any allowance in respect of any db-

E"P1"~ 'me' preciation carried forward under Chapter VI [chapter on half') Aggregation and set off] shall be deemed to be dep11ecia- tion "actually allowed". 7 , ' n of 1922.

2 of 1886.

135 .

Clauses 43-47 Buildings provided by the assessee for the residential section 43 accommodation of his employees engaged in the business, Residences of profession or vocation, where the occupation by the em-- €mP1°Y¢¢s- ployees of such building is subservient to and necessary for [New] the performance of their duties, shall, for the purposes of computation of income chargeable under the head "Proﬁts and gains of business, profession or vocation", be deemed to be buildings occupied by the assessee for the purposes of his business, profession or vocation.

Insurance business Notwithstanding anything to the contrary contained in S°°ti°n '44.. the provisions of this Act relating to the computation of income chargeable under the head "Interest on securities". ' d_ "Income from house property" or "Income from other-sour- §'c'hfe%1Zl)e 23¢ ces", or in section 207 [18(5), main para, part regarding 9_] ' credit for tax deducted at source] or in sections 28 to 43 [all earlier sections regarding Proﬁts and gains of busi- ness], the proﬁts and gains of any business of insurance, including any such business carried on by a mutual insu- rance association or by a co-operative society, shall be com- puted in accordance with the provisions of the First Sche- dule [Schedule, Rules 1 to 8].

E--Ca.pital gains .... ........Any proﬁts or gains arising from the sale-, ex- section 45 change, relinquishment or transfer of a capital asset effect- Capital gains ed in the previous year shall, save as otherwise provided [5, :2 B (1) in sections 55 and 56 [12B(4)] be chargeable to income-tax maigl para under the head 'Capital gains'. °a"l'" Pa"-1 The income chargeable to income-tax under the head yef. "Capital gains" shall be deemed to be the income of the [3 mm ) previous year in which the sale, exchange, relinquishment m',,-,, P3,; or transfer took place. ' latter part] For the purposes of section 45 [12B'(1) main para], the Section ,47 following shall not be treated as a sale,--e:cchange, relinqui- T"'""°"°"' shment or transfer of capital assets-- :f§a_f§§;:i°di

(i) any distribution of capital assets on the total or [8- 123(1) partial partition of a Hindu undivided family; I',:"!;t'] P"°"'

(ii) any trﬁnsfer of a capital asset under a .... .. gift .... .-l:Ps1:dIV2.Bp(aIl)'E.5st or W'1 ;

» . ~ . - d

(iii) any transfer of a cap1tal asset bv a company to its §?,o'5.B£L)."i§L, subsidiary company if-- A part.]

(a) the parent company or its nominees hold the whole of the share capital of the subsidiary corn-

pany, and

(b) the subsidiary company is an Indian company and is a resident. ' Section 48.

Mode of com-

putation and deductions.

[s. _x2B(2), opening lines.] [s. 12B(2) (i)] [s. 12B(2) (ii) pa:-L] Section 49.

Statutory cost with referen-

ce to modes of acquisition [New] Section 50.

Determina-

tion of statuo tory cost.

[s. 12 B(2)

(ii), part.] x2B(2), Prov.

[ .

3si'd part.] 136 Clauses 48-50 The income chargeable under the head "Capital gains"

shall be computed by deductin from the full value of the consideration for which the sa e, exchange, relinquishment or transfer of the capital asset is made, the following amounts, namely--

(i) expenditure incurred wholly and exclusively in connection with such sale, exchange, relinquish-

ment or transfer;

(ii) the statutory cost of the capital asset, as determin- ed in accordance with the provisions hereinafter contained .......... ..

Where the capital asset became the property of f the assessee by any of the following modes, the statutorycost of the asset shall be determined. in accordance with ; the provisions of sections 50 and 51 [next two sections follow- ing, dealing with determination of statutory cost]-

(i) under a purchase, exchange, relinquishment or other transfer;

(ii) on any 'distribution of capital assets on the total or partial partition of a Hindu undivided family;

(iii) under a gift or will;

(iv) (a) by succession, inheritance or devolution; or

(b) on any distribution of capital asset on the dissolu- tion of a firm or other association of persons; or

(d) under a transfer on revocable or irrevocable trust. The statutory cost of an asset shall be determined as follows-

(1) Where the cavital asset became the property of the assessee by any of the modes specified' in section 49(1) [clause (i) of section for statdtory cost with reference to modes of acquisition], the statutory cost of the asset shall be----

(a) the cost of acquisition of the hsset to the ses- see ....... .., as increased by the cost of any; im- provements made thereto, incurred and bornk by the assessee; or '

(b) where the capital asset became the proper? of the assessee .......... .. before the 1st day of fann- ary, 1954, then, at the option of the assessee, the fair market value of the asset on the 1st day of January, 1954, as increased by the cost of any improvements made thereto on or after the 1st day of January, 1954;", incurred and borne by, the assessee. ' i 137 Clause 50 (2) Where the capital asset became the property of[s-_ 1213(3), the assessee by the mode speciﬁed in section 49 (ii) [clause '"31? Pm!»

(ii) of section re: statutory cost with reference to modes 52:3' half' of acquisition], the statutory cost of the asset shall be de- ' termined as follows-

(i) where the capital asset became the property of the [s. 1213 (3), assessee before the 1st day of April, 1956, the sta- Prov. (i), tutory cost of the asset shall be the highest of the Pa"-3 following--

(a) the cost of acquisition of the asset to the previ- [s. 123(3). ous owner thereof,.as increased by the cost of mail} para, any improvements made thereto after its ' acqui- °""{'°' ha":

sition by the previous owner or the assessee, in- at] curred and borne by the previous owner or the assessee, as the case may be; or

(b) .......... ..the fair market value of the .... ..asset on [s. 12B (3), the date on which it became the property of the pr0V- (i), assessee ................ .., as increased by the cost of p""] any improvements made thereto after its acqui-

sition by the assessee, incurred and borne by the assessee; or

(c) where the capital asset became the property of[s. In B (2), the previous owner .... ..before the 1st day of 3rd Prov- January, 1954, the fair market value of the as- Pm] set on the 1st day of January, 1954, as increased by the cost of any improvements made thereto on or after the 1st day of January, 1954, by the previous owner or the assessee, incurred and borne by the previous owner or the assessee, as the case may be;

(ii) where the capital asset became the property of[S- 113 __(3) the assessee on or after the 1st day of April, 1956, pmvis-° ("H .......... ..the statutory cost of the asset shall be the fair market value of the asset on the date of the partition. as increased by the cost of any improve- ments made thereto on or after the date of the par- tition, incurred and borne by the assessee.

(3) Where the capital asset became the property of the assessee by any of the modes speciﬁed in section 49

(iii) [clause (iii) of section regarding statutory cost with reference to mode of acquisition], the statutory cost of the asset shall be determined as follows :-- [S m B ( )

- 2

(i) where the capital asset became the propert of sP""2'§ the assessee before the 1st day of April, 19%, its (3),' ;,,a;,, statutory cost shall be determined in accordance para, earlier with the provisions of clause (i) of sub-section (2); B98;

(ii) where the capital ass t beca e: the property of PM/i0 (1'). the assessee on or aft the 1s iay of April 1956, Pm] the statutory cost of the. ets pl be--

138

Clauses 50-51 [,_ ,2}; (3), (a) the cost of acquisition of the asset to the previ- main para, ous owner thereof, as increased by the cost of earlier half: any improvements made thereto after its acqui- part] sition by the previous owner or the assessee, in-

curred and borne by the previous owner or the assessee, as the case may be; or [s. 12B (2), (b) where the asset became the property of the 1072- 3rd prov. vious owner before the 1st day of January, 1954, P""-] then, at the option of the assessee, the fair mar-

ket value of the asset on the 1st day of January, 1954, as increased by the cost of any improve- ments made thereto on or after the 1st day of January, 1954, by the previous owner or the as- sessee, incurred and borne by the previous own- er or the assessee, as the case may be.

(4) Where the capital asset became the property of the assessee, whether before or after the 1st day of Janu- ary, 1954, by any of the modes speciﬁed in section 49 (iv) [clause (iv) of section re : statutory cost and mode of ac- quisition], the statutory cost of the capital asset shall be-

[S_ ,2 B (3), (a) the cost of acquisition of theasset to the previous main para. owner thereof, as increased by the cost of any im- ;=;1t1]6r half» provements made thereto after its acquisition by the previous owner or the assessee, incurred and borne by the previous owner or the assessee, as the case may be; or [5, ,2 B (2), (b) where the asset became the property of the previ-

" 3rd prov. ous owner before the 1st day of January, 1954, Pm] then, at the option of the assessee, the fair market value of the asset on the 1st day of January, 1954, as increased by the cost of any improvements made thereto on or after the 1st day of January, 1954, by the previous owner or the assessee, incur- red and borne by the previous owner or ﬂie as- sessee, as the case may be.

[s- _!'-'B (3), E:cplanation.--Where the cost of acquisition of a capi- halﬁljraa tal asset to the previous owner cannot be ascertained, the fair market value on the date on which the capital asset became the property of the previous owner shall be=deem- ed to be the cost of acquisition thereof to the L 'ous owner for the purposes of this section. J Section 5: Where the capital asset is an asset in respect of which Special pr0- a deduction on account of depreciation has been obtained :::'"uﬁn ' by the assessee in any previous year either under this Act smuptoryﬁost or under the Indian Income-tax Act, 1922, or any Act re- inthe case of pealecl by that Act, or under executive orders issued when deprcciable the Indian Income-tam Act, 1886, was in force, the ' i-

3"°'5- sions of section 50 Eprecedixtg section regarding d 'ermi-

? § ' _ l 139 Clauses 51-55 nation of statutory cost] shall be subject to the following ;'o::;gg2 modifications:----

(1) The written down value, as deﬁned in section 42 clause (7) [s. 10(5)], of the asset, as adjusted, shall dmgovgfg' be taken as the statutory cost of the asset. pm]p ' (2) Where under any provision of section 50 .... ..[pre-

ceding section regarding com utation of statutory 5- ":'1B (:1! cost] the fair market value 0 the asset on the 1st P"""'°' pa 1 day of January, 1954, is to be taken into account at the option of the assessee, then, the statutory cost of the asset shall, at the option of the assessee, be the fair market value of the asset on the said date, as reduced by the amount of depreciation, if any, allowed to the assessee after the said date, and as adjusted.

.......... ..Where any capital asset was on any previous Section 52 occasion the subject of negotiations for its sale, exchange, 0P"°"

relinquishment or transfer, any option or other money re- ;':c'c",,,cd_ ceived and retained by the assessee in respect of such nego- B (2) tiations shall be deducted from the cost of acquisition or,[;h'£§',,,,,;,°]' the written down value or the fair market value, as the case may be, in computing the statutory cost.

The full value of the consideration for the exchange section 53_ of a capital asset referred to in section 48 [section re: Considera- computation of income] shall be taken to be the fair mar- tion for ex- ket value, on the date of the exchange, of the asset obtain- °h'"3°' ed by the assessee in exchange,-* [New]

(a) as increased by the value of any other considera-

tion obtained by the assessee, and

(b) as diminished by the value of any consideration, in addition to the capital asset, given by the asses- see. ' Where the Income-tax Oﬁicer is satisﬁed that the con-- Section 54. sideration recited in any deed of sale, exchange, relin- C_1°ns=d°7a' quishment or transfer of a capital asset is low and that it "°" f°' 531°' was so recited with the object of avoidance or reduction §'c°{ﬂmine§°; of the liability of the assessee under section 45 [section 's of re: chargeability], the full value of the consideration I'e-un.erstate- ferred to in section 48 [section re: computation of capital m°3"- - gains] shall, with the prior approval of the Inspecting As- [s-12 B (2)- sistant Commissioner ................. .., be taken to be the fair "'P'°"-1 market value of the capital asset on the date on which the sale, exchange, relinquishment or transfer took place.

Notwithstanding anything contained in section 45 [S. %°°'!:"'l gig? 12B(1) main para], where a capital gain arises from the ,,,:,*:,;[ gymm sale, exchange or transfer of one or more capital assets,"

being buildings or lands appurtenant thereto the income [gm 3 (4) of which is chargeable under the head i'Income from house (a)';| 10-] Law Com./58. ' ' Section 56.

Proﬁt on sale of property used for resi-

dences.

((2)? B (4), Section Interpreta-

tion.

[NW] [&_'f. s. 12B (2), 2nd prov .

latter half] 57

iii)'§a?t] (2)' 140 Clauses 55-57 property", and the full aggregate value of the considera-

tion for which the sale, exchange, or transfer is made does not exceed the sum of twenty-ﬁve thousand rupees, the capital gain shall not .......... .. be included in the total in- come of the assessee:

Provided that this section shall not apply in any case where the aggregate of the fair market values of all capi- tal assets, being buildings or lands appurtenant thereto the income of which is chargeable under the head "Income from house property", owned by the assessee immediately before the sale, exchange or transfer aforesaid is made, exceeds the sum of rupees ﬁfty thousand.

Where a capital gain arises from the sale, exchange, relinquishment or transfer of a capital asset to which the provisions of section 55 [12B(4) (a)] are not applicable, be- ing buildings or lands appurtenant thereto the income of which is chargeable under the head 'Income from house property', which in the two years immediately preceding the date on which the sale, exchange, relinquishment or transfer took place, was being used by the assesseeor a parent of his mainly for the purposes of his own or the parent's own residence, and the assessee has within a period of one year before or after that date purchased a new property for thepurposes of his own residence, then instead of the capital gain being charged to inconqe-ta.x:

as income of the previous year in which the sale, exch nge, relinquishment or transfer took place, it shall, if the sses- see so elects in writing before the assessment is mase, be dealt with in accordance with the following provisions of this section, that is to say,---- I f

(i) if the amount of the capital gain is greater than the cost of the new asset, the difference between the amount of the capital gain and the cost f the new asset shall be charged under section 45 [ 12B) (1), main para] as income of the previous year; or

(ii) if the amount of the capital gain is equal to 1 less , than the cost of the new asset, the capital gain shall not be charged under section 45 [secti 12B (1) main para].

In sections 50 and 51 [sections re :

statutory cost]--

(a) "adjusted", in relation to written down valite or fair market value, means diminished by an loss deducted or increasediby any proﬁt assessed, nder the provisions of section 32(1) clause (iv) s. 10 (2) (vii)----part for losses] or section 41(2) [s.g10(2)

(vii)--part for proﬁts], as the case may be; ,

(b) "cost of any improvements" means all expenditure of a capital nature incurred in making any§addi-

tions or alterations it) the capital asset, but does I determination of 3 141 Clauses 57----59 not include any_ expenditure which is deductible in computing the income chargeable under the head "Interest on securities", "Income from house property", "Profits and gains of business, profes- sion or vocation" or "Income from other sources" ,* and "improvements" shall be construed according- ly.

F--Income from other sources Section 58 (1) .......... .. Income .... .. of every kind .......... ..shall1"¢°m€ "Om be chargeable to income-tax under the head "Income from °'h"','°"'°°"

other sources" if it is not chargeable to income-tax under [S°°"°""(')] any of the heads speciﬁed in section 14, items A to E [Sec- tion 6, clauses (i) to (iv) and (vi)].

(2) In particular, and without prejudice to the genera-

lity of the pnovisions of sub-section (1), the following in- come shall be chargeable to income-tax under the head "In- come from other sources", namely :--

(i) dividends ................ ..; '- 'ﬁe,i,"','?,.°'('§','{,,]

(ii) income from machinery, plant or furniture belong- H"c°h'i'fc!_ mg to the assessee and let on hire, if the income gig", I)', Y' is not chargeable to income-tax under the head furniture, "Proﬁts and gains of business, profession or voca- [New] tion"; '

(iii) where an assessee lets on hire -machinery, plant or Lease of furniture belonging to him and also buildings, and .""'1'['"3:l the letting of the buildings is inseparable from the }:';°":;';c °°f letting of the said machinery, plant or furniture, mac 'ncfy the income from such letting of the buildings, if it etc. is not chargeable to income-tax under the head [New] '€I>roﬁts and gains of business, profession or voca-

tion."

(1) For the purposes -of inclusion in the total income 5" °" 59 of an assessee ....... ..any dividend paid by a company whose.G _ ins "P total income is chargeable to ' income-ital: under this Act °fd' 'd°"d" shall be the gross amount of the dividend as determined [5-. 5 (2)' under sub-section (2). - 3:', Pan' (2) Subject to the provisions of sub ection (3), the gross [s.1 (2), amount of the dividend shall be the a 'nt of"the net divi~ mai Pm:

dend as increased in accordance with the following for-- P3"

mula--

DxR 100 minus R. In the above formula,-

(i) "Increase" stands for_ t increaqe to be made in the amount of the net divi 'end;

Increase = 142 Clauses 59-60

(ii) 'D' stands for the amount of the net dividend; and

(iii) 'R' stands for the average rate of income-tax ap- plicable to the company for the ﬁnancial year in which the dividend is paid, credited or distributed or deemed to have been paid, credited or distri- buted. The rate is to be expressed as a percentage; for example, where the rate is 25 naya paise 'per rupee, 'R' stands for the ﬁgure 25.

(3) .......... ..When the fund out of which the dividend [S-16(2) has been paid, credited or distributed or deemed to have P'°""°-3 been paid, credited or distributed includes-

(i) any proﬁts and gains of the company not included in its total income, or

(ii) any income of the company on which income-tax was not payable, or

(iii) any amount attributable to any allowance made in computing the proﬁts and gains of the company, the increase to be made under sub-section (2) shall be calculated only upon such proportion of the net dividend as the said fund after deduction of the inclusions enumerated above bears to the whole of that fund.

Section 60 The income chargeable under the head "Income from Dcductions, other sources" shall be computed after making the follow- ing deductions, namely:------ _

(i) .......... ..in the case of..,' ....... ..dividends, any reason-

[5-. 12 (2): able sum paid by way of commission or remunera-

":'t"] 93"' tion to a banker or any other person realising such p ' dividend on behalf of the assessee;

(ii) in the case of income of the nature referred to in [s. 12(3) & section 58(2), clauses (ii) and (iii), [new sub-sec-

4)j part for tions regarding income from hire of machine; etc. "°"°""] and lease of buildings, inseparable from mach nery, in the Section regarding chargeability], dedudtions, so far as may be, in accordance with the provisions of sections 30(a)(ii), 30(c), 31, clauses (i) and (ii), 32(1). clauses (i) (ii) and (iv), and 36, clause (1) [section 10(2)(iv), (v), (vi) and (vii) portions in-

corporated in draft section for deductions in income from business]. and subject to the provisions of sections 34 and 38 [section 10, provisions incorpo- rated in draft section regarding conditions for de- preciation and development rebate and partial [s._ 12 (2), user];

$313] Pam (iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earn-

ing such income ...... ....... ..

143

Clauses 61-62 Notwithstanding anything to the contrary contained in Section 61 section 60 [Section regarding deductions for income from Amounts not other sources], the following amounts shall not be deduc- deductible. tible in computing the income chargeable under the head "Income from other sources", name1y:----

(a) in the case of any assessee-- [S- 1,2 (2), prov1s0.]

(i) any personal expenses of the assessee;

(ii) any interest chargeable under this Act which is payable outside India (not being interest on a loan issued for public subscription before the 1st day of April, 1938), ................ ..on which tax has not been paid or deducted under section 202 or 204 [Sections regarding deductions of tax at source]. and in respect of which there is no per- 'son in India who may be treated as an agent under section 173[section 43];

(iii) any payment which is chargeable under the head "Salaries", if it is payable without India, unless tax has been paid thereon on assessment or de- ducted therefrom under section 201 [18(2)] or recovered under section 209 [18(7)];

(b) in the case of a company, any expenditure or allow-- [S- I2 (5) ance of the nature referred to in section 40, clause Pi'; S '°"*"

(c) [section 10(4A)(a) and"(b)], notwithstanding [Ix] ' '° that the amount thereof is included in the total in- ' come of any person referred to in section 40(c)(i) [10(4A) (a)]-

(1) The provisions of section 41(1) [Section 10(2A)] S'=°,*i°n 52 shall apply, so far as may be, in computing the income of Prqﬁts an assessee under section 58 [main section regarding charge-- Clmgeabk ability of Income from other sources], as they apply in '° 'a''' computing the income of an assessee under the head [5, 1, (5) "Proﬁts and gains of business, profession or vocation". pan.) (2) When_any buildings, machinery, plant or furniture [s. 12 (3) & to which section 58(2). clauses (ii) and (iii) [sub-sections (4) part for regarding income from hire of machinery etc. and lease P'°'ﬁ"-1 of building, inseparable from machinery, in the section re-

garding chargeability] apply are sold, discarded, demolished or destroyed, the provisiqns of section 41(2) [Section 10(2)

(vii), 2nd and 4th provisos, so far as they deal with proﬁts] shall apply, so far as may be, in computing the income of an assessee under section 58 [Section regarding chargeability of income from other sources] as they apply in computing the income of an assessee under the head "Profits and gains ~ of business, profession or vocation".

144

Clauses 63-67 CHAPTER V INCOME OF OTHER PERSONS. INCLUDED IN ASSESSEE'S TOTAL INCOME Section 63 All income arising to any person by virtue of a transfer Transfer of ............. ..whether revocable or not and whether eﬁected '['§°°"l'g- (1) before or after the commencement of this Act, shall, where wmain para, there is no transfer of the assets from which the income came, ham] arises, be chargeable to income-tax as the income of the S 6 transferor .......... ..and shall be included in his total income. 'ection Revocable 4 All income arising to any person by virtue of a revo- transfer or cable transfer of assets shall be chargeable to income-tax assets. as the income of the transferor and shall be included in his [S- F5 (U (C): total income.

mam para, latter half.] S¢°'i°" 55 (1) The provisions of section 64 [S. 16(1)(c), main para, Trrevocable latter half] shall not apply to any income- transfers.

[3- I5 (I)_ (C), (a) arising to any person by virtue of a transfer which is not revocable for a period exceeding six years or during the lifetime of the transferee, or, in the case of a transfer by way of trust, during the life- t'ime of the beneﬁciary, and

(b) from which income the transferor derives no direct or indirect beneﬁt.

,lS- 16(1) (C) (2) Notwithstanding anything contained in sub-section 13a'ftler]1:;',',1']'S° (1), all income arising to any person by virtue of a transfer ' shall be chargeable to income-tax as the income 09' the transferor as and when the power to revoke the transfer arises, and shall then be included in histotal income.

s°°"'?'f 66 For the purposes of sections 63, 64 and (55 [section 16 D°ﬁ"'"°"3- (1)(c), main para and 3rd proviso] and of this sect1on,--~ E1' (a) ......... ..a transfer shall be deemed to be revocable

(i) it contains any provision for the retransfer direct- ly or indirectly of the income or assets to the .......... ..transferrn:, or 1

(ii) it, in any way, gives the transferor a right to reassume power directly or indirectly ovet the S 6 income or assets; § Eta' (12) "transfer" includes any settlement, trust, covenant, parI.] agreement or arrangement. ' Section 67 In computing the total income of any individual, being Husband, a male, there shall be included all such income as arises Wifc and directly or indirectly-

mmor chi -

ten. (i) to his wife from the membership of the wife in a [S- *5 (3)-1 ﬁrm in which such individual is a partner;

(ii) to a minor child of such individual from the a is- sion of the minor to.' the beneﬁts of partne hip in a ﬁrm in which sucll individual is a partner, 9 145 Clauses 67-69

(iii) to his wife from assets transﬁerred directly or in- directly to the wife by such individual otherwise than for adequate consideration or in connection with an agreement to live apart .......... ..

(iv) to a minor child, not being a married daughter, of , such individual from assets transferred directly or indirectly to the minor child by such individual otherwise than for adequate consideration; or

(v) .......... ..to any person or association of persons .... .. .... ..from assets transferred-otherwise than for ade- quate consideration to the person or association by such individual for the beneﬁt of his wife, or a minor child (not being a married daughter), or both.

CHAPTER VI AGGREGATION OF INCOME AND $ET--OFF OR CARRY FORWARD OF LOSS Aggregation of income In computing the total income of an assessee, there Section 68 shall be included all income on which no income-tax isTo;a1ineome payable under the provisions of sections 81 to 87 [Sections [3 16 (I) (3) relating to income on which no income-tax is payable]. °3'?'°' P3"-1 (1) In computing the total income of an assessee who Sécttionﬁs ' is a partner of a ﬁrm, .......... ..whether* the net result of the Method or computation of total income of the ﬁrm is a proﬁt or a loss, °°IPP"tins _ his share (whether a net proﬁt or a net loss) shall be :hm,P"i'x'1"':{1:

computed as follows-- incbme ofthc

(a) any interest, salary, commission or other remunera- [5 (,) (1,) tion paid to any partner in respect of the previous main para.] year shall be deducted from the total income of ' -

the firm, and the balance ascertained and appor- tioned among the paiftners; '

(b) where the amount apportioned_ to the partner under clause (a) is a proﬁt, any salaryl, interest, commission or other remuneration paid to the partner by the ﬁrm in respect of thegprevious year shall be added to that' amount, and the result shall be treated as the partner's share in the income of the ﬁrm;

(c) where the amount apportioned to the partner under clause (a) is a loss, any salary, interest, commission or other remuneration paid tb the partner by the ﬁrm in respect of the previous year shall be ad-- justed against that amount, and the result shall be tireated as the partnefs sharein the income of the rm. 2 3 146 Clauses 69-_73 [New] (2) A partner's share in the income of the ﬁrm, as . computed under sub-section (1), shall, for the purposes of assessment, be apportioned under the various heads of in- come in the proportion which the income of the ﬁrm under each head bears to the total income of the ﬁrm.

[New] (3) Any interest paid by a partner on capital borrowed for the purposes of investment as his capital in the ﬁrm shall, in computing his income chargeable under the head "Proﬁts and gains of business, profession or vocation" in respect of his share in the income of the ﬁrm, be deducted from the share, but no other deduction shall be allowed in respect of the said share.

[S- 16(1) (b) (4) If a part'ner's share in the income of the ﬁrm, as P'°'"5°-1 computed under this section, is a loss, such loss may be set off, or carried forward and set oﬁ, in accordance with the provisions of this Chapter.

[NEW] Explanation.--In this section, "paid" has the same mean- ing as is assigned to it in section 42, clause (2) [s. 10(5)]. Se°"°" 7°. Where any sum is found credited in the books of an Cash °'°d"3- assessee maintained for any previous year, and the assessee [New] offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory, the sum so credited shall be deemed to be the income of the assessee and shall be chargeable to income-tax as the in- come of that previous year.

S°°'i°" 7} Where in the ﬁnancial year immediately preceding the U'1€"P'a'"°d assessment year the assessee has made investments which I""°5'"'°"'s' are not recorded in the books of account maintained by him [NW] for any source of income, and the assessee offers no expla- nation about the nature and ;ource of the investments or the explanation offered by him is not accepted by the In- come-tax Oﬁicer, the value of the investments shall be deem- ed to be income of the assessee of such ﬁnancial year. Section 72 Set oﬂ', or carry forward and set off Set-off ofloss Save as otherwise provided in this Act, where the net from one bu- result for any assessment year in respect of any business, ;'"°53 '° 111°" profession or vocation carri d on by the assessee, computed mm a"°' Cr' under the head "Proﬁts and gains of business, profession or [NW] vocation", is a loss, the assessee shall be entitled to have the amount of such loss set of against the proﬁts and gains assessable for that assessment year from any other business, profession or vocation under .the said head of in- come. ' . Section 73 Scmqonoss (1) Where in respect of any assessment year the net from one head' result of the computation under any of the heads of income to another. mentioned in section 14 [6] other than "Capital gains" is [3, ,4 M, a loss to the assessee, the assessee shall, subject to the other main para.] provisions of this Chapter, be entitled to have the amount 147 Clauses 73-74 of such loss set off against his income assessable for that assessment year under any other head ................ .. except "Capital gains".

(2) Where for any assessment year the net result of Carry for- the computation under the head "Profits and gains of busi- ;"§"}§"d. 5°' ness, profession or vocation" is a loss 110 the assessee, not 105;; "me" being a loss sustained in a speculation business, and such loss has not been wholly set off in accordance with the pro- visions of sub-section (1), so .much of the loss as is not so pm] set off or the whole loss where the assessee had no income ' under any other head, shall, subject to the other provisions of this Chapter, be carried forward to the following assess- ment year, and .......................... ..

(i) .......... ..it shall be set off against the proﬁts and gains, if any, of any business, profession or voca- tion carried on by him and assessable for that assess- ment year, provided that the business, profession or vocation for which the loss was originally computed continued to be carried on by him in the previous year relevant for that assessment year; and

(ii) if the loss ........ .._..cannot be wholly so set off, the amount of loss not so set oﬁ shall be carried forward to the following assessment year and so on.

(3) Where any allowance or part thereof is under sub- 24b (9)» section (2) of section 32 [section regarding depreciation] or ,n3";f Bop sub-section (4) of section 35 [Section regarding scientiﬁc (xiv) 2nd research expenditure] to be carried forward, effect shall Pl'0V.(f)part.] ﬁrst be given to the provisions of sub-section (2).

(4) ....... ..No loss shall be ....... ..carried forward under [s-,'-'4 (2) this section for more than eight assessment years i:mme- mam Pa"

diately succeeding the assessment year for which the loss part') was first computed.

_ Section 74.

(1) Any loss computed in respect of a speculation busi- Lomsin sPe_ ness carried on by the assessee, shall not be set 033' except culmion bug-

against proﬁts and gains, if any, of another speculation busi- ness. ness. [s. 2 (1), 1st . prov.

(2) Where for any assessment year any loss computed [5, 34 (2), in respect of a speculation business has not been wholly set may Para off under sub-section (1), so much of the loss as is not so P"*"'-1 set off or the whole loss where the assessee had no income from any other speculation business, shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and------

(i) ............. ..it shall be set off against the proﬁts and gains, if any, of any speculation business carried on by him assessable for that assessment year; and

(ii) if the loss cannot be wholly so set off, the amount of loss not so set 01)' shall be carried forward to the following assessment year and iso on.

148

Clauses 74-77 §','°.f b)(;,?,',., (3_') In respect of allowance on account of depreciation or and s. 10 (2) capital expenditure on scientiﬁc research, the provisions of (XIV), 2nd sub-section (3) of section 73 [preceding section regarding set I})';':;'-]' (9 off etc. in non-speculation business] shall apply in relation to ' speculation business as they apply in relation to any other business. .

5- 24 (2), (4) No loss shall be carried forward under this section mi" Pam' for more than eight assessment years immediately succeed-

pam] ing the assessment year ﬁor -which the loss was first com- puted.

Scction 75 (1) Where in the previous year relevant for any assess-

Losses under ment year the assessee sustains a loss under the head "Capi- ﬁg .t [had tal gains", the assessee shall, subject to the other provisions gai:f,',_a of this Chapter, be entitled to have the amount 0 such loss set off against his other income assessable for t at as- [5- '*'4('*'A)] sessment year under the head "Capital gains".

[S- 24 (2B), (2) Where in respect of any assessment year the net Pa"-1 result of the computation under the head "Capital . gains"

. is a loss to the assessee, suchloss shall, subject to the other provisions of this Chapter, be carried forward to the ﬁol1ow- ing assessment year and set off against capital gains assess- able for that assessment year, and if it cannot be so set off, the amount thereof not so set off shall be carried forward to the following assessment year and so on .... ..: ' Provided that where the loss computed in respect of any assessee, not being a company, for any assessme year does not exceed ﬁve thousand rupees, it shall not car- ried forward under this sub--section.

[5, 24 (23) (3) .......... ..No .......... ..loss shall be carried fdrward Parr.) under sub-section (2) for more than eight assessmen years immediately succeeding the assessment year for wh' h the loss was first computed. i Section 6. _ _ 5 Losses of:C_ (1) _. ......... ..Where the assessee IS a registered ﬁrm, any g;,t¢,cd ﬁrms. loss which cannot be set off against other mcome..., ....... .. of the firm shall be apportioned between the partners of [$034 ('Hfd the ﬁrm and they alone shall be entitled to have the ount lﬁaiﬁso' a er of the loss set off under sections 73(1), 74(1) and 75i1) [24 (1)1. , [s. 24(2) (2) Nothing .......... ..conta.ined in section 73(2), 74(2) or Pr0Yis° (0), 75(2) [s. 24(2) main para and 24(2B)] shall entitle any as-

e3'1'°' Pa" sessee, being a registered ﬁrm, to have carried forward and _ set off its loss .......... ..under the provisions of section 73(2) :'=°"°" :7 or 74(2) [24(2) main para] or section 75(2) [24(2B)]£ OSSCS 0 xﬁgnregistercd In the case. of an unregistered ﬁrm .......... ..assessed as'? under the provisions of section 190(b) [23(5)(b)] in res-

ﬁ,mf[,_24(,) pect of any assessment yeai-,2 its losses for that assessirient Proviso (d).] year shall be dealt with as if git: were a registered ﬁrm:

149

Clauses 78--82 (1) ....... ..Where the assessee is an unregistered ﬁrm S°°"°" 78 which has not been assessed as a registered ﬁrm under L°"°'.°f d the provisions of section 190(b) [23(5)(b)] any .......... ..1ossg,',;',3:§;'}:§ of the ﬁrm shall be set off only against the income ....... .. partners.

of the ﬁrm. [3, ,4") ma . V 0, (2) .......... ..Where the assesse is a partner of an unregis- 331;: ham tered ﬁrm which has not been assessed as a registered ﬁrm under the provisions of section 190(b) [s. 23(5)(b)] and his share in the income of the ﬁrm is a loss,-

(a) such loss shall not be set off under the provisions [New] of section 73(1), 74(1), or 75(1) [Sec. 24(1)];

(b) nothing contained in sectio_n 73(2) or 74(2) [Sec. 24 [§-o94(:)Ec) (2) main para] or section. 75(2) [s. 24(2B)] shall ;;"§',',,an'.'1 entitle the assessee to have carried forward and set not)' against his crwn income such loss.

( 1) Where a change has occurred in the constitution of S°°"°" 79 a ﬁrm, nothing in this Chapter shall be deemed to entitle 5¢'°'T°f the ﬁrm to have set off so much of the loss pro-, c°f';:° portionate to the share of a retired or deceased partner com-- conititﬁion puted in accordance with the provisions of section 69 [clause of firms or on

(b) of sub-section (1) of section 16] as exceeds his share of SU°°=5Si°n- proﬁts, if any, of the previous year in the ﬁrm, or to entitle [s_.24(2), Pro- any partner to the beneﬁt of any portion of the said loss '"50 ('N which is not apportionable to him under section 69 [sec- tion 16(1)(b)].

( 2) Where any person carrying _on any business, profes- sion or vocation has been succeeded in such capacity by another person otherwise than by inheritance, nothing in this Chapter shall be deemed to entitle any person other E than the person incurring the loss to have it set off against , his income ................ ..

Notwithstanding anything contained in this Chapter, no Scc|§on80 loss which has not been determined in pursuance of a re- su ' 'on turn ﬁled under the provisions of section 143 [22] shall be of Eturn for carried forward and set of under section 73(2) or 74(2)1°'-"t- [24(2)] or section 75(2) [24(2B)]. -- [s- ap<2A).

part-I CHAPTER VII INCOMES ON WHICH NO INCOME--'.=['AX IS PAYABLE ;

Income-tax shall not be pxtyable by an assessee in res- section 31 pect _of such portion, if any, the med income inc1u- Earicd in- ded in his total income as 1S directed by the annual Cen- conic.

-tral Act ﬁxing the rate or rates of income-tax for any as- [8- I5A»°=1'1i-

sessment year to be deducted in making an assessment for °' """'] that year .................................. ..

(1) Income-tax shall not be payable by a co-operative %°0°_':g';mi§:

society, including a co-operative society carrying on the soc;_~,,._ business of banking,-- ' e '[s._ (3)..

' , I . mm para.) IS- 14 (3) EX' pln.] ta. :4 <3).

provxso.] Section 83.

Dividends from Co-ope-

rative socie-

ty~ [S-14(4):] Section 84.

Marketing Society.

[M4 (5).) Section 85.

Newly estab-

lished indu-

strial under-

takings.

[8-I5 C (1)1 [s. x_5 C (2), mam para.] 150 Clauses 82-85

(i) in respect of proﬁts and gains of business carried on by it;

(ii) in respect of interest and dividends derived from its investments with any other co-operative socie-

ty;

in respect of any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities;

(iii)

(iv) in respect of any interest on securities chargeable under section 18 [8] or any income from property chargeable under section 22 [9], Where the total income of such society does not exceed twenty thousand rupees and the society is not a housing society or an urban consumer's society or a society carrying on transport business.

(2) For the purposes of this section an "urban consu- mers' co-operative society" means a society for the beneﬁt of consumers within the limits of a municipal corporation, municipality, municipal committee, notiﬁed area committee, town area 01 cantonment.

(3) The provisions of sub-section (1) shall not apply, to------

(i) the Sanikatta Saltowners' Society;

(ii) a co-operative society carrying on insurance busi- ness in respect of the proﬁts and gains of that business computed in accordance with section 44 [Rule 9 of the Schedule].

Income-tax shall not be payable by an assessee, who is a member of a co-operative society, in respect of any dividends received by him from the society.

Income-tax shall not be payable by an assessee, which is an authority constituted under any law for the time be- ing in force for the marketing of commodities, in respect of any income derived from the letting of godowns or ware- houses for storage, processing or facilitating the marketing of commodities.

(1) Save as otherwise hereinafter provided, income- tax shall not be payable by an assessee on so much of the proﬁts or gains derived from any industrial undertaking to which this section applies as do not exceed six per cent.

per annum on the capital employed in the undertaking,.

computed in accordance with such rules as may be made in this behalf by the Central Board of Revenue.

(2) This section applies to any industrial undertaking which fulﬁls all the following conditions, namely:.--

(i) it is not formed by the splitting up or the recons-

truction of business already in existence . . . . . . ..

151' Clauses 8537

(ii) it is not formed by the transfer to'a new business of building, machinery or plant used in a business which was being carried on before the 1st day of April, 1948;

(iii) it has begun or begins to manufacture or produce articles in any part of India at any time within a period of thirteen years from the 1st day of April, 1948, or such further period as the Central Gov- ernment may, by notiﬁcation in the Ofﬁcial Gazette, specify with reference to any particular industrial undertaking;

(iv) it hmploys ten or more workers in a manufactur- ing process carried on with the aid of power, or employs twenty or more workers in a manufac- turing process carried on without the aid of power.

(3) .......... ..The Central Government may, by notiﬁ- [M5 c (2), cation in the Oﬂicial Gazette, direct that the exemption proviso.) conferred by this section shall not apply to any particular industrial undertaking.

(4) The proﬁts or gains of an industrial undertaking [S-I5 C-'(3)l - to which this section applies shall be computed in accor- dgiace with the provisions of sections 28 to 43 [Section 1 .

(5) Nothing in this section shall aﬁect the application [:45 c(_=,)1 of sections 113 to 120 ....... .. [23A] in relation t6 the pro- ﬁts or gains of an industrial undertaking to which this sec- tion applies.

(6) The provisions of this section shall apply to the [Ma 0(5)] assessment----

(i) for the assessment year if in the previous year for that assessment year the assessee begins to manu- facture or produce articles, and

(ii) for the four assessment years immediately suc- ceeding.

Income-tax shall not be payable by a shareholder in seceiones respect of so much of any dividend id or deemed to be 1); dud paid to him by an industrial underta ng as is attributable from new; in- to that part of the_ proﬁts or gains on which inc'ome-taa: 5" ial . is not payable under section 85 [preceding section re: new '["',= '3??? industrial undertakings]. 5' 5 4' Income-tax shall not be payable by an assessee in res~ Section 37 pact of the following amounts which are included in his Other in. total 'income---- comes.

(i) ....... ..the interest received on any security of the [5.-8- 2"'! P'°' Central Government_issued on declared to be in- ""°' come-tax free; ' ' ' ' 152 Clauses 87-88 [New] (ii) the interest received on any security of a State Government issued income-tax free, the income- [Cf.s.8, 3rd tax whereon shall be payable by the State Gov-

proviso.] ernment ;

[5-'4") (3)1 (iii) if the assessee is a partner of an unregistered ﬁrm, ............. .. any portion of the assessee's share in the proﬁts and gains of the ﬁrm computed in the manner laid down in section 69 [16 (1) (b)] on « Valhlch income-tax has already been paid by the rrn ;

[,_,4 (._,)(aa)] (iv) if the assesse is a partner of a registered firm, the amount which represents the difference bet- , ween--

(a) the assessee's share in the total income of the ﬁrm,'and '

(b) hisshare in such total income as reduced by the income-tax, if any, payable by the ﬁrm.

the shares in either case being computed in the manner laid down in section 69 [16(1) (b)]; and (V) if the assessee is a member of an associatibn of persons, other than a Hindu undivided family. a company or a ﬁrm, .... .; any portion of the amount which he is entitled to- receive from the associa- tion on which income-tax has already been. paid by the association. 8 CHAPTER VIII _ REBATES AND RELIEFS X A---Rebate of income-tax.

I!-14(9) (W '''''on (1) Subject to the provisions of this section, the as- life insumnce sessee shall be entitled to a deduction, from the amount of prcmia, income-tax on his total income with which he is c arge- annuities and able for any assessment year '0 an amount equal to t e in- fg"";g;'i'é::; come-tax calculated at the dverage rate of income-1; on fund'; cm the following sums, namely:--- f [s- :7 (2). ft ;'::5'1m] (a) .......... ..where the assessee is an individua any sums paid in the previous year by the asse ee-

(i) to effect or to keep in force an insurance the life of the assessee or on the life of a Wife or husband of the assessee ; or

(ii) to eﬁect or to keep in force a contract foria de- ferred annuity on the lig of the assessee gar on the life of a wife or husband of the assessee ; or

(iii) as a contribution to any provident fund to which 1909' 1925- the Provident Funds Act. 1925, applies;

)1 153 Clauses 88-89

(b) where the assessee is a Hindu undivided family,... [s_ ,5 (2)] any sums paid in the previous year by the assessee to effect or to keep in force an insurance %n the life of any male member of the family or of the wife of any such member; '

(c) ....... ..any sum deducted in the previous year from [s_-, (1), 1,. the salary payable by or on behalf of the Govern- proviIo.] ment to any individual, being a sum deducted in accordance with the conditions of his service, for the purpose of securing to him a deferred annuity or making provision for his Wife or children, in so far as the sum so deducted does not exceed one- ﬁfth of the salary; '

(d) if the assessee is an employee participating in a [New] recognised provident fund, his own contributions to his individual account in the Jund in /the previ- ous year, to the extent provi ed in section 295 [58F] ;

(e) if the assessee is an employee participating in an [New] approved superannuation fund, any sum paid in the previous year by him by way of contribution towards the superannuation fund, to the extent provided in section 311 [58R].

(2) The provisions of clauses (a) and (b) of sub-section [s-I5§(2A)] (1) shall apply only to so much of any premium or other ' payment made on a policy (other than 'a contract for a deferred annuity) as is not in excess of? ten per cent. of the actual capital sum assured. = * Eacplanation:-- ....... ..In calculating any such capital sum, no account shall be taken-- f

(i) of the value of any premiums agreed to be return- ed, or

(ii) of any beneﬁt by wayof bonusor otherwise over and above the sum aqtually assured, which is to be or may be received under' the policy by any person.

(3)_ The aggregate of the sums in respect of which a[,_,5 (3)1 deduction of income-tax is allowed under sub-section (1), shall not .......... .. exceed, in the case of an individual, one--fourth of his total income ......... or eight thousand ' rupees, whichever is less, and in the case of a Hindu undi-

vided family, one-fourth of iits total income or sixtee thousand rupees, whichever is less. ' (1) Subject to the provisions of this. section, the asses- S°Ctl°P- 39~ see shall be entitled to a deduction from the amount of Dongtiom for income-tax on his total income with which he is charge- °b"l""b'° able for any assessment 'year,;_of an _ 1 nt equal to the p"mv_°m' l [s. 1513 (1) main para and 17 (2), part.] [s.15B (I)2nd 154 _ Clause 89 income-tax calculated at the average rate of income-tax on any sums paid by him in the previous year as donations to any institution or fund to which this section applies.

(2) No deduction shall be made under sub-section (1) p'°"is°' (3): if the aggregate of the sums paid as aforesaid by the asses-

[s.15B (1)2nd proviso, (b).] [S-1 53 (3)1 [s.15B (2), main para.] 21 of 1860 1 of 1956 see is less than two hundred and ﬁfty rupees.

(3) No deduction shall be made under sub-section (1) in respect of any sums paid in excess of one-twentieth of the assessee's total income as reduced by any portion there- of on which income-tax is not payable under any provi- sion of this Act and by any amount in respect of which a deduction of income-tax has been granted under the pro- visions of this Chapter, or one hundred thousand rupees, whichever is less.

(4) The amount of income-tax deductible under this section, together with the amount of super-tax deductible under section 109 [section 15-B--for super-tax] shall not in any case exceed half the aggregate of the donations in respect of which the deduction is allowed under this sec- tion.

(5) This section applies to any institution or fund established in India for a charitable purpose which fulﬁls the following conditions, namely:--'

(i) if the institution or fund derives any income-, such income would not be liable to inclusion in its total income under the provisions of section 12 (1) to 12 (4) [section 4(3)(i)] or section 12(5) [4(3) (ii)] or section 11(24) [new provision added in the draft clause for exclusion from total income, Wh' h re- lates to universities or' other educational i stitu- tions not existing for proﬁt] ;

(ii) the institution or fund is not expressed to be for the beneﬁt of any particular religious community;

(iii) the institution or fund maintains regular accounts of its receipts and expenditure; and

(iv) the institution or fund is either constitutedas a public charitable trust or is registered under the Societies Registration Act, 1860, or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956, or is a university established by law, or is any other educational institution recognised by Government or by a university established by law, or afﬁliated to any university established by law or ....... .. is an institution ﬁnanced wholly or in part by the'Government or, a local authority.

155

Clauses 89-92 x (6) An institution or fund established for the beneﬁt [s.l (2), of scheduled castes, backward classes, scheduled tribes or Exp n-] of women and children shall not be deemed to be an insti- tution or fund expressed to be for the beneﬁt of a religious <(:ommunity within the meaning of clause (ii) of sub-section

5). .

B.--Relief for income-tax Where, by reason of any portion of an assessee's sala- Sgctiongo ry being paid in arrears or in advance, or by reason of his 531,", paid having received in any one ﬁnancial year salary for more for more than than twelve months or a payment which is under the pro- 0116 V68'- visions of section 17 [sub-section (1) ofsection 7] a perqui- [5-5° (")1 site or a proﬁt in lieu of salary, his income is'assessed at a rate higher than that at which it would otherwise have been assessed, the Central Government may grant the ap- propriate relief.

(1) Where by virtue of the provisions of section l3 5°°'_3°" 9'- [section 25(3) part and section 25(4) part as incorporated in Business 359- the Chapter an exclusion from total income] the income fffe°dIn;':;:

of any business, profession or vacation of any period has tax 'Act,',9,3 not been included in the total income of the assessee, the [s.25 (3),par assessee may further claim that the income .... .; .... .. from and*25 (4). that business, profession or vocation of the said period P'"'] shall be taken as the amount of income from that business, profession or vacation of the previous year immediately preceding the said period. Where anysuch claim is made, the income-tax payable in respect of the total income of the previous year immediately preceding the said period shall be determined in accordance with that claim. and if an amount of incomes-tax has already been paid in respect of that previous year in excess of the amount payable on the basis of such determination, a refund shall be given of the excess.

(2) No claim to the relief afforded under sub-section [ms (5)3 (1) shall be entertained unless it is made before the ex- ' piry of one calendar year from the date on which the busi-

ness, profession or vocation Was discontinued or the suc- cession took place, as the case may be.' CHAPTER IX DOUBLE TAXATION RELIEF The Central Government may enter into an agree- Section 92 ment" Agreement with coun-

(a) with the Government of any 'country outside India tries-

for the granting of relief in respect of income on ["495] which have been paid; both came-tax (including super-tax) under this ;Act rncome-tax in that ' country, or ' ' ll--l Law Com.I58

'1 Section 93 Countries 156 Clauses 92-93

(h) with the Government of any country outside India for the avoidance of double taxation of in- come ....... .. under this Act and under the corres- ponding law in force in that country; and may, by notiﬁcation in the Official Gazette, make such provi- sions as may be necessary for implementing the agreement.

(1) If any person who is resident in India in any pre- vious year proves that, in respect of his income which ac-

with which crues or arises during that previous year without_ India noagreemcnt-(and which is not deemed to accrue or arise in India), he exists.

[349 13(1)] [M9 D(3)] l5- 4-9 D:

Expl.] has paid in any country, with which there is no agreement under section 92 [49A] for the relief or avoidance oi dou- ble taxation, income-tax, by deduction or otherwise, nder the law in force in that country, he shall be entity d to the deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income at the Indian rate of tax or the rate of tax of the said country, whichever is the lower, or at the Indian rate of tax if both the rates are equal. ' ;

(2) If any person who is resident in India in an pre-

vious year proves that -in respect of his income whi h ac- crues or arises to him during' that previous year in akis- tan he has paid in th tlcountry, by deduction or othe ise, tax payable to the overnment under any law f the time being in force in that country relating to taxat on of agricultural income, he shall be entitled to a deduction from the Indian income-tax payable by him-- 3

(a) of the amount of the tax paid in Pakistan llnder any law aforesaid on, such income which is gliable to tax under this Act also; or i

(b) of a sum calculated on that income at the llndian rate of tax; 1 whichever is less.

Explanation.--In this section,-

(i) the expression "Indian income-tax" means in ome-

tax and super-tax charged in accordance wi the provisions of this Act ; 3 _

(ii) the expression "I 'an rate of tax" me 5 the rate determined by 'viding the amount of dian income-tax. after deduction' of any relief du un- der the provisions of this Act but before ded ction of any relief due under this section, by the total V income; '

(iii) the expression "rate of tax of the said country"

means income-tax and super-tax actually paid in the said country in accordance with the rres- ponding lawsof the id country after deducgbn of all' relief du but ﬁfpre deduction of any ;relief I - I i 157 Clauses 93-96 due in the said country in respect of double taxa- tio_n, divided by the whole amount of the income asessed in the said country;

(iv) the expression "income-tax" in relation to any coun-

try", includes any excess proﬁts tax or business proﬁts tax charged on the proﬁts by the Govern- ment of any part of that country or a local autho- rity in that country.

(1) Where any dividend has been paid, credited or dis- S°"f'°" 94 tributed or is deemed to have been paid, credited or dis- R611" to tributed to a shareholder of a company which has obtain- gzmligzrdgg ed the relief .......... ..granted under section 92 [49A] or un- as "relief to der the India and Burma (Income-tax Relief) Order, 1936, share holder. the shareholder shall be deemed in respect of such divi- [L450] dend himself to have obtained such relief at the rate at 3 which such relief has been granted in respect of income- tax only to the company for the ﬁnancial year preceding the year in which the dividend was paid, credited or dis- triguteg or is deemed to have been paid, credited or dis- tri ute .

(2) If the rate at which a shareholder is deemed un- der sub-section (1) to have obtained relief exceeds the rate at which he would have been entitled to relief had such relief been given direct to him by or under the said section or Order, any excess shall be recovered from him either as an addition to the tax payable by him on any assess- ment made on him under sect on 147 or 148 [23] or section 152 [34] or by setting it oif against any relief due to him under section 247 [48]. ' CHAPTER X PROVISIONS AGAINST AVOIDANCE OF TAX. ; _ SC¢t10n 95 Where business is carried on between a resident and a Och . non-resident, .......... .. and it appears to the Income-tax ',':,';$ Ofﬁcer, that owing to the close conn tion between them, at-esmmn. the course of business is so arrange that the business transacted between them prgduces ti) the resident either no proﬁts or less than the or inary proﬁts which mi ht be expected to arise in that business, the Income-tax ﬂicer shall determine the amount of proﬁts .......... .. which may reasonably be deemed to have been? derived therefrom ﬁnd include such amount in the total income of the resi-

ent .......... ..

Explanation.--For the purposes of this section, "non- ~-resident" includes a person who is not ordinarily resident within the meaning of section 6, clause (6) [4B]. V Samoa 96 (1) Where there is a transfer of assets by virtue or in Aioidam, of consequence whereof, either alone or in conjunction with indome-tax associated operations, any income .......... ..becomes payable 1237 transec- to a non-resident, the following provisions shall apply-- "°''' '°''''"'''' [S- p2 (2)1 l in of ' e to no -residents [s.4 D (1), part.

[S- 44 D (2).

part.] [s~ 4413(3)] l=~ 4413(4)]

(a)

(b) (2) 158 \ Clause 96 where any person has by means of any such trans-

fer, .......... .. either alone or in conjunction with as-_ sociated operations, acquired any rights -by virtue .......... ..of which he has. within the meaning of this section, power to enjoy .... ..whether forthwith or in the future, any income of a non-resident per- son which, if it were -income of the ﬁrst--mentioned person received by him in India, would be charge- able to income-tax, that income shall, whether it would or would not have been chargeable to income-tax apart from the provisions of this sec- tion, be deemed to be income of the ﬁrst-men- tioned person for all the purposes of this Act;

where, whether before or after any such transfer, .......... .. any such first mentioned person receiv- es or is entitled to receive .......... .. any capital sum the payment whereof is in any way connected with the transfer or any associated operations, then any income which, by virtue or in consequence of the transfer, either alone or in conjunction' with associated operations, has become the income of a non-resident shall, whether it would or would not have been chargeable to income-tax apart from_ the provisions of this section, be deemed to be the income of the ﬁrst-mentioned person for all the purposes of this Act. .

The provisions of sub-section (1) shall not apply if such first mentioned 'person shows to the satisfaction of the Income-tax Officer either-

(a) that neither the transfer nor any associated ope-

ration had for its purpose or for one of its puifposes the avoidance of liability to taxation; or '

(b) that the transfer and all associated operations? were (3) bona ﬁde commercial transactions and were not designed for the purpose of avoiding liabllijiy to taxation. ;

For the purposes of this section, an "assoéiated operation" means, in relation to any transfer, an operation of any kind effected by any person in relation to-E

(i) any of the assets transferred, or

(ii) any assets representing whether directly or' indi-

rectly any of the assets transferred, or

(iii) .......... ..the income arising from any such assets, OI'

(iv) .......... .. any assets representing whether directly or indirectly the accumulations of income arising from any such assets.

159

Clause 96 (4) A person shall, for the purposes of this section, be [S_ 4413(5)]- 'deemed _to have power to enjoy income of a non-resident . . . . . . . . . ..

(a)

(b)

(c)

(d)

(e) the income is in fact so dealt with by any person as to be calculated at some point of time and, whe- ther in the form of income or not, to enure for the beneﬁt of the ﬁrst-mentioned person, or the receipt or accrual of the income operates to in- crease the value to such ﬁrst-mentioned person of any assets held by him or 'for his beneﬁt, or such ﬁrst-mentioned person receives or is entitled to receive at any time any beneﬁt provided or to be provided out pf that income or out of moneys which are or will be available for the purpose by reason of the effect or successive effects of the as- sociated operations on that income and assets which represent that income, or such ﬁrst-mentioned person has power by means of the exercise of any power of appointment or power of revocation or otherwise to obtain for himself, whether with or without the consent of any other person, the beneﬁcial enjoyment of the income, or such ﬁrst-mentioned erson is able, in any man- ner whatsoever and W ether directly or indirectly, to control the application of the income.

(5) _In determining whether a person has power to en- [S-4413(5)] joy income within the meaning of this. section, regard shall.

- be had to the substantial result and effect of the transfer and any associated operations, and all? beneﬁts which may at any time accrue to such person as a result of the trans- fer and any associated operations shall be taken into ac- count irrespective of the nature or form of the beneﬁts.

(6)

, '(a) For the purposes of this section----

.., .... ..'assets' includes propert' or rights of any kind. and .... ..'transfer' in relat on to rights includes the creation of those rights;

[s. ' .44, D (7) \3) J

(b) .......... ..'beneﬁt' includes a payment of any kind; [s.4',D(-,-)Eb)]

(i) any sum paid or payable by way of a loan or re-

payment of a loan; and -

(ii) any other sum paid or payable otherwise than as income, being a sum which is not paid or payable for full consideration in money or money's worth.. ' ' -

[§'a'§'t4.1D M .

160

Clauses 96-97 l"44D(7)(d)l (d) references to assets representing any assets. income or accumulations of income include references to shares in or obligation of any company to which, or obligation of any other person to whom, those assets, that income or those accumulations are or have been transferred;

["44D(7)(°)3 (e) any body corporate incorporated outside India shall be treated as if it were a non-resident;

["'44D(') 5' (f) a person shall be treated as a non-resident if he is mp ""1 not ordinarily resident within the meaning of sec- tion 6, clause (6).[4B].

[.4413 (3)] (7) The provisions of this section shall apply .......... ..

also in relation to transfers of assets and associated opera- tions carried out before the commencement of this Act.

[MAD (9)1 (8) Where any person has been charged to income-tax on any income deemed to be his under the provisions of ' this section, and that income is subsequently received by him, whether as income or in any other form, it shall not again be deemed to form part of his income for the pur- poses of this Act.

Section 97 (1) Where the owner of any securities (in this sub- Avoidance of section and in sub-sections (2) and (3) referred to as "the baangzzj owner") sells or transfers those securities, and .... ..', ...... .. mm, in Sew buys back or re-acquires the securities, then, if thegresult mics, of the transaction is that any interest becoming payable in respect of the securities is receivable otherwise? than [344 E(I)] by the owner, the interest payable as aforesaid shall whe- ther it would or would not have been chargeable to i ome- tax apart from the provisions of this sub-section, be eem- ed. for all the purposes of this'Act, to be income 0 the owner and not to be the income of any other person;

[,_4_1E(,)] . (2) The references in sub-section (1) to buying back -A or re-acquiring the securities shall be. demed to include references to buying or acquiring similar securitie' so however, that where. similar; securities are bought r ac- quired, the owner shall be under no greater liabilit to income-tax than he would have been under if the o 'ginal .

securities had been bought back or re-acquired.

[S-4413(1) & (3) Where any person .......... .. has had at any I time ""m;'§l4F during any previous year any beneﬁcial interest in} any Pam] securities, and the result of any transaction relating to such securities or the income thereof is that, in resp ct of such securities, within such year, either no income ;is re- ceived by him or the incomereceived by him is less than the sum to which the income would have amounted if the income from such securities had accrued from day to day and been apportioned accor, ' 'gly, then the incomeifrom such securities for su¢h year all be deemed to be t in- come of such person..§ ' considers necessary for the 161 Clause 97 (4) .......... ..The provision of) sub-section (1) or sub- [s.44p() section (3) shall not apply if has had a beneﬁcial interest in the securities, as the case may be, proves to the satisfaction of the Income-tax Offi- cer-

(a) that here has been no avoidance of income-tax, or

(b) that the avoidance of income-tax ....... .. was excep- tiona1'and not systematic and that there was not in his case in any of the three preceding years any .......... ..avoidance of income-ta_x.........by a trans- action of the nature referred to in sub-section (1) or sub--section (3).

(5) Where any person carrying on a business which consists wholly or partly in dealing in securities bugs or acquires any securities, and .......... ..sells back or 're-t'rans- fers the securities, then. if the result of the transaction is that interest becoming payable in re$ect of the securities is receivable by him, no account shall be taken of the transaction in computing for any of the purposes of this Act the proﬁts arising from or loss sustained in the business. ' (6) Sub-section (5) shall_ have effect, subject to any necessary modiﬁcations, as if references to selling back or re-transferring the securities included references to selling or transferring similar securi;ties_- ' (7) The Income-tax Ofﬁder may by require any person to furnish him vjrithin such time he may direct (not being les than tiventy-eightdays), in respect of all securities of W ch such iperson was the owner or in which he had a beneﬁcial interest at any time during the period speciﬁed in the notice, Sileh particulars as he urposes of this section and for the purpose of discove ng whdther income-taar: has been borne in respect of the intere$ 'on all those securi- ties .......... .. i ' notice in writing (8) For the purpose of sectian_.---.- ('a)' .......... ..'interest' includes a ﬁividend;

(b) .......... ..'securities' includes stocks and shares;

(c) securities shall be deemed to be similar if they entitle their holders to the "same rights against . the same persons as to capital and interest and the same. remedies for the enforciement of those rights', notwithstanding anydiﬁerendte in the total nominal amounts of the respﬁtive s_ urities or in the form in which they are id or' gas-manner in which they can be transfe ed. a i ' . e owner, or the person who proviso.

[S-44 13(3)] ['-;s4 sun I ' .E(6J.

as csagier »---.~.. 4.

I-E44 13(5)] .

Section 98 Charge of super-tax.

[s. 55, main para.] [New] [s.55, 1:! prov.] Section 99 Total income for super-tax, [s. 56.] Section 100 Business, pro-

fession or vocation cha-

rged under 1 91 3 Act.

[Sect 25, proviso (a) below subsec-

uon(4)-l Section 101 Deductions under interest on securities.

[New] 162 Clauses 98-101 CHAPTER XI SUPER-TAX A--Principal provisions (1) In addition to the income-tax charged for any assessment year, and save as otherwise provided in this Act, there shall be charged, levied and paid for that as- sessment year in respect of the total income of the previ- ous year or previous years, as the case may be, of every person, not being a registered ﬁrm ......... ..;.an additional duty of income-tax (in this Act referred to as super-tax) at the rate or rates laid down for that assessment year by any Central Act:

Provided that where by virtue of any provision of this Act super-tar is to be charged in respect of the income of a period other than the previous year, super-tax shall be charged accordingly.

(2) In respect of income chargeable under sub--section (1), super-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act.

(3) .......... ..In the case of a registered ﬁrm, or an un-

registered ﬁrm which has been assessed in the manner ap- plicable to a registered ﬁrm under the provisions of sec- tion 190 (b) [s. 23(5) (b)], su er-tax shall be payablo by each partner of the ﬁrm indi dually on his share in the income...- ....... ..of the ﬁrm and not by the ﬁrm itself.

.... ..Subject to the provisions of this Chapter, the :total income of any person shall, for the purposes of super}-tax, be the total income as assessed .......... ..for the purposes of income-tax, and where an assessment of total incomdl has become ﬁnal and conclusive for the purposes of income-tax for any assessment year, the assessment shall also be ﬁnal and conclusive for the purposes of super-tax for the same assessment year. 1 The provisions of sections 13 and 91 [25(3) whole: and (4) whole] shall not apply to the determination of the total income for the purposes of super-tax except where the' ro- -

ﬁts and gains of the business, rofession or vocation' assesed to super-tax for the st time either for th sessment year 1920-1921 or for the assessment year 1922.

Where and in so far as the total income of an assessee includes any interest on securities or: which no incom tax is payable under section 8'7(i) or section 8 (ii) [section 8 Provisos 2 and 3], the - follow- ing amounts shall be deducted in computing his total in- come for the purposes of super-tax, namely :~--

(i) any reasonable sum expended by the assessee jor the purpose ofrealising interest on such securi- ties; . "1 ' ' ere BS-

_921--

* ' 163 Clauses 101-107

(ii) any interest payable on money borrowed for the purpose of investment in such securities by the as- sessee.

(1) -All» the provisions of this Act relating to the charge Section 102 assessment, collection and recovery of income-tax .... ..sha11 Applicability' apply, so far as may be and save as otherwise provided, of provisions to the'charge, assessment, collection and recovery of su-t°SuPer-"W per-tax. [S-58 (P)Parl] (2) Save as expressly provided in any other section in [Scc.58(x), this Chapter, the provisions of sections 3, 167 174 (a)(i) and Part] (V11)

(ii), 188 and 200 (1) [Section 3, section"19, section 20, and First Proviso to sub--section (1) of section 41, section 8, 3rd proviso] and of Chapters VII, and VIII and sections 295 and 311, and rule 3(c) (ii) of the First Schedule [chapters relating to income on which no income-tax is payable and rebate of income-tax] shall not apply to the charge, assess- ment, collection and recovery of super-tax.

Without prejudice to the generali of the provisions Section I03 of section 99 [section providing that t e total income for Avoidance of income-tax shall be the total income or super-tax also] super-tax- the provisions of sections 97(2), 97(3), 7(4), 97(7), and 279 [NW] [44E(2), 44F(3), Proviso and 44E(6)] apply in relation_ to [05 58- 13 super-tax as they apply in relation to income-tax, with an "F the modiﬁcation that references therein to income--tax shall be construed as references to super-tax.

B.--Incomes which do not form part of total income for super-tax , .... ..Where the income of an unregistered ﬁrm or other Scct_i-->n I04 association of persons not being a company has been as- share in un- sessed to super-tax, .......... ..the share of a partner in the Ifgegisiercd income of the ﬁrm or the amount of such income which ci';'m:'0§"'°' is proportionate to' the share of a member of the associa- pmms, tion, as the case may be, _shall not be included in his total [s_ 5» "d income for the purposes of super-tax P,-ov, . . . . Section 105 Any income of a co-operative society, in respect where- Co_ov mm of no income--tax is payable" by it by virtue of the provi-wcie _ sions of section 82 [14(3), for "income_-tax], shall not be [S I -(3) for included in its total income for the purposes of super-tax sﬁpc um] Any dividends received by a' member of a co--o erative lsgctgen :6 society from the society shall not be included in is total ,,;'g~ '(';o_op_ income for the purposes of super-tax. ﬂame mic.

ty.

.......... ..Any income derived from the letting of go- [5°°- I4 (4) downs or warehouses for storage, processing or facilitating f°~'s"P°"'""] the marketing of commodities by an assesse, which is an 5°°'i°".'°7 authority constituted under a y law or the time being Efcﬁbtmg in force for the marketing of c mmodi as, shall not be-in- [s. :15) for cluded in its total income for. .e pu ties of super-tax. xupctttam] l ' i 164 Clause 108 Section 108 Dividend, . _(1) Dividends received by a company .......... .. from an from certain Indian company formed and registered after the 31st 'day of ¢°mP=mi=8- March, 1952, shall not be included in its total income for the, purposes of super-tax, where-

[S- 55A (Mi) (1) the Central Government is satisﬁed that the Indian Pa"-1 company is wholly or mainly engaged in an indus- try for the manufacture or production of any one ordmore of the items specified in sub-section (3), an [,,55A(,)(ii)] (ii) the Indian company fulﬁls the following :condi- tions, namely :-

(a) it is _not formed by the splitting up or recons-

truction of business already in existence;;

(b) it is not formed by the transfer to it of building, machinery or plant used in a business whibh was at any time being carried on; and A

(c) it employs ten or more workers in a manufac- turing process carried on with the aid of ' ower, or employs twenty or more workers in annanu- facturing process carried on without thelaid of power. ;

\ [5- 55A (2)) (2) The exclusion speciﬁed in sub-section (1); shall apply also to dividends payable to a company in respect of any fresh capital'. raised by an Indian company after the 28th day of February, 1953, by public subscript n for the purpose of increasing the' production of, or s ing a separate unit of, any one orjmore of the items spec ed in sub-section (3). = [5, son.' m (3) The items referred to in sub-sections (1) and (2)

0) Pm-l are the following, namely:-- f (1) Coal, including coke and other derivatives; § (2) Iron and steel; Q (3) Motor and aviation fuel, kerosene, crude oik and synthetic oils (not being oil exploration);

(4) Heavy chemicals ingluding fertilizers;

(5) Heavy machinery used in industry including ball and roller bearing and gear wheels and parts thereof, boilers and steam generating equipment;

(6) Machinery and equipment for the gen ration, transmission and distribution of electric e ergy;

(7) Non-ferrous 'metals including alloys; (8) Paper including newsprint and paper board; (9) Internal colnbustiongengines; 'I (10) Power-driven pumps?" f § 1 l 165 Clauses 108-111 (11) Automobiles;

(12) Tractors:

(13) Cement:

(14) Electric Motors:

(15) Locomotives:

(16) Rolling Stock:

(17) Machine Tools:

(18) Agricultural Implements: (19) Ferro--manganese;

(20) Dye--stuffs:

as speciﬁed in the First Schedule to the Industries (Deve- 55 '°Y 1951 lopment and Regulation) Act, 1951.

C---Rebate of super-tux. S _ my (1) Where under the provisions of section 39. [1513 for °"":;m for income-tax] an assessee is entitled to a deduction of income- 3;'1";,a,,,e tax in respect of any sum paid as donation, he shall also puqiom.

be entitled to a deduction, from the_ amount of super-tax [15]';.fo,,.,p¢, with which he is chargeable on histotal income, of an ta:c,'pan and amount equal to the super-tax calculated at the aver- S-1l(3).Part-] age rate of super-tax on such sum. .

(2) The provisions of this sectiondo not apply to a [S- .153 (1) company. - V E' !_'""'-1""

[1011 (1) The assessee shall be entitled to a deduction, 'from NT}, ,,,,,,_ the amount of super-tam with which he is chargeab e on lish d indus-

his total income, of an amount equal to the super-tax cal-g ' undertak-

culated at the average rate of 'super-tatr: on proﬁts or gains '5 15E {or derived from an industrial undertakmg, in cases where gu-,,,,_,,,x at and to the extent to which inicome-tat ':is'not payable on s,1 (3),pa|'t.] suc]h profits or gains under section 85 [15C for income- ' tax .

(2) A shareholder shall be .-entitledto a deduction, from the amount of super-tax with which he is chargeable on his total income, of an amount equal {to the super--taa} cal-_ culated at the average rate of §super-tctrj on so much of any dividend paid or deemed to he paid to' him by an indus- trial undertaking as is attributable to itltat part of the pro- ﬁts or gains on which he is entitled to a deduction of su- per-taa: under this section. 1 z 1 ' Where the assessee is a partner bf a registered ﬁrm, Se¢i°n 1"

he shall be entitled to a deduction, from the amount of Share from super-tax with which he is chnrgeablé on his total income, rceristefed of an amount equal to the suyjer-tax "ll:-ulated at the aver- '[is"'!'1'4(2)(") age rate of super--ta.7c on the follow» g sum, that is to ',.p,,., rm'. say--- suﬁer-tax, an Proviso the amount which repres ts thedifference between------ an sec. I7

(i) the assessee's share in the+dtal income of the (3 Pam] ﬁrm d * ~ "

E 9 166 Clauses 111-114

(ii) his share in the total income of the ﬁrm as re- duced by the income-tax, if any, payable by the ﬁrm. at the rate of income-tax applicable to its total income, on the amount of its income from all sources other than from any business carried on by it ............. ..

the shares in either case being computed in the manner laid down in section 69 [section 16(1) (b)]. Section 112 Renemr sa1_ The provisions of section 90 [Section 69(2)] apply in my received relation to super--tax as they apply in relation to income- in arrear etc. tax.

}:f',°°' 62532.: D----Additional super-tax on undistributed proﬁts. tax.] section 113 (1) Subject to the provisions of sub-section (2) and of supemax 0,, sections 114, 115, and 116 [Sec. 23A, su_b-sections (2), (ti) undistributcd and (9)], where the Income-tax Officer is satisﬁed that in income of respect of any previous year the proﬁts and gains distribu- gggafnics ted as dividends by any company within the twelveVmon- [Se IE3,' '(D ths immediately following the expiry of that previous part.] year are less than the statutory percentage of the distri- butable income of the company of that previous year, .... .. iii;"i£{é5meLi;i$é"oiiicer"§ii},iii"f .....'.'.'.'.I'.':h'.3,1'1l:e a}{""'c§'r}ier iii writing that the company shall, apart from the surn de- termined as payable by it on the basis of the assessment under section 147 or 148 [23], be liable to pay super- tax at the 'rate of-- J

(a) ﬁfty per cent, in the case of an investment com- pany, and

(b) .......... ..thirty-seven per cent. in the case cﬁ any other company, ' = on the undistributed balance of the total income of the previous year, that is to say, on the distributable income are reduced by the .......... ..-...dividends actually distributed, 1 any. .

[S- 23A (1) (2) The Income-tax Oﬂiccr shall not make an prder P'""]' under sub-section (1) if he is satisﬁed-- '

(i) that, having regard to the losses incurred by%- the company in earlier years or to the smalln s of the proﬁts made in the previous year, the~pa ' ent of a dividend or a larger dividend than that dee- lared would be unreasonable; or

(ii) that the payment of a dividend or a 1arger§divi- dend than that declared would not have resulted in a beneﬁt to the revenue .......... .. . Section 114 , _ special pmvi_ No order under section 113 [s. 23A(1) operative part] gem go, ee,_ shall be made,-- e e 7 $2 °°mpa' (i) in the case of an investment company which has distributed not less than ninety per cent. of its ts. 23A (2)1 distributable income; or.

i :

i 167 Clauses 1143117

(ii) in the case bf any other company whose distribu-

tion falls short of the statutory percentage by not more than ﬁve per cent. of its distributable in- come; or

(iii) in any case where according to the return made by a company under section 143 [22] it has dis- tributed not less than the statutory percentage of its distributable income, but in the assessment made by the Income-tax Ofﬁcer under section 147 or 148 [23] a higher total income is arrived at and the difference in the total income does not arise out of the application of section 150(1) Pro-- viso or section 150(2) [proviso to section 13] or section 148 [sub--section (4) of section 23] or the omission by the company to disclose its income fully and truly; / unless the company, on receipt of a notice from the Income-tax Oﬂicer that he proposes to make such an or-

der, fails to make within three months of the receipt of such notice, a further distribution of its proﬁts and gains so that the total distribution made is not less than the sta-, tutory percentage of the disributable income.

No order shall be made by the Income-tax Oﬂicer under S°°'i°" "5 section 113 [s. 23A(1) operative part] unless the previous Approval of approval of the Inspecting Assistant Commissioner .......... .. ....... ..has been obtained, and the Inspecting Assistant Com- Com,,{;,,i°,,_ missioner shall not give his ap roval to any order proposed er. to be made by the Income-tax fficer until he has given the [S- 23 A (3)-] company.concerned an opportunity of being heard.

Nothing contained in section 113 [s. 23A (1), operative Scction us part] shall apply----- ' Savings for com any in

(a) to any company in which the public are substantial- 3:' 3" "tb'"_' ly interested; or tially iii';-

(b) to a subsidiary company of such company if the A (QM whole of the share capital of such subsidiary com- pany has been held by the parent company or by its nominees throughout the previous year.

(1) For the purposes of ............. .......... .. section 116 'S'°(:;°" 'f7 [23A(9)] a company shall be deemed to be a company-1nwhi'§P""3;;l:

which the public are substantially intcrested-- ' Pub -6 an substantially

(a) if it is a company owned by the Government or in interested."

which not less than forty per cent. of the shares are 123 A held by the Governmmt; Se (a),

(b) (i) main para, clause

(b) (ii) and clause ( b)

(iii); main par earlier hm? ,.

168

Clause 117 1 of 1956 (b) if it is a public company as deﬁned in the Com- panies Act, 1956, and?-

(i) its shares (not being shares entitled to a ﬁxed rate of dividend, whether with or without a fur- ther right to participate in proﬁts) carrying not less than ﬁfty per cent. of the voting power have been allotted unconditionally to, or acquired un- conditionally by, and were throughout the pre- Vious year beneﬁcially held by, the Government or a corporation established by a Central, State or Provincial Act or the public (not including a company to which the provisions of section 113 [23A(1) operative part] apply):

[sec. 23 A, Provided that in the case of any such company: as is Elf?-. 1» °1- referred to in clause (ii) of section 120 [s. 23A, Exp. 2. , this ( H') P'°"'] sub-clause shall apply as if for the words "not less than

-- ﬁfty per cent." the Words "not less than forty per cent." had been substituted; .

(ii) the said shares were' at any time during the pre-

vious year the subject of dealing in any'recognised stock exchange in India or were freely transferable by the holder to other members of the public; and

(iii) the affairs of the company or the shares carrying more than ﬁfty per cent. of the total voting ower were at no time duringthe previous year con _ olleda or held by five or less persons .......... ..:

[scc. 23 A, Provided that in the case of any such company' as is l"gI_pl I 01- (b) referred to in clause (ii)' of section 120 [Sec. 23A E p. 2], (ml P'°"'] this sub-clause shall apply as if for the words "morg than ﬁfty per cent." the words "more than sixty per cent' had been substituted. -

(2) In computing the number of ﬁve or less persons E§;f,',:,,§3,,b',§' aforesaid,-- f )' (a) the Government or any corporation establis Ad by

(iii) main a Central, State or Provincial Act oracomp y to para, latter which the provisions pf ...... .;. section '113 [2 A(1), half, part] operative part] do not apply, shall not be aken into account, and g

(b) personsh who are relative? of org: another ger-

sons w o are nominea 0 any 0 er person o {e er with that other persotrshall be treated as alsingle {SW1 ,3 A person.

Exp . 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .; . . . . . . . . . . . . . . . . . . . . . . . .. clausc (b), E.rplanation.--In this sub-section, the expression :"rela- '!!!"°1'*"3° . tive" ............. me ns husband, wife, lineal ascendant or ("O 1%? descendant, brother gr sisters ' F . . . . . . . . . . . . . . . . . . . . . . . . . . . . us . . . . . . . . . .., . . . . . . . . ..' . . . . . . . . . . . . . . . . . . . . . . ..:. . . . . ..

. I» I « s 169 Clauses 118-120 For the purposes of sections 113 and 114 [23A (1), sub- Section 118 stantive part and (2)], "distributable income" means the <<Dig¢.-ibuta-

total income of a company .... ....... .. as reduced by--

(a) the amount of income-tax and super-tax payable by the company in respect of its total income, but excluding the amount of any super-tax payable under section 113 [s. 28A(1) operative part];

(b) the amount of any other tax levied under any law for the time being in force on the company by the Government or by a local authority in excess of the amount, if any, which has been allowed in comput» V ing the total income; ............. ..

(d) in the case of a banking company, the amount ac- tually transferred to a. reserve fund under section 17 of the Banking Companies Aet, 1949.

For the purposes of sections 113. 114 and 120, [Sec. 23A, sub-section (1) Operative part, sub-section (2) and Explana- tion 2], "investment company" means a 9' dmpmzy whose busi- ness consists wholly or mainly in the dealing in or holding of investments. ' For the purposes of ....... .. ections 113 and 114 [23A(1), substantive part and 23A (')] "statutory percentage"

means,------ T 1

(i) in the case of an investment copipany ....... .. 100%.

(ii) in the case of an In ' company whose business consists wholly in the manuf ture orﬁprocessing of goods or in mining or in the generat n or dikﬁribution of electri-

city or any other form of powqr ........ .................. ..45%.

(iii) in the case of an Indihn com (any, a part only of whose business consists in anylof the ctivities speciﬁed in clause (ii)-- ' 1 '

(a) in relation to the said ;part of the company's busi-

ness ..................................... ..,..' .................. ..45%.

(b) in relation to the remaining pm of the company's business-- 3 ' (1) if it is a company which sa. ' ﬁes the conditions speciﬁed in sub-clause (a) of 1 use (iv) ....... ..90%.

(2) in any other case ............. ....I ................... ..60% the said percentages being applied separately with reference to the amounts of proﬁts and gains attributable to the business aforesaid respectively the t 10f the company's 'd amounts were i the companyin blc inccme".

[s. 2 A (1).

part.

10 of194.g.

Sect, :19 7011 "Investment company."

[New] 120 S. A'.

170

Clauses 120-122 relation to each of its parts, the amount of divi- dends and taxes also being similarly apportioned, for the purposes of sections 113 and 118 [s. 23A (1)--part regarding "Distributable Income"];

(iv) in the case of any other company not referred to in the preceding clauses.-

(a) where the accumulated proﬁts and reserves (includ- ing the amounts capitalised from the earlier re- serves) representing accumulations of past proﬁts which have not been the subject of an orderunder section 113 [s. 23A(1), operative part] exceed the greater of the following, that is to say,--

either I. the aggregate of--

(i) the paid-up capital of the company exclusive of the capital, if any, created out of its proﬁts and gains which have not been the subject of an order under section "113 [s. 23A(1), operative part];

(ii) any loan capital which is the property of the share-

holders;

or II. the actual cost of the ﬁxed assets of the company, %,

(b) where sub-clause (a) does not apply ....... .. 60%.

CHAPTER XII"

DETERMINATION OF TAX IN CERTAIN SPECIAL CASES ~ Section mi Where there is included in the total income of any Detcrmina.- assessee ................ .. any Income on which no income-tax tion of in- is payable by or under_the provisions of this Act, he shall be_ entitled to a 'deduction, from the amount of income-tax which no with which he 'LS chajrgeable on his total income, ;of an income-tax is amount equal to the income-tax calculated at the average payab1¢'[s- I7.rate of income-tax -on the amount on which no income- ('3:P'"'-] tax is payable. ' Section 122 . . . . . , . . . . . .

Tax on "cw participating in a recognised provident fund is inclu ed in mulated his total income, owing to the provisions of sectio 296 balance of [s. 58G(2)] not being applicable, the Income-tam er recognised shall calculate the total of the various sums of income-tax ﬁ::gd°"' and super-tax in accordance with the provisions of section [Neg] 297(1) [s. 58G(3)]_.

(2_) Where the accumulated balance due to an employee participating in a recognised provident fund which is not included in his total income under the provisions of section 296 [Sec_. 58G(2)], becomes p gable, super-tax shall cal- culated in the manner provided by section 297(2) [ G(1) latter half]. '2 f I (1) Where the accumulated balance due to an emgloyee .

. 171 Clause 123 (1) Where the total income of an assessee includes any swim. compensation or other payment which is chargeable as the Tax proﬁts and gains of a business carried on by the managing °.°mP°""- agent, manager or other person, as the case may be, under '['s°T'I'o ( A) the provisions-of section 28(ii), (a), (b), (c) and (d) [10(5A)1a;; gara:

opening lines, clauses (a) (b) (c) (cl) and last para, earlier latter half.] half], the tax payable by him on his total income shall, if he so elects, be-

123

0|?

(i) the income-tax payable on his total income as re-

duced by the amount of such compensation or other payment, at the average rate /of income-tax,

(ii) the super'-tax payable on his total income as re- duced by the amount of such compensation or other payment, at the average rate of super-tax, and

(iii) the tax on such compensation or other payment at the average -of the average rates of income-tax and super-tax applicable to his total income for the three assessment years immediately preceding the assessment year ................ ..

E.7cplanation.--For the purposes of determining the [New] average under clause (iii), the rates of income-tax and super- tacc applicable for any assessment year preceding the assess- ment year shall,'where the assessee had been assessed as a registered ﬁrm, be the rates applicable for such assessment year to an unregistered ﬁrm having the same total income as that declared by the assessee for such assessment year.

(2) Where an assessee is a partner of a registered ﬁrm [NW1 or an unregistered ﬁrm assessed as a registered ﬁrm under the provisions of section 190(b) [23 (5) (b)], and such ﬁrm is in receipt of any such compensation or other payment, the taxbpayable by him on his total income shall, if he so elects, e-- i

(i) the income-tax payable 'on his total income as re- duced by the amount of his share in such compensa- tion or other payment, at the average rate of in- come-tax, '

(ii) the super-tax payable on his total income as reduc- ed by the amount of his share in such compensation or other payment, at the average rate of super-tax, and '

(iii) the tax on his share in such compensation or other payment at the average of the average rates of in- come-tax and super-taag appl' le to his total in- come for the three as ssment years immediately preceding the assessm t year: ~;

12-1 Law. Com/58, 4 ' 172 Clauses 124-125 §>=¢€50§ 124- {3} Where a person is a 'rw'a--residem: and is not a_;com- rax 01;; the pany. _.he_tax .............. .. payable by him or on his be- ;E:';fim_"°"' half on 1115 total income shall be an amount equal to-+-

[s- 37(1) (a) the income-tax which would be payable on his mam para] tatal income at the maximum rate, plus

(b) either the super-tax which would be payable on his total income at the rate of nineteen per cent. or the super--tax which would be payable on his total in- come if it were the total income of a resident, whichever is greater.

E=- I7(I)qst (2) Any nomresidemf, other than a company, may .... .. P"T';"~ °3"""' ........ .. on or before the 30th day of June of the assess- ?" '1 ment year in which he first becomes asseésable, ..... ...... ..

by notice in writing to the Income-tax Ofﬁcer declare §(such declaration being ﬁnal and being applicable to all assess- ments thereafter) that the tax ......................... .. payable by him or on his behalf on his total income shall be deter- mined with reference to his total world income, and Shere- upon notwithstanding the provisions of subsection (1):, such tax shall be determined in accordance with sub-gectioil.' (3).

[._ ,7") m (3) Where under the provisions of sub-section (H) or prom, latter under any similar provision of the Indian Income-tar Act, P3"-If 1922, any non-resident has exercised his option to beltaxed " ° '9" with reference to his total ugorld income. the tax p gable by him or on his behalf on His total income shall be an amount bearing to the total amount of tax .......... ..I ...... .. which would have been payable on his total world i come had it been his total income the same proportion 5 his total income bears to his total world income.

It :7 (I).2nd (4) .......... ..Where any .......... ..person referred to in """"3 sub-section (1) satisﬁes the Income-tax Officer that he was prevented by sufﬁciept cause' from making the declapmtion referred to in that sub-section or in any similar pftmision II $1992 of the Indian Income'-tan: A 1922, on the ﬁrst occa'?'gn on which he became assessable nder this Act or the s ' Act as the case may be, and his failure to make such declration has not resulted in reducing his liability to tax for an' year, the Income-tax Oﬂicer may, with the previous app): val of the Inspecting Assistant Commissioner. allow such erson to make the declaration at 3; time after the expiry of the period specified, and such claration shall have e ct in relation to the assessment for the year in which the clare- tion is made (if such assesmient had notibeeneco pleted before such declaration} and all assessments there ter.

Section r2:;- Where the total income of an assessee. not I ing a if' company, includes any income chargeable under t head cmf?,fassCS_ "Capital gains", the tax. ................... .. payable by im on sesotheg than his total income shall be--

Eim (a) the amount $1' inconjegtax and super-tax payable on panlc (6) .

opegnglincs his total in me as ﬁejzluced by the amount of such 173 Clauses 125-127 inclusion, had the total income so reduced been his total income, plus [s- *x7 _(6) clause (1) part]

(b) an amount of income-tax determined in accordance [s- 1] (6)(ii)' ' with the following formula, that is to say---- mm" Pm") YX99, T--2/3CG where-

X stands for the amount of income-tax referred to in the beginning of this cause.

T stands for the total income of theassessee (which in- cludes capital gains), CG stands for the income chargeable under the head "Capital gains" included in the total income of the ' assessee. and Y stands for the income-tax which would have been payable on the total income of the assessee as re- duced by two-thirds of the amount of the income chargeable under the head "Capital gains" included in his total income. had the total income so reduced been his total income :

Provided that-- [,_ ,3? (5) (ii) s

(i) ....... .. where the total income does _not exceed the P¥°V °-1 sum of ten thousand rupees, the amount payable under clause (b) shall be nil; and

(ii) in no case shall the amount payable under clause

(b) exceeds one-half of the amount, if any, by which the income chargeable under the head "Capital gains" exceeds the sum of ﬁve thousand rupees S€C"lOl'I mfi Where the total income of a company includes any :1?' °;'in:"§;1' income chargeable under the head "Capital gains". the tax case fcom.

payable by it shall be-- paniés.

(a) the amount of income-tam with_'which it is charge- [s. 17(7). able on its total income, and Pa"-l

(b) the amount of super--taa< with which it is charge- able on its total income as reduced by the amount of such inclusion. had the total: income so reduced been its total income.

CHAPTER XIII ' INCOME-TAX AUTHoR.i'rIEs A{----Appointment and control Scc..ion 127.

There shall be the following classes of Income-tax IncDmc_-'_I'ax authorities for the purposes offthis Act, 'namely :-- ""'?'°'"'°'-

(a) the Central Board of _evenue,q ( I." 5m]

(b) Directors of Inspection i ' I c) Commissioners of Inco e-tax, 174 Clauses 127-130

(d) Assistant Commissioners of Income-tax, who may be either Appellate Assistant Commissioners of In- come-tax or Inspecting Assistant Commissioners of Income--tax.

(e) Income-tax Oiﬁcers, and

(f) Inspectors of Income--tax.

(1) The Central Government may appoint as many Di- Section 128. rectors of Inspection, Commissioners of Income-tax, Appel- APP°""' late or Inspecting Assistant Commissioners of Income-tar f(')'::,is_m';fI"' and Income-tax Officers of Class 1 Service, as it thinks ﬁt...

Authorities, . . . . . . . . . . . . . . . . . . . . . .. .. ..

[$616, 5(IA)' ear ier part, _ . _ _ ' 5695(2), (2.) ................... .. The Commissioner may, sub3ect to earlier part, the rules and orders of the Central Government regulating and S°°~ the conditions of service of persons in public services and 39%] mm" posts, appoint as many Income-tax Oiﬁcers of Class II Ser-

[Sm 5(3) vice and as many Inspectors of Income-tax, as he thinks ﬁt.

1'"'°" P3"-3 (3) Subject to the rules and orders of the Central Gov- ernment regulating the conditions -of service of persons in [566-5(3A)l public services and posts, an Income--tax authority may ap- point such executive or ministerial staff as may be neces- sary 1;o assist it in the execution of its functions.

Section 129 (1) Appellate Assistant Commissioners .......... .. shall be g:'c"(:;f;_tax°f under the direct control of the Central Board of Reve-

Authnrities' nue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[Se_c- 5(4), ~ C8.I'll€i' part.] (2) ................ .. Inspecting Assistant Commissioners [Scc. 5 (7) shall be subordinateto the Director of Inspection, and to (M the Commissioner ................... .. within whose jurisdiction they perform their functions. . ' (_t,§§c. 5(7) (3) Income-tax Olﬁcers shall be subordinate to the Di- ll rector of Inspection. the Commissioner .......... .. arid the Inspecting Assistant Commissioner ............. .. within whose jurisdiction they perform their functions.

[Sec- 5 (5A), (4) Inspectors of Income-tar shall be subordinate to the lme' Pa"-1 Income-tax Oﬁicer or other Income-tax authority under whom they are appointed to work and to any other Income- tar authority to whom the said Oﬁicer or authority is subordinate. _ .

Explanation.-----For the purposes of sub-section (2). "Di- rector of Inspection" does not include a Deputy Director of Inspection or an Assistant Director, of Inspection; and for the purposes of sub--section (3), "Director of Inspection"

56650,, ,3.,. does not include an Assistant Director of Inspection.

1"5""'°{)i°'§. (1) All 0ﬂ'icers and persons employed in the execution fate 5';u°trh;_' of this Act shall observe and ollow the orders, instructions ,me,, and directions of the Centria Board of Revenue: ! [Sec 5 (8).] I i j 175 Clauses 130-131.

Provided that no such orders, instructions or directions shall be given so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate functions:

Provided further th.at all such orders, instructions and [NW] directions of a general nature affecting assessees shall be published in the of India Gazette.

(2) The Director of Inspection, the Commissioner or the [Sec 5(7B) Inspecting Assistant Commissioner, as the case may be, may earlier part] issue such instructions as he thinks fit for the guidance of any Income-tax Officer subordinate to him in the matter of any assessment ................ ..

B-Jurisdiction (1) .......... .. Directors of In _ection shall, subject to the Section 13:

control of the Central Board of evenue, perform such func- Jurisdiction tions of any other Income-tax authority as may be assigned Of indome-tax to them by the Central Government. '['S:'c*f°;i'i(°I5A) latter part.] (2) .......... .. Commissioners shall perform their func- [$60.5 (2), A tions in respect of such areas or of such persons or classes latteﬁpart] of persons or of such incomes -or classes of income or of such cases or classes of cases as the Central, Board of Revenue may direct, and where such directions have assigned to two or more Commissioners ............. .. the same area or the same persons or classes of persons or the same incomes or classes of income or the same cases or classes of cases, they shall have concurrent jurisdiction sub-

ject to any orders which the Central Board of Revenue may make for the distribution and allocation of the work to be performed.

(3)~(a) ................ .. Appellate Assistant Commissioners [Sm 5(4), shall perform their functions in respect« of such persons or lame part.] classes of persons or of such incomes or classes of income or in respect of such areas as the Central Board of Revenue may direct, and, where such directions have assigned to 'two or more Appellate Assistant Commissioners .......... .. the same persons or classes of persons or the same incomes or classes of income or the same area, in accordance with any orders which the Central Board of Revenue may make ﬁor the distribution and allocation of the work to be per-

ormed:

(b) The Central Board of Revenue may transfer an appeal from one Appellate Assistant Commissioner to ano- [New] ther.

(4) Inspecting Assistant Co issio rs ............. .. and [S 3 H Income-tax Oﬁicers shall perfo' their' 31 ' 5 5 V nctions. in respect can , pan] of such persons or classes of p rsons 0, of such incomes or 176 A Clause 131 ' classes of income or in respect of such areas as the Com-

,missioner .......... .. may direct, and where such directions [369 5(5), _atter pa.rt.] [Scc. 5 (5A) earlier Part.] [SW 5(5)] [New] [New] have assigned to two or more Inspecting Assistant Commis- sioners ....... .. or Income-tax Officers, the same persons or classes of persons or the same incomes or classes of income or the same area, in accordance with any orders which the Commissioner may make for the distribution and allocation of the work to be performed .......... ..

(5) ............. .. The Commissioner may, by general or special order in writing, direct that the powers coriferred on the Income-tax Officer and the Appellate Assistant Com- missioner by or under this Act shall in respect of any speci- ﬁed case or class of cases or of any speciﬁed person or classes of persons be exercised by the Inspecting Assistant Commis- sioner and the Commissioner respectively. and for the pur- poses of any case or person in respect of which any such. order applies, references in this Act or in any rules made hereunder to the Income-tax Officer and the Appell 'te As- sistant Commissioner, shall be deemed to be refere pces to the Inspecting Assistant Commissioner, and the Commis- sioner, respectively. i func-

them hority tions in the execution of this Act as are assigned t by the Income-tax Officer or other Income-tax au (6) Inspectors of Income-tax shall perform suc|% under whom they are appointed to work ............ ..

. . . . . . . . ..

(7) The Central Board of Revenue may, by notification in the Official Gazette, empower Commissioners. ....... .. Appellate Assistant Commissioners and Income-tax ﬁicers to perform such functions in respect of such classes f per- sons or such classes of income or such area as may b speci- ﬁed in the notiﬁcation, and thereupon the functions 5 speci- ﬁed shall cease to be performed, in respect of the s ciﬁed classes of persons or classes of income or area, by the other authorities appointed under "sub-sections (2), (3) and{ (4).

Such notiﬁcation shall not render necessary the 'V -issue of any notice already issued ' the Income-tax Oﬁic r who was previously exercising such functions.

(8) For the purposes of any case or person in respect whereof an order under sub,»-section (5) applies.---- 2

(a) any provision of Act requiring the a mval or sanction of the linspecting Assistant C m'mis- sioner in any/matter shall not apply;

(b) any appeal which would otherwise lie to the Ap- pellate Assistant Commissioner shall lie to the Oommissionerr; and

(c) any appeal which would have lain from any order of the App late A ' tan: Commissioner' ,- the High Court ll lie': 'm the order of "the C mis- sioner to thy High _ _ rt. i ' i ' 177 Clauses 132-134 (1) The Commissioner .......... .. may, for reasons to sect,~a,,3g be recorded in writing, transfer any case from one In- Tramps, or come-tax Officer subordinate to him to another also sub- case ftomonc ordinate to him, and the Central Board of Revenue may, 1n°°I¥°"3«"

for reasons to be so recorded, transfer any case from any 033°" '° 'm' h .

.......... "Income-tax Officer to any other............ 5(7A) (2) The Commissioner or the Central Board of Reve-

nae, as the case may be, shall, before passing any order an- [New] der sub~section (1), give the assessee cl reasonable oppor- tunity of being heard in respect of the proposed transfer.

(3) The Commissioner or the Central Board of Reve- [New nue, as the case may be, may, in special cases and for reasons to be recorded in writing, dispense with the giving of such opportunity as is referred to in sub-section ((2), but the assessee shall, in every such case, be entitled to make a representation to the Commissioner or the Central Board of Revenue, as the case may be, againa the order of trans- fer within one month of the date on which he comes to know of the order. ' . (4) .......... ..Transfer of a case under sub-section (1)[s.5 (7A), may be made at any stage of the proceedings, and shall mam Pan» no. render necessary the re-issue of any notice already is- 1""? 9"") sued by the Income-tax Officer from whom the case is ' transferred.

Explanation.--In this section, "case", in relation to any [5 (M) person whose name is speciﬁed in the order of the trans-- "M15 fer, means all proceedings under this Act in respect pf ., any year (including a past year) which may be pending on ' the date of the transfer, and, includ 6 -all proceedings un- der this Act which may in respect $ any year (including a past or a future year) be commenced after the date of the transfer .......... .. ' .

Whenever in respectmf any proceeding under this Act Section I33 an Income-tax authority ceases to exercise jurisdiction, 9 angc of and is succeeded by another who has and exercises jurisdic- 1 umbcm °' tion, the Income-tax authority so succeeding may continue[ °'5°°('7C) the proceeding from the stage at which the proceeding was min p'Z,a»_] ' left by his predecessor : 6 6 Provided that the assessee concerned may .demand [' 5' (7C). 18¢ that before the proceeding 'is so continued the previous K "-3 proceeding or any part thereof be re-opened or that be---

fore any order for assessment is passed against him he be ' reheard.

(1) For the purposes of sections 260, 265, 267(2), 271 S-cction :34 and 272 [Section 33(2), earlier partgsection 33(4), section uthnrity 33A. section 33B(1), section 66(1), section 66(2), 66(3), 66(5), '?°;nP¢t¢'1t t9 66(7)] the Commissioner re erred therein shall, in rela-'3 ° °' °°'""

tion to an assessee, be t "Comm aner having for the "° am"

time being jurisdiction V the 3 Nawj mg'.

178

Clauses 134-135 (2) For the purposes of sections 230 to 239 and 275 [section 33(5), sec. 46] the Income-tar Oﬂicer referred to therein shall, in relation to an assessee. be the Income-tax Oﬁicer having for the time being jurisdiction over the as- sessee.

5<=Cti0n I35 (1) Where an assessee carries on a business, profes- Ingo:notax_ sion or vocation at any place, he shall be assessed by the '(B3103 0111:' Income-tax Officer of the area in which that place is situ-

""°'s ate or, where the business, profession or vocation is carried [S' 64(1)] on in more places than one. by the Income-tax Oiﬁcer of the area in which the principal place of his business, pro- fession or vocation is situate. .

[S. 64(2)] (2) In all'other cases, an assessee shall be assessed by the Income-tax Oﬁ'icer of the area in which he resides.

[S64 (3), (3) Where any question arises under this section as to main P*"''-3 the place of assessment, such question shall be deterrrlined» by the Commissioner. or. where the question is between places within the jurisdiction of different Commissioners, by the Commissioners concerned or, if they, are not in agreement, by the Central Board of Revenue:

{S5543}: W Provided that, before any such question is determined. P' "'3 the assessee shall have had a reasonable opportunity of being heard in respect of the question. (4) .......... ..The place of assessment shall not be cal-

led in question by an assessee----

S' ' (a) if he has made a return ............................... .... .. ;[;ro%i(3¢e)ariiI:: , under section' 143(1) [Section 22(1)] and has Parl]- stated therein his principal place of business, pro- fession or vocation, or [g,5,._(3),2,,d (b) (if he has not- made such a return), ....... .. after prov. latter the expiry of the time allowed by the notice under Part-] section 143(2) [sub-section (2) of section 22] or under section 154 [34] for the making of a re- turn.

[s. 64(3), 3rd (5) .... ..If the place of assessment is called in question Prov-l by an assessee, then, subject to the provisions of sub-sedtion (4), the Income-tax Oﬂicer shall, if not satisﬁed withi the correctness of the claim, refer the matter for determination under sub-section (3).before assessment is made.

[s. 64(4)] (6) Notwithstanding anything contained in this ';sec- tion,» every Income-tax Oﬁicer shall have all the powers conferred by or- under this Act on an Income-tax Oﬂicer in respect of any income .......... ..accruing, or arising or received within the area for which he is appointed. 2 [g_ 54(5)] (7) The provisions of sub~section (1) and sub-section (2) shall not apply .......... ..to any assessee---

(a) on whom an assessment ..or re-assessment for ,.u the purposes of th Act hajsﬁbeen, is being or is t be made in the c e of any case in respect of w$ich E i .

179

Clauses 135-136 a Commissioner .......... .. appointed without refer- ence to area under section 131(2) [Sec. 5(2), latter part] is exercising the functions of a Commissioner, . . . . . . ..'....OI'

(b) where by any direction given or any distribution or allocation of work made by the Commissioner .......... ..under section 131(4)......[Sec. 5(5), earlier- part] or in consequence of any transfer made un- der section 132 [Sec. 5(7A), main para], a particular Income-tax Officer has been charged with the function of assessing that assessee, or

cation issued under section 131(7) [S. 5(6)]; but the assessment of such person; ......... ..shall be made by the Income-tax Ofﬁcer for the time being charged with the function of making such assessment by the Central Board of Revenue or by the Commissioner .......... .. to whom he is subordinate, as the case may be. .

C--Powers.

(1) The Income-tax Ofﬁcer, Ap ellate Assistant Com- 36°"-"' 135 missioner and Commissioner .... ..shall," for the purposes of *'9""'-"' .'°3'"' this Act have the same powers as are vested in a court d'"gm'3i':°c':i'; under the Code of Civil Procedure, 1908 when trying ;¥'p¢vid,,n¢., a suit in respcet of the following matters, namely- :~-- etc.

(a) discovery and inspection; [Sec-37(1)]

(b) enforcing the attendance of any person, inc1uding5°"9°3 any officer of a banking company and examining him on oath;

(d) issuing commissions.

(2) Where any Income-tax authority exercises ' any powers referred to in sub-section (1),. it shall follow, so far as may be, the same procedure as a court under the said Code. ' (3) Subject to any rules made in this behalf, any au- [Sec-137(3)] thority referred to in sub-section (1) may impound and retain in its custody for such period as it thinks ﬁt any books of account or other documents produced before it inany proceeding under this Act:

Provided that an Income-tax Ofﬁoer shall not----

(a) impound any ooks of account or' other documents without recording his reasons for so doing, or [New]

(b) retain in his custody any such books or documents for a period exceedin ﬁfteensdays (exclusive of holidays) without obt ining tlle; approval of the Commissioner therefor; 4 ' - -

180

'Clauses 136-138 [New] _ (4) Where any person, whether a party to the proceed- ing or not, is desirous of receiving back any book of ac- count or other document produced by him in any pro- ceeding under this Act before any Income-tax authority, the Income-tax authority may, unless the book 'of account or other document is impounded under sub-section (3), re-

turn the same to such person on an application made for the purpose.

[3- 37(4)] _ (_5) Any proceeding before any authority referred to in this section shall be deemed to be a judicial' proceeding within the meaning of sections 193 and 228 and for the-_ 45 of186o purposes of section 196 of the Indian Penal Code.

Section 137- Subject to any rules made in this behalf, any Income-

Powers of s§- tax Ofﬁcer specially authorised by the Commissioner in arch and 5°" this behalf may,---- _ ZUYC. .7 [5- 37(9)} (i) enter and search any building or place where he has reason to 'believe that any books of account or other documents which in his opinion will beiuse- ful for, or relevant to, any proceeding under this Act. may be found, and examine them, if fdund;

(ii) seize any such booksiof account or other documents and have them removed to his oﬁice, if necpssary;

(iii) place marks of identiﬁcation on any such books of account or -other documents or make or cause to be made extracts or copies therefrom;

(iv) make a note or an .inventory of any articles or things found in the course of any search under this section which in his opinion will be useful fox; or relevant 'to, any proceeding under this Act;

5 of 1393- and the provisions of the Code of Criminal Proce- dure, 1898, relating to searches shall apply, so far as may be, to searches under this section.

a Section X38 The Income-tax Olﬁcer, _the Appellate Assistant Com- powc, to can missioner or the Inspecting ?Assistant Commissioner may, or inrorma- for the purposes of this Act,----- 3 - U011. .

[SW 33] (1). require any ﬁrm .... .:to furnish him with a return of the names and addresses of the partners of the ﬁiirmvand their respective shares;

(2) require any Hindu undivided family to furnish him with a return of the names and addresses of thb man- ager and the members of the family;

(3) require any. person whom he has rea n to believe to be a trus ee, guadian or agent, to furni h him with a return of th names3>ﬁ the persons fpr or of whom he is trustee, guard or a' ept, and of their addr es;

181' Clauses 9.138-141 (4) require any assessee to furnish a statement of the names and addresses of all persons to whom he has paid in any previous year rent, interest, commission, royalty or brokerage, or any annuity, riot being an annuity taxable under the head "Salaries", amounting to more than four hundred rupees, together with particulars of all such pay- ments made;

(5) require any dealer, broker or', agent or any person concerned in the management of a 'stock or commodity Ex- change to furnish a statement of the ' names and addresses of all persons to whom he or: the Exchange has paid any sum in connection with the sale. exchange or transfer of a capital asset, or on whose behalf or from whom he or the Exchange has received any such sum. together with parti- culars of all such payments and receipts;

(6) require any person, including a banking company or any officer thereof. to furnish i Vormation in relation to such points or matters, or to furnish statements of ac- counts and affairs veriﬁed in the manner speciﬁed by the Income-tax Officer. the Appellate Atsistant Commissioner or the Inspecting Assistant Commissioner, giving informa- tion in relation to such points or matters as, in the opinion of the' Income-tax Ofﬁcer, the Appellate "Assistant Commis- sioner or the Inspecting Assistant Commissioner, will be useful for. or relevant to, any proceeding under this Act.

The Income-tax Officer, the Ag) fllate Assistant Com- section .39 missioner or the Inspecting Assis nt Commissioner, or _P§Wcr *0 any person subordinate to him authorised in writ--1 * "Sit:

ing in this behalf by the Income-tax,.Oﬂicer, the Appellate: pmics_° Assistant Commissioner or the Inspecting Assistant Com- [,4_ 393 missioner, may 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 of any entry in such register. » i The Director of Inspection. the Commissioner and the l5_;°°"°n 14°' Inspecting Assistant Commiqsionerﬂzi. ll be competent to Em" 3; makqany enquiry under this'Act, a A" gar this purpose shall Inspection have all the powers that an Income-tax Officer has under and Inspect- this Act in relation to the making oﬁ enquiries. '$8 rsctc.

[. 5 (713).

limcrpmt.] D--DiscIosurei of information. , (1) All particulars contained in": any statement made. %_¢'i°n 14!' return furnished or accounts or documents produced under i» the provisions of this Act, or -in any; evidence given, or af- ,oh;b;.cd_ fidavit or deposition made, in the course of anv proceedings . 54 (in under this Act, other than proceedin under Chapter XXIII ' [Existing Chapter VIII-Oﬁences an? penalties], or in any A record of any assessment ﬁancee ' °f '87' , or any proceed-

demand, prepared , : shall be {treated ing relating' to the recov of a for the -purposes of 's v r I of 1872 [S- _54 (2), earlier part] Is-54 (3) (a)] 45 of 1860 [s- 54 (3)(b)] [New] [S- 54 (3) (0)1 [S- 54 (3) (d)] [New] [9 of 1908 1 of 1956 I82 Clause 141 as confidential, and notwithstanding anything contained in the Indian Evidence Act. 1872, no court shall, save as pro- vided in this Act, be entitled to require any public servant to produce before it any such return, accounts, documents or record or any part of any such record, or to give evidence before it in respect thereof. .

(2) No public servant shall disclose any particulars contained in any such statement. return, accounts, docu- ments, evidence, aﬂidavit, deposition or record .......... ..

(3) Nothing in this section shall apply to the disclo- sure----

(a) of any such particulars for the purposes of a prose- cution for any offence under the Indian Penal Code, 1860 in respect of any such statement, return, accounts, documents, evidence, affidavit or deposi- tion, or for the purposes of a prosecution for any oﬁence under this Act; or of any such particulars to any person acting in, the execution of this Act .... ..where it is necessary or desirable to disclose the same to him for the pur- poses of this Act .... ..; or

(b)

(c) the substance of any material to an assessee, being relevant material gathered for the purposes of making an assessment under section 147(3) [Sec- tion 23(3)] or under section 148 [Section 23(4)], without disclosing any information which might enable the assessee to identify the person to whom the material relates; or

(d) of any such particulars, where the disclosure is oc- casioned by the lawful employment under this Act of any process for the service of any notice or the recovery of any demand; (or

(e) of any such particulars to a civil. court in any suit or proceeding to which Government or 'any Income-tax authority is a party, which relates to any matter arising out of any proceeding under this Act or under any other law for the time being in force authorising any Income-tax authority to exercise any powers thereunder; or

(f) (i) of any such particulars contained in any ac- counts, or

(ii) of any registered document of which a certiﬁed copy can be obtained under the provisions of the Indian Registration Act, 1908, or i

(iii) of a balance sheet' or audit report or proﬁ and lossoccounts led u 17 the Companies Act, , 956, or any other ct rel ing to companies, 183 Clause 141 l to a civil court in any suit orlproceeding to which (3) {hi (1)

(j) of any such particulars relevant to any inquiry

(ii) (1) of such facts. to an authorised ofﬁqer of the Gov-

the person who produced the accounts, registered document, balance sheet, audit report or profit and loss account, or his representative-in-interest, is a party, if the particulars, registered document, ba- lance sheet, audit report, or proﬁt and loss account are relevant to any matter in issue in such suit or proceeding;

of any such particulars to the Comptroller and Au- [s. 54 (3) (c} ditor-General of India for the purpose of enabling him to discharge his functions under the Consti-

tution; or oi any such particulars to any officer apoointed by [5, 54(3) (r; the Comptroller and Auditor-General of India or the Central Board of Revenue to audit income-tax receipts or refunds; or of any such particulars, relevant to any inquiry [Se-:. 54 (3) into the conduct of an ofﬁcial of the Income-tax (S) Department. to any persons appointed Commis-

sioners under the Public Servants (Inquiries) Act, 1850, or to an otﬁcer otherwise appointed to hold 37 oflB50 such inquiry, or to a Public Service Commission established under the Constitution, when exercis-

ing its functions in relation to any matter arising out of any such inquiry; or Es . 5+ . (3) into a charge of misconduct in connection 'with 35-] income-tax proceedings against a legal practitioner or chartered accountant. to the authority referred -

to in section 324 (3) [Section 61(3)], when exer-

cising the functions referred-tlo in that sub-section .......... .., or ~ of any such particulars by any public servant, [Scc. 54 (3)- where the disclosure is occasioned by the lawful (bill exercise by him of his powers under the Indian Stamp . Act. 1899. to impound an insuﬁiciently 90f 1599 stamped document; or [ - (> 5"' 3 ernment of any country outside India which has entered into an agreement with India for the grant- ing of relief in respect of or avoidance of double tax_ation .... .., as may be necessary for the purpose of enabling such relief or a refund under section 92 [49A] to be given or such avoidance under that section to be made effective ; or

(m) of such facts, to an oﬂicer of a State Government I3'-'€« 5-4. {3} as may be necessary for the purpose of enabling,'-W that Government to; levy at realise any tax im- f posed by it; or ' 3 t * [New] 54 (3) 7 of 1878 54 (3) [Scc- 54 (3)

(m).] [Sea 54 (3) (HM [Sea 54 (3) (9)-] [Sea 54 (3)

(p).] 31 of 1950 560- 54(4)] [NW] Section 142.

Saving regar-

ding Volun- tary disclosu-

184

Clauses 14~1-142

(n) of such facts, to an officer of the Central Govern- ment as may be necessary for the purpose of en- abling that Government to levy or realise any tax imposed by it; or

(o) of such facts, to any authority exercising powers under the Sea Customs Act, 1878, or any Central Act imposing a duty of excise as may be neces- sary for enabling it duly to exercise such powers; or

(p) of such facts, to any person charged by law with the duty of inquiring into the qualiﬁcations 'of electors as may be necessary to establish whether a a person is or is not entitled to be entered on an electoral roll; or

(q) of so much of such particulars, to the appropriate authority, as may be necessary to establish whe- ther a person has or has not been assessed to in- come-tax in any particular year or years, where under the provisions of any law for the time be- ing in force such fact is required to be established; 01'

(r) of such particulars to the Reserve Bank of India as are required by that Bank to enable it to ;com- pile ﬁnancial statistics of international investment and balance of payments; or

(s) of such information as may be required by any officer or department of the Central Government or of a State Government for the purpose qf in- vestigation into the conduct and affairs of; any public servant; or

(t) of any such particulars to the Custodian of [Eva- cuee Property appointed under the Administ tion of Evacuee Property Act, 1950, for the purp e of enabling him to discharge the duties imposed %upon him by or under the said Act. ' (4) Nothing in this sectionshall apply to the produc- tion by a public servant before a court of any document, declaration or aﬂidavit ﬁled, or the record of any state- ment or deposition made _in a proceeding under section 181 [25A] or sections 191 to 193 or._ to the giving of evidente by a public servant in respect thereof. . ' (5) In this section, "public servant" means any public servant employed in the execution of this Act.

Nothing in section 141 [54(1), 54(2) and' 54(3), as re- duced in preceding section] shall prohibit the voluntary disclosure of any particulars referred to in sub-section (1) res by persons of that section, by the person by whom the statement was making . [New] thc made, the return fu SKECCIIICIH CIC.

'shed, t e, accounts or documen _pro- duced, the evidence iven it-he affidavit or depo tion made, as the case ma be. ' i8-5 ~ Clause 143 CHAPTER XIV PROCEDURE FOR ASSESSMENT (1) (a) Every person, .......... ..if his total income, or the Section I_4,3 total income of any other person in respect of R°""" °f"1' which he is assessable under this Act, during °°m°' the previous year exceeded the maximum [s. 22 0)] amount which is not chargeable to income-tax shall furnish, to the Incomegtaa: Officer having jurisdiction to assess him, on or before the 30th day of June of each: ﬁnancial year, a return of his income or the income of; such other person during the previous year, in the prescribed form and veriﬁed in the prescribed manner and set-

ting forth .......... ..such -other particulars as may be prescribed:

Provided that the Income-ta;x Office; may in his discre- tion extend the date for the delivery of the return in the case of any person or class of persons:

Provided further that no such return need be furnished by any such person if he has already furnished a return - of income for such year in accordance with the provisions of sub-section (2) .......... ..[22(2)].

(b) Where a return of income has been sent under .

clause (a) to an Income-tan: Officer who has no jurisdiction to make the essment, it shall be his duty to forwartl the urn to the Income- taa: Oﬂicer having jiurisdictibn.

_ (2) In the case of any person whd. in the Income-tax ts. 22 (9)1- Oﬂicer's opinion .......... .., is assessable wider this Act, whe- ther on his own total income or on theitotal income of any other person during the previous year, the Income-tax Offi- cer may before the end of the relevant assessment year ; serve a notice upon him requiring him to furnish, within i thirty days from the date of service oﬁ the notice, a return of his income or the income of such other person during that

-year, in the prescribed form and veriﬁed in the prescribed manner and setting forth ..... other particulars as may be prescribed ..........

Provided that the Incorné-tax Officer may, in his dis- cretion, extend the date for the delivery of the return.

(3) If any person ........... ..has sustained a loss .......... ..in [s.;22 (2-A). any previous year under the head 'Proﬁts and gains of busi- P3-it-1 ness, profession 'or vocation', and such =1oss or any part there- of would ordinarily have been carried forward under sec- tion 73(2) or 74(2) [Sub-section (2) of section 24], such per- son. or the person assessable 'n resp: of the total income of- such person. shall, if he not be ' ed with a notice h under sub-section (2), .... .. ' h:on.f: before the 3o§h.dq'y ! E --' E [s- 22 (3)1 Ls- 22 (5)) Section I . Return whom to signed.

[New] Section I145. _ .

provisional receipt of a return, niade un assessment. make, in a summary; mann ,a provisional assessm_nt of, 2 'J 186 Clauses 143-145 of June of the assessment year or within such further time as the Income-tax Oﬁicer in any case may allow. a return of loss in the prescribed form and veriﬁed in the prescribed manner and containing such other particulars as may be prescribed; and all the provisions of this Act shall apply as if it were a return under sub--section (1).

(4) If any person has not furnished a return within the time allowed by or under sub-section (1) or sub--section (2), or having furnished a return under either of those sub- sections discovers any omission or Wrong statement therein, he may furnish a return or a revised return. as the case may be, at any time before the assessment is made.

(5) The prescribed form of the returns referred to in sub--sections ( 1), (2) and (3) shall, in the case of an assessee engaged in any business, profession or vocation, require him to furnish particulars of the location and style of the prin- cipal place wherein he carries on the business, profession or vocation and of the branches thereof. the names and ad- dresses of his partners, if any, in such business, profession or vocation and the extent of the share of the assessee and the shares of all such partners in the proﬁts of the busi- ness, profession or vocation and any branches thereof;

The return under section 143 [22(1) or 22(2) or 22(3)] 45: shall be signed and veriﬁ.ed----

(a) in the case of an individual, by the individual him- self; where the individual is absent from India, by some person duly authorised by him in this behalf; and where the individual is mentally incapa 'tated from attending to his affairs, by his guard 11. or committee or by any other person competent ;to act on his behalf;

(b) in the case of a Hindu undivided family, by the Karta, and, where the Karta is absent from India or is mentally incapacitated from attending to his , affairs, by any other adult member of such family;

(d) the case of a firm, by any partner thereof, not be- mg a minor; '

(e) in the case of any other association, by any member of the association or the principal oﬁicer thereof; and

(f) in the case of any other person, by that person or by some person competent to act on his behalf.

( 1) The Income-tax Officer may, at any time aft r the 1' section l43[22], pr ed to 4 : i ~ 187 Clause 145 the tax payable by the assessee, on the basis of his return [s. 2_3B (1), and the accounts and documents, if any, accompanying carlwr part] it ................... ..

(2) In making any assessment under this section due [at 233 (I). effect shall be given 190-. 13"" Pam]

(a) the allowance referred to in section 32(2) [para (b) of the proviso to section 10(2)(vi)], and

(b) any loss carried forward under section 73(2) or 74 <_2) [24(2>1.

(3) A partner of a ﬁrm may 'be provisionally assessed [s. 23 B (2)] under sub-section (1) in respect of his share in the income of the ﬁrm, if its return has been received, even if the return of the partner himself has not been received.

(4) A ﬁrm may be provisionally assessed under sub- [=- 23 3 (3)1 section (1) as an unregistered ﬁrm, except in the following cases, where it shall be assessed as a registered firm-

(a) where the firm was assessed as a registered ﬁrm for [Ncw. see the latest assessment year for which its assessment N°'iﬁ¢8ti°n has been completed, and it has before the date 1I"°'33:ff prescribed for the purposes of this clause, ﬁled its 52,433,, of application for registration or declaration under Finhncc, section 191(7) [section for declaration] for the as- R.¢*5=I}"° sessmgnt year for which the provisional assessment D"'"'°"-1 is to be ma e;

(b) where no regular assessment has been made on the ﬁrm for any assessment year preceding the assess- ment year for which the provisional' assessment is to be made, and the firm has, before the date pres- cribed for the purposes of this clause, filed its appli- cation for registration, or declaration as aforesaid, for the assessment year for which the provisional assessment is to be made.

(5) After a regular assessment hw been made .... ..any [3, ,3 B (7) amount paid' or deemed to have been paid towards the pro- visional assessment made under sub-section (1) shall be deemed to have been paid towfards the regular assessment; andwhere the amount paid or deemed "to have been paid towards the provisional assessment exceeds the amount pay- able under the regular assessment, the excess shall be re- funded to the assessee.

(6) Nothing d-one or suffered by reason or in consequ- [s- 23 B (8)1 ence of any provisional assessment made under this section shall prejudice the determination, on- the merits, of any , issue which may arise in the tourse of 'the regular assess- ment ........ .. 5 4 13-1 Law Com.I58 i :0 [=- 23 13 (4)1 Section 14.6.

Enquiry be-

fore asses-

sment.

Is~ 22 (4)] [New] [New] Section 1 47 Assessment.

[=- 23 0)] [s- 23 ml 188 Clauses 145-147 (7) There shall be no right of appeal against a provi- sional assessment made under sub-section (1).

(1) For the purpose of making an assessment under this Act, the Income-tax Ofﬁcer may serve on any person who has made a return under section 143(1) [22(1)] or section 143(3) [22(2A)] or upon whom a ﬁotice has been served under se_ct'1on 143(2) [22(2)] (whether a return has been made or not), a notice requiring him, on a date to be there- in speciﬁed,--

(i) to produce, or cause to be produced, such accounts or documents as the Income-tax Ofﬁcer may require, or

(ii) to furnish in writing and veriﬁed in the prescribed manner information in such form and on such points or matters (including a statement of all as- sets and liabilities of the assessee, whether inclu- ded in the accounts or not) as the Income-tax Offi- cer may require : .

Provided that the previous approval of the Commis- sioner shall be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts:

Provided further that the Income--tax Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year.

(2) For the purpose of obtaining full information 'in respect of the income or loss of any person, the Income-tax Oﬂicer may make such enquiry as he considers necessary.

(3) The assessee shall, except where the assess-

ment is made under section 148 [s. 23(4), part regarding best judgment assessment], be given an opportunity of rebutting the substance of any material gathered on the basis of any enquiry under sub-section (2) and proposed to be utilised- for the purpose of the assessment.

(1) Where a return has been made under section 143 [22] and the Income-tax Officer is satisﬁed without requir- ing the presence of the assessee or the production by him of any evidence that the retum .......... .. is correct and§com- plete, he shall assess the total income or loss of the assessee, and shall determine the sum payable by him or refundable to him on the basis of such return. ' (2) Where a return has been made under section 143 [22] but the Income-tax Oﬂicer is not satisﬁed without re- quiring the presence of the person who made the return or the production of evidence thgat the return ............. cor- rect and complete, h shall 'r,ve on such person a otice requiring him, on a ante to e therein speciﬁed, eit er to E i ,= L 189 Clauses 147-149 attend at thellncome-tax Ofﬁcer's ofﬁce or to produce, or to cause to be there produced, any evidence on which such person may rely in support of the return.

(3) On the day speciﬁed in-the notice issued under sub- [s. 23 (3)] section (2), or as soon afterwards as may be, the Income-tax Officer, after hearing such evidence as such person may pro- duce and such other evidence as the Income-tax'Ofﬁcer may require, on speciﬁed points, and after taking into account all relevant material which the Income-tax Officer has gathered and which the Income-tax Officer is competent to take into account, shall, by an order in writing, assess the total income or loss of the assessee, and determine the sum payable by him or refundable to him on the basis of such assessment.

(1) If any Person'' Section 148.

(a) fails to make the return reguired by any notice 3°" J"dS' given under section 143 ( ), [sub-section (2) 0 mm. section 22] and has not made a return or a revised - return under section 143(4) [sub-section (3) of sec- [5- .23 (4)

- main para, non 22]! or earlier part

(b) fails to comply with all the terms of a notice is- sued under section 146(1) [sub-section (4) of sec- tion 22], or

(c) having made a return, fails to comply with all the terms of a notice issued under section 147 [section re: assessment under 23(1) (2) & 23(3)], the Income-tax Officer, after taking into account all rele- vant material which the Income-tax Officer has gathered and which the Income-tax Oﬁicer is competent to take into account, shall make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment.

(2) The Income-tax Officer shall, in every order under [NC-W] sub-section (1), refer to the material on the basis of which the assessment is made.

f ment. Assess-

For the purposes oflsections 147 and 148, [two preced- section :49.

ing sections regarding assessment and best judgment] the "R lcyagt relevant material which the Income-tax Officer is compe- '""l°"a' gent to take into account in respect of an assessee inclu- [Ndw] es----

(a) market conditions in the previous year of the trade in which the assessee -was engaged in the previous year,

(b) rates of proﬁts disclosed by the accounts of other persons engaged in the same ﬁne of trade, and

Section I 50- Mcthod of accounting.

[s. 13, main para] [s. 13, Provi-

so, part] [s. 13, Provi-

so, part.] Section 151.

Reopening of assessment at the instance of the asses-

566. [S. 27] Section 152.

Income es-

caping assess-

mcnt.

[s- 34 first clause part.] £5.

rst clause part] .

(I)~ para, (3') 2 34 0)' para, (13).

\ ' 190 Clauses 150-152 (1) Income ....... .. chargeable under the head "Proﬁts and gains of business, profession or vocation" or "Income from other sources" shall be computed .... .. in accordance with the method of accounting regularly employed by the assessee: . , Provided that, if, though the accounts are correct and complete to the satisfaction of the Income-tax Officer, the method employed is such that, in the opinion of the In- come-tax Officer, the income ....... .. cannot properly be de- duced therefrom, then the computation shall be made upon such basis and in such manner as the Income-tax Oiﬁcer may determine.

(2) Where the Income-tax Oﬂicer is not satisﬁed about the correctness or the com leteness of the accounts of the assessee, or where no met 0d of accounting has been re- gularly employed by the assessee, the Income-tax Oﬂicer may make an assessment in the manner provided in sec- tion 148 [23(4) main para, part regarding best judgment assessment].

\ Where an assessee assessed under section 148 [23(4)] makes an application to the Income-tax Officer, within one month from the service of a notice of demand issued in consequence of the assessment, for cancellation of the assessment on the ground---

(i) that he was prevented by suﬂicient cause from making the return required by section 143 [22], or

(ii) that he did not receive the notice issued under section 146(1) [22(4)] or section 147 [23(2)], or

(iii) that he had not a reasonable opportunity to comply, or was prevented by sufﬁcient cause from comply- ing, with the terms of the ....... .. notices referred to in clause (ii), --

the Income-tax Officer shall, if satisﬁed about the exis-

tence of such ground, cancel the assessment and proceed to make a fresh assessment in 'accordance with the provi-

sions of sections 147 and 148 [section 23] If--

(a) the Income-tax Officer has reason to believe; that by reason of the omission or failure on the part of an assessee to make a return of his income tmder section 143 [22] for any assessment year or to dis- close fully and truly all material facts necessary for his assessment for that year, income .... .. char-

geable to tax has escaped assessment for that year, or

(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Oﬁicer has in§con- sequence of informatipn in his possession reason I91 Clauses 152-155 to believe that income . .. chargeable to tax has escaped assessment for any assessment year.

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

he may, subject to the provisions of sections 153 to 159 [9- 34 [other sections in group dealing with escaped in- 22"] come] assess or reassess such income ....... .. or recompute P the loss or the depreciation allowance, as the case may be, - for the assessment year concerned (hereafter in sections 153 to 159 [other sections in the group for escaped income] referred to as the relevant assessment year).

(1)

para 0 Ea:planation.---Production before the Income-tax Ofﬁ- [s. 4 (1) cer of account books or other evidence from which mate- Expll rial evidence could with due diligence have been discover- ed by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section.' ............ ..

' For the purposes of section 152 [section regarding in- Section :53. come escaping assessment], the following shall also be "1I!°°m'= deemed to be cases where income chargeable to tax has h';_ escaped assessment, namely----

sessmcnt"

Meaning.

(a) where income .... ..chargeable to tax has been un- 34 (,)_ der-assessed; or rs! pan, clause (3.),

(b) where such income .... .. has been assessed at too part, and low a rate ; or - clause (b), part].

(c) where such income has been made the subject of excessive relief under this Ant; or

(d) where excessive loss or depreciation allowance has been computed. c (1) Before making the assessment, reassessment, or re- SW50" I53, computation under section 152 [section regarding income whm escaping assessment], the Income-tax Officer shall serve on g,-Nome M, the assessee, or, if the assessee is a company, on the prin- esqaped as-

cipal officer thereof; a notice containing all or any of the ==Sm¢nt~ requirements which may be included in a notice under [:1 34 (1), section 143(2) [section 22(2)]; and the provisions of this '°¢°"d P3"- Act shall, so far as may be, apply accordingly as if the 94"] notice were a notice issued under that sub-section.

(2) The Income-tax Oﬂicer shall, before issuing any [so 34 (I) notice under this section, record his reasons for doing so... must PE§i")' ' part.) \ (1) The notice under section 154 [section regarding So'ction_ 355. notice] may, subject to the provisions of sub-section (2)'f"m°'1!m"

and of section 157 [section regarding sanction], be issued-- °'"°"°°'

(a) in cases falling under clause (a) of section 1525* 34 ('ls [section .... .. regarding' income escaping assess- ;°:,°t3'd pan' ment],----

(i) at any time, if the 'ncome..,.......chargeab1e to tax [" 34 M' "' . . . cl which has escape assess ent or has been un-( °v' 1:3:

der-assessed or asﬁassed a gtpo a low rate or hash i put] 3 [s. 34 (1), ist Ptov., clause

(ii), latter half, part-

modiﬁed] 0 II of 1922 [S' (I): [st Prov. Cl. (ii) earlier half] ' [s- 34 (I) second para, part] [s~ 34 2nd l'rov.] Section 156.

Provision for cases where assessment is in pursuance of an order on appeal etc_ [s- 34 <3)» 2nd Prov.

latter half, part Section 157.

Sanction for issue of notice.

[s. 34, (i), ist Prov. .

(iii), part] (1)5.

192

Clauses 155-157 been made the subject of excessive relief under this Act, or the loss or depreciation allowance which has been computed in excess, amounts to or is likely to amount to ﬁfty thousand "upees or more for the relevant assessment year;

within a period of sixteen years fromthe end of the relevant assessment year, where the case does not fall under sub-clause (i) of this clause and the income chargeable to tax which has escaped assessment or has been under-assessed or assessed at too low a rate or has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1922, or the loss or depreciation allowance which has been computed in excess under this Act or under the said Act, amounts to or is likely to amount to one lakh of rupees or more in the aggregate for the sixteen assessment years (including assess- ment years under the said Act) immediately pre- ceding the assessment year in which such notice is issued; ' within a period of eight years from the end of the relevant assessment year, in any other case;

(b) in cases falling under clause (b) of section 152 [section regarding income escaping assessment], within a period of four years from the end of the relevant assessment year.

(2) .... ..If the person on whom a notice under section 154 [section re: notice] is to be served is a person tredted as the agent of a non-resident under section 173 [s.,43] and the assessment or reassessment to be made in pursu- ance of the notice is to be made on him as agent of such non-resident, the notice shall not be issued after the ex- piry of a' period of two years from the end of the relevant assessment year. ' Notwithstanding anything contained in sub-section; (1) or sub-section (2) of section 155 [preceding section], :but subject to the provisions of section 157, [section regar ing sanction], the notice under section 154 [section regar ing notice] may be issued at any time for the purpose of mak- ing an assessment or re-assessment on the assessee or 'any person in consequence of or to give effect to any ﬁnding or direction contained in an order under section 259, 3263 269, 271, or 272 [section 31, 33, 33A, 33B, 66 or 66A] passed in the case of the assessee. '

(ii)

(iii) (1) No notice shall be issued under section 154 [sec-

tion regarding notice] after the expiry of eight years from the end of the relevant assessment year, unless the Gen- tral Board of Revenue .... .. is satisﬁed on the reasons re-

; corded by the Income-ma: that ittis a ﬁt case or the issue of such notice} 193 Clauses 157-160 (2) No notice shall be issued under section 154 [section 34 (I)..lSt _ regarding notice] after the expiry of four years from the 'Um' end of the relevant assessment year, unless the Commis- sioner is satisﬁed on the reasons recorded by the Income- tax Officer that it is a ﬁt case for the issue of such notice.

(1) In an assessment or re-«assessment made under Section 158' section 152 [section regarding income escaping assessment], 0.93" Pm' the tax shall be chargeable at the rate or rates at which it '"s'°"s would have been charged had the income .... ..not escaped as- ['r'o5:4](') 2"' sessment or full assessment, as. the case may be. P ' (2) Where an assessment is reopened in circumsta_n-- [8- 34 (2)1 ces falling under clause (b) of section 152 [section regard- ing income escaping assessment], the assessee may, if he has not impugned any part of the original assessment order for that year either under sections 254 to 256 [30] or under section 272 [33A], claim that the proceedings under section 152 [section regarding income escaping assessment] shall be dropped on his showing that he had been assessed on an amount or to a sum not lower than what he would be right- ly liable for even if the items alleged to have escaped asses- sment had been taken into account, or the assessment or computation had been properly made:

Provided that in so doing he shall not be entitled to reopen matters concluded by an order under section 271 [33B] or section 161 or 162 [35] or -by a decision under section 263 [66] or section 269 [66A].

An assessment or re-assessment under section 152 Sfclion I59« [section regarding income escaping ssessment] shall be ga ff' mg:

completed within the time, if any, limi ed by section 160 [34 1- , go, ' E2" p:l'ction.

(1) No order of assessment .... .. shall be made under Section' _z69. section 147 or 148 [23] .... .. at any time after-- 4 E1r'1|°cOn1l'p'1£1;f

(a) the expiry of _four years from the end of the ass-"O Ofasserslz essment year in which the lnqoine ....... .. was ﬁrst 2°-"' mints assessable; or [,_ 34 (3), main para, parﬂ

(b) the expiry of four years fromthe issue of a notice [Now] under section 283(1) [28(3)], 'n, a case falling under (Contrast _s.

section 280(1) (c) [s. 28(1) (c)]; or 34- 3): "W"

_ pa , words "o cr than _ _ . . applies").

(c)]the expiry of one year from the date of the ﬁling [NW] of a return or a revised return under section 143 (4) [23(3)];

whichever is latest.

(2)' No order of assessment or re--assessment shall be [NW] made under section 152 [section re :=-income escaping as- , sessment]-- =' _ i -, ' '

(a) where the assessrnewit or 1-e+1fsessment is to be (3), para, [=- , 34 main part] [s.

[St 34 (3), Prov.] [s- 34 (3).

and Prov.

earlier half] is. 34 (3).

ov 2nd .

latter half, part] [s. 5 (7C):

2nd Prov.] [New] [New] 194 Clause 160 made under clause (a) of that section .... .., [sec- tion re: income escaping assessment], after the expiry of four years from the end of the assess- ment year in which the notice under section 154 [section re: notice] was served;

(b) where the assessment or re-assessment is to be made under clause (b) of that section [section re:

income escaping assessment], after--

(i) the expiry of four, years from the end of the assessment year in which the income was first assessable, or the expiry of one ear from the date of service of the notice un er section 154, [section re:

notice], whichever is later.

( 3) The provisions of sub-sections (1) and (2) shall not apply to the following classes of assessments and re-assess- ments, which may be completed at any time-

(i) where a re-assessment is made under section 15] ( ii) 3

(ii) where the assessment or re-assessment is made on the assessee or any rson in consequence of7or to give effect to any ding or direction contained in an order under section 259, 263, 269, 271, or 272 [section 31, 33, 33A, 33B, 66 or 66A].

Explanation 1.-- ....... .. In computing the period of ii- mitation for the purposes of this section, the time talien in reopening the whole or any part of the proceedin 101- in giving an opportunity to the assessee to be rehear under section 133, Proviso [5 (7C) 1st Prov.], or any period dur- ing which the assessment proceeding is stayed by an order or injunction of any court, shall be excluded.

Explanation 2.---Where, by an order under section 259, 263, 269, 271 or 272, [31 section 33, section 33A, section 33B, section 66 or section 66A] any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another as- sessment 'year shall, for the purposes of section 156 and this section [34(3), 2nd Proviso, latter half both parts], be deemed to be one made in consequence of or to give eﬁect to any ﬁnding or direction contained in the said order.

Explanation 3.--Where, by an order under section 259, 263, 2.69, 271 or 272, [31, section 33, section 33A, section 33B, section 66 or section' 66A] any income is ex- cluded from the total. income of one person and heldto be the income of another person, then an assessment of such income on such othergperson, hall, for the purposes sec- tion 156 and this seetion [ (3), 2nd Proviso, latte half 195 Clauses V160-161 both parts] be deemed to be one made in consequence of or to give etfect to any ﬁnding or direction contained in the said order, provided such other person was given an opportunity of being heard before the said order was passed.

(1) With a view to rectifying any mistake apparent Section' 16:.

_ Reotiﬁcation from the record of mimkc

(a) the Income-tax Oﬁicer may amend any order of |_s. .35 (1), assessment or of refund or any other order, passed mam Para» by him.' Pm]

(b) the Appellate Assistant Commissioner may amend [s. 35 (1)' any order passed by him in appeal under section main para' 259 [31]; ' Pm]

(c) the Commissioner may amend any order passed by [.. 35 (1), him in revision under section 272 [33A] or section main Para.

271 [33B]. Pm] . (2) Subject to the other provisions of this section, the [,_ 35 m authority concerned-- main para

(a) may make an amendment Imder sub-section (1) P of its own motion, and

(b) shall make such amendment for rectifying any . such mistake which has been brought to its notice by the assessee.

(3) An amendment which has the eﬁect of enhancing [-5- 35 (I). m an assessment or reducing a refund or otherwise increas- P'°'-1 ing the liability of the assessee, shall' not be made under this section unless the authority concerned has given no-

tice to the assessee of its intention so 120 do and has allow-

ed the assessee a reasonable opportunity of being heard.

(4) Where an amendment is made under this section, [Neil] an order shall be passed in writing by the Income-tax authority concerned. ' (5) Where any such amendment has the effect of re-[s- 35 (§)] ducing the assessment, the Income-tax Officer shall make any refund which may be due to such assessee.

(6) Where any such amendment has the effect of en- [3, 35 (4)1 hancing the assessment or reducing' a_ refund already _ * made, the Income-tax Ofﬁcer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 163 [section 29], and the provi- sions of this Act shall apply accordingly.

(7) Save as otherwise provided in section 162 or sec- [seqa 35 (1), tion 193 (4), [s. 35(5) to 35(10) or see. re: cancellation ofmmﬁ P3"- registration], no amendment under t is section shall be pm] made after the expiry of four; years am the date of the order sought to be amended. 2 1 Section 162.

other amend-

mcnts [s- 35 (5)1 [New] [s- 35 (3)1 196 Clause 162 (1) Where in respect of any completed assessment of a partner in a ﬁrm it is found-

(a) on the assessment or reassessment of the ﬁrm, or

(b) on any reduction or enhancement made in the in- come of the ﬁrm under section 161(1), 259, 263, 269, 271 or 272, [section 31, section 33, section 33A, section 33B, section 66, section 66A -or section 35(1)], that the share of the partner in the income of the ﬁrm has not been included in the assessment of the partner or, if included, is not correct, the Income-tax Oﬂicer may amend the order of assessment of the partner with a view to the inclusion of the share in the assessment or the correction thereof, as the case may be; and the provisions of - ection 161 [35(1) to (4)] shall, mutatis-mutandis, apply t ereto, the period of four years speciﬁed in sub-section (7) of that section being recluoned from the date of the ﬁnal order passed in the case of the ﬁrm.

(2) Where in respect of any completed assessment of a member 0)' an association of persons it is found-

ia) on the assessment or re-assessment of the associa- tion, or

(b) on any reduction or enhancement made in t e in- come of the association under section 161(1 , 259,

263. 269. 271 or 272, [section 31, section 33, section 33A, section 33B, section 66, section 66A or spcti-on 35(1)} i that the share of the member in the income of the ; asso- ciation has not been included in the assessment of the E'mem- be)" or, if included, is not correct, the Income-taa: er may amend the order 0')' assessment of the member ith a view to the inclusion of the share in the assessment 7' the correction thereof, as the case may be; and the prquisi in of section 161 [35(1) to (4)] shall, mutatis-mutandis, pply thereto, the period of four years specified in sub-secti (7) of that section_being reckoned from the date of theg final order passed in the case of the association : z > Provided that nothing in this sub-section shall iaﬁect the provisions of section 87, clause (v) [14(2)(b)]. ' (3) Where, as a result of proceedings initiated nder clause (a) of section 152, [section corresponding to exvsting section 34(1) and (2)] ' ......................... .. a ﬁrm or an;asso- ciation of persons is assessed orreassessed .......... .., and the Income-tax Otﬁcer concerned is of opinion that it is necessary to compute or recompute the total income of a partner in the ﬁrm or a mem er of the association oligar- sons, ............. .. as the case 1' be, the Income-tax G cer may proceed to compttte or r pute the total income' and I . E ?

1 197

\ Clause 162 determine the sum payable on the basis of such computation

- or recomputation and make the necessary amendment; and the provisions of section 161 [35(_1) to (4)] shall mutatis- mutandis apply thereto, the period of four years speciﬁed in sub-section (7) of that section being reckoned from the date of the ﬁnal order passed in the case of the ﬁrm or association, ................ .. as the case may be.

(4) Where the Income-tax Officer is satisﬁed that the [S- 35(9)] income-tax payable by a company on its proﬁts and gains out of which the company has declared a dividend, has not been paid within three years after the ﬁnancial year in which the dividend was declared -or within one year after the ﬁnancial year in which the assessment of the company for the assessment year concerned was made, whichever is later, the amount of income-tax which a shareholder of the company is deemed himself to have paid in respect of such dividend under section 246 [49B], or the amount for which credit is due to him under section 246 [sub-section (5) of section 18] in respect of such dividend,'sha1l be deemed to have been wrongly computed; and the Income--tax Oﬁicer may, notwithstanding anything contained in this Act, pro- ceed to recompute such amount by reducing it in the same proportion as the amount of income-tax remaining unpaid by the company bears to the amount of income-tax'payable by it on such proﬁts and gains, and make the necessary amendment: ............. .. and the provisions of section 161 [35(1) to (4)] shall mutatis mutandis apply thereto, the pe- riod of four years speciﬁed in sub-section (7) of that section being reckoned from the date on which the period of three years aforesaid has expired or the date on which the period of one year aforesaid has expired, whichever is later.

(5) Where an allowance by way of development rebate [1 35 has been made wholly or partly to an éassessee in respect of a ship, machinery or plant in any assessment year under section 33 [clause (vib) of subsection (2) of section 10], and subsequently at any time before the expiry of ten years from the end of the previous year in which the ship was ac- quired or the machinery or plant was installed-

(i) the ship, machinery or plant is sold or otherwise transferred by the assessee to any person other than the Government: or

(ii) the assessee utilises the amount credited to _the reserve account under the said section read with section 34 [section for conditions]-

(a) for distribution by way of dividends or proﬁts; or

(b) for remittance outside India as proﬁts or for the creation of any asset outside India; or (C) for any other purposekwhich " snot a purpose of the business of the un rtakin _ a (")1 198 Clauses 162-166 the development rebate originally allowed shall be deemed to have been wrongly allowed, and the Income-tax Ofﬁcer may, notwithstanding anything contained -in this Act, .... .. ....... .. recompute the total income of the assessee for the relevant previous year and make the necessary amendment; and the provisions of section 161 [s. 35(1) to (4)] shall, muta- tis mutandis, apply thereto, the period of four years speciﬁed' in sub-section (7) of that section being reckoned from the end of the previous year in which the transfer takes place or the money is so utilised.

[NW] (6) Where any such debt or part (Of debt as is referred to in section 36(6)(i) [sub-clause (i) of clause (6) of secti-on relating to deductions from business] is written 011' as irre- coverable in the accounts of the assessee for a previous year, and the Income-tax Oﬂicer is satisﬁed that such debt or part thereof became a bad debt in an earlier previous year, the Income-tax Oﬂicer may, notwithstanding anything con- tained in this Act, allow such debt or part of debt as a deduction for such earlier previous year, and recompute the total income of the assessee for such earlier previous year and make the necessary amendment; and the provisions of section 161 [35(1) to (4)] shall, mutatis mutandis,: apply thereto, the period of four years speciﬁed in sub-section (7) of that section being reckoned from the end of the previous year in which the debt is actually written oﬂ' as irrecover-

able.

Section 163- When any tax, penalty or interest is due in consequence §°"°°d ''f of any order passed under or in pursuance of this Act, the "m" ' Income-tax Officer shall serve upon the assessee ..; .... .. a I" 29] notice of demand in the prescribed form specifying the sum so payable.

section ,54_ When, in the course of the assessment of the total in- Intimation of come of any assessee, it is established that a loss .......... .. 1059- has taken place which the assessee is entitled to have carri-

[s- 24 (3)] ed forward and set off under the provisions of section 73(2), 74(2) or 75(2) [24(2) (2B)], the Income-tax Officer shall notify to the assessee by an order in writing the amount of the loss as computed by him for the purposes of section 73 (2), 74(2) or 75(2) [24(2), (2B)].

Section _x65. Whenever a registered ﬁrm is assessed, or an unregister- 1'""'""'°'t' ed ﬁrm is assessed under the provisions of_ section 190(b) 2';f:'m°" [23(5)(b)], the Income-tax Officer shall notify to the ﬁrm 6 ] by an order in writing the amount of its total income ....... .. B' 23 ( ) assessed and the apportionment thereof between the several partners. .

Section 166. (1) The person responsible for paying any interest, Information not being "Interest on securities", shall, on or before the 3' '°'"""'*- ﬁfteenth day of June in each year, furnish to the Income-

[8- 20A and tax Ofﬁcer having jurisdiction to assess him, a return, in .

fax?' 4" & the prescribed formdand veriﬁed in the prescribed manner, of the names and a dresses pf all persons to whomiduring I 199 Clauses 166-167 the previous ﬁnancial year he has paid interest or aggregate interest exceeding such amount, not being less than four hundred rupees, as may be prescribed in this behalf, to- gether with the amount paid to each such person.

(2) The prescribed person in the case of every Gov-- [s_ 2,_] ernment office, and the principal officer or the prescribed person in the case of every local authority, company or other public body or association, and every" private employer shall prepare. and within thirty days from the 31st day of

- March in each year, deliver or cause to be delivered to the Income-tax Oﬁicer in the prescribed form and veriﬁed in the prescribed manner, a return in writing shoWing----

(a) the name and, so far 3 it is known, the address, of every person who was receiving on the 31st day of March, or has received or to whom was due during the year ending that date, from the Govern- ment, the authority, company, body, association or private employer, as the case may be, any income chargeable under the head "Salaries" of such amount as may be prescribed; -

(b) the amount of the income so received by or so du to each such person, and the time or times at which the same was paid or due, as the case may be;

(3) Where an employer deducts from the emoluments [, 53¢} paid to an employee or pays on his behalf any contribu- tions of that employee to an approved superannuation fund, he shall include all such deductions or payments in the return which he is required to furnish under sub- section (2), as provided by section 314 [58T].

(4) The principal oﬁicer ofevery company which is an [,_ ,9A1 Indian company or a company which has made such effec- tive arrangements as may be prescribed for the declara- tion and payment of dividends in India shall, on or before the 15th day of June in each year, furnish to the rescribed ' officer a return in the prescribed form 'and veri ed in the prescribed manner of the names and of the addresses, as entered in the register of shareholders maintained by the company, of the shareholders to whom a dividend or aggre- gate dividends exceeding such amount may be prescribed in this behalf has or have been distributed during the pre-

ceding year and of the amount so distributed to each share- holder.

The principal ofﬁcer of every company shall, at the Section :67. time of distribution of dividends, furnish to every person Ceftiﬁvatebv receiving a dividend a certiﬁcate to the effect that the :§;"l_;P::]';,m'° company has paid or will pay income-tax or that no income- me, - tax is payable (as the case may be) on proﬁts which are divi ndl. being distributed and specifying such er particulars as [., 2 may be prescribed. - i ' ' Section 168.

Legal repre-

sentatives.

[s- 243 (1), part] z[3i«iisB>i2)' [New] [New] Is- 24 B (I).

pm] IS- 943 (I).

13.4"] 200 Clause 168 CHAPTER XV LIABILITY IN SPECIAL CASES A----Legal representatives.

(1) Where a person dies, his ................ ..legal repre- sentative shall be liable to pay any tax, penalty or other sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased.

(2) For the purpose of making an assessment (includ- ing an assessment under section 152 [section 34] ) of the in- come of the deceased and for the purpose of levying any tax, penalty or other sum in the hands of the legal repre- sentative in accordance with the provisions of sub--section (1)):

(a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be con-

tinued against the legal representative from the stage at which it stood on the date of the death of the deceased; :

(b) any proceeding which could have been 'taken against the deceased if he had survived, may be taken against the legal representative; and

(c) all the provisions of this Act shall apply accdrding-

ly. ' (3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessce.

(4) The provisions of sub-section (3) of section 170 [section relating to liability ofrepresentative assesse , sub- section (3)], section 171 [new section regarding ri ht of representative assessee to recover tax paid] secti 172, [new section providing when representative asse ee is personally liable] and section 176 [new section rela 'ng to remedies against properties in case of representati e as- sessee] shall, so far as may be and to the extent to hich they are not inconsistent with the provisions of this sec- tion, apply in relation to a representative assesseeg (5) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4), be limited to the extent to which the estate is capable of meet- ing the liability.

(6) In this Chapter, "legal representative" includes an executor or adminisvtatnr. " ,.

201

Clauses 169-170 B----Representative assessees--General provisions.

"(1) For the purposes of this Act, "representative asses- Section :69.

see means-- 'fRepresenta-

_ _ _ . . tlve assessee.

(1) in respect of the income of a non-resident specified [$420) main in section 9(1) [Section 42(1), mam para, earlier para, latter part], the agent of the non-resident, including a per- half» Part] son who is treated as such under section 173 [43];

(ii) in respect of income of a minor, lunatic or idiot, the [s. 4.0 (u), guardian or committee or manager or trustee who part] is entitled to receive or is in receipt of such income on behalf of such minor, lunatic or idiot;

(iii) in respect of income ......................... .. which the [s- _4l (1):

Court of Wards, the Administrator-General, the ":;'t']'iP""» Ofﬁcial Trustee or any receiver or manager (in-P cluding any person. whatever his designation, who in fact manages property on behalf of another) appointed by or under any order of a court, ....... .. ................ .. receives or is entitled to receive, on behalf of any person, ............. .. such Court of Wards, Administrator-General, Official Trustee, re- ceiver or manager ...................... ..;

(iv) ............. .. in respect of income which a trustee or [5, 4, (0 trustees appointed under a trust declared by a main para.

duly executed instrument in writing whether tes- Pm] tamentary or otherwise (including any Wakf deed which is valid under the Mussalman Wakf Valid- ing Act, 1913) receive or are entitled to receive on 6of!9I3 behalf of any person, ................ .. such trustee or trustees ................ ..

(2) Every representative assessee shall be deemed to {New-of. s. 42 be an assessee for the purposes of this Act. ')1 (1) Every representative assessee, as regards the in- Section :70. come in respect of which he is a representative assessee, Liability of shall be subject to the same duties, responsibilities and lia- ;§,';'¢'°"'"' V bilities as if the income were income received by or accru- I "s°"°°' ing to or in favour of him beneﬁcially, and shall be liable £5'; S)'InP;'; to assessment in his own name in respect of that income; pg, ' pm, but any such assessment shall be deembd to be made upon 5.4.2 I),main him in his representative capacity onl 1', and the tax shall, Pam 13""

subject to the other provisions contai ed in this Chapter, half'? Pm] be levied upon and recovered from him in like manner and to the same amount as it would be leviable upon and re- coverable from the person represented by him.

(2) Any tax payable in respect of any such assessment [New] shall be recoverable from the representative assessee, but to the extent only of assets be onging to the person whom he represents which may be 0 may j in his possession or under his management, di al or» ntrol:

202

Clauses 170-173 Provided that nothing in this sub-section snall aﬂect the provisions of section 172 ........................................... .. [newly added section laying down when representative as- sessee personally liable.] [New] (3) Where any person is, in respect of any income, as- sessable under this (ﬂiapter in the capacity of a represen- tative assessee, he shall not, in respect of that income, be assessed under any other provision -of this Act.

Section m. (1) Every representative assessee who, as such, pays Right Of_ '6' any tax, shall be entitled to recover the amount so paid from the person on whose behalf it _is paid, or to retain movcnax out of any moneys that may be in his possession or may paid. come to him in his" representative capacity, an amount [NW] equal to the amount so paid.

[s.42 (1), 2nd (2) . . . . . . . . . . . . .. Any representative assessee, or any PIOV-] person who apprehends that he may be assessed as a repre- sentative assessee, may retain out of any money payable by him to the person on whose behalf he is liable to pay tax (hereinafter in this section referred to as the principal), 'a sum equal to his estimated liability under this Chapter, and in the event of any disagreement between the principal and such representative assessee or person as to the amount to be so retained, such representative assessee or gerson may secure from the Income-tax Oﬁicer a certiﬁcate ating the amount to be so retained pending final settlement of the liability, and the certiﬁcate so obtained shall be his warrant for retaining that amount. -

[5- 42 (1): 31d (3) ................... .. The amount recoverable from such p'°"'] representative assessee or person at the time of ﬁnal settle- ment shall not exceed the amount speciﬁed in such certi- ﬁcate except to the extent to which such representative assessee or person may at such time have in his hands addi- tional assets of the principal.

Section 172. Every representative assessee shall be personally;lia'.ble sV;'x*l't";':iv'c°P'°' for any tax_ payable by him in his representative cazacity, if, while his liability for tax remains undischarge , he :::=as1sl:rc1i§§1r; charges, disposes of or parts with any assets, which are in [Ncw] his possession or come to him after the tax is payablej when from or out of such assets, the tax could legally have been paid. .

C-----Representative assessee--special cases. Section I73.

Who may be (1) For the purposes of this Act, "agent", in relation to.

gggﬁded 35 a non-resident, includes any person in India--

[s. 43 main (a) who is employed by or on behalf of the rwn-resi- para] dent, or

(b) who has any business connection with the non-

resident, or _ 203 Clauses 173-174

(d) who is the trustee of the non-resident ............. .. : [s. 40 (2)) Provided that a broker in India who .......... .., in res- [s.43,» lst pect of any transactions, does not ................ .. deal directly P'°"-1 with or on behalf of a non-resident principal but deals with or through a non-resident broker ................ .. shall not.be deemed to be an agent under this section in respect of such transactions, if the following conditions are fulﬁlled, name- ly :--

(a) the transactions are carried on in the ordinary course of business through the first-mentioned broker; and '

(b) the non-resident broker is carrying on such tran-

sactions in the ordinary course of his business and not as a principal. .

E.7:planation.----A person, whether a resident or a non- [s.4_-,,I-'.xpIn.] resident, who acquires ...................... .. whether by sale, A 1 exchange, ...................... .. transfer or relinquishment, a capital asset in India from a non-resident shall, for the pur- poses of charging to tax the capital gain arising from such sale, exchange, ................ .. transfer or relinquishment, be deemed to have a business connection, within the meaning S of this section, with such non-resident. .

(2) .......... .. No person shall be treated as the agent 3.43, 2nd of a non-resident ................... .. unless he has had an' oppor- p,°._] tunity of being heard by the Income-tax Ofﬁcer as to his liability to be treated as such.

................... .. Where any incomexin respect of which See on :74. the persons mentioned in section 169 1) (iii) and (iv), [S. Ch eof tax 41(1) Part, as embodied in the clauses , ling with Court of '"f "ih¥° Wards etc. and trustees in the newly added section deﬁning "° °"' representative assessee] are liable as éepresentative asses- [5 2 m m sees, or any part thereof, is not speciﬁcally receivable on p,',°'$t ,a;.1i,,,. behalf of any one person, or where thefindividual shares of half,: part] the persons on whose behalf sudh income or such part there- of is receivable (which persons are herleinafter in this sec- tion referred to as the beneficiaries) are indeterminate or unknown,-- *

(a) income-taa: shall be charged-- '

(i) ................... .. as if such incoriie .... .. or such [s.4i (If, us:

part thereof were the total income of an association Pr°Vg» me!' of persons, or "' h"1f""""] nknown

(ii) if such income or such part thereof is received by [s. 4; (1), _m a beneficiary, then at the rate or rates applicable Pmfv» earhe_r to the beneﬁciary, , haJ,~. m0dl-

' ' ﬁcdli as the Income-tax Oﬂicer may direct; and é 14-] Law Com /58. ' . " ' 204 Clauses 174-178 [New] (b) super-tax shall be charged as if such income or J such part thereof were the total income of an asso- ciation-of persons.» %;°s'ei°"'~ ................ .. Where part only of the income ................ ..

pan of mm of a trust is chargeable under this Act, that proportion only income is of the income, ................... receivable by a beneﬁciary chargeable. from the trust which the part so chargeable bears to the [$.41 (1) 2nd whole income ................ .. of,the trust shall be deemed to PI'°V- have been derived from that part.

D--Representative assessees--General.

Secti°(rl1_I76- _The Income-tax Oﬂicer shall have the same remedies §g°;':St'°;w_ against all property of any kind vested in or under the con- pmyin cases trol or management of any representative assessee as he of xepresema- would have against the property of any person liable to pay fivc assessew any tax, and in as full and ample a manner. [New] lS)°_¢ti°" 177- Nothing in the foregoing sections in this Chapter shall prevent either the direct assessment of the person on whose mi behalf income .......... ..therein referred to is receivable, or [MI (2) and the recovery from such person of the tax payable in respect s.4.2(1), main Of such income .......... .. ' para, latter :':::nde,f']"" ' E------Executors. K Section 178. (1) Subject as hereinafter provided, the income of the Ex<=°"l°r-S estate of a deceased person shall be chargeable to tax in the [New] hands of the executor,-

(a) if there is only one executor, then as if the executor were an individual, or

(b) if there are more than one executor, then as if the executors were an association of persons.

(2) -The assessment of an. executor under this section shall be made separately ;from any assessment; that may be made on him in respect of his own income. g , (3) Separate assessments shall be made under th sec-

tion on the total income of each completed previous y ar or part thereof as is included i ' the period from the the death to the date of co ete distribution to the ciaries of the estate according to their several inter te of eneﬁ-

sts.

(4) In computingtthe total income of any prev' year under this section, a inco ' of the estate of that pr ious year distributed to, I applie to the beneﬁt of, an bene- ﬁciary of the estate during that previous year s ll be excluded; but the income so excluded shall be inclu d in the total income of the previous year of such beneﬁ ry.

Explanation.--In this section, "executor" includes an administrator or other person administering the estate of a ,deceased person. 'I I r 205 Clauses 179-180 The provisions of section 171 [New section' authorising S<2°ti°n 179. a representative assessee to recover tax paid from the prin- exfcum for cipal] shall, mutatis--mutand_is, apply in the case_ of an exe-- ,e¢ov¢,. tax cutor in respect of tax paid or payable by him as they paid. apply in the case of a representative assessee. . [New] F---Succession to business, profession or vocation.

(1) Where a person carrying on any business, profes- Section; :80. sion or vocation, (such person hereinafter in this section 5"".°°"'°" '° being referred to as the predecessor) has been succeeded °:';f;fji:c therein by another person (hereinafter in this section refer- thgnondmh red to as the successor) who continues to carry on that busi- [s. _ 26(2), ness, profession or vocation, the predecessor and the succes- mam Pm] sor shall. subject to the prov'sions of sections 13(2), 13(3), 91(1) and 100 [section 25(4)] each be assessed in respect of his actual share, if any, of the income ................... ..of the previous year, that is to say ,--

(a) the predecessor shall be assessed in respect of the income of the previous year upto the date of succes- _ sion, and l

(b) the successor shall be assessed in respect of the in- come of the previous year after'. the date of succes- sion. ' (2) Notwithstanding anything contained in sub-section [s- 26(f2). (1), when the predecessor carinot [be lound, the. assessment °'""'°"

of the income of the previous ,year in which the succession , took place upto the date of succession, dnd for the previous year preceding that year shall? be maxieion the successor in like manner and to the same amount dsiit would have been made on the predecessor .......... ..

(3) .......... ..When the tax in respect of the income of [I-2 25(2)» such business, profession or vacation, or the previous year ha] '""°' in which the succession took lace up, jthe date of succes-

sion or for the previous year A ceding that year, assessed on the predecessor. cannot be re vered rbm him, it shall be r payable by and recoverable rom t afsuccessor, and the successor shall "be entitled to recover' rbm the predecessor the amount of any tax so pdid. I J (4) .......... ..Where any ..... ..',....business, profession or vo- l*- 25-4(2)», cation ................... ..carried oniby a ; du undivided family 'If 1 P""' ............. ..is succeeded to, and isimulta. _ ' ly with the suc-- , cession or after the succession there» ' been a partition of the joint family propert betwe the members or groups of members, the tax d in re ' ' profession or vocation succee ed to j; o the date of suc- cession shall be assessed and iiecover in the manner pro- vided in section 181(4) and 1 (6) [s ' 'on 25A(2), remain- ing part, as embodied in secti 'on tion], but without prejudice to the provisions oft is se ' i 206 Clause 181 G--Partition.

(1) .......... ..A Hindu family hitherto assessed as undivi- afmpmition ded .......... ..shall be deemed, for the purposes of this Act, of a Hindu to continue to be a Hindu undivided family, except where tgmd_ilvided and in so far as a ﬁnding of partition has been given under am: . ' ' ' ~ -

[s_ 25YA(3)} this section in respect of the Hindu family.

[s. 25A(1), (2) Where, at the time of making an assessment under "'"_i." Pa" section 147 or 148 [23], it is claimed by or on behalf of '5" '°' Pm] any member of a Hindu family .......... ..assessed as undivid- ed that a partition. whether total or partial, has taken place among the members of such family, the Income--tax Ofﬁcer [S- 25A(I).- shall make an inquiry thereinto .......... ..after giving notice I"°"'] of the inquiry to all the members of the family.

ls-_ 25-4(1)» (3) On the completion of the inquiry, the Income-tam P333' Officer shall record a ﬁnding as to whether there has been a total or partial partition of the joint family pnoperty, _and, if there has been such a partition, the date on which it has taken place. ' [s- , 25A(2)» (4) Where a finding of total or partial partition has been magi Pam» recorded by the Income-tax Ofﬁcer under this section and pa the partition took place during the previous year,-

(a) .......... ..the total income received by or on behalf of the joint family in re V ect of the period upto the date of partition shall e assessed as if no partition had taken place; and [s-_ 25A(2) (b) each member or group of members shall, 'in addition Pam to any tax for which he or it may be separately P liable and notwithstanding anything contain in section 11. clause (2) [section 14(1)], be jointlyé and severally liable for .......... ..the tax on the income so assessed .............. .. » [New] (5) Where a ﬁnding of total or partial partition i has been recorded by the Inncome-tax Officer under this se tion and the partition took place after the expiry of the pr ious year, the total income of the previous year of the oint family shall be assessed as if no partition had taken p cc:

and the provisions of clause Eb) of sub-section (4) all, mutatis mutandis, apply to the case.

is. 2sA<2>, (6) For the purposes of clause (b) of sub-sectioni-(4), mm" para' the several liability of any member or group of members.

[s. 25A(2), Prov.] pm] thereunder shall be computed according to the portion of _the joint family property allotted to him or it at the partqtion. [New] (7) After a ﬁnding of total partition has been recdrded by the Income-tax Oﬂicer under this section in respect of any Hindu family, the Income_~taac Oﬂicer having ju ' dic_- tion to assess the Hi family shall, subject to the pom-

sions of section 135(7) 64(5)] ,~_y_~ . 2 ! the 207 Clauses 181-182 / (a) if the Hindu family carried on any business, pro- fession or vocation, be the Income-tax Oﬁicer of the area in which its principal place of business, pro- fession or vocation was situate immediately before the partition; and

(b) in other cases, be the Income-tax Oﬁicer of the area in which the person who was the last manager of I the Hindu family was residing immediately before the partition.

(8) The provisions of this section shall, mutatis mutan- [New] dis and so far as may be, apply in relation to the levy and collection of any penalty or other sum in respect of any ' period upto the date of the partition, whether total or par-

}i tial, of a Hindu family as they apply in relation to the levy and collection of tax in respect of any such period.

Explanation.--In this section,-" ~ '[Ncw]

(a) "partition" means-

(i) a physical division of the property, if the pro- perty admits of such division, or,

(ii) where the property does not admit of physical division, then such division as the property admits of; .......... .. and a mere severance of status shall not be deemed to be a partition;

(b) "partial partition" means a partition which is par- tial as regards the persons constituting the Hindu undivided family, or the properties belonging to the Hindu undivided family, or both.

H--Shipping business of non-residents.

(1) The provisions of this section shall, notwithstanding Section :82. anything contained in the other provisions of this Act, apply Shipping for the purpose of the levy and recovery of tax in the case Eggﬂzifdcnfj of a non-resident who carries on business in India in any [s;4 ,c,m,,, financial year as the owner or chartener of a ship (such per-- pan son hereinafter in this section being referred to as the prin- cipal) .......... .. ' (2) Where a ship of the principal carries passengers, [5, 4413 (2), livestock, mail or goods shipped at a port in India, one-sixth latter 112"] of the amount paid or payable on acéount of such carriage to the principal or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the principal on account of such carriage .......... ..

(3) Before the departure from any port in_ India of any [s- 4413(1)] such ship ............. ..the master of the ship' shall prepare and furnish to the Income-tax 0 er a re , , of the full amount paid or payable to the prin pal, or' d any person on his s 5 '3 1 l l [s' _ earlier half, part] [s- _ 44B(3), earlier part] [s- , 443(2), earlier half, part] [s- 4413(3).

latter part] [s.44C] [s. 44A, latter part ] Section 183;

Recovery of tax in respect of non-resi-

dent from his assets [s.4.2(I), Ist l'rov.] 208 Clauses 182-183 'behalf: on account of the carriage of all passengers, live- stock, mail or goods shipped at that port since the last arri- val of the ship thereat.

(4) On receipt of the return, the Income-tax Officer shall assess the income referred to in sub-section (2) .......... ..and determine the sum payable as tax thereon at the rate or rates for the time being applicable to the total income of a company which has not made the arrangements referred to in section 203 [18(3D), main para], and such sum shall be payable by the master of the ship ....... ..

(5) For the purpose of determining the tax payable under sub-section (4), the Income-tax Oﬁicer may call for such accounts or documents as he may requﬁe .......... ..

(6) .......... ..A port clearance shall not be granted to the ship until the Customs-Collector, or other oﬂicer duly autho- rised to grant the same, is satisﬁed that the tax assessable under this section has been duly paid.

(7) Nothing in this section shall be deemed to prevent the principal from claiming in the ﬁnancial year following that in which any payment has been made on his behalf 'under this section, that an assessment be made of his total income of the previous year, and that the tax payable on the basis thereof be determined in accordance with" the other provisions of this Act, and if he so claims, any such payment as aforesaid shall be treated as a payment in advance of the tax leviable i.n the relevant assessment ear, and the difference between the sum so paid and the am unt of tax found payable by him on such assessment shal be paid by him or refunded to him, as the case may be. =;

(8) The provisions of this section shall not apply where the Income-tax Ofﬁcer is satisﬁed that there is an agenit of the principal from whom the tax will be recoverable in: the igflevant assessment year under the other provisions of this . ct.

\ I--Recovery of tax in respect of non-residents.

u x Without prejudice to the provisions of section 1'7 (1) [section embodying the rule that a representative asse see-

is liable to pay the tax] or of section 176 [section newly dd- ed authorising the Income-tax Ofﬁcer to proceed ag nst assets with agent], where the person entitled to the inc me .......... ..referred to in section 9. clause (i) [42(1) main ra, earlier part] is a non-resident. the tax chargeable ther on, whether in his name or in the name of his agent whq is liable as a representative assessee. may be recovered; by deduction under any of the provisions of sections 20E to 204 [18(2) to 18(3D)] and .......... ..any arrears of tax may be recovered also in accordance with the provisions of his Act from any assets of the non-ii-¢sident which are, or ay at any time come within; India. 3 ' a ( ¥q 4'.

~ K 209 Clause 184 J --Persons leaving India.

(1) Notwithstanding anything contained in section 3 5¢°ti°" '34- [section 3], when it appears to the Income--tax Oﬂicer that f,?'°"""°m any individual may leave India during 'the current assess-1.,,,ving1,,d;,,, ment year, or shortly after its expiry,-and that he has no [L ,';'A(,), present intention of returning, .......... ..the total income of main para, such individual for the period from the expiry of the pre- earlier half] vious year for that assessment year, to the probable date of his departure from India .......... ..shall be chargeable to tax in that assessment year.

(2) .......... ..The total income of each completed previous [s. 234A (1), year or part thereof included in such period ............ ..... .. ngain para. shall be chargeable to tax at the rate or rates in force in '""f' ham that assessment year, and separate assessments shall be 9"] made in respect of each such completed previous year or part thereof. ' (3) The Income-tax Officer may estimate the income of 5- ?4A(')v such individual for such period or any part thereof, ﬂgff' where it cannot be readily determined in the manner pro- paft] ' vided in this Act.

(4) For the purpose of making an assessment under sub- [I- 24A(2)l section (1), the Inc.ome~tax Officer may serve a notice upon such individual requiring him to furnish, within such time, , not being less than seven days, as may be speciﬁed in the 2 notice, a return in the same form and veriﬁed in the same manner as a return under section 143(2) [sub-section (2) of section 22], setting forth .......... ..his total income for each ....... .. completed previous year comprised in the period re ferred to in sub-section (1) and his estimated total income for any part of a complete previous year comprised in that period .......... ..; and the provisions of this Act shall, so far as may be, and subject to the provisions of this section, apply as if the notice were 1 noticeiissued under section 143(2) [sub-section (2) of section 22]. 1 (5) Tax chargeable under, this section shall be in addi- [Nlcw] tion to the tax, if any, chargeable under any other provision of this Act. -

(6) Where the provisions of sub-section (1) are appli- [Nlvwl cable, any notice issued by the Income-tax Oﬂicer under 1 section 143(2) [sub-section (2): of sectihn 22] or section 154 (1) [section 34(1), second part, portion relating to the issue of a notice containing the're._t;uirem'eht to be included on the lines of section 22(2)] in respect dfiany tax chargeable , under any other provision of this Act may, notwithstanding anything contained in section 143(2) Esection 22(2)] or sec- tion 154(1) [section 34(1) second para, portion relating to notice containing such requirements] as'the case may be. require the furnishing of the return by such individual within such _ riod, not bein less thfn.-seven days, as the Income-tar ﬂicer may thin properﬁg ' i 210 Clauses 184-186 [New] (7) Every assessment under sub-section (1) shall be _ completed within three months of the date on which the notice under sub-section (4) is served, except where such individual himself waives his right to have the assessment so completed, or where the assessment is delayed owing to any conduct of such individual.

K--Di'scontinuance of business, or dissolution.

Section 185. (1) Notwithstanding anything contained in section 3, Discontinued, [section 3] where any business, profession or vocation which E"""°" was not charged under the provisions of the Indian Income-

p,;,f]5(')' tax Act, 1918, is discontinued in any.assessment_year, the 7 of1g18 total income of such business, profession or vocation of the period from the expiry of the previous year for that assess- ment _year .upto the date of such discontinuance may, at the discretion of the Income-tax Oﬂicer, be charged to tax in that assessment year.

[New] (2) The total income of each completed previous year or part thereof included in such period shall be chargeable to tax at the rate or rates in _force in that assessment year, and separate assessments shall be made in respect of each such completed previous year or part thereof.

[S- 25(2)» (3) Any person discontinuing any such, business, pro- °a"'" Pm] fession or vocation shall give to the Income-tax Oﬁicer notice of such discontinuance within ﬁfteen days there-

of .......... .. -

[s. 25(1), (4) Tax chargeable under this section shall be in addi- Pm] tion to the tax, if any, chargeable under any other provision of this Act.

section 133, ( 1) Where any business, profession or vocation carried A_ssociati0n on by .......... ..an association of persons has been discontinu- 'g3:i';:;d °' ed or where .......... .. an association of persons is dissolved,--- d'5°°"'i""°d- (a) the Income-tax Oﬁicer shall make an assessment of §;r'f]'*('3' the total income of the .......... ..association of per- sons as if no such discontinuance or dissolution had taken place; and [8- 44(3), (b) every person who was at the time of such discon- Paﬁl tinuance or dissolution a .......... ..member of ' the association, and the legal representative of any such member who is deceased, shall in respect of the in- come of the association be jointly and severally liable for the amount of tax.....; .... ..payable, and all the provisions of this Act, so far as may be, shall apply to any such assessment .......... ..

[New] (2) Where such' discontinuance or dissolution takes place after any proceedings in respect of an assessment year ave commenced, the procecdings be continued agains ' the s _t persons referred to in: sub- on (1) from -the sta e at I . r 211 Clauses 186-188 V which the proceedings stood at the time of such disconti- nuance o'r dissolution, and all the provisions of this Act shall, so far as may be, apply accordingly. .

(3) The provisions of sub-sections (1) and (2) shall, so [New] for as may be and mutatis mutandis, apply in relation to [s. (2) part any penalty or other sum, chargeable under any provision 5-44 3) Part] of this Act, as they apply in relation to tax.

(4) Nothing in this section shall aﬁect the provisions Of [New] section 170(2) [24B(1), portion limiting liability of legal re- presentative to extent of estate].

/ L--Special propisions for certain kinds of income.

Where the time taken by the author of a literary or Scctiors I37- artistic work in the making thereof is more than twelve R°Y".";'°' .......... ..months,............the amount received or receivable f;§';'§"tm_ by him during any previous year on account of any lump rafy 0, mi. sum consideration for the assignment or grant of any of stic work. his interests in the copyright of that work or of royalties [8 "AM or copyright fees (whether receivable in lump sum or other- ' wise), in respect of that work, shall, if he so claims, be allocated for purposes of assessment as hereunder---

(i) where the time so taken is less than twenty-four , months, one-half of the amount of such lump sum, royalties or fees as the income of the previous year in which the vsfhole amount is received or receiva-

ble, and the other half as the income of the next succeeding previous year; and

(ii) where the time so taken is twenty-four months, or more, one-third of the amount of such lump sum, royalties or fees as the income of the previous year in which the" whole amount is received or receiva- ble, and one-third of the said amount' as the income of each of the two next succeeding previous years.

Explanation:-For the purposes of this section, the ex- pression 'author' includes a joint author, and the expression 'lump sum', in regard to royalties or copyright fees, inclu- des an advance payment on account of such royalties or copyright fees which is not returnable.' M----Liability of State Governments. §,'§?Zi.§'s't otnss' ' - - income-tax.

.......... ..Income--tax payable on the interest............ on Fm 9-tcurmf-8 any security of the State Govanment ,; issued income-tax °"' $'"'° free shall be payable by the St te Govepgment at such rate gf";'ﬁ';1,'§°m' as may be laid down by any Ce ral Acté ~ pm I l .« l, r Section 189.

Assessment of registered firms.

[8- '-',3 (5) opening lines ] [5' ?3(5) (3):

mam para ] [s- 23(5)_(a).

xst Proviso] [s- 23(5)(a).

and Proviso] Section-190.

212

Clauses 189-191 CHAPTER XVI SPECIAL PROVISIONS APPLICABLE TO FIRMS A----Assessment.

(1) Notwithstanding anything contained in sections 147 and 148 [section 23(1) to (4)], .......... ..and subject to the pro-

visions of sub-section (3 , in the case of a registered ﬁrm, after assessing the total i come of the ﬁrm,-

(i) the income-tax payable by the ﬁrm itself shall be determined; and

(ii) the share of each partner in the income of the ﬁrm .......... ..shall be included in his total income- and assessed to tax accordingly.

(2) .......... ..If such share of any partner is a loss it shall be set off against his other income or carried forward and set off in accordance with the provisions of sections 72 to 80 [24(1) and (2)].

(3) .......... ..When any of the partners of a registered ﬁrm is a non-resident, the tax on his share in the in- come .......... ..of the ﬁrm shall be assessed on the ﬁrm at the rate or rates which would be applicable if it? were assessed on him personally, and the tax so assessed shall be paid by the ﬁrm. ~ ' In the case of an unregistered ﬁrm, the Income-tax Ofﬁ-

Assessment of Ce1"' unregistered ﬁrms.

[S-23(5)(b)l Section 191 .

Application

(a) may .......... ..determine the tax payable b the ﬁrm. itself on the basis of the total income 0 the ﬁrm; or

(b) .......... ..if, in his opinion, the aggregate amo nt of the tax .......... ..payable by the partners 1'. t ﬁrm were treated as a registered firm would e eater- than the aggregate amount of the tax which . ould be payable by the ﬁrm under clause (a) and the tax which would be ' ayable by the partners indi- vidually, ma A procee to make the assessmentiunder section 189(1 (ii) [23(5)(a)(ii)] as if the ﬁrm 1' ere a registered firm; and Where the procedure sp ciﬁed in this clause is applied to any unregistere ﬁrm, the provisions of section 189(2) and 189(3) [1 t and 2nd provisos to section 23(5)(a)] shall apply here- to as they apply in the case of a registered rm.

B--Registration. E (1) An application for registration of a ﬁrm for the pur-

for rcgistra- poses of this Act may be made to the Income-tax Officer tion.

[s.26'A(1)] on behalf of any ﬁrm if---

(i) -the partnership is eyidenced by an instrunient,..-

and 5 L1', ,5.

'6' r ....._e.4....'. .' 213 3 Clause 191

(ii) the individual shares of the partners are speciﬁed in that instrument, or can be ascertained from that instrument with or without the aid of the instru- ments of partnership of any other connected firms.

(2) Such application may, subject to the provisions of [NW] this section, be made either during the existence of the ﬁrm or after its dissolution. . r (3) The _application shall be made to the "Income-tax ['~rf5A (2)& Oﬂicer having jurisdiction to assessthe 'ﬁrm, and shall be fﬂth' Rufgi, signed---- second para:

(a) by all the partners (not being minors) personally, Pm] or

(b) in the case of a dissolved ﬁrm, by all "persons (not being minors) who were partners in the ﬁrm im-

mediately before its dissolution. and by the legal representative of any such partner who is deceas-

ed. V (4) The application shall be made before the end of,[f,;,,_'§¢':d(')' the_ previous year for the assessment year in respect of with Rule 2, which registration is sought: - _ Second para.

part] Provided that the Income-tax Oﬁicer may entertain an application made after the end of the previous year, if he is satisﬁed that the ﬁrm was prevented by sufficient cause from making the application before the end of the previous year. 4 _ (5) The application shall be accompanied by the 0Ti_gi- Edrisﬁcag) nal instrument evidencing the partnersltip, together with with Rhxlc~31 a copy thereof: ' ' Provided that if the Income-tax Oﬂider is satisﬁed that for sufficient reason the original instrument cannot con- veniently be produced, he may accept a 'copy of it certiﬁed in writing by all the partners (not being minors). or, where the application is made after the dissolution of the ﬁrm, by all the persons referred to in clausei(b) of sub-section (3), to be a correct copy, or a certified (logy of the instru- ment: and in such cases the application,s all be accompa- ;_ nied by' a duplicate copy of the original instrument: ' {Provided further that where the individual shares of _i the partners are not speciﬁed in the ins ,' ent of partner- ; ship, the provisions of this sectiqn shall ' pply also in rela- ' tion to the instruments of partnership re erred to in clause'

(ii) of sub-section (1) as they apply in relation to the instru- niient evidencing the partnershipof the firm to be register- e .

(6) The application shall be made in the prescribed [s- 2611(2). form and shall give the following particulars-- 'ﬁfe 3'

(i) the names and addresses of the rtners of the ﬁrm £3115':

during the previous year, tgdther with their ° °] shares: -e 3 3 .

we {New} [See. Rule 6] [New] Section 192.

Procedure on receipt of application.

[s. 26A (2), part, read with Rule 4] [See Rule .1,

0)] [See Rule 4 (9)1 {Ncw] INN] 214 Clauses 191-192

(ii) the dates of their admission to the partnership ,-

'(iii) the interest on capital or loans payable to the partners;

(iv) the salary or commission or any other amount payable to the partners; and

iv) the manner in which the proﬁts of the firm were divided for the latest previous year for which such division -has been made and the mode of distribution, that is to say, whether the distribu- tion was made by crediting the accounts of the partners or in any other manner, or if the proﬁts have not been divided the reason for not dividing the proﬁts.

(7) Where registration is granted to any ﬁrm for any assessment year, it shall have effect for every subsequent assessment year, provided there is no change in the consti- tution of the ﬁrm or the shares of the partners as eviden- ced by the instrument of partnership on the basis of which the registration was granted, and provided the ﬁrm furni- shes, along with its return of income for the assessment year concerned, a declaration to that effect, in the prescrib- ed form and veriﬁed in the prescribed manner.

(8) Where any such change has taken place in the pre-

vious year, the ﬁrm shall apply for fresh registration for the assessment year concerned in accordance with the pro- visions of this section.

» (1) On receipt of an\application for registration of a firm, the Income-tax Oﬂicer shall inquire into the genuine- ness of the ﬁrm and its constitution as speciﬁed inlthe in- strument of partnership (as read with the instruments of partnership referred to in clause (ii) of sub-section (1) of section 191, where the case so requires), and---

(a) if he is satisﬁed that there is or was during the pre- vious year in existence a genuine ﬁrm with the constitution so speciﬁed, he shall pass an qrrder in writing registering the ﬁrm for the assessment year ;

( b) if he is not so satisﬁed, he shall pass an order in writing refusing to register the firm. ' (2) The Income-tax 01ﬁC_€'I' shall not reject an appli- cation for registration merely on the ground that 'the ap- plication is not in order, but shall intimate the defect to the ﬁrm and give it an opportunity to rectify the defect in the application within a period of one month from the date of such intimation.

.(3) If the defect is not rectified within such tiine, the Income-tax Oﬂicer may reject the application.

'..

. 215 Clauses 192-193 (4) The Income-tax Oﬁicer shall ﬁnish- the inquiry un- [New] der this section before the expiry of a period of one year from the date of ﬁling of the a lication, or before making an assessment on the ﬁrm for We assessment year, which- ever is earlier.

(5) Where a ﬁrm is registered for any assessment year, [NeWl the Income--ta:x: Officer shall record a certiﬁcate on the in- {Sec Rule4 strument of partnership or. on the certiﬁed copy submitted 1) Part] in lieu of the original instrument, as the case may be, to the effect that the ﬁrm has been registered under this Act, for that assessment year; and where a declaration under section 191(7) [relevant sub-section of section for applica- tion for registration, to the effect that in the 'case of subs- equent assessment year only a declaration need be sent] is furnished by the ﬁrm for any subsequent assessment year, he shall also endorse a note of such declaration hav- ing been furnished on the said instrument or certiﬁed copy.

(6) Notwithstanding anything contained in ' this sec- [s. 23 (4), tion, where, in respect 'of any assessment year, there is, onmain ta. the part of a ﬁrm, any such failure as is mentioned in sec- lam' "3 tion 148 [s. 23(4), main para, earlier hal:E,,embodied in sec- P"'.1, tion re: best judgment assessment], the Income-tax Oyfﬁcer ' may refuse to register the ﬁrm for the assessment year. -

(1) I)', where a ﬁrm has been registered, or its regis- Scctim 193. .tration has effect under section 191 (7) [newly added sub- Can°§11§ti°n section in section re: application for registration, to the ff RP3""'*' effect that registration has effect for subsequent year], for ""1 any assessment year, the Income-tax Ogflcer is of opinion [N°"'1. - that there was during the previous year no genuine ﬁrm 5" 1]"'° 631 in existence as registered and that the registration was ob- ; tained or continued by misrepresentation, he may, with f the previous sanction of the Inspecting Assistant Commis- sioner and after giving the ﬁrnt a reasonable opportunity of. being heard, cancel the registration of the ﬁrm for that assessment year. ' (2) If, where a ﬁrm has been registered or its regis- [s. 23§(4), tration has effect under section'191(7) newly added sub- mini para. section in section re: application for gistration, provid-1";f]' ""3 ing that registration once granted has effect for future pa ' years] ,- for any assessment yearjsthere is, on the part of the ﬁrm, any such failure in respect of the assessment year as is mentioned in section 148 [section 23(4), main para, ear-

_lier half, i.e., section for best judgment assessment], the , . Income--tax Officer may cancel the registration of the ﬁrm E' 2 ,( ) for the assessment year, after giving the ﬁrm not less than p,'.,,.?,';,']' ' fourteen days' notice intimating his intﬂition to cancel its registration and after giving it a reasmable opportunity of being heard. , ' » Section 194.

216

Clauses 193-195 [New] (3) Where the registration of a ﬁrm is cancelled for any assessment year, the Income-tax Oﬂicer shall amend the assessments of the and its partners for that assess- gtent year on the footing that the ﬁrm is an unregistered rm.

[New] (4_) The provisions of section 161 [35 (1) to (4)] shall, mutatis mutandis, apply to the amendments of the assess- ments of the firm and its partners under sub-section (3). ' the period of four years speciﬁed in section 161 (7) [S. 35 (1)] being reckoned from the date of the order cancelling the registration. .

INew] (5) No order cancelling the registration of a ﬁrm for any assessment year shall be made after the expiry of eight years from the end of that assessment year.

C--Changes in constitution, succession and dissolution.

(1) Where, at the time of m'aking an assessment under Change in section 147 or 148 [23] it is found that a change has occur- °'t2n-Wlltiol red in the constitution of a ﬁrm, .... .. the assessment shall ° "'ﬁ""° be made on the ﬁrm as constituted at the time of making 5- 25 (')3 the assessment: * Provided that the income of the previous year shall, for the purposes of inclusion in the total incomes of the partners, be apportioned between the partners vtho, in such previous year, were entitled to receive the same:

Provided further that when the tax assessed 'ipon a partner cannot be recovered from him, it shall reco- vered from the ﬁrm as constituted at the time of rnaking the assessment.» g {New} (2) For the purppses of this section, there is 'a change in the constitution o;f the ﬁmn-- (

(a) if one or more of thé partners cease to be ners or one or more new partners are admitted, i such circumstances that one or more/of the perso who were partners of the' firm before the chang con-

tinue as partner or partners after the chan e, or

(b) where all the partners continue with a chat: ge in their respective shares or in the shares of szxme of them. ' . Where a ﬁrm carrying on a business profession E r vo-

§f,?c1:;i335I,f cation is succeeded bx another ﬁrm, and the case is ngt one one ﬁnn by covered by section 1 4 [26 (1), relating to changes 11 the . 100016? ﬁmh constitution of the ﬁrm], separate assessments sh ll be [New] made on the predecessor ﬁrm; and the successor ft m in accordance with the jarovisiorts of section 180 [26(2)].§ i 217 Clauses 196-197 (1) Where any business, profession or vocation carried S¢Cti°n 195- on by a firm .... .. has been discontinued, or where a ﬁrm Finn di8§01V- ....... .. is dissolved,-- gisggjfggggf

(a) the Income-tax Officer shall make an assessment [",'t*j*(')' of the total income of the .... .. ﬁrm as if no such discontinuance or dissolution had taken place ; and

(b) every person who was at the time of such discon-- [s. 44 (3), tinuance or dissolution a partner of the ﬁrm, and Part] the legal representative of any such partner who ' is deceased, shall, in respect of the income of the ﬁrm, .... .. be jointly and severally liable for- the amount of tax ....... .. payable, and all the provi-

sions of this Act, so far as may be, shall apply to any such assessment ............. ..

(2) Where such discontinuance or dissolution takes [Nevg place after any proceedings in respect of an assessment year have commenced, the proceedings may be continued against the persons referred tofin sub-section (1) from the stage at which the proceeding stood at the time 'of such discontinuance or dissolution, a d all the provisions of this ;. Act shall, so far as may be, amly accordingly. , i I (3) The provisions of subsections '»(1) and (2) shall, [s- 41(2). Dirt mutatis mutandis and so far as may i ,' apply in relation "44 ,3)'*'''"] to any penalty or other sum ' rgeab, . under any provi- sion of this Act, as they apply _n relation to tax.

(4) Nothing in this section shall dﬂiect the provisions'[N°".'] of section 170 (2) [24B (1), portion limiting liability of legal representative to extent of estate.] 2 ' , D~Other provisions. ' ' A (1) Besides the provisions; contaizfpd in this Chapter, Sqct on :3;

the following are' the provisions of this 'Act specially r_ele- L"

vant in respect of ﬁrms-- C lions' Section 6, clause (2). . [4A (b)] relating to .rcsiQenoe:of ﬁrms.' Section 28 (ii) .. [xo(5A) part]1re1ating t9 'charge of compensation etc. for uumﬁing agenqy. . § ; ' ' i 40 (b) . . [IO (4.) (b)] xlating to 4' ' 'ssib'l'ty of fntercst, l 'V salary, comzission of -zemuxlieraiibn paid to a l partner. g ,1 j "

bections 76 & 77. . [24 (1) 2nd p K viso part,"' 2:4, (2) proviso (c) and '(d)' [24 A2) pg-ooh part] relati to loss f ga registered firm or an 3 unregistered treat Vpapt registered. = Section 78 . . ' [24 (1) 2nd proviso, pit; and _24. (2) misc (c) part] relating to loss of_ umcgtstered

1. Underlining of sections in" the list has not beenﬁnic, for facility of 0 ~ I .

218

Clauses 197-198 s"°ti°"'79 (I) .. [24 (2) Prov. (e)] relati.ng.to set off of 1033;; in cases of change of C0l1Stltut10n in a ﬁrm.

3605011 I23 .. [10 (5A) part] relating to computation of tax on compensation etc. Section r38 clause(1) [3fm(1)] relating to information and returns by a Section 165 . . [23 (6)] relating to intimation of shares.

Section 280 (2) & 280 (4.) [28 (1) Proviso (d) and 28 (2)] relating to computa- tion of penalty in the case of ﬁrms and penalty for wrong apportionment of shares.

Section 320 (2) (a) .. ' !63] relating to service of notices in the case of Section 321 (2) . . [Newly added section in Misc. Chapter relating to service of notices in the case of dissolv ﬁrms.' (2) The list of provisions given in sub-section (1) is for convenience of reference only.

CHAPTER XVII SPECIAL PROVISIONS APPLICABLE TO COMPANIES i*?¢'ti°19 191? (1) The following provisions of this Act are specially si;'ns';p1;fl'i';';: relevant in' respect of companies, namely," - ble to comp. Section 6 clause (3) [4.A(c)] relating soresidencc of a company;

uues.

[New] Section 20 [8 Expln.] relating to deductions in the case of a banking company under the head «interest on securities";

Section 28 (ii) [10 (5A)] . relating to compensation etc., to a agent;

Section 4.7 (iii) [12B (1) relating to' transfe of capital assets to a shbsidir 2nd prov.] ry company ; ' ;

Sect'on 85(5) [15C (5) relating to non-applicability of section 85 5 _ to I I proﬁts andhdins to which section r :3 [sz3A ' Section :08 [56A] relating to exemption from tax of dividends from certain Indian companies; ' Section tog (2) [r 5B (r) relating to non-applicability of section 109 [1513] for 'xst prov]. super-tax in relation to companies;

Sections 113 to :20 [23A] relating to additional super-tax;

Section 123 (1) [1o(5A) . relating to computation of tax where total (income part] includes compensation esc.;

Section 126 [I7 (7)] relating to computation of tax where total income includes capital gains; ' Section 139 [39] relating to powers of the Income-tax Oﬁcer etc. to

-- examine registers;

' 'Provisions applicable" only to partners have not been included. 3.1 he list of sections has not been un¢1-lined, for facility of reading. ;

219

Clauses 198-201

-Section 166 (5) [19A] gelating to information and return regarding divi-

ends;

_Section :67 ' [20] relating to ocrtiﬁcatesin respect of tax on divideo n ; '/ ' Section 203 [18 (3D)] relating to deduction)! super-tax from dividends;

Sehtion 254. (a) [30 (1) relating to appeal: against an order under section _ prov.] :13 [23A];

Section 320 (2)(b) [63] relating to setivice of notices.

(2) The list of provisions given in sub-section (1) is for convenience of reference only. :

CHAPTER XVIII» _ COLLECTION AND RECOVERY or TAX.

A--General.

(1) Notwithstanding that the regular assessment in res- Seciotr 199, pect of any income is to be made in a hter assessment year, uction at the tax on such income shall :be payable by' deduction at *0 cc '"15 source or by advance payment,'as the e may be, in accor- the 9""

dance with the provisions qf this Chap t_ . [N 1' (2) Nothing in this section shall rejudice the charye of tax on such income under the provisions of section 3(1) . 3 . M A [] (1) In the case of income in respe of which provision See 'on i 200. is not made under this Chapter? for de cting income-tax at PW' the time of payment, and in any case where income-tax has '[':° 9'] not been deducted in accordanqe with (he provisions of th' ' Chapter, income-tax shall be payable bI'¢the assessee direct.

(2) Save as provided in this Chapt 3 super-tax shall be [s. 38 (2)1 payable by the assessee direct. 3 L B--Deductiong at stmfce.

: « (1) Any person responsib for ' chargeable under the head "S aries"

payment, deduct income-tax d su payable at a rate representing the av tax and average rate of super- , re A the ﬁnancial year in which p the estimated...' ....... ..income 0 the as for that ﬁnancial year. ' ' ing any income Sec on 201.

all, at the time of 5*' -

on the amount [". "-3 (2)' rate of income- mm ""1 vely, in force for t is made, on ée under this head 2 I (2) Any person responsibl§S£t>r lying any income [s. *'18 (23), chargeable under the head ~ ' '2 to a non-resident ml' Plfl] shall, at the time of payment, &duct....£.;.....tax on the esti- ?

mated income of the assessee. ' ' cial year in accordance with [section 17(1)]. i .»z' 15--I Lew G_oIn.I58.

220

Clauses 201-203 [s- _l8 (2), (3) ._. ..... ..The person responsible for making the pay-

P"°'"'°] ment referred to in sub-section (1) or (2) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deﬁciency arising out of any previous deduction or failure to deduct during the ﬁnancial year.

[New] (4) The trustees of a recognised provident fund, or any person authorised by the regulations of the fund to make payment of accumulated balances due to employees, shall in cases where section 297(1) [58G (3)] applies, at the time an accumulated balance due to an employee is paid,,make therefrom the deduction provided for in section 298 [58H].

[New] (5) Where any amount standing to the credit of an em- ployee in an approved superannuation fund is paid to the employee, income-tax on the amount so paid shall be deduct- ed by the trustees of the fund to the extent provided in section 313 [58S (2)]. ' {s. 18 (2A). (6) For the purposes of deduction of tax on salary pay- 1"'""P""] able in foreign currency, the value in rupees of such alary shall be calculated at the prescribed rate of exchangg.

Section 202. The person responsible for paying any income charge- ::c'§r"i°:i'es°" able under the head "Interest on securities" shall..;., ..... .., I,' 18 23) at the time of payrnent,--

main para] '

(a) unless otherwise prescribed in the case of any' secu- rity of the Central Government, .......... ..ded inc come-tax on the amount of the interest paya le at the maximum rate ; and , [s. _18 (3A), (b) also deduct super-tax on such amount, when paid min Para] to a non-resident--- ;

(i) in the case of a conipany, at the rate app]: able to a company which has not made the a nge- ments for deduction of super-tax referr to in section 203 [18(3l?)]; _ %

(ii) in the case of any pther person, in accorfance V wit]h the provisions! of section 124(1)(b) 17(1)

(b) - -

Section 203. The principal oﬁicer of an (Indian company or a com-

Di"'?§"d3'b pany which has made such effective arrangements as: may gin P5" 1)' be rescribed for the educt' of super-tax from divi ends ' sh 1, at the time of ying' if dividend to a share lder whom the principal A er ' ';no reason to believe 0 be

221. Clauses 203-205 a resident, deduct super-tax on the amount of such dividend as increased in accordance with the provisions of section 59 Section 16(2) main para, latter part], at the following rates :--

(i) if the shareholder is 1 company, at the rate appli-

cable to a company which has not made the arrangements for deduction of super-tax from dividends referred to above;

(ii) if the shareholder is a person other than a com- pany, in accordance with the provisions of section 124(1) (b) [Section 17(1) (b)].

(1) Any person responsible for paying to a non-resi- Section 204.' dent .......... ..any .......... ..sum chargeable' under the provi- E3332? "lmfa sions of this Act, (not being income chargeable under the (3B)'°,':,a,n head "Salaries" or "Interest on securities". and not being para} a dividend) shall, at the time of payment, unless he is him- self liable to pay any income-tax and super-tax thereon as an agent. deduct on such sum-

(a) income-tax at the maximum rate, and

(b) super-tax-

(i) in the case of a company, at the rate applicable to a company which has not made the arrange- ments for the deduction of super-tax referred to_ in section 203 [18(3D)];

(ii) in the case of any other person, in accordance with the provisions of section 124(1) (b) [17(1)

(b)]; ' Provided .......... ..that nothing in this sub-section shall gs. 18 (3B), apply to any payment made in the course of transactions nd D_1'°V-J in respect of which a person responsible for the payment is deemed under section 173(1), Piaoviso [section 43, First Proviso] not to be an agent of the' payee.

(2) Where the person responsible for paying any such [s- 18 (3C)] sum .......... ..( other than interest) to a nan-resident considers, E that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Income-tax Oﬂicer to determine, by general or spe- cial order. the appropriate proportion} of such sum so chargeable, and upon such determination tax shall be deduc- ted under sub-section (1) only on that proportion of the sum which is so chargeable.

1 (1) Where. in the case of my income in respect of Sccti 11205 which income-tax or super-tax is required to be deducted Cm' t¢_ at the time of payment at a particular rate under' the pro- "'lg3':'r";';:':

visions of sections 201 to 204 [Section 1B(2B) main para, 'sec 18 2 ' Section 18(3) main para. Sec, 8(3A f para, Section [min '$32 1_8(3B) main para or Section 3D) para], the In- [3 (3 ,'p,.,.. com'e-tags Oﬁicer is sq.tisﬁed- H V income at the ino,( )1 , Proviso; (3B), lst proviso, and (3D) , proviso;] [s. 18 (2B), prov, part] Section 206.

'1 ax dedu-

cted is inco-

me received.

[S- 18 (4)1 Section 207.

Credit for tax dcduclcd [S._ 18 (5).

main para, earlier half, part] [5- I3 (5) main para, latter half,pa-

rt, and ist prov.] [s. 18 (5)2nd prov., part] [s. 18(5), 3rd prov. part] Section 208.

Duty of per-

son deduct-

ing tax.

[S. 18 (6)] Section 209.

C0 en-

c-s of 'lure to deduct or P3)'-

222

Clauses -205-209 total world income of the recipient justifies the deduction of income-tax or super-tax at any lower rate or no deduction of income-tax or super--ta:c, the Income--tax Oﬂicer shall, on an application made by the assessee in this behalf, give a certiﬁcate in writing to that eﬁect.

(2) .......... ..Wherc any such certiﬁcate is given, the person responsible for paying the income shall, until; such certiﬁcate is cancelled by the Income--tax Officer, deduct income-tax and super-'tax at the rates speciﬁed in such cer- tiﬁcate .......... ..or deduct no tax, as the case may be.

All sums deducted in accordance with the provisions of sections 201 to 204 [18(2) to 1.8(3D)] shall, for the purpose of computing the income of an assessee, be deemed ito be income received.

Any deduction made ........ ....in accordance with the provisions of sections_201 to 204 [18(2) to 18(3D)]....', .... .. shall be treated as a payment of income-tax or super-ttix. as the case may be, on behalf of the person from whose income the deduction was made, or of the owner of the securﬁty or of the shareholder as the case may be, and credit sh ll be given to him for the amount so deducted (exclusive qf any portion of such tax for which he obtains, in accordance with the provisions of this Act, a refund,) on the prod ction of the certiﬁcate furnished under section 211 [sub-s tion (9) of section 18] ............. .., in the assessment, if any, ade for the immediately following assessment year unde this Act :

Provided .......... ..that where such person or owrler or share-holder is a person whose income is included nder the provisions of section 63 or 64 [clause (0) of sub-s ction (1) of section 16], section 67 [sub-section (3) of s ction 16]. section 96 [4413] or- section 97[44E] in the total income of another person, the payment shall be dee cl to have been made on_behalf of; and the credit shall be iven to, such other person .......... .. , Provided furtherthat where any security or shkre in a company is owned jointly ,b. two or more perso not constituting a partnership, one it in respect of t tax deducted .......... ..may be given to each such person the same proportion in which the interest on such secu ty or dividend on such share has been included in his total i ome.

Any person deducting an' sum in accordance wi the provisions of sections 201 to 4 [18(2) to 18(3D)] sha l pay within the prescribed time, the sum so deducted the credit of the Central 'Government or as the Central card of Revenue directs. ;

. (1) If any such person does not deduct or after d duct- mg fails to pay the as to 204 ns (2) to 18, (3D)] in section 203 [Sect' n 18( i 223 Clauses 209-212 the company of which he is the principal officer shall, [so I8 (7)1 without prejudice to any other consequences which he or it may incur, be deemed to be an assesee in default in res-

pect of the tax:

Provided that no interest shall be charged .under sec- tion 230 [Section 46 (l)] from such person, principal officer or company unless the Income-tax oﬂicer 1S satisﬁed that such person or principal oﬂicer, as the case may be, has wilfully failed to deduct and pay the tax.

(2) Where the tax has not been paid as aforesaid after [New] it is deducted, it shall be a first charge upon all the assets of the person, or the company, as the case may be', referred to in sub--section (1).

The power to levy by deduction under sections 201 to 5° 5°". *'°- 2o4 [section 18(2) to (3D)], shall be without prejudice to 2; "g;;§';m any other mode of recovery. dc by move. TY."

[sgis (3)] Every person deducting income-gtax or super-tax in Se¢Iti_°n 211- accordance with the provisions of sections 201 to 204 [Sub-- g'j{'g:':;:::'5 sections (2), (2B), (3), (3B), (3C), or' (3D), of section 18] [358 (9)] shall, at the time of payment pf the sum from which tax - has been deducted, furnish to the person to whom such payment is made, a certiﬁcate to the effect that income-.-tax or super-tax has been deducted, _and specifying the amount so deducted, the rate at which the taix has been deducted, ' and such other particulars aslmay bejprescribed.

For the purposes of sections 201 to 211 [All sections in- Section, 212. corporating any part of section 18] and section 166(1) Person respo- [20A] the expression "person responsible for paying" ".5eb1°f°'P"

yu .

meanS-- . [s 18 F.xpl.] _ (i) in the case of payments of income chargeable un- der the head "Salaries" 0t 1'! than payments by the Central Government or he Government of a State, the employer himself pr if the employer is a company, the company itsdlf including the prin-

cipal oﬁicer thereof ;'

(ii) in the case of payments of in ome chargeable un-

der the head "Interest onjge, urities" other than 'payments made by br on Hehalf of the Central Government or the Government of a State, the local authority or company including the princi-- ' pal oﬂicer thereof ; 4.

(iii) in the caseﬁof payments of any other sum char- geable under the prdvisions -of this Act, not being income chargeable under ihe head "Interest on securities", the pay him, ' or -if the payer is a company, the co y i including the prin-; cipal officer thereo , 1 " ' ' 224 Clauses --2'1'3-217 sl'3°°"°" i?'i3;- ....... ..Where tax_is deductible at the source under sec- d§';cf'§fc'r':fa_ tions 201 to 204 [section 18(2), 18(2A), 18(3), 18(3A), 18(3B), nd 0,, as,,.,_.,. 18(.5C) or 18(3D)], the assessee,sha11 not be callediupon see to pay the tax himself unless he has received the income [3- 7, (1): 9nd without such deduction. proviso--ex-

t ded sfaxétionl 2:4. The provisions of section 207 [section re: credit for Saving regar tax deducted at source--i.e., parts of s. 18(5)] are without dlﬂ(gi:axh;i'fe- prejudice to those of section 246 [section re: tax deemed {,';'";,, Said fin to have been paid on dividends----existing s. 18(5), part and dividends. S. 49B]. ' ' [New] C----Advance payment: of tax.

Section 215. (1) Tax shall be payable in advance in accordance Advancetax with the provisions of sections 216 to 228 [All other sec- tions embodying any part of section 18A] in the case of in"?-mfg "2'of"i"°§i;4°Es'i§'c'i§§§is'°§§?§i§'§n§ §¢?Ju3'§f'°i%('i§'dfE sec 10 o , f,'.;,§,f'_f,'a,',;'£2? (2A), 18(2B). 13(3), 18(3A),_18(3B) and 18(3C)] for deduc- rlicr half pa- tion of income-tax at the time of payment and whibh is §t.»x§fg)]"""h not chargeable under the head "Capital gains".

[New] (2) Such income is hereinafter. in this Chapter 1iefer- red to as "income subject to advance taxf', and such tax is hereinafter in this Chapter referred to as "advance tax".

[NW] (3) The provisions of this section shall, in relation to any dividend which is to be increased under the provi- sions of section 59 [section 16(2), main para, part re' ard- ing increase of dividends], apply only for the purposes of 'super-tax. , 1 Advance tax shall be payable in the ﬁnancial year----

Section 2x6._ condition or (a) where the total income of the assessee referred to liability to ' in section 217 (a) (i) [18A (1) (a), main para,: ear-

pay advance lier half, part, as embodied in the draft sebtion relating to "computation of advance tax"] ..' .... ..

(a)ma;,, pm, exceeded the maximum amount not chargea e to earlier half, income-tax in his case by two thousand ﬁve, un- Partl dred rupees, or - 3 tax.

[s. 18A (1)

(b) where it is pa able b virtue of the provisions of section 220(3) s. 18A(g)].

Subjecteto the provisions of section 215(3), [sub-clause newly added re: advance tax on'dividends] the amount of Section 217.

Computation of advance ,,,_ advance was payable by an assessee in the ﬁnancial lyear [NW] shall be computed as follows:--- --

[" 38") (")' (a) (i) .... ..his tot ' inco ' iaf the latest previous 'year in respect of hich fhas been assessed by hall pu-t.] first be asc 'ﬂed.' '3 " .

H ments in which the advance 225 Clauses 217-218

(ii) so much of such total income as consists of income which was or could have been subject to advance talx in that previous year shall next be ascertain- € ;

(iii) income-tax and supervtax shall then be calculated 5, 18A (1) on the last mentioned income at the average rate Ea). main of income-tax and the average rate of super-ta.'/: 'WC' respectively applicable in the ﬁnancial year to the ' pm') total income determined for the said previous year;

(iv) the sum total of income-tax and super-tax so calcu- lated shall, subject to the prcwisions of clauses (b) and (-c), be the advance tax payable;

(b) .... ..in cases where under the provisions of section [8- I8A(§) 124(2). or 124 (3) [section 17(1) 1st Proviso], the tax: ('L 1"?"

payable by the assessce is to be determined with re- °' yference to his total world income, the advance tax payable by him shall_ bear to the total amount of income-tax and super-tax which would haveebeen ; payable on his total world income of the said pre-

vious year had it been his total income the same proportion as the amount of the income subject to advance tar: which is 'included therein bears to his total world income;

(c) in cases where an estimate is sent by the assessee [Néw.] under section 220(1) or 220(2) [18A(2)] or section J _220(3) [18A(3)], the total income so estimated _ j shall, for the purposes of calculation of tax under this section. be substituted for the total income re-

ferred to in clauses (a) and 4(b), and the income subject to advance tax so estimated shall be subs- tituted for the income to be ascertained under item (ii) of clause (a).

V E.7c'planation.----- .... ..If the assessee is a partner of a_[;.£ 18A(1) registered ﬁrm and an assessment of the ﬁrm has been zmi Pr0V.] completed for a previous year later than the latest previous year. for which the assessee's .... ..asses$ment has been com- pleted, his share in the income oftltajﬁrm shall, for the , purposes of clauses (a) and (b), be included in his total & income on the basis of the said assessment of the ﬁrm. * (1) Where a person has been prqztously assessed uné se'ion 2:8. der this Act or under the Indim Income-taac Act, 1922, the u gof 1922. Income-tax Oﬂicer may, on or after the 1st day of April Or r 5)' in the ﬁnancial year, by order in writing require him to 7" °""' pay .... ..to the credit of the Central Government, advance ; "

tax determined in accordance with the provisions of sec- ¥;"'8A(')'(') tions 215, 216 and 217 [s. 18A(1_) (.a) as embodied in other 6,, ,, "£.'i',--; sections]. . I pan] (2) The notice of dema is a _under section 163 (£')';' '3££i'l)' [29] in pursuance of such er the ' L 'fy the instalr _' , 1 is _ le under section pm.) 226 Clauses 218-220 219 [s. 18A(1), (a) earlier half, part and 1st Proviso and section 18A(1) (b), and newly added provision, as embodi-

ed in the draft section relating to instalment].

[5, .sA(.) (3) ....... ..If afterthe making of an order by the Income (3). 3rd tax Oﬁicer under this section and before the 15th day of P'°'"] February of the ﬁnancial yearan assessment of the asses- see (or of the registered ﬁrm of which he is a partner) is completed in respect of a previous year later than that re- ferred to in the order of the Income-tax , Offi- cer, the Income-tax Oﬂicer 1 may make an amended order requiring the assessee to pay in one ins- talment on the speciﬁed date, or in equal instalments am the speciﬁed dates, if more than one, falling after the date of the amended order, the advance tax computed on t_ re- vised basis as reduced by the amount, if any, paid 1 ac- cordance with the original order; but if the amount already paid exceeds the advance tax determined on the revised basis, the excess shall be refunded. ' Section 219. (1) Subject to the provisions of this section and 0 sec- lnstalmcnts tion 220[18A(2) and l8A(3)], advance tax shall be pa able Of adVanC° in equal instalments on the 15th day of June, 15th da of """' September. 15th day of December and 15th day of Marph in [s(-8), *3£;:x)1 the ﬁnancial year:

para, earlier i half, part.] -

'[3- '3A(') Provided that, where the previous year of the assessee

(a), 1st Prov.] in respect of any source of in ome ends after the 31s day of December and before the §oth day of April, .... ..th ad-

vance taac on that source of income shall, subject as ore- said, be payable in three equal; instalments on the 15t day of September, the 15th day of lDecember and the 15t day of March, respectively. 9 R5] I3A(I) (2) If the notice of demand issued under sectio 163 [29] in pursuance of the order under section 218 [se tion .

18A(1) (a), main para, earlier;-h,alf, part relating to» der of Income-tax Oﬂ'icer]jis serv after any of the dat on which the instalments tspeciﬁe therein are payable, the advance tax shall be payable ' equal instalments on ach of such of those dates 'as fall 'after the date of the se vice of the notice of demand, or in one sum on the 15th d of March if the notice is served after the 15th day of De em-

ber.

Section 220- (1) If any assesseel who is required to pay advanc tax Estimate by by an order under section 218) [s. 18A sub-section (1) (a), '-W¢95=¢- main para, earlier half, part re; Order by Income-tax ﬂi-

?[S-_ 18(2), cer] estimates at any time before the last instalment is due """" P3"-1 that his total income or income subject to advance t the period which wo'u1 be the. evious year for the { me- diately following assc , 'ye ', is l'ess'*than the tot in-' come on the basis of. _hich, L income on which, e is W , :adjust any excess or deﬁciency in respect of any 227 Clauses 220 required to pay such tax, as the case may be, and accord- ingly wishes to pay an amount less than the amount which 3% is so required to pay. he may send to the Income-tax ' cer--

(i) an estimate of the total income for that period,

(ii) an estimate of the income subject to advance tax for that period, and ((iii) an estimate of the advance tax payable by him cal-

\' culated in the manner laid down in section 217 [s. 18A(1) (a) main para, part, as embodied in section re: computation of tax%. He shall pay such amount as accords with his es imate in equal ins- talments on such of the dates' speciﬁed in section 219 [s. 18A(1) (a) main para, earlier half, part as embodied in draft section re: instalments] as have not expired or in one sum if ohly the last of such cdates has not expired. ' '(2) .... ..The assessee may send a revised estimate of [S4, 1 1815(2)', :'the advance tax payable by him beiore any one of the dates Prov'-l :speciﬁed in section 219 [s. 18A (1) (a),' main para, earlier half, as embodied in draft section re! instalments] anld insta -

ment already paid in a subsequent instalment or in subse- quent instalments.' ' ' ' (3) Any person who has not previobsly been assessed [S- ' under this Act or under the Indian Income-tax Act, 1922, u 0 shall, before the 15th day of arch in each ﬁnancial year, if his total income of the siod w ich would be the previous year for the immediately fol oiving assessment

-year is likely to exceed the ximumiaanount not charge- able to income-tax in his caseby two? thousand ﬁve hun- .dred rupees, send to the Income-tax'Ofii¢er--

(i) an estimate of the totaljincome the said previous year; ,

(ii) an estimate of the income subgidct to advance tax, a of the said previous year; and * i(iii) an estimate of the adv nce taxi " able by him .... .. calculated in the ma per laid? bwn in section 217 [s. 18A(1) (a) main pira, ear' 1' half, part as em- bodies in .section ne: . co utation of' tax], and shall pay such amdunt as <§}o.rds with his esti- mate, on such of the dates sp ﬂed in section 219 [s. l8A(1) (a), main para, ear er half, as embodi- ed in section part re: i ment] as have not expired, by insta,I, ents ' may be revised according to sub-sec ' (2) _iso to s. 1815(2)], . ; e - r » «s A 4 ~.

- ;

i :8A<a>1 '' 1922.

p and ,,tp,ov_] relates to income subject to 228 Clauses -220-223 [New]. 2 (4) Every estimate under this section shall be sent in the prescribed form and veriﬁed in the prescribed man- 71.81'.

Section 22:. Where part of the income subject to advance tax con-

commasgon sists of any income of the nature of commission which is.

receipts. receivable periodically and is not received or adjusted by [S. 18A(4).] the payer in the assessee's account before any of the quar-» terly instalments of advance tax become due, he may defer' payment of advance tax on that part of his income to the- date on which such income would be normally received or' adjusted, and if he does so he shall communicate to the- Incciome-tax Ofﬁcer thedate to which such payment is defer-V re 2 Provided that, if the advance tax of which the pay- ment is deferred is not paid within ﬁfteen days of the date' on which such incomeor part thereof is received oradjust-2 ed by the payer in the assessee's account, the advance tax shall be payable with ﬁour per cent. simple interest per annum from the date of such receipt or adjustment to the date of payment of the advance tax.

Section 222. (1) The Central Government shall pay simple in-- 2 Intcrcstpa.ya- terest .......... .. at four per cent. per annum .......... ..on the- NC by Gov- amount by which the aggregate sum of any instalments of ' °'"m°'"' advance tax paid during any ﬁnancial year in which they are [S-. '3A(5)» payable under sections 215 to 221 [All sections embodying' mm" Pam' any part of section 18A(1), 18A(2)', 18A(3) of 18A(4)] exceeds.

pan] the amount of the tax determined on regular assessm¢nt,...' from the 1st day 0 April next following the said ﬁnancial [S. x8A(5), year to the date 0 the regular assessment .......... .. for; the- 2"'! PFOV-] assessment year immediately following the said ﬁnancial' year.' (2) .... ..On any portion of such amount which is refund-

[S. 18A(5), ed under the provisions of sections 215 to 221 [sectio' 18A '5' PPOV-l (1) to (4)] interest shall be payable only up to the d e on which refund was made. 1 section _ (1) Where in any ﬁnancial year an assessee- I t "3 has paid advance tax under section 220(1) or 22(_)(2) [sub- a',;,:'°" Fag" section (2) of.s. 18A] or section 220(3) [sub--sect1on (3) of .,,.,,m, V s. 18A] on the basis of his own estimate, and the advance tax' so paid is less than eighty per _cent. of the tax determined 5;'. '3A(6)v on the. basis of the regular sessment, so far as such tax m Pam zzvance tax and so far as; it is. not due to variations in the rates of tax made by the Fi ance Act enacted for the year for which the regular asses nt is made, simple interest at the rate of four per cent,' per' annum from the 1st day of April next following the; said ﬁnancial year up to the date of the said regular assessment shall be payable by the assessee upon the amount by which. the advance tax so paid falls short of the said eighty per cent. ' '. See also alternative ' ft in'thc I' i on Clauses. _ g '. Existing section 18 A( , ut ' prescribes, the rate of four pf! cent-

as from tst April, 1952. , 3 p '£29 Clauses 223-225 (2) .... ..Where provisional assessment is made under [s. 18A (6) section 145 [23B],-- ﬁnd "W-l

(i) interest shall be calculated in accordance with the foregoing provision up to the date on which the tax as provisionally assessed is paid, and

(ii) thereafter interest shall be calculated at the rate aforesaid on the amount by which the tax as so assessed (in so far as it relates to income subject to advance tax) falls short of the said eighty per cent.

(3) ...Where as a result of an order under section 259 [s~d 13A (6)' [31] or section 272 [33A] or section 161 or 162 [35] or section 3' P'°"'] 263 [66], or section 269 [66A],.the amount on which inte- rest was payable under this section has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded together with the amount of income-tax that is refundable.

(4)...In such cases and under such circumstances as may f., .3A (5),- be prescribed, the Income-tax Officer may reduce or waive 5th Prov.] . the interest payable by the assessee under this section.

Where, on making the regular assessment. the Income- Section 224.

tax Officer ﬁnds that any assessee has-- ' I'"°'°" Pa?' able by asses-

(a) under section 220(1) or 220(2) [s. 18A(2)] or section 5? in 0389 220(3), [s. 18A(3)] under estimated the advance tax ;'tn;'t"ld::'c'_°"' payable by him and thereby reduced the amount [s. 1 (7)], payable in any of the ﬂrst three instalments, or .

(b) under secion 221 [s. 18A(4)] wrongly deferred the payment of advance tax on a part of his income, he may direct that the assessee shall pay simple interest at four per cent, per annum-----

(i) in the case referred to in clause (a), for the period during which the payment was deficient on the difference between the amountipaid in each such instalment and the amo nt which should have been paid having regard to he aggregate advance tax actually paid ....... ..during the year, and

(ii) in the case referred to 'm clause (b), for the period during which the payment of advance tax was .... .. so deferred.

Explanati.on.--. . .For the purposes of this section, any in- stalment due before the expiry of six months from the com- mencement of the previous year in re ect of which it is to be paid shall be deemed to have beco 4 due ﬁfteen days after the expiry of the said six months.

(1) Where, on making the regular assessment, the In- S°<=ti°n M5- come-tax Officer ﬁnds that no» yrnentl 'advance tax has "" ' 'ﬁg:

been 'madein accordance wit the' p . 'sions of sections mu, 'mg, 215 to 220 [s. 18A(1), 18A(2), I (3)], ' nest calculated in [s. : (8)1 230 Clauses" 225-229 the manner laid down in section 223(1) and 223(2) [s. 18A(6), main para, and 1st Proviso and 2nd proviso] shall be added to tire tax as determined on the basis of the regular assess-

men .

7[NeW] (2) The provisions of section 223(3) [s.«18A(6), 3rd Prov.] and of section 223(4) [s. 18A(6), 5th Prov.] shall apply to interest payable under this section as they apply to interest payable under section 223 [s. 18A(6) ].

:51: _ ( 1) If any assessee does not pay _on the speciﬁed date any Em deemed instalment of advance tax that he is required to pay under to be in def" section 218 [section 18A(1)] and does not, before thepdate on ult.. which any such instalment as is not paid becomes d e, send [I8A(I0)] under section 220(1) or section 220(2) [s. 18A(2)] n esti- mate or a revised estimate of the advance tax pay;ble by him, he shall be deemed to be an assessee in default, in res- pect of such instalment or instalments.

(2) If any assessee has sent under section 220(1) or 220(2) 7 [18A(2)] or section 220(3) [18A(3)] an estimate or a grevised estimate of the advance tax payable by him, but does not pay any instalment in accordance therewith on the ' ate or dates speciﬁed in section 219 [s. 18A(1) (a), main pa a, ear- lier half, part embodied in section re : instalmen ], he shall be deemed to be an assessee in default in re ect of such instalment or instalments : * Provided that the assessee shall not, under sub-section (1) 'or this sub-section, be deemedfto be in default in re ect of any amount of which the payment is deferred under ection 221 .[s. 18A(4)] until after the date communicated _V him to the Income-tax Oiﬁcer under section 221 [s. 18 |(4)]. '5€C'i9n 227- Any sum, other than a penalty or interest, pai by or jfgﬁggcc ti': recovered from an assessee in pursuance of the pr_ isions '[s_ ,gA (")1 of sections 215 to 226 [all sections embodying any art of section 18A(1) to 18_A(10)] shall be treated as a pay ent of tax in respect of the" income' of the period which w uld be the previous year for an assessment for the assessme t year next following the Aﬁnancialyear in which it was yable, and credit therefor shall be given to the assessee in t regu- _lar assessment. ' ' "

'5°°'l°". 923-f. Any income chargeable under the head "Capitalzgains"

§;';i',';i'°;'ai:s shall not be taken into account for any of the_ pur ses of

-[s. ,gA (,2)] sections 215 to 227 .[All other sections embodying a 1,): part of section 18A]; and the emresstons total zncom and "total world income" occurriitg in any of those sectio s shall accordingly be construed as not including such inco e.

'Section 229. ' When tax D--Collection and Recovery 2 1'fi;'§§."'.§.-.?§L'.l ' (1) Any amoun speci ' ' as payable tin a n ice of déemcd in demand under .... .. tion 1 29.].....j.shallz'~be;. paid ithin 'd°f"'"'«' ~ the time, at the pla e.and' V ' ' '_ in the 231 Clauses 229-230 notice ........... ....., or if a time is not so mentioned, then on or [5, 45, mam before the exp ry of a period of forty-ﬁve days from the date para. Part] of the service of the notice. ' (2) On an application made by the assessee before the expiry of the due date under sub-section (1), the Income- tax Oﬂicer may extend the time for payment or allow pay- ment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case.

[New] (3) If the amount is not paid within the time limited [, under sub-section (1) or extended under sub-section (2), as the case may be, at the place and to'the person men- tioned in the said notice, the assessee ....... ..shall be deeme:l A . 4.5, main, para, part] 'to be in default.

(4) I f, in a case where payment by instalments is allow- [New] ed under sub-section (2), the assessee commits default in. paying any one of the instalments within the time ﬁxed under that sub-section. the asséssee shall be deemed to be in de ault as to the whole of the amount then outstanding, and t e other instalment or instalments shall be deemed to have been due on the same date as the" instalment actually in default. .

(5) ....... ..Where an assessee has presented an appeal [s. under section 254 [30], the Inoome-tax») Oﬁicer may, in his Pro'?- discretion, and subject to such conditions as he may think ' fit to impose in the circumstanees of thecase, treat the as- sessee as not being in default. in respect of the amount in dispute in the appeal, even though the 'time for payment has expired, as long as such aappeal remains undisposed of.

5: I 3t?

F (6) ....... ..Where an assesseeehas be assessed in respect [s. 5, '_2lld't of income arising outside 'slndia a country the Pt laws of which prohibit or restrict the remittance of money i to India, the Income-tax Oﬂicen shall nbt: treat the assessee ' as in default in respect of that part of the tax which is due ; in respect of that amount of his income.,which, by reason of = such prohibition or restriction, cannpt be brought into India, and shall continue to ﬁreat the" assessee as not in . default in respect of such part 'of the until the prohibi- ?

s tion or restriction is removed.' * Explanation.---=For the p oses of-litllis section, income [3, 45, Expl.-]; shall be deemed to have been brought: into India if it has - been utilised or could have been util' for the purposes of any expenditure actually incurred 'the assessee with- out India or if the income, whpther ltalised or not, has been brought into India in any? form. . ' (1) When an assessee is in default or is deemed to be Section 230-, in default in making a payme , ' of tax' shall, in addition' {:1 . ' 9""

to the amount of -«the arrears'. I Ha _ 3 pay, by w§y'oi;,¢ ,;,&"h°''_,.''

- ' (Ina! 232 ' Clauses 230-232 penalty, simple interest from the date of default to the_date of payment at the rate of ten« per cent. per annum on the amount of arrears.

(2) If the arrears of tax are paid within three months from the due date, the interest. by way of penalty levied o-r leviable thereon under sub-section (1) shall be remitted.

(3) No interest shall be charged under sub-section (1) in respect of any period for which the assessee is, by virtue of any provision of this Act, treated as not in default.

Scictifén 23:. (1) When an assessee is in default or is deemed to be in '° default in making a payment of ta.7c,_ the Income-ta); pfﬁcer It 46(2)] may forward to the Collector a--cert1ﬁcate under h1s fs1vgna- ture specxfymg the amount of arrears due from the assessee, and the Collector, on receipt of such certiﬁcate, shall proceed to recover from such assessee' the amount speciﬁed therein by one or more of the modes men- tionﬁd gelow, }rL1c§o'£'dance with the' procedure laid down inte econd ceue-- '

(a) attachment and sale of the assessee's movable pro- perty; . y ' _

(b) attachment and sale of the assessee's immovable property; _

(d) appointing a receiver for the management of the assessee's movable and immovable properties, ls-45(7),Expl. (2) The Income-tax Oﬂicer may issue a certificate under 'am' ha" sub-section (1) notwithstanding that dproceedings for treco- Pm] very of the arrears by any other mo e have been ta en.

Section 232. (1) The Income-tax Oﬂicer may forward the certhicate S:'gr°:'°:cn';3 referred to in section 231 [46(2), main para] to-

.ﬁ°3'¢ 'S '° 56 (a) the Collector within whose jurisdiction the as' ssee carries on his business, profession or meat' n or within whose jurisdiction the principal place Yf his business, profession or vacation is situate, or 2

(b) the Collector within whose jurisdiction t Z as- sessee resides or any -movable or immovable; pro- perty of the assessee is situate. 2 (2) If the Collector to whom a certificate is sent ' an Income-tax Oﬂicer is not able to recover the entire a ount by sale of the property, movable and immovable, but information that the assessee has property in a district within the jurisdict' of a , her Collector, he may end the certificate to such her (gqﬁctor or to a Collector ,'th- .,in whose jurisdiction ',the -ass" ,ee resides. and ther pan 233 Clauses 232-234 that Collector shall proceed to recover the' amount under this «Chapter as if the certiﬁcate was sent to.' him by the Income- tax: Oﬁicer. ' Explanation.--In this section, "Collector" means a Col- .lector of a district in any part of India, and includes an Additional Collector of any such district.

(1) When the Income-tax Oﬁicer sends a certiﬁcate to S<='=t_i°_n 233- a Collector under section 231 [46(2) main para] it shall not 2::'l§'c';'tc °f be open to the assessee to dispute before the Collector the and; ,m,',,d. correctness of the assessrruent, and no objection to the mcntthcrcof. '-certiﬁcate on any ground shall be entertained by the Col- [New] lector.

(2) An assessee objecting to the issue of any certiﬁcate, on any ground open to him. other than the correctness of the assessment, may apply to the Income-tax Oﬁicer for withdrawal or cancellation of the certiﬁ.'t'-"he, and the In- come-tax Officer shall, after giving the assessee a reasonable gpportunity of being heard, pass such orders as he thinks t. ' (3) Notwithstanding the issue of a certiﬁcate to a Col- lector, the Income-tax Officer shall have power to correct any clerical or arithmetical mistake in the certiﬁcate by sending an intimation to the'Collector.

(4) The Income-tax Oﬂicer shall intimate to the Collec- tor any orders withdrawing or cancellingj a 'certiﬁcate pass- ed by him under sub-section (2). or any;correction made by him under sub-section (3) or any amendment made under section 234(4) [sub-section in newly added section providing for amendment of certiﬁcate on reduction etc. in any pro- ceeding under the Act]. * (1) Notwithstanding that a, certiﬁcate has been issued Scctirn 234- to the Collector for the recovery of any tax, the Income- 01, g;':°c:f1_ tax Oﬂicer may grant time for the payment of the tax and man; '0, thereupon the Collector shall stay the proceedings until the with walof _ expiry of the time so granted. . 'mi '°-

[Ne (2) Where a certiﬁcate for the recovery of tax has been issued, the Income-tax Officer shall Ice 3 the Collector in- formed of any tax paid or time ' anted dr payment. subse- quent to the issue of/such c ﬁcate. I ' _ (3) Where the order giving ' e to a demand of tax for which a certiﬁcate for recov has been issued has been reduced in appeal or other proceeding under this Act but is the subject-matter of further proceeding, the Income-tax Oﬂicer shall stay the recovery of such pdrt of the amount of the certiﬁcate as pertains to he sai eduction, for the period for which the appeal' other _, eeding remains pending. : 'V H 3 ' ' 234 Clauses 234-235 _ (4) Where a certiﬁcate or the recovery of tax has been issued and subsequently t amount of the outstanding demand is reduced as a result of an a eal or. other pro- ceeding under this Act, the Income-tax er shall, when. the order which was the sulzject-matter of such appeal or other proceeding has become ﬁnal and conclusive, amend. the certiﬁcate or withdraw it, as the case may be.

gﬂgnmgggé (1) Notwithstanding the issue a certiﬁcate to the Col-

of move" lector under section 2331 [46(2) main para], the Income-tax [L 45, EXPL, Oyfﬁcer may recover the tax by any one or more of the latter] half modes provided in this section.

part.

[s. 46 (_=,)] (2) If any assessee is in receipt of any income charge- able under the head "Salaries", the Income-tax Olﬁcer may require any person paying the same to deduct from any payment subsequent to the date of such requisiti any arrears due from such assessee, and such person sha(l)lbcom- ply with any such requisiticm and shall pay the sum so deducted to the credit of the Central Government, 'or as the Central Board of Revenue directs.

Salary exempt from attachment in execution . of a decree of a civil court under section 60 of the Code oﬂ Civil:

5 of I908. Procedure, 1908, shall be exempt from any requisitiongmader under this sub-section. ' 5 i [s. 46 (5A), (3) (i) The Income-tax Oﬂicer may, at any time on from "it Para' time to time, by notice in writing ....... .., require any rson P" '1 from whom money 15 due or may become due to t e as-

sessee or any person who holds or may subsequentl hold money for or on account of the assessee, to pay to t e In- come-tax Oﬂicer either forthwith upon the money om- ing due or being held or at or within the time speci _ in the notice (not being before the money becomes due or is held) so much of the money' as is sufficient to pay the amount due by the assessee in "respect of arrears ..... ..,'.....or the whole of the money whm it is equal to or less? than that amount.

[.. 4'6 (5A), (ii) A copy of the notice shall be forwarded to t 15' t-1 Para» sessee at his last address known to the Income-tax O cer. par .

[5, 45 (5,3), (iii) Where a person to whom a notice under thi sub-

6th pa-ra~] section is sent objects to it on the ground that t sum demanded or any part thereoil is not due to the asses e or that he does not hold% any for or on account the assessee, then, nothing conta' e in this sub-section shall be deemed to require such erson to pay any suc or part thereof, as the case m y be...._....., if the Inc Oﬁicer is satisﬁed about the correctness of such obje [s- 46 (5A)» (iv) The Income-tax Oﬁicer may at any time or :,flT)l_Tt 2'" p"""] time -to time amend revo . ny notice issued und this sub-section or extend ' or making any paqm it in pursuance of such no 'ca * * ..4 235 Clauses 235-238 . (_v) The Income--ta.7_c Officer shall grant a receipt for any [5, -45 (5A),- amount paid in compliance with a notice issued under this 3fd para} sub-section, and the person so paying 'shall be.- fully dis- ' charged from his liability to the assessee to the extent of the amount so paid. ~ .

(vi) Any person discharging any liability to the assessee [s. 4.6 (5A), after receipt of a notice under this sub'-section shall be per- 4th para] V sonally liable to the,Income-tax Oﬁicer to the extent of his own liability to the assessee so discharged or to the extent of the assesee's liability .... ..f<xr tax, interest and penalties, whichever is less. . '

(vii) If the person to whom a notice under this sub- [s.:46 (5A),' section is sent fails to make payment in pursuance thereof 5"' P3"-1 to the Income-tax Officer, further proceedingsmay be taken against him for the realisation of thefiamount as if it were an arrear of tar due from him, in the manner provided in sections 231 to 234 [S. 46(2)], and the notice shall have the same effect as an attachment of a debt by the Collector in exercise of his powers under section. 231 [46(2)]. ' (4) The Income-tax Oﬂicer may 'apply to the court in [New] whose custody there is money belonging to the assessee for payment to him of the entire amount «of such money, or, if it is more than the tax due, an amount sufficient to dis- charge the tax.

(5) The Income-tax Oﬂicer may, if so authorised by [s.:4.5(3) and the Commissioner, proceed to recover the tax by distraint (421 and sale of the movable pr erty of the assessee in the manner laid in the Third Sc edule.

. \ If the recovery of tax in any area has been entrusted to Section 236.

a State Government under article '258(1) of the Constitu-- R$'°°V¢'3S' tion, the State Government may direct with respect to that-afﬂmgize area or any part thereof, that tax shallbe recovered there- 6 (-6)] . in with, and as an addition to, any municipal tax or local [" 4 rate, by the same person and in the same manner as the municipal tax or local rate is recovered.

For the purposes of sect(i§)n 231 [il6(2)], the expression senion 237.

"Collector" shall include a , llectorein Pakistan, and the R' _V°'¥2 Income-tax Ofﬁcer may forward a 'certiﬁcate under that g""1'::'c9t*.(')r- . iii section to a Collector in Pakistan through the Central 2%,, Board of Revenue of -Pakistan, if thefgassessee has property 3 4:;(:;'] in the district of that Collector; ' 1 Where a Collector in India receives through the 'Central S<=Fti°n 2331; Board of Revenue of India a certiﬁcate under theﬁsignature 1],' of an Income-tax Ofﬁcer in Pakistan,:jthe Collector shall , 6 ( )1 ' proceed to recover the amount speciﬁed therein in the [574 9 manner in which he would proceed to recover the amount ' speciﬁed in a certiﬁcate received from an Income-tax Officer in India, and shall remit any sum SQ Ilecovered by him to the Income-tax Officer in Pa istan, r deducting'-liisex-' penses in connection with t «reco . _preceeding'b.=' - vf' 16-1 Law Coin./58 ' ' i V ¥ Section 239.

- Condition for recovery of Indian tax in Pakistan or of Pakistan tax in India.

[s. 4.6 (xo)] Section 24.0.

Recovery of penalties, interest and other sums.

15- 47] Section 24.1.

Tax Clear-

ance Certi-

ﬁcate.

[8- 45A (1)1 15 of 1940 21 of 1947 u'_of 1922]"

[s. 46A (2), main para] 236 (ﬂauses 239-241 The provisions of sections 237 and 238 [Section 46(8) and (9)] shall remain in force only so long as there are in ' force similar provisions in the Indian Income-tax Act, 1922, as in force as part of the law of Pakistan or under any other similar Act forming part of the law of Pakistan for "the recovery of tax by a Collector in Paksitan on receipt of a certiﬁcate from an Income-tax Oﬁicer in India.

Any sum imposed by way of penalty under the provi- sions of section 282 [Sub-section (9) of section 18A], sec- tion 281 [Sub-section (2),of 25], section 280 [Section 28], or section 279 [Sub-section -(6) of Section 44E], or payable under section 230 [Sub-section (1) of section 46], and any interest payable under the provisions of sections 221, 223, 224 and 225 [Sub-section (4), (6), (7) or (8) of section 18A] and any other sum payable under the provisions of this Act, shall be recoverable in the manner provided in this Chapter for the recovery of arrear of tax.

(1) Subject to such exceptions as may be made by the Central Government, no person who is not domiciled in India, or who, even if domiciled in India at the time of his departure, has, in the opinion of an Income-tax autho- rity, no intention of returning to India, shall leave the terri- tory of India by land, sea or air unless he ﬁrst obtains from such authority as may be appointed by the Central Gov- ernment in this behalf (hereinafter in the section referred to as the "competent authority") a certiﬁcate stating that he has no liabilities under this Act, the Excess Proﬁts Tax Act, 1940, or the Business Proﬁts Tax Act, 194-7, or the Indian Income-tax Act, 1922, or that satisfactory arrange- ments have been made for the payment of all or any of such taxes which are or. may become payable by that per- son :

Provided that if the competenfauthority is satisﬁed that such person intendsto. return to India, he may issue an exemption certiﬁcate either in respect of a single journey or in respect of all journeys to- be undertaken by that per- son within such period as may be speciﬁed in the certiﬁcate.

(2) If the owner or charterer of any ship or aircraft carrying persons from any place in the territory of India to any place outside India allows any person to whom sub-

section (1) applies, to travel by such ship or aircraft without 5 ﬁrst satisfying himself that such person is in possession of [S- 45A (3)1 a certiﬁcate as required by that sub-section, he shall be personally liable to pay the whole or any part of the amount of tax, if any, payable by such person as the Income-tax Oﬁicer may, having regard to the circumstances of the case, determine. , (3) In respect of any sum payable by the owner or charterer of' any ship aircraﬂ; ;under sub-section (2),'the owner or charterer, 380516 case may be, shall be deeme to 1' :

237

Clauses 241-242 be an assessee in default for such sum, and such sum shall be recoverable from him in the manner provided in sections 230 to 240 [all sections, including sec: for interest, relat-

ing to recovery] as if it were an arrear of tax.

(4) The owner or charterer of every ship or aircraft, [New] which takes passengers on board on any port or place in India for any place outside India, shall, within one month from the departure «of the ship or the aircraft from that port or place, furnish to the Commissioner having jurisdiction over the area in which that port or place is situated, a list in the prescribed form showing the name and last known address in India of every person (other than members of the crew and the staff of the ship :or aircraft) who travelled on the ship or aircraft and the particulars of the certiﬁcate or the exemption certificate presented by such person under this section.

(5) No proceedings shall be commenced for enforcing [New] the liability under sub-section (2) after the expiry of two years from the date on which the list required to be filed under sub-section (4) is ﬁled.

(6) The Central Government may make rules for regu- [9, 46A (4)] lating any matter necessary for, or incidental to, the pur- pose of carrying out the provisions of this section.

Explanation.--For the purposes of this section, the ex- [s. 46A (2), pressions "owner" and "charterer" include any represen-- EXPI-l tative, agent or employee empowered by the owner or charterer to allow persons to travel by the ship or aircraft.

Save in accordance with the provisions of section 183 Section 242. [Section 42(1)] or 229(6) [second proviso to section 45], Period for '-and except as otherwise provided in section 241(5) [new commencing sub-section in section 46A, laying down a limit of 2 years], '°°°"°cfjX no proceedings for the recovery of an sum payable under P'°°° "'8"

this Act shall be commenced after t e expiration of one [546 gag] year from the last day of the ﬁnancial year in which the mamp demand is made, or, in the case of a person who is deemed ;to be an assessee in default under any provision of this Act, after the expiration of one year from the last day of the ﬁnancial year in which the Income-tax Oﬂicer sends an intimation in writing to such person to the effect that he is deemed to be an assessee in default: » Provided that the period of one year ............. ..referred f,_ 45 (7) 1,:

to above shall be _r_'eckoned--- Prom]

(i) where an assessee has been treated as not being in default under section 229(5) [Sec. 45, 1st proviso] as long as his appeal ' ' 'undis sjed of, .......... ..from the last day of the fi ncial ar in which the ap-

peal is disposed of; 5 4 ' [s- 46 (7).

Expl., earlier half] Section 243.

Recovery by suit or under other law [s. 4.6 Expl.

latter half, part] Section 244.

Recovery of tax payable under provi-

sional assess-

ment.

[S- 2313 (5)] Section 24.5.

Tax paid by deduction or advance pay-

mcnt.

[S- 233 (5)1 238 Clauses 242-245

(ii) where recovery proceedings in any case have been stayed by any order of a court, .......... .. from the last day of the ﬁnancial year in which the order is I withdrawn;

(iii) where the date of payment of tax has been extend- ed by an Income-tazx authority to another date, from the last day of the ﬁnancial year in which such other date falls; ' where the sum payable is allowed to be paid by instalments, from the last day of the ﬁnancial year in which the last of such instalments is due.

(iv) Explanation.----A proceeding for the recovery of 2 any sum shall be deemed to have commenced within the mean- ing of this section, if some action is taken to recover the whole or any part of the sum within the period herein-« before referred to ................... ..

The several modes of recovery speciﬁed in this Chapw ter shall not affect in any way-

(a) any other law for the time being in force relating to the recovery of debts due to Government ., ..... ..

- or .~ . . . . . . . . . ..,

(b) the right of the _Government, to institute a suit for the recovery of the arrears due from the assessee;

and it shall be lawful for the Income-tax Officer ...... or the Government, as the case may be, to have recpurse to any such law or suit notwithstanding that the tart due is being recovered from the assessee by any .......... .. mode speciﬁed in this Chapter. E E--Ta.x payable under provisional assessment.

For the avoidance of doubt, it is hereby declared that the provisions of section 229, [all sections embodyin any part of section 45] except section 229(5) [45, 1st Prov. , and sections 230 to 239 [all sections embodying any pa, of section 46] apply in relation to any tax payable in ' rsu- ance of a provisional assessment made under sections 45(1) and 145(2), [s. 23B(1)] as if it were a regular asses ent made under section 147 or 148 [23(1) to (5)].

Tax paid or deemed to have been paid under sections 201 to.213 [all sections embodying any part of section 18] or sections 215 to 228 [alltsections embodying any part of section 18A] in reqrect of any income provisionally as- sessed under sections. 145(1) and 145(2) [section 23?(1)], shall be deemed to . E e beenjipaid towards the provi ional.

assessment. g ,1; i 239 Clause 246 CHAPTER XIX TAX DEEMED TO HAVE BEEN PAID ON DIVIDENDS S°°"°" 246' Tax deemed to have been (1) ............. .. Any sum by which a dividend has been §::$s°" d""' increased under section 59 [section 16(2), main para, latter '8 half] shall be treated as a payment hf income--tax (exclu- ELM' pag) sive of super-tax) ............. .. by the shareholder ............. ..;ear1;er 1,315, and credit shall be given to him therefor on the produce Part] tion of the certificate furnished under section 167 [20], [s._ :8 (5), in the assessment. if any, made for the assessment year ml" Pam referred to in clause (b) of sub-section (2) : ha"

Provided that, where such shareholder is a person [s. 18 .(5) whose income is included under the provisions of section '4" P'°"S°» 63 or 64 [clause (C) of sub-section (1) of section 16], section 67 [ S. 16(3)], section 96 [4413] or section 97 [44E] in the total income of another person, the payment shall be deem- ed to have been made by, and the credit shall be given to, such other person :

[s. 18 (5) 3rd Provided further that where any share in a company is pm" pm] owned jointly by two -or more persons not constituting a partnership, the credit ............. .. may be given to each such person in the same proportion in which the .......... .. divi- dend on such sharethas been included in his total income:

Provided further that where any share in a company is [Ncw] owned by two or more persons constituting a partnership , and the firm is a registered ﬁrm or an unregistered ﬁrm assessed under the provisions of section 190(b) [23(5)

(b)], the credit may be given to each such person in the proportion in which the pro-ﬁts of the firm are shared by him. V (2) The provisions of sub-section ( 1) shall not apply unless the following conditions are fulﬁlled :-- a

(a) the company ....... .. is assessed to income-tax [F 493 (r), in India or elsewhere; and ' P l

(b) ....... .. the dividend is included in the total income of the shareholder or other person to whom credit is to be given, as assessed for the assessment year immediately following the previous year of which the dividend is deemed to be. the income, (3) For the purposes of sub-section (1). income-tax [S- 493(2)] shall be deemed to include agricultural income-tax as-

sessed on a company by any State Government, and where any shareholder proves that the company has been so as- sessed to agricultural income-tax. he shall be entitled to the reduction from the tax yﬁyable ltys him under this Act of a sum equal to---- 3 4 2 240 Clauses _ 246-249

(a) the appropriate agricultural income-tax (reduced by the amount of refund, if any, allowed to him by the State Government), or

(b) the appropriate Indian Income-tax on the amount of the dividend which has not been increased under section 59, [Section 16(2), main para, latter half] whichever is the less.

Explanation.--In this sub-section,-

(a) "appropriate agricultural income-tax" means such proportion of the agricultural income-tax as the amount of dividend which has not been increased under section 59 [S. 16(2), main para, latter half] 4 bears to the total proﬁts of the company assessed to agricultural income-tax; and \

(b) "appropriate Indian Income--tax" means such pro- portion of the income-tax payable by the share- holder under this Act as the amount of dividend which has not been increased under section 59 [S. 16(2) main para, latter half] bears to the total in- come of the shareholder.

CHAPTER XX REFUNDS section 24% If any person ............. .. satisﬁes the lncome-tax Officer Refunds .................................................................................... .. [s- 48 (1)) .................................................................................... .. that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly charge- able under this Act, for that year. he shall beentitledfto a refund of the excess. .

Section 248, Person emi_ (1) Where income of one person is included under, any tledw claim provision of this Act in the total income of any Other refund in cer- person, the latter alone shall be entitled to a refund under tain special this Chapter in respect of such income.

cases.

[s- 48 (3)1 , _ _ [5, 49 F] (2) Where through death, incapacity, bankruptcy, liqui- dation or other cause, a person ............. .. is unable to claim or receive any refund due to him, his executor, administra- tor or other legal representative, or the trustee or guardian or receiver, as the case may be, shall be entitled to claim - or receive such refund .......... ..for the beneﬁt of such per-

Section 249. son or his estate.

£3: (1) Every claim for refund under this Chapter shall be manner. ' refund and made in the prescribed form and veriﬁed in the prescﬁbed [New] :

i 241 Clauses g49--254 (2) No such claim ........ .. .......... ..shall be allowed, un- [05 Rules less it is made within four ears from the -last day of the 3637]' assessment year in which t e income in respect of which [5- 5° the claim is made was assessable. m'''"' P"'''] Where, as a result of an order passed in appeal or Section 250 other proceeding under this ct, refund of an amount be- :'°f":fi tc°"

comes due to the assessee, the Income- %;[ﬁcer shall, we ° ' except as otherwise provided in this Act. refund the amount [s' 48 (2)1 without any application by the assessee.

In a claim under this Chapter, it shall not be open to Section 25! the assessee to question the correctness of any assessment c;.°"°°"'°"

or other matter decided which has become ﬁnal and conclu- :o,a"°,:,'m°{,'; sive ............. .. or ask for a review of the same, and the Qjlestioned. assessee shall not be entitled to any relief on such claim [s_ 43 (4)1 except refund of tax wrongly paid or paid in excess.

If, within a period of three months from the date on Section 252 which a claim for refund is made under this Chapter, the I'"°'°3t- Income-tax Officer does not pass an order thereon, the Cen- [New] tral Government shall pay the claimant simple interest at the rate of two per cent. per annum on the amount directed to be refunded from the date on which the claim is made to the date of the order directing the refund.

Where under any of the provisions of this Act, a re- section 253 fund is found to be due to any person. the Income-tax Set off Officer, Appellate Assistant Commissioner or Commis- Of _ refund! sioner, as the case may be, may, in lieu of payment of the :9:l""i' 33"

refund, set off the amount to be refunded or any part of p';'y:b1§'_'"g that amount, against the tax, interest or penalty, if any, 5? 9 E] remaining payable by the person to whom the refund is du F 4 after giving an intimation in writing to such person of the action proposed to be taken under this section.

CHAPTER XXI APPEALS AND REVISION A. Appeals to the Appellate Assistant Commissioner.

Any assessee aggrieved by any of the following orders of an Income-tax Ojﬁcer may appeal to the Appellate Assis- tant Commissioner against such order---- Sc"

1011 254.

(a) an order against the assessee, being a company, Appcmblc under section 113, [23A(1) main 'para, operative orders.

Part]; [s. _ '30 (It),

(b) an order of assessment under section 147 or 148 ""'" P""'] [sections 23(1) to (5)], ........... .. where the as-

sessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed;

'As the section hasbeen broken ﬂute n erous clauses, reference I0 pro-

: _ en visign has not been given foreach cl , and, verbal changes have not itali- cis ' ' a 242 A Clause 254 1' (c) "an order under section 151 [27] refusing to' reopen an. assessment made under section 148 [23(4) mam para, part authorising best judgment assessment] ;

(d) an order under section 161 or 162 [section'35], where the assessee -objects to the amendment made or refused thereunder;

(8) an order adverse to the assessee, where the assessee denies his liability to be assessed under this Act;

(f) an order under; section 180(2) or 180(3) [section 26(2) Proviso];

(g) an order under section 181 [25A];

(h) an order refusing to register a ﬁrm under section 192(1)(b) [section in the Chapter on Firms relating to refusal of registration because there was no genuine ﬁrm in existence in the previous year] or under section 192(6) [section 23(4) main para, latter part relating to refusal to register a [ﬁrm because of failure to ﬁle return etc. leading to best judgment assessment];

(i) an order cancelling the registration of a ﬁrm under section 193(1) [section .in the Chapter on Firms au--

thorising cancellation of registration because there .

was no genuine ﬁrm] or under section 193(2) [sec- tion in the Chapter on Firms corresponding to section 23(4). main para, part. authorising §can- cellation on such failure. as leads to best judgment assessment];

(j) an order levying interest under section 224[18A(7)];

(k) on order under section 229(5) [s. 45, 1st Prov.];

(I) an order under section -233(2) [new section ire :

withdrawal of certiﬁcate];

(m) an order under section 247 [48(1)];

(n) an order imposing penalty under-

(i) section 279 [44E(6)], or

(ii) section 280 [28(1) & '(2)], or

(iii) section 281 [25(2), latter part], or

(iv) section 2821 [%18A(9)],Q "

.; 2 G .

243

Clauses "254-258 _ Explanation.--For the purposes of clause (b) an objec- ~ tion_ to any interest charged under section 223 [18A(6)] or section 225 [18A(8)] .shall be treated as an objection to the

-amount of income assessed.

.......... .. Where the partners of a ﬁrm are individually Section 255. assessable on their shares in the total income of the ﬁrm, Appcal by 3113' Such Partner may appeal to the Appellate Assistant partner. Commissioner against any order of an Income-tax Officer [s. 'go (1)

-determining the amount of the total income or the loss of 2nd PFOV-l the ﬁrm or the apportionment thereof between the several partners, but he cannot agitate such matters ............. ..in any appeal preferred against an order of assessment deter- mining his own total income or loss.

Any person having in accordance with the provisions of Section 256- section 208 [ub--section (6) of section 18] read with APP°a1d bl' section 208 [sub-section (6) of section 18] deducted and paid tax in respect of any sum chargeable under this Act to deduct other than interest, who denies his liability to make such tax. ' deduction may appeal to the Appellate Assistant Commis- [s_ 30 (IAN sioner to be declared not liable to make such deduction.

(1) The appeal shall be in the prescribed form and shall S°°'i°" 257-

be veriﬁed in the prescribed manner. Form of ap- peal? and . litnilation.

' (2) The appeal shall. ordinarily be presented within B' 3° (3)1 thirty days of the following date, that 'L8 to say,-- 5' '3° <2)' part]

(a) where the appeal relates to any tax deducted under section 204(1) [18(3B)], the date of payment of the Q 5 tax, or ' , '2

(b) where the appeal relates to any assessment. interest or penalty, the date of receipt of the notice of de- mand relating to the assessment. interest or pen- alty, or

(c) in any other case, the date on which intimation of , the order sought to be appealed against is received ' (3) .......... .. The Appellate Assistant Commissioner may [s. lo (2), admit an appeal after the expiration otf the said period if Pa"

he is satisﬁed that the appellant had, sufficient cause for not presenting it within that period. A (1) The Appellate Assistant Commissioner shall ﬁ)_( a§::;';;'ur:5ﬁ;

day and place for the hearing of the appeal, and shall give appm1_ notice of the same to the appellant and to the Income--tax [S :31 (1) Officer against whose order the appeal is preferred. .,;,,i.:, pm] ' (2) The following slhall have the right to be heard at [s.d §3) the hearing of the appea -- 4- A , . 9" 0"-

(a) the appellant either i-nlperson $11 by an authorised, /representative; * ' 244 Clauses 258-259

(b) the Income-tax Officer, either in person 'or by a representative.

[-8- 3! (I). (3) The Appellate Assistant Commissioner shall have 13"°'Pa"] the power ............. ..to adjourn the hearing of the appeal'.

from time to time.

[s. 31 (2)1 (4) The Appellate Assistant Commissioner may. before' disposing of any appeal, make such further inquiry as he thinks ﬁt, or may direct the Income-tax Oﬁicer to mal<':e fur- ther enquiry and report the result of the same to the Ap- pellate Assistant Commissioner.

[s- 31 (2A)] (5) The Appellate Assistant Commissioner may, at the hearing of an appeal, allow the'appellant to go into any ground of appeal not speciﬁed in the grounds of appeal, if the Appellate Assistant Commissioner is satisﬁed that the omission of that ground from the form of appeal was not wilful or unreasonable.

[New] (6) The order of the Appellate Assistant Commissioner disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision, and the relief, if any, to which the "appellant is entitled.

B' 3' (5)1 (7) On the disposal of the appeal, the Appellate Assis-

tant Commissioner shall ............. ..communicate the order passed by him to the assessee and to the Commissioner.

56<=ti0n 259- (1) In disposing of an appeal, the Appellate Assistant Powers of the Commissioner shall have the following powers- Appellate As-

sistant Com- (a) in an appeal against an order of assessment, he may missioneh conﬁrm, reduce, enhance or annul the assessment; £:h31'(§)l;C;']F" or he may set aside the assessment and refer [,_ g 343), the case back to the Income-tax Oﬁicer for making main para, a fresh assessment in accordance with the directions C1«(a)l given by the Appellate Assistant Commissioner [5-. 31(3), and after making such further enquiry as may be "('b)]pa'a' necessary, and the Income-tax Oﬁicer shall there-

upon proceed to make such fresh assessment and determine, where necessary, the amount of tax payableion the basis of such fresh assessment;

[s. 31(3), (b) in an appeakéigainst an order imposing a penalty, main Para, he may con m or cancel such order or va it so C" (01 as either to enhance or to reduce the pena ty;

[s. 31(3), (c) in any other case, he may pass such orders in the main Para. appeal as he thinks ﬁt.

CL (c), (d).

(6), (8) and E91" ) N (2) .......... ..The Appellate Assistant Commissioner -shall p;.,3§,_f ' not enhance an assessment on a penalty unless the ap llant has had a reasonable opportunity of showing cause gainst such enhancement.- , ' ' - l 245 Clauses 259-261 Explanation.--In disposing of an appeal, the Appellate [New] Assistant Commissioner may consider and decide any mat- ter determined by the Income-tax Oﬂ'i_cer in the course of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised laefore the Appellate Assistant Commissioner by the appel- ant.

B----'-Appeals to the High Court.

(1) Subject to the provisions of sub-section (3), any Section 260.. assessee aggrieved by any of the following orders mayAppea1ab1c~ appeal to the High Court ............. ..against such order---- <[ardm. ( ) S. I ,

(a) an order passed by an Appellate Assistant Commis-1653"] (I) sioner under section .......... ..280 .......... ..[28(1) and PM 33 "

(2)1 ;

(b) an order passed by an Appellate Assistant Commis- [s. 33(1),.

sioner under section 259 [31(3) embodied in sec- Part] tion dealing ,with powers of Appellate_ Assistant Commissioner] ;

-missioner rejecting or dismissing an appeal without . a decision on the merits;

(d) .......... ..an order passed by the Commissioner under [s. 338(3),. section 271(1) [S. 33B(1)]. p . Part] (2) Subject to the provisions of sub-section (3), the [s. 33(2),car-. Commissioner may, if he objects to any order passed_by an 11°F Part] Appellate Assistant Commissioner under section 259 [31 (3) as embodied in section for powers of Appellate Assis- tant Commissioner], appeal to the High Court against such order .......... ..

(3) Where the amount or value of the subject matter [New] in dispute in appeal to the High Court is rupees seven thousand ﬁve hundred -or more, an appeal shall lie under this section both on a question of fact and on a question of law; but where the amount. or value of the subject mat- ter in dispute in such appeal is below rupees seven thousand five hundred, the appeal shall lie only on a question of law. - ' (1) The appeal to the High Court shall be ﬁled within Section 26:

sixty days of the date on which the order sought to be Limitatio . appealed against is communicated to the assessee or to the [s- 33(1)- Commissioner, as the case may be. am_»r"- 31l'>)$_)t»,.

~ ;.-2.). .2 1 main , t] (2) The High Court may admit, _an appeal after the ex- in PZIEQA piry of the sixty days referred; to in spb-section (1) it it .nd'(;l53s(7A, is satisﬁed that there was sufﬁciént cauq for not presenting -

it within that period. 7 1 .

1' t 246 Clauses 262-268 Scfction 262. The appeal to the High Court shall be in such form F0" 0' 'P' and shall be veriﬁed in such manner as may be prescribed Egg' 3§(33g by the Supreme Court by rules made under this Chapter.

§l:)c}ig:n]263. Subject to such rules as may be made bylthe Supreme Powers and Court in this behalf, the powers to be exercised and the P"'°"d"gE- procedure to be followed by the High Court in respect of }[,:;,,] (5)' appeals under this Chapter shall be the same as those appli-

cable in respect of appeals to the High Court against the original decrees of courts subordinate to it.

semen 25+ (1) ....... ..The appeal shall be heard by a Bench of not Hearing by less than two Judges of the High Court and shall be decid-

Iéench-66A ed in accordance with the opinion of such Judges or of m'ain pang'), the majority, if any, of such Judges.

[3, 55A(,) (2) .......... ..Where there is no such majority, the Judges Pi-ov.] shall state the point .......... ..upon which they differ, and the case shall then be heard upon that point only by one or more of the -other Judges of the High Court. and such 'point shall be decided according 'to the opinion of the majority hf the Judges who have heard the case. including those who ﬁrst heard it.

Section _255. A copy of the judgment of the High Court shall be t(.3°m":f""'°§' sent to the Commissioner. to the Appellate Assistant Com- i:l°;'p;,ea','_' '3' missioner and to the assessee; and the Commissioner shall [5, 55(5), cause such steps to be taken as may be necessary to give part effect thereto.

.......... ..The costs of the appeal shall be in the discre- [ Er;-(6)1 tion of the High Court. a ' ' s. _ Section 267. (1) Notwithstanding that an appeal has been pneferred Refund cons- under this Chapter to the High Court, the refund,:if any, "'l"°"1"a1 °" due to the assessee shall be made, unless the High Court makes an order authorising the postponement of the pay- ment of the refund until disposal of the appeal.

(2) If, as a result of the appeal to the High Court, the Section 266.

[5, 66(7), PIOVISO-1 amount of an assessment is reduced .......... .., the amount-

over-paid shall be refunded with such interest as the High Court may ﬁx, unless the High Court, on intimatio given by the Commissioner within thirty days of the repeipt -of the result of such appeal that he intends to ask for leave to appeal to the Supreme Court, makes an order authorising the Commissioner to postpone payment of suchil refund until the disposal of the appeal by the Supreme Court or the rejection of the application for leave to appeal, as the case may be. ' C----Appeals to the Supreme Court.

Section 268. An appeal sh 1 lie t gig Supreme Court f In any '_A alable judgment of the ' h Co , livered on an appea prefer- 1" "'°'"- red under section 60 [66(l)§main para, part' emb , led in ' 247 Clauses 268-271 section for appealable order] in any case which the High [s. 66A(2)] _ gourt certiﬁes to be a ﬁt one for appeal to the %upreme ' ourt.

(1) The provisions of the Code of Civil Procedure, l908, Section 269 relating to appeals to the Supreme Court shall, so far as He Minus may be, apply in the case of appeals under section 268 b::';':'g;:r'f [S. 66A(2)] in the like manner as they apply in the caselgoflgw ' of appeals from decrees of a High Court: [s. . 66A(3), Provided that nothing in this section shall be deemed In %;i;rXi3), to affect the provisions of section 263 or 265 [S. 66(5)] or 1st Prov. .......... ..section 273 [66(7), main para]. Part] (2) The costs of the appeal shall be in the discretion [New] of the Supreme Court.

(3) Where the judgment of the High Court is varied [s_55A(4)_] or reversed in the appeal,...._ ...... ..eiTect shall be given to the order of the Supreme Court in the manner provided in section 265 [S. 66, sub-section (5)] and section 267 [S. 66(7) Prov.] in the case of a judgment of the High Court.

D----Appeals to the Central Board of Revenue.

(1) Any employer objecting to an order of the Com- Section 270 missioner refusing to recognise or an order withdrawing APP!=-313 to recognition from a provident fund ma appeal to the Cen- gm .dC':."{{"1 tral Board of Revenue in accordance with the provisions of °" ° c' section 301 [58B(4)]. ~ E§';§fj (2) Any person in respect of whom a direction disquali- fying him for representing an assessee ' made under section 324(4) [S. 61(3), main para, latter haliﬁ may appeal to the Central Board of Revenue in accordance with the provi-

sions of section 324(4), Proviso [S. 61(3), Prov. (b)].

E--Revision by the Commissioner.

(1) The Commissioner may call for and examine the sec;_io_n 27; record of any proceeding under this Act, and if he con» Re 131°" ,0' siders that any order passed therein by the Income-tax Offiéggc '15 't';°{:_' cer is erroneous in so far as it is prejudicial to the interests V, e_ of the revenue, he may, after giving the assessee an oppor- [s. 3B(:)] tunity of being heard and after making or causing to be , made such inquiry as he deems necessary; pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the' assessment, or can- celling the assessment and directing a fresh assessment.

(2) No order shall be made under sub-section (1)-

(a) to revise an order of ' re-assessment made under [ .33B(2)] the provisions of section 152 [34(1), (a) (b) power to reopen], or

(b) after the expiry of t years ﬁfiiom the date of the 5 order sought to be rev ed. ' '~ ' _ is Section 272 Revision of other orders.

[s-_ 33A(I)» main para, 1' _ 33A(2):

mam para,

- part] [N ew] i[s- 33A(I)' Prov., (c)] [8- 33A(2)»

- inain para, part] Is- 33A 0)» Prov. (a),part, ands.33A(2);

rst Prov. (a), part.] I!» 33A(I)» Prov.(a),part, and s.33A(2);

ist Prov. (a), part] [8- 33A(I), Prov.(b),part and s.33A(2), Ist Prov. (b)] [s- 33A(I)» Prov. (b), part and s.33A(2), Ist Prov. (c)] [=- 33A(3)] 248 Clause 272 (1) In the case of any order other than an order to which section 271 [33B(1) and (2)] applies passed by an authority subordinate to him, \ the Commissioner may.

either of his own motion or on an application by the assessee for revision, .......... ..call for the record of any proceeding under this Actin which any such order has been passed .......... .., and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks ﬁt.

(2) Where an application for revision was made by the assessee, he shall be given an opportunity of being heard before the application is disposed of.

(3) The Commissioner shall not of his own motion re- vise any order under this section if .......... ..the order has been made more than one year previously.

(4) In the case of an application for revision under this section by the assessee, the application must be made with» in one year from the date on which the order in question was communicated to him or on which he otherwise came to know of it, whichever is earlier:

Provided that the Commissioner may, if he is satisﬁed that the assessee Was prevented by sufﬁcient cause from making the application within that period, admit an appli- cation made after the expiry of that period.

(5) The Commissioner shall not revise any order under this section in the following cases-

(a) Where an appeal against the order lies to the Appellate Assistant Commissioner .......... ..but has not been made and the time within which such appeal may be made has not expired;

(b) where an appeal against the order lies to the High Court but has not been made, and neither the time within which such appeal may be made has expired nor the assessee has waived his right of appeal;

(c) where the order is pending on an appeal before the Appellate Assistant Commissioner .......... ..;

(d) where the order has been made the subject of an appeal to the High Court, and the appeal is pend-

ing or has been disposed of on the merits.

(6) Every application by an assessee for revision under this section shall be accompanied by a fee of twenty-ﬁve rupees. A '1

-249 Clauses 272-277 Explanation 1.--An order by the Commissioner declin- [8-3s_A(2)2ud ing to interfere shall, for the purposes of this section, be P'°""°3 deemed not to be an order prejudicial _to the assesses.

Explanation 2.------For the purposes of this section, the [s_ 33AM, Appellate Assistant Commissioner shall be deemed to be Expl.] an authority subordinate to the Commissioner.

F--General section 273 Notwithstanding that an appeal has been preferred n':tw.3:

under this Chapter to the High Court or to the Supreme sanding a;,p_ Court, tax shall be payable in accordance with the assess--ea1s. ment made in the case, unless the High Court or the [5-55(7),main Supreme Court, as the case may be, grants stay of the Wm' and 3' collection of the tax pending the disposal of the appeal. l;>€¢§v(i3§l§,$zt] Section 2 .......... ..The High Court may, on petition made for the Execution fl:

-execution of the order of the Supreme Court in respect of §°*'53Wa!d¢d any costs awarded thereby, transmit the order for execu- C"'m'°;'"P'""° tion to any court subordinate to the High Court. [s.66A(3),2nd

- rroviso.

Where as the result of an appeal to the Appellate SCCME175 Assistant Commissioner, the High Court or the Supreme Amendmcnt 'CON-TlF'--' of msessmcnt on appeal.

(a) any change is made in the assessment of a ﬁrm or [,_3,(,,) and an association of persons or a new assessment of 33(5), modi-

a firm or an association of persons is order- ed to be made, or

(b) any alteration in any assessment has to be made, .......... ..the Income-tax Officer shall, whether or not a direc- tion is given by the appellate authority, make an amend- ment of the assessment so as to carry out the order of the appellate authority, including, where necessary, an amend-

ment of any assessment made on any partner of the ﬁrm or any member of the association.

In computing the period of limitation prescribed for Section 276 an appeal or an application under this Act, ............. ..the Exclaim of day on which the order complained of was'made, and, if time rate.-nfor the assessee was not furnished a copy of the order when °°PY- ' the notice of the order was served upon him, the time [I-57Al' ruleqgliislite for obtaining a copy of such order, shall be ex-

1: u e .

The Supreme Court may make rules, not inconsistent Scction 277 with the provisions of this Act, on all or any of the follow- ':6' "'° ing matters, namely--- ~ C0',',',,_

(a) the powers to be exercised and the procedure to [NW1 be followed in appeals to the High Court under this Chapter ; '

(b) any other matter which to be or ma be pres- cribed by the Supreme Court underfhﬁs _ pter. » » 250 Clauses 2278-280 Scctim 273 In this Chapter,---

Deﬁnitions.

[S- 55(8)] (a) 'the High Court' means,----

(i) in relation to any State, the High Court for that State ;

(ii) in relation to the Union territories of Delhi and Himachal Pradesh, the High Court of Punjab;

(iii) in relation to the Union territories of Manipur and Tripura, the High Court of Assam;

(iv) in relation to the Union territory of the Anda- man and Nicobar islands, the High Court at Calcutta ; and

(v) in relation to the Union territory of the Lacca- dive, Minicoy and 'Amindivi islands. the High Court of Kerala;

[New] (b) "status" means the category under which the asses- see is assessed, with reference to the Finance Act applicable to the case, as "individual", "Hindu undivided family" and so on.

CHAPTER XXII PENALTIES IMPOSABLE BY INCOME-TAX AUTHORITIES Section 279 .... ..If any person without reasonable excuse fails to Failure to comply with a notice issued under section 97 (7) [s. §44E(6), furnish info" earlier half] the Income-tax Ofﬁcer may direct that such """i°" '°g"' erson shall' a a nalt not exceedin ﬁve hundred {}§';im?°°""' igupees and a Iiuiytherpgenally of the like agnount for every [s. "E 6 day after the inﬂiction of such penalty during which the lane, hair] ' failure continues.

3°°'i°" 98° (1) If the Income-tax Officer, or the Appellate Atsistant Ef°n°°?1:;¢"* Commissioner ........... .., in the course of any proceedings in me - - - _ or improper under this Act, 1S satisﬁed that any person-- ; distribution of proﬁts etc. [s.28(x),ma.in para]

(a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish ....... .. under section 143 (1) [22(1)] or by "notice given under section 143 (2) [sublsection (2) of section 22] or section 154 [34 (1) (a) (b')] or has without reasonable cause failed to furnish it within the time allowed and in the man.ner re- quired by section 1 (1) [22 (1)] .or by.such notice, as the case ntay be, a i _ . I 2 4

-- 17-1 Law Com.I58 251 Clause 280

(b) has without reasonable cause failed to comply with a notice under section 146 (1) Esub-section (4) of section 22] or section. 147(2) sub-section (2) of section 23], or

berately furnished inaccurate particulars of such income, he .......... ..may direct that such, person shall pay by way of penalty,--- '

(i) in the case referred to in clause (a), in addition to' the amount of the tax, if any, payable by him, a sum not exceeding one and a half times that am- ount, and

(ii) in the cases referred to in clauses (b) and (c), in addition to any tax payable by him, a sum not exceeding one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accept- ed as the correct income. ~ (2) When the person liable to penalty is a registered [5,28(;),Prov.

ﬁrm or an unregistered ﬁrm which has been assessed under (d)] j section 190 (b) [23 (5) (b)], then, notwiﬂistanding anything ' contained in the other provisions of th ._Act, the penalty imposable under sub-section X1) shal be a. sum not eacceeding--- » ' 1 4

(i) in the case referred to %in cla.uaeA(a) of subsection (1), one and a half times the giamount of the tax .......... ..payable by an; unregistered ﬁrm on an income equal to the ﬁrm's total income, and

(ii) in the cases referred to in clauses (b) and (c) of sub-sect1'.on (1), .......... ..one andfgas half times the difference between thegamountrof the tax .......... .. payable by an unregisteijed ﬁrmgon an income equal to the ﬁrm's total income and :the amount of the tag: .......... ..payable by $13 unr istered firm on an income e ual to the in me of he ﬁrm as actually returned y it. ' . I (3) (a) .... ..No penaltyyfor failure tot of his total income under secti 143 ( imposed under sub-section (1) income does not exceed the able to tax in his case by one t ' l[22 (1)] shall" be 3)] see whose total» 'mum' mount not charge- 5 e hundred rupees.

(b) Where a person has failed to comply with a notice [,_,3(-,), under section 143 (2) [sub-section (2) of section 22] or r;ov.qb)} section 154 [section 34(1) (a)( )] and roves that he has = no income liable to tax, the pe_ alty ' ble under sub- section (1) shall not exceed ty-ii V _pees.

ish the return Es.28(' ),Pi-ov'. . 4 252 Clauses 280-282 [s.28(1),Prov. (c) No penalty shall be imposed under sub-section (1) (C)l upon any person assessable under section 169(1) (i) read with section 170 [42 (1) main para, latter half, part regard-' ing liability of agent to be assessed as representing non- resident] as the agent of a non-resident for failure to fur-

nish the return .......... ..under section 143 (1) [22 (1)]. [,,23(2>] (4) If the Income-tax Ofﬁcer, or the Appellate Assistant Commissioner, .......... ..in the course of any proceedings under this Act, is satisﬁed that the proﬁts of a registered ﬁrm have been distributed otherwise than in accordance with the shares of the partners as shown in the instrument of partnership on the basis «of which the firm has been' registered under this Act, .......... ..and that any partner has thereby returned his income below its real amount. he ....... .. may direct that such partner shall, in addition to the tax. if any, payable by him, pay by way of penalty a sum not exceeding one and a half times the amount of tax which has been avoided, or would have been avoided if the in- come returned by such partner had been accepted fasihis correct income ; and no refund or other adjustment shall be claimable by any other partner by reason of such direc- tions.

section 23,_ ...... ..Where any person fails to give the notice of Fail," to discontinuance of his business profession or vocation re- Eivconoticc of fcquiredﬁ by sectio3_18i(3)l £25 (t) earilieiil' gait], the lgcgme. 130 n muan- ax o cer may irec a a sum s a e recovere rom °°- him by way of penalty not exceeding the amount of tax [5-25(2):1*"'°' Subsequently assessed on him in respect of any income Pm] .......... ..of the business, profession or vocation up to the date of its discontinuance.

s.,c,;.,,, ,3, If the Income-tax Ofﬁcer, in the course of any pro-

I,-am c5,;ma_ ceedings in connection with the regular _ assessment, is te oforfailume satisﬁed that any assesse-- ' d -

hoe: Va (a) has furnished under section 220 [sub--secti n (2) [s. "r 18A(9), or sub-section (3) of section 18A] an esti te of main para] the advance tax payable by him which he: knew or had reason to believe to be untrue, or

(b) has without reasonable cause failed to furnish an estimate of the advance tax payable by im in accordance with the provisions 'of section , 20 (3) [sub-section (3) of section 18A], ' l 'he may direct that such person shall,_ in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum not exceeding-

[3, 18A(9), (i) ....... ..in the case referred to in clause (a , one Prov.] and a half times the. amount by which e tax actually paid_ during ifthe ﬁnancial year immediately i 3 253 ' Clauses 282-285 preceding the "assessment year, uhder the provi- sions of sections 215 t0 228 [s. 18A] falls short of---

(1) eighty per cent. of the ta':c regularly assessed, ' as modiﬁed under the provisions of section 223 [18A (6)], or (2) where a notice under section 218 [18A (1) (a), main para, part as embodied in section regard- mg order of Income--tax Oﬁicer] was issued to the assessee, the amount payable" thereunder, whichever is the less; and

(ii) in the case referred to in clause'(b), one and a half ' times the amount on which interest under section 223 [sL 18A(6)].

is payable (1) No order imposing a penalty -under this Chapter s¢c.;o,, 233 shall be made ............. ..unless the assessee or the partner Procedure or the other person on whom the penalty is sought to be [s. 28(3)] 'imposed, as the case may be, has been heard, or has been given a reasonable opportunity of being heard.

(2) The Income-tax Officer shall not impose an _ under section'.28Q [s. 28(1) or (2)(] or section 282 [18A(9)] without the previous approval of the Inspecting Assistant Commissioner.

(3) An Appellate Assistant , Commissioner, on making an order under section 280 [28(1) or (2)], shall forthwith send a copy of the same to the Income-tax Oﬂicer.

No prosecution for an offence against this Act shall be Scclion_2'8f agams uccution.

[8- 53(4)] instituted in respect of the same facts on which a penalty has been imposed under this Chapter.

CHAPTER XXIII / OFFENCES AND PROSECUTIONS If a person fails without reasonable cause or excuse----

(a) to grant inspection or :allow copies to be taken in accordance with the pnovisions: oif section 139 [39]; V"

(b) to furnish in due time any of t e returns mentioned in section 166(4) [Section 19 ], 166(1) [section section 22] or 138 [section 38];

(c) to produce, or cause to be produced, on or before [s. 5x(d)] the date mentionedin any n, tice under section 146(1) [Sub-section (4)3 of secti Ii 22] such accounts and documents as are' referr , 51:0 in the notice;

Bar pl'0l [=- 28(5)] H13 01' O!' Y Penalty [s. 28(6)] pee on.

20A], 166(2) [section 21] 143(2) [sub--section (2) of uj-8~']i'x;cs°P'.'"' [s. §i(c [s. 51 (c i ii _ withdrawal [s- 5r(a)] [5- 51(5)] [s- 51.

last part] Section 286 False state-

ment in declaration.

[s- 52] Section 287 Prosecution to be at insta-

nce of Inspec-

ting Assistant Commissio-

IICF.

[s- 53] Section 288 Disclosure of particulars by public serva-

nts.

[5~ 54-(2) :

latter part] [s- 54(5)] Section 289_ According & of . recogni-

tion.

[I. 58B(x).] 254 Clauses 285-289

(d) to deduct and pay tax as required by sections 201 to 204 [all sections embodying section 18] or under , section 235(2) [Sub-section (5) of section 46]; or

(e) to furnish a certificate required by section 211 [sub-

section (9) of section 18] or by section 167 [Section 20] to be furnished;

he shall, on conviction before a Magistrate, be punishable with ﬁne which may extend to ten rupees for every day during which the default continues.

If a person makes a statement in any verification under this Act which is false, and which he either knows r be- lieves to be false, or does not believe to be true, he ﬂail, ._ ......... .., on conviction before a Magistrate. be puni able with simple imprisonment which may extend to six m nths, or with ﬁne which may extend to one thousand rup s. or with both.

(1) A person shall not he proceeded against for an offence under section 285 [51] or section 286 [52] exc pt at the instance of the Inspecting Assistant Commissio gr.

(2) The Inspecting Assistant Commissioner may either before or after the institution of proceedings compound any such offence. , (1) If a public servant discloses any particulars, t i dis- closure of which is prohibited b section 141(2) [S. (2), earlier part, as incorporated in Cliapter on Income-ta Au- thorities], he shall, 'on conviction before a Magistra e, be punishable with imprisonment which may extend 0 six months, and shall also be liable to ﬁne. ;

(2) No prosecution shall be instituted under th'i sec- tion except with the previous sanction of the Commisgoner.

CHAPTER xxnf RECOGNISED PRQVIDENT FUNDS Recognition ' (1) The Commissioner....,.... may accord reco 'tion to any provident fund which, in his opinion, satisﬁ the . conditions prescribed in section 290 [58C. embodied i sec-.

tion for conditions] and the rules made thereunder}, and may, at any time, withdraw such recognition if, in h' opi- riiion, the provident fund cojiizravenes any of thos con-

itions: ' - ea s I' .

Q' a ,...........4...

z.---« ., l-_ .._;, * r" "yr . 58(»C) (1) (g) latter part], satisfy the, conditions set out by .

255', Clauses 289-290 Provided that the Commissioner may,--

(a) subject to such conditions; if any, as he may con- sider necessary. accord recognition to any provi- dent fund maintained by an enterprise which has been exempted from any or all of the provisions of any scheme framed under the Employees' Pro- vident Funds Act, 1952, notwithstanding that any 19 of 1952. of the conditions menstioned in section 290 [58C embodied insection regarding conditions] are not satisﬁed ; and .

(b) withdraw such recognition if, in his opinion, the provident fund contravenes any of the conditions subject to which recognition» was accorded by him.

(2) An order according recognition shall take effect [s. 58B(2).] on such date as the Commissioner may ﬁx in accordance with any rules the Central Board of Revenue may make in this behalf, such date not being later than the last day of the ﬁnancial year in which the onder is made.

(3) An order withdrawing recognition shall take effect [s. ;8B(3).] from the date on which it is made. 3 (4) An order according 'recognition to a provident [s. $813 (3A)] fund shallgnot, unless' the Commissioner otherwise directs, * be affected by the fact that the fund is subsequently amal- gamated with another provident fund bn the occurrence of an' amalgamation of the undertakings, in connection with which the two funds are maintained, or fthat it subsequent- ly absorbs the whole or a pant of anqther provident fund belonging to an undertaking which is wholly or in part transferred to or merged in the undertaking of the em- ployer maintaining the first mentioned fund. -

In order that a provident fund mayreceive and I'e'ta1n.Scciion 290 recognition, it shall, subject to the provisions of section Conditions to 291 [s. 58C(l) Provisos to cls; (a), (b), (d). 58J (4), 58(D),bc satisﬁed below and any other conditions which Tithe Central Govern- 1-33° ment may, by rules, prescribe--- ' [s. 583(1) 0135 1118

(a) All employees shall be employpd in India, or shall [s. be employed by an employer ; whose principal (3). min place of business is inrlndia. P"'',-] a: » at 1 as =

(b) The contributions of ' an e loyee in any year [s. 3580(1)' shall be a deﬁnite proportion of his salary for that (b).% main _ year, and shall be' dedt1cted.b3i the employer from P'-"+1 the employee's salary in that proportion, at each l periodical payment 0 such fry in that year, I and credited to the Individual account» in the fund. ' 256 Clauses 290-291 3 u g 530") (c) ...The contributions of an employer to the in- ' dividual account of an employee in any year shall not exceed the amount of the contributions of the employee in that year, and shall be credited to the employee's individual account at intervals not exceeding one year.

[s- 5800,) (d) The fund shall consist of contributions as above ('$31 "W" speciﬁed and of donations, if any, received by the P " trustees, of accumulations thereof, and of interest (simple and compound), credited in respect of such contributions, donations and accumulations, and of securities purchased therewith and of any ca- pital gains arising from the sale, exchange or transfer of capital assets of the fund, and of no other sums.

* ¥ 3 %:'H58(°) (0 (e) The fund shall be vested in two or more trustees or in the Official Trustee under a trust which shall not be revocable save with the consent of all ,the beneﬁciaries. . .

580(1) (f) The employer shall not be entitled to recoveij any ' sum whatsoever from the fund, sav! in cases where the employee is dismissed for misconduct or voluntarily leaves his employment otherwise than on account of ill-health or other unavoidable cause before the expiration of the term of service speciﬁed in this behalf in the regulations of. the fund.

In such cases the recoveries made by the employer shall be limited to the contributions made by him to the individual account of the employee, and to interest (sim- ple and compound) credited in respect of such con ribu- tions and accumulations thereof, in accordance wit the regulations of the fund. "

[s- 580(1) (g) The accumulated balance due to an employee: shall £53] °a'1'°' be payable on the day he ceases to be an employee of the employer maintaining the fund ........

f [s~ 580(1) (h) Save as provided in clause (g), or in accortiance 001- with such conditions and restrictions as thei Cen- tral Government may, by rules, prescribe, no por- tion of the balance to the credit of an employee shall be payable to him. 3 Section 29z_ (1) Notwithstanding anything contained in section Relaxation of 290(a) [38C(l), (a) main para], the Commissioner may, if °°ndM°nS- he thinks ﬁt, and subject to such conditions, if any, as he [s-' 580(1) thinks proper to attach to tljeirecognition, accord r og'ni--

(a)» Prov-l tion to a fund maintained byg an employer whose pritcipal 257 Clause 291 place of business is not in India, provided the proportion of employees ............. ..employed outside India does not exceed ten per cent.

(2) Notwithstanding anything" contained in section 290(b) [58C(1) (b) main para], an employee who retains his employment while serving in the armed forces of the Union or when taken into or employed in the national ser-

vice under any law for the time being in force, may, whe- ther he receives from the employer any salary or not, .con- tribute to the fund during his service in the armed forces of the Union or while so taken into or employed in the national service a sum not exceeding the amount he would have contributed had he continued to serve the employer.

(3) Notwithstanding anything contained in section 290(d) [58C(l)(d) main para] or section 290(g) [58C(1)

(g), earlier part],--

(a) at the request .... .. made in writing by the em- ployee who ceases to be an employee of the«em- ployer maintaining the fund, the trustees of the fund may consent to retain the whole or any part of the accumulated balance due to the employee to be drawn by him at any time on demand;

(b) where the accumulated balance due to an employee who has ceased to be an employee is retained in the fund in accordance with clfause (a) of this sub- section, the fund may consist also of the accumu-' lated balance due to "the e loyee ..... ..'..and of interest (simple and compoun ) in respect thereof (-4) Subject 'to any rules which the -Central Govern- ment may make in this behalf, the Commissioner may, in respect of any particular fund, relax the provisions of sec- tion 290(c) [58C (1) (c)]----

(a) so as to permit the payment of larger contribu- tions by an employer to the individual accounts of employees whose salary does not exceed ﬁve hundred rupees per mensem; and

(b) so as to permit the crediting by employers to the , individual accounts 'of emplpyees 'of periodical bonuses or other contributions of a contingent nature, where the calculation and payment of such bonuses or other contributions is provided for on deﬁnite principles by the regulations of the' fund.

(5) Notwithstanding anything contained in section 290

(h) [58C(1)(h)], .... .. in order to enable an employee to pay the amount of tax assess» d on total income as de- termined under section 299( tled to withdraw from the alances his "credit in the [5- 58_C(!)

b) Proviso].

[s. » 580(1) (3), ' paw] 5300) (dj, Provism] [..i§so.1 [s- 's8J(a.).1 [5sJ~l(§].s,, he shall be enti- . ' latter 258 Clauses 291-296 recognised provident fund a sum not exceeding the dif- ference between such amount and the amount to which he would have been assessed if the transferred balance referred to in section 299(3) [s. 58J(3)] had not been in- cluded in his total income.

section 292 Where there is a_ repugnance between any regulation Rcpugnancy of a recognised provident fund and any provision of this ;. 1-¢gu[3ﬁon5_ Chapter or of the rules made thereunder, the regulation [3, 53(;(,)_] shall, to the extent of the repugnance, be of no effect.

The Commissioner may, at any time, require that -such iepiégnance shall be removed from the regulations of the un .

Treatment of contributions and balances.

Section "293. Any sum paid by an employer by way of contribution EmP193b:¢r'-5 towards a recognised provident fund shall be deducted in ﬁ(';:"'"fl'en computing his income for the purpose of assessment.' deducted in assessing his Income.

[New] That portion of the annual accretion in any previous section 294. year to the balance at the credit of an employee partici- Employe,-S pating in a recognised provident fund as consists of--;'

(a) contributions made by the employer in excess of buti0ns_ ten per cent. of the salary of the employee, and 4 when écemcd (b) interest credited on the balance to the cred t of ;'c'C:fv;3°°'§° the employee in so far as it exceeds one-thi, of cmploym Y the salary of the employee or is allowed at agrate [s. 58E.] . exceeding the rate ﬁxed by the Central Go em-

réient in this behalf by notiﬁcation in the O cial azette, ' shall be deemed to have been received by the emp yee in that previous year and shall be included in his _ota1 income for that previous year, and shall be liable t¢ in- come-tax and super-tax ?

section 295_ An employee participating in a recognised prov '2 ent Employee's fund shall be entitled to a deduction, from the amou t of contribqtions income-tax on his total incomeiwith which he is charg ble . ' g"°'"P"°" for any assessment year, of an amount equal to the i -

[ST'58F_] tax calculated at the average rate of income-tax on his own contributions to his individual; account in the fund in the previous year, in so far as the aggregate of such contribu- , tions .... ..does not exceed one-ﬁfth of his salary in that pre-

vious year or eight thousand rupees, whichever is less.

_ ....... ..The accumulated balance due and becoming Fay- Scction 296.

able to an employee participating in a recognised provi ent £:1C,:,T:lE,t:d fund shall be excluded from the computation of his otal clusion from income----

total income.

[s. 58G (2) ,E.;.;L,é,7l§ti(); (1) if he has rendﬁ conwuous service withfiis em.

vno, part] ' player for a p d of e years or more, or 2.59 Clauses 296-299

(ii) if, though he has not rendered such continuous ser- vice, the Commissioner ....... .., being of the opinion that the service has been terminated by reason of the employee's ill-health, or by the contraction or discontinuance of the employer's business or other cause beyond the conﬁol of the employee, allows the employee the beneﬁt of this section.

.(1) Where the accumulated balance due to an employee Section 297. participating in a recognised provident fund is included in Tax 0,, am... his total income owing to the provisions of section 296 [58G muluted ba- (2)] not being applicable, the Income--tax Officer shall ca1- '9-"W culate the total of the various sums of income-tax and [8-58G(3)] super-tax which would have been payable by the employee in respect of his total income for each. of the years con- cerned if the fund had not been a recognised provident fund, and the amount by which such total exceeds the total of all sums paid by or on behalf oflsuch employee by way of tax for such years shall be payableby the employee in addition to any other income-tax and super-tax for which he may be liable for the previous year in which the accu- mulated balance due to him becomes payable.

(2) Where the accumulated balance due to an employee [s. I 58G(1). participating in a recognised provident fund which is not lattdr part]- included in his total income under the provisions of section 296 [58G (2)] becomes payable ....... .., an amount equal to the aggregate of the amounts of super<tax on annual ac- cretions that would have been payable-under section 58E of the Indian Income-tax Act, 1922, for any assessment year ,1 gr 1922, upto and including the assessment year 1932-1933, if the if Indian Income--tax (Second Amendmen Act, 1933. had come ,3 3 ,933_ into force on the 15th March, 1930, s l" be payable by the 1 employee in addition to any other tars: payable by him for the previous year in which such balance becomes payable.

The trustees of a recognised provident fund, or any Scciiion 298. ' person authorised by the regulations of? the fund to make don at payment of accumulated balances due' to employees, shall, 50,, of in- in cases where section'297 (1) £58G(3)}§ applies, at the time c an accumulated balance due 0 an em loyee is paid, de- Yab duct therefrom the amount payable uxl r section 297 (1) 3°"

[S. 58G(3)] ....... .., and all the provisio' ' of sections 206 to 211 [18(4) to 18(9)] shall apple as if M e accumulated bal-l [*- ance were income chargeable nder the-jhead "Salaries".

E C68.

(1) Where recognition is accorded :';.to a provident fund sec on 299, with existing balances, an account shall be made of the T, tmmt of fund up to the day before the day on which the recognition baﬁace in takes eﬁect, showing the balance to tile', credit of each em-' n; Y recog- ployee on such day, and containing such further particulars "ST P"°""

as the Central Board of Revenue may prescribe. . gfn _ (2) The account shall al sho .1. in respect of the [s- E J(2)l- balance to the credit of each ﬁiploy Jhe amount thereof which is to be transferred to 1: t em , ' ee's account in the .

[8- 53 J(3)l [=- 53J(5)l-

Section 300 260 Clauses 299-301 provident fund, and such amount (hereinafter transferred balance) shall be shown as the balance to hlS credit in the recognised provident fund on the date on which the recognition of the fund takes effect, and sub-section (3) of this section and sub-section (5) of section 291 [s. 58J(3) (4)] shall apply thereto.

Any portion of the balance to the credit of an em- ployee in the existing fund which is not transferred to the recognised fund shall be excluded from the accounts of the recognised fund and shall be" liable to income-tax and super-tax in accordance with the provisions of this Act, recognised called his 'other than this Chapter.

(3) Subject to such rules as the Central'Board of Reve-

nue may make in this behalf, the Income-tax Officer shall make a calculation of the aggregate of all sums com rised in. a transferred balance which would have been lia 1e to income-tax if this Chapter had been in force from the date of the institution of the fund, without regard to any tax which may have been paid on any sum, and such aggregate (if any) shall be deemed to be income received by the em- ployee in the previous year in which the recognition bf the fund takes effect and shall be included in the employee's total income for that previous year, and, for the purposes of assessment, the remainder ofthe transferred b ance shall be disregarded but no other exemption or reli f, by way of refund or otherwise, shall be granted in respect of any sum comprised in such transferred balance:

Provided that, in cases of serious accounting diﬂiculty, the Commissioner shall have power, subject to the said rules, to make a summary calculation of such aggregate.

(4) Nothing in this section shall affect the rights of the persons administering an unrecognised provident fund or dealing with it, or with the balance to the credit of any individual employee, before recognition is accorded, in any 'manner which may be lawful.

Other provisions (1) The accounts of a recognised provident fund: shall Accounts of be maintained by the trustees of the fund and shalllbe in recognised provident funds.

[s. 58--I] Section 301.

Appeals.

[3-' 58 3(4)] such form and for such periods. and shall contain such particulars, as the Central Board of Revenue may, pres- cribe. i (2) The accounts shall be open to inspection at all rea- sonable times by Income-tax authorities, and the trustees shall furnish to the Income-tax-Oﬂicer such abstracts there- of as the Central Board of Revenue may prescribe.

An employer objecting to an order of the_ Commis- sioner refusing to recognise or an order withdrawing ecog- nition from a provident fund , y appeal, within _s1xt days of such order, to theiCentrali card of Revenue. 3 1 261 Clauses 301-303 . The appeal shall_be in the form and shall be verified in the manner prescribed by the Central Board of Revenue.

(1) Where an employer who maintains a provident fund Section 302. (whether recognised or not) for the beneﬁt of his employees Treatment of and has not transferred the fund or any portion of it, trans- fundtfamfcr fers such fund or portionto trustees in trust for the em- 'id by °""

ployees participating in the fund, the amount so transfer- t° red shall be deemed to be of the nature of capital expendi- [S 5B_K] ture. ' (2) When an employee participating in such fund is paid the accumulated balance due to him therefrom, any portion of such balance as represents his share in the amount so transferred to the trustee (without addition of interest, and exclusive of the employee's contributions and interest thereon) shall, if the employer has made effective arrangements to secure that tax. shall be deducted at source from the amount of such share when paid to the employee, be "deemed to be an expenditure by the employer within the meaning of section 37 [clause (xv) of sub-section (2) of section 10], incurred in the previous year'in which the accumulated balance due to the employee is paid. -

(1) All rules made under this Chapter shall be subject Sectiofl 303» to the provisions of section 329 (4) [sub-section (5) of sec- f'l°"!"°T"

- eating to tion 59]. _ ml' .

/ [s. 53 L.] (2) In addition to any power conferred by this Chap- ter, the Central Government may make rules-

(a) 'prescribing the statements and other information to be submitted with -an application for recogni- tion ; ' '

(b) limiting the contributions to a recognised provi- dent fund by employees of a company who are shareholders in the company ;

(c) providing for the assessment by way of penalty of any consideration received by an employee for an assignment of, or creation of a charge upon, his 'geneﬁcial interest in a recognised provident und ;

(d) determining the extent to and the manner in which exemption from payment of income-tax and super-tax may be granted in respect of contribu- tions and interest credited to the individual ac- counts of employees _in a provident fund from which recognition has been withdrawn; and

(e) generally, to carry out the purposes of this Chap- ter and to secure such further control » over the recognition of provident fun land the adminis- , tration of recognised provide _ {funds as it may ;--

deem requisite. ' 3"-

262

Clauses 304-305 s°°'i°" 3°4- This Chapter shall not apply to any provident fund to A 1' ' . .

,,f"{',,',',"§.f,';;',, which the Provident 'Funds Act, 1925, applies. ter.

[s. 58M] ' IQ of 1925 %°c°§:$'iox1;!:5- _ In this Chapter, unless the context otherwise re- [s_ 58A] q'u'L'I'€S,--- I p

(a) a "recognised provident fund" means a provident fund which has been and continues to be recog-

nised by' _the Commissioner, in accordance with the provisions of this Chapter;

(b) an "employer" means any person who maintains a provident fund for the beneﬁt of his or its em- , ployees, being-

(i) a Hindu undivided family, company, ﬁrm or other association of persons, or

(ii) an individual engaged in a business, profession or vocation whereof the proﬁts and gains e as- sessable to income-tax under the head " .'roﬁts and gains of business, profession or vocation', .... ..

(c) an "employee" means an employee participating in a provident fund, but does not include a per- sonal or domestic servant;

behalf of any employee out of his salary, or y an employer out of his own monies, to the indi 'dual account of an employee, but does not includv sum credited as interest; 1

(d) a "contribution" means any sum credited by gr on any

(e) the "balance to the credit" of an employee means the total amount to' the credit of his individual account in a provident fund at any time;

of an employee means the increase to such b lance in any year, arising from contributions a ,d in- terest; '

(f) the "annual accretion" to the balance to the Eredit

(g) the "accumulated balance due" to an em loyee means the balance to his credit, or such p rtion thereof as may be elaimable by him under the regulations of the fuhd, on the day he ceases to be an employee of the employer maintaining the fund; and '

(h)_ the "regulations of a .-fund" means the specia* body of regulatio ' gove " g the constitution a ad- ministration'?

fa pa ular provident fund.

4' 5 l 1? l »' .I:~ 2 am .I 263 Clauses 306-30.7 CHAPTER xxv APPROVED SUPERANNUATEON FUNDS Approval (1) The Central Board of Revenue may accord appro- Section 306. val to any superannuation fund or any part of a superan- -"PPT°V""""

nuation fund which in its opinion complies with the re- ':f":'d'":',:,l guirements of section 307 [58P]i, and may at any time With- "pm ' raw such approval, if in its opinion, the circumstances of [" 5&0] the fund or part cease to Warrantthe continuance of the approval. ' -

(2) The Central Board of Revenue shall communicate in writing to the trustees of the -fund the grant of approval with the date on which the approval is to take effect, and, where the approval is granted subject to conditions,- those conditions.

(3) The Central Board of Revenue shall communicate in writing to the trustees of the fund.» any withdrawal of approval with the reasons for such Withdrawal and the date on which the Withdrawal is to take effect.

(4) The Central Board of Revenue shall neither refuse nor withdraw approval to any superannuation fund or any part of a superannuation fund unless it has given the trus-

tees of that fund a reasonable opportunity of being heard in the matter.

(1) In order that a superannuation fund may receive SecI::on3o7. and retain approval, it shall satisfy the 'conditions set out Con<"ti0nI below and any other condition: which the Central Govern- f°" '°"""

ment may, by rules, prescribe-- T [=- 5 1' 4(a) the fund shall be a fund estalflished under an ir- ma ypara] revocable trust in connection: with a trade or = undertaking carried on in India;

(b) the fund shall have for its sol ij purpose the provi-

sion of annuities for employ g s in the trade or undertaking on their rqtiremen at or after a speci- ﬁed age or on their beboming ncapacited prior to such retirement, 'or for the \idows, children or dependants of persons ?Who arq or have been such employees on the deatli of thoqeipersons; and

(c) the employer in the trade or undertaking shall be ' a contributor to the fund, i 1 (2) ....... ..The Central Bo ad of avenue may, if it [s. 51:, thinks ﬁt and subject to sup cond ibhs, if any, as it Prov 1 thinks proper to attach to the approval', approve a fund or any part of a fund-- -

(i) notwithstanding that the rules of the fund provide for the return in cerrt{ain contingencies of contribu- tions paid to the fu d, or

(ii). if the main purpose of e fun is the provision of such annuities as afo said, ' fthstanding that such provision is not i sole p e, or -

264. Clauses 307-310

(iii) notwithstanding that the trade or undertaking in connection with which the fund is established is carried on only partly in India.

[New] (3) Where there is a repugnance between any rules of an approved -superannuation fund or the terms of the in- strument under which the fund is established and any pro- vision of this Chapter or of the rules made thereunder, the rules of the fund or the terms of the instrument under which the fund is established, as the case may be, shall, to the extent of the repugnance, be of no effect; and the Central Board of Revenue may at any time require that ' such repugnance shall be removed from the rules of the fund or the terms of the instrument, as the case may be.

section 303, (1) An application for approval of a superannuation Application fund or part of a superannuation fund for any assessment '°' 3PP'°"a'- year shall be made in writing before the end of that year [=- 58 Q] by the trustees of the fund to the Income-tax Officer by whom the employer is assessable; and shall be accompanied by a copy of the instrument under which the fund is estab- lished and by two copies of the rules and of the accounts of the fund for the last previous year for which such ac- counts have been made up. The Central Board of Revenue may require such further information to be supplied as it thinks proper.

(2) If any alteration in the rules, constitution, objects or conditions of the fund is made at any time after the date of the application for approval, the trustees of the fund shall forthwith communicate such alteration to the Income-tax Oiﬁcer mentioned in sub-section (1), and in default of such communication any approval given ;sha11, unless the Central Board of Revenue otherwise orders, be deemed to have been withdrawn from the date on which the alteration took effect. . E .Treatment of investments and contributions.

Section 09. , _ . . r .

Income mm approved superannuation fund, and any capital gains aris- investmcnts. ing from the sale, exchange or transfer of capital assets of [s. 58R main such fund, shall not be included in the total income bf the Para» Part] person in receipt thereof. .

Section 310. .... ..Any sum paid by an employer .... ..by way at con-

F-mp1_°ver'= tribution towards an approved superannuation fun shall .... ..be deducted in computing' his income .... ..for the pur-

Pcducﬁon pose of assessment: - ' 3 01'.

[s. 58R, main ?

Para. part] Provided .... ..that where the contribution is not 23 ordi-

[s. 58R, 2nd nary annual contribution, it shall be treated as_ the entral Pr°V-] Board of Revenue may direct, either as a deduction for the year in which -the sum is paid, or as a deduction to be spread over such petiod of years as the Central Bohrd of Revenue thinks proﬁer. ' % .... ..Income derived fromfinvestments or deposits of an 265 ' Clauses 311-315 Where the assessee is an employee participating in an 5°°*i°n 1;!!- approved superannuation fund, any sum paid in the pre- f'"'P'F'bV°°' vious year by him by way of contribution towards the super- -°"'" "' annuation fund shall, in so far as such sum is an ordinary exempt. annual contribution, be treated for allthe purposes of this [s_ 531;, min Act as if it were a sumto which the provisions of section pan, part 88 [15] apply. .and_ 1 1st . proviso Where any amount standing to the credit of an em- Section 3m_ ployee in an approved superannuation fund is paid to the Contribution employee during his lifetime but not at or in connection PM '° W- with the termination of his employment, the amount so pl°"°°_Wh°"

paid-shall be deemed for the purposes of income-tax (but '§Z°§.'§§nc. to not for the purposes of super-tax) to be income of the em- [5, 533 0)] ' ployee of the previous year in which it is so paid to him. .

Where any amount standing to the credit of an em- Section. 3:3. ployee in an approved superannuation fund is paid to the Dcductwn QT employee during his lifetime but not at or in connection ""' °" °°"'"' with the-termination of his employment, .......... ..income-- I';"';',':' 132,? tax (but not super-tax) on the amount so ....... ..paid shall, ployee.

except in the case of an employee whose employment was [3, 533 (2)] carried on abroad, be deducted by the trustees of the fund at the average rate of income"-tax at which the employee was liable to income-tax during the preceding three years or during such period, if .less than three years. as he was a member of the fund, and shall be "paid by the trustees to the credit of the Central Government within the pre-

scribed time and in such manner as the Central Board of Revenue may direct. .

Other provisions.

Where an employer deducts from the emoluments paid Scction_ 314- to an employee or pays on his behalf any contributions of D°d'--'°"°"

. that employee to an approved superannuation fund, he shall if?' 9" °f ' include all such deductions or payments in the return b.,t;;,n:°mf,:

which he is required to furnish under section 166(2) [21]. be If of cm oyec to , be included in return. ' [3-El3Tl If a fund or a part of a fund for any reason ceases to Secton' 315. be an approved superannuation fund, the trustees of the Liabilities of fund shall nevertheless remain liable ..to account for tax '"'-""°" °"

on any sum paid_--- T a:pp="£vw:'f

(a) on account of returned contributions (includingf'"'- 1 interest on contributions, if any), and [" 53m

(b) in commutation or in lieu of annuities, in so far as the sum so paid is in respect of contribu-

tions made before the fund or part of the fund ceased to be an approved superannuation fund under the provisions of this Chapter.

266 i 3 ' Clauses 316-317 aglg The ltrusteeshof ant aglgpiéovetd superannugctlion fubd . an em 0 er w 0 con ri u es 0 an approv supe E: ,.£';;,::he.,(} tio¥1 furliod syhall, when required by notice from the I supcrannua- tax Ofﬁcer, within such period, not being less than' tion f"nd=- one days from the date of the notice, as may be 3 [s. 58V] in the notice, furnish such return, statement, part' information, as the Income-tax Oﬁicer may require.

4: a n: s an e ' an. an e /__, \ V A_ | ~ -

at an t 3 8 0 O 3 I 'are it t :3 e an at an ;

5°°ti°n 317- (1) All rules made under this Chapter shall be i bject £'§;:i°"s'f; to the provisions .of section 329(4) [sub-section (5) 'f sec-

1-u1cs_ .

[NW1 . . . ' (2) In addition to any power conferred by this Chapter, the Central Government may make rules--- , '

(a) prescribing the statements and other informaiion to be submitted with an application for appr val;

(b) prescribing the returns, statements, particul rs, or information which the Income-tax Oﬁicer y re- quire from the trustees of an approved super nnua- tion fund or from the employer; ; \

(c) limiting the ordinary annual contribution a i any ~ other contributions toan approved superann tion fund by an employer; A I

(d) providing for the assessment by way of pe lty of any consideration received by an employee or an assignment (if, or "creation of a charge up , beneﬁcial interest in 'an approved superann tion fund; e

(e) determining the extent to and the manner in hich exemption from payniernt of income-tax and per- tax may be granted in respect of any paymen made from a superannuation fund from which ap al has been withdrawn; Y

(f) providing for the withdrawal of approval ' the case of a fund which ceases to satisfy the r uire- ments of this Chapter or of the rules made ,here- under; and 5

(g) generally, to carry out the purposes of this pter and to secure such further control over the appro- val of superannuation funds and the administration of approved superannuation funds, as it may deem requisite.

Clauses 318-320 ' In this Chapter, unless the context otherwise 'requires,-- Section 318 . Deﬁnitions.

(21) "approved superannuation fund" means a super- [s. 58N'1 annuation fund or any part of a superannua- tion fund which hm been and continues to be approved by the Central Board of Revenue in accordance with the provisions of this Chapter;

77 H

(b) "employer , employee" and "contribution" have, in relation to superannuation funds, the meanings assigned to those expressions in section 305 [58A] in relation to provident funds; _

(c) "ordinary annual contribution" means an annual contribution of a ﬁxed amount or an annual con- tribution computed on some deﬁnite basis by refe- rence to the income chargeable under the head "Salaries", the contributions or the number of mem- bers of the fund.

CHAPTER XXVI MISCELLANEOUS A.--Miscellaneous provisions.

Income which has once been charged to income-'-tax or Section 3x9. super-tax in the hands of any person for any assessment Barbfdoublc year shall not be charged again to income-tax or super- 3"3{1'1°"A""' tax, as the case may be, in the hands of the same person, °' ° °"

either for the same assessment year or for a diﬁerent [NW] assessment year. ' (1) A notice or requisition under this Act may be serv- Section 320-

ed on the person therein named either by post or as if it S°"'*.°°- °f were a summons issued by a court underathe Code of Civil Procedure, 1908. 5 ongog, (2) Any such notice or requisition may be addressed-

(a) in the case of a ﬁrm or a Hindu undivided family, ' .......... ..to any member; of the ﬁrm or to the mana- ger "or any adult male member of the family;

(b) in the case of a local authority, company, or other association of persons, ........ .., to the principal officer thereof ;

(c) in the case of any oth persom(gnot being an indi.- ; vidual), to the person who mfqages or controls i his afairs. E 2 A ~ A 18--l Law Com.I58.

2.68 Clauses 321-323 32:3 (1) After a findinﬁi of total partition has been recorded noﬁcc when by the Income-tax O Y _cer under section 181 [25A] in res- family is pect of any Hindu famil , notices under this Act in respect gisruptid 9: of the income of the Hin u family shall- rm e c., is _ , . _ _ dissolved. T (a) in the case of a notice under section 154 [sub-section [New (1) of section 34], be served on all personswho were members of the Hindu family immediately before the partition and the legal representative of any such member who is deceased ; and

(b) in other cases, be served on the person who was the last mana er of the Hindu family, or, if such person is dea , then on all adults who were mem- bers of the Hindu family immediately before the partition.

(2) Where a ﬁrm or other association of persons i dis- solved, notices under this Act in respect 0 the income of the ﬁrm may be served on any person who was a partner (not being a minor) or member of the ﬁrm or association, as the case may be, immediately before its dis-

solution.

§°°''.°" 3"} _ Where an assessment is to be made under sectio 185 ﬁfe [25(1)], or section 91(1) [section 25(3), latter half 0 sec- cm or (5,- tion 25(4) main para, latter half], the Income-tax cer continued may serve on the person Whose income .......... ..is to be

- b"'"'°3'- assessed, or in the case of a ﬁrm, on any person iwho It 25 (6)1 was a member of such ﬁrm at the time of its dibcon-I tinuance, or, in the case of 1 company, on the pri cipal ofﬁcer thereof, a notice containing all or any of the re uire- ments which may be included:.in a notice under sectio 143 (2) [s. 22(2)], and the provisions of this Act shall, far as may be, apply accordingly as if the notice were a riotice issiled under section 143(2) 22(2)]. T:

r sec:io_n 323. _ (1) There shall be endorsed on every document hich Mayllgns 0f has been placed on the record' by any Income-tax aut ority °""' "" the following particulars, .namely-- , [New]

(a) the number ofthe case, _,

(b) the name of the person producing the docu jent,

(c) the date on which it wasproduced, and E

(d) a statement of its having been so placed oh the record; 3 and the endorsement shall be signed or initialled by the Income-tax authority. I! (2) Where any Income-tax authority bases any or er or any part of the order on any document, the Inca -tax authority shall eacpreqsly ma aa reference in its or er to such document, giving parti ldrs sufficient to identi the document. ' § l i 269 Clause 324 (1) Any assessee who is entitled or required to attend Se tion 324.

before... ....... ..any Income-taxauthority in connection with A °8ran_°e any proceeding under this Act otherwise than when requir- :'eV':"'h°t"s°d ed under section 136 [37] to attend personally for examina- ,i3:,°s°n 1' tion on oath or aﬂirmation, may, subject to the other pro- 5 61 (1) visions of this section, attend by an authorised representa- pg"; tive.

(2) For the purposes of this section, "authorised repre- sentative" means a person authorised by the assessee in writing to appear on his behalf, being-

gsa; ]61 (1).

(i) a relative of or a person regularly employed by [Sp 61 (In the assessee ; or .......... .. payt]

(ii) ...... ..any officer of a Scheduled Bank with which is 51 <2)<01 the assessee maintains a current account or has other regular dealings ; or

(iii) any legal_practiti_oner who is entitled to practise [s_5, (2)(;;)] in any civil court in India ; or

-. .. . 6

(iv) an accountant , or £2" ' ('l

(v) any other person who, immediately before the [sf 5, M commencement of this Act,;, was a lawyer, an pan, and accountant or an Income-ta.rV practitioner within 515(2) (M1 the meaning of sub-section (2) of section 61 of I the Indian Income--tax Act, 1922, and was actually ,1 {or 192, practising as such. ' 2 Explanation;--In this section, "accountant" means a [§_-. 51 (2) chartered accountant within the meaning of the Chartered ("W Accountants Act, 1949, and includes, in relation to any State, 33:" '949 any person who by virtue of the PT0v1lsions of sub-section ' (2) of section 226 of the Companies Act', 1956, is entitled to I 3% !955 be appointed to act as an auditor of companies registered j in that State. . ;

ment service after the 1st day.ofsApril;, 1938, shall be.quali- m n . para.

ﬁed to represent an assessee under sub-section (1); and if P any legal practitioner or .......... ..accountant is found guilty of misconduct in connection with an%income--tax proceed- t (3) No person who has been dismissed from Govern-[23:61 (3), ings by the authority empowered to t Q disciplinary action against members of the profession 'which he belongs. .......... ..he shall be thenceforward disqualiﬁed to represent an assessee .......... ..under sub-section (1). A (4) ....... ..If any person, other than a legal practitioner 55- . 5' (3) or accountant, is found guilty of .......... ..misconduct in con- :'3't']' 9"' nection with any income-tax proceedings by the prescribed authority, the prescribed aut rity , direct that he shall u be thenceforward disqualiﬁed' to relpws nt an assessee un- der sub-section (1) : 2 if 5 [s. 61 Prov.] (3)! [New] [I of 1922.

Section 32 5.

Receipt to be given.

[s. 62] Section 326.

Indemnity.

[s. 65] Section 327- Bar of suits in civil court.

[s. 67] Section 328.

Act to have effect pend-

ing legislative provision for charge of tax.

[s. 67 B] Section 329.

Power to make rules.

[s. 59] 270 _ Clauses 324-329 Provided that-

(a) no such direction shall be made in respect of any person unless he is given a reasonable opportunity of being heard;

(b) any person against whom such direction is made may, withinone month of the making of the direc- tion, appeal to the Central Board of Revenue to have the direction cancelled ; and A

(c) no such direction shall take effect until one month from the making thereof, or, when an appeal is preferred. until the disposal of the appeal.

(5) A person disqualiﬁed to represent an assessee by virtue of the provisions of sub-section (3) of section 61 of the Indian Income-tax Act, 1922. shall be disqualiﬁed to represent an assessee under sub-section (1).

A receipt shall be given for any money paid or recover- ed under this Act.

Every person deducting, retaining, or paying any-'tax in pursuance of this Act in respect of income belonging to another person is hereby indemniﬁed for the deduction, re- tention, or payment thereof.

No suit shall be brought in any civil court to set aside or modify any assessment made under this Act, and no prosecution, suit or other proceeding shall lie against any officer of the Government for anything in good faith done or intended to be done under this Act.

If on the 1st day of April in any assessment year pro- vision has not yet been made by a Central Act for the charging of income--tax or super tax for that assessment year, this Act shall nevertheless have effect until such pro- vision is so made as if the provision in force in the preced- ing assessment year or the provision proposed in the 'Bill then before Parliament, whichever is more favourable to the assessee, were actually in force.

B--Rules.

(1) The Central Board of Revenue may, subject to the- control of the Central Government, by notiﬁcation in. the Gazette of India, make rules for carrying out the purposes of this Act and .for the_,ascertai§1Inent and determinatio of any class of income. Suph rules'-may be made for the w ole of India or for such part thereiof as may be speciﬁed. «' E 271 Clause 329 (2) Without prejudice to the generality of the fore- going power, such rules may---

(a) prescribe the manner in which, and the procedure by which, the income ............. ..shall be arrived at in the case of-

(i) income derived in part from agriculture and in part from business;

(ii) persons residing out of India;

(b) provide for the determination of the value of any perquisite chargeable to tax under this Act in such manner and on such basis as appears to the Central Board of Revenue 'to be proper and reasonable;

(d) prescribe the procedure for giving effect to the terms of any agreement for the grantingof relief in respect of double taxation or for the avoidance of double taxation which may be entered into by the Central Government under this Act;

(e) provide for the maintenance of a register of persons other than legal practitioners or accountants as defined in section 324(2), Explanation [61]; practis- ilng before Income-itax authorities and for fthe con- stitution of, and procedure to be followed by, the authority referred to in sub-section (4) of section 324 [61]; A -

(f) provide for the issue of certificates verifying the payment of tax byxtssessees ; 3

(g) provide for any matter which by this 'Act§ is to be or may be prescribed. . g (3) In cases coming '_ er clause (a) of_sub-se tion (2), where the income .......... .. able to tax cannot be eﬁnitely ascertained, or can.be ascertained only with an a ount of trouble and expense to the :assessee which in th opinion of the Central Board of Revenue is unreasonable, e rules made under that sub-section may---- 3

(a) prescribe methods 'by which an estimatelof such income .......... ..may be made, and '

(b) in cases coming under sub-clause (i) of clause (a) ' of sub-section (2), prescribe the proportion of the income which shall be deemed to be income .......... .. _liable to tax;

and an assessnuent ba 'V ;on such estimate or p ' portion shall be deemed t? be d irnade in accordance ith the provisions of this ct. ' I SCH. I 272 (4) All rules made. under this section shall be laid before each House of Parliament as soon as may be after they are made, and shall be sibject to such modiﬁcations as Parliament may make in the session in which they are so laid or the session immediately following:

C--Transitional provisions and repeal' THE FIRST SCHEDULE INSURANCE BUSINESS (See section 44) A~Life insurance» business.

Rule 1. . In the case of a person who carries on or at any time P'°ﬁ'S °f "'3 in the previous year carried on life insurance business; the be proﬁts and gains of such person from that business shall computed be computed separately from his ....... ..proﬁts and gains sepaxatelw from any other business.

[Schedulc, _ Rule 1] Rule 2. (1) The proﬁts and gains of life insurance business g°"1;§')'ffl*t's'i°;'f shall be taken to be the greater of the following--.

life insurance b"s"'°"' (a) the gross external incomings of the previous year §:f;°':3"°' from that business, less the management expenses of that year .......... ..; -

(b) the annual average of the surplus arrived a' by adjusting the surplus ;or deﬁcit disclosed by the 40f 1938 actuarial valuation in in accordance with the Insurance Act, 1938, ' 'respect of the last i ter- _ valuation period endi " before the commence ent of the assessment yea, so as to exclude f ' any surplus or deﬁcit included therein which made in any earlier inter-valuation period andiany expenditure which is not deductible under the visions of sections 30 :40 [Sections regardin de-

ductions for business] ' {computing income c ge- able under the sjhead " = oﬁts and gains of busi ess, profession or vocation" « (2) .......... ..The amount to be allowed asmanage ent expenses under sub--rule (1) shall not exceed the aggre ate of the following-- i

(a) 7% per cent. of the premiums received duringi the previous year in respect of single premiumglife insurance poliqies;.......£..... l 2 .4 ,, -- , i I

1. Not drafted. See notes, $:r a di¢c1.qi+y' of theimporta.nt'point:. ' 273 in respect of the first year's premiums received in respect of other life insurance policies for which the number of annual premiums payable is less than twelve, or for whichithe number of years during which premiums are payable' is less than twelve, for each such premium or each such year 7% per cent. of such ﬁrst year's premiums received during the previous year; .......... ..

0°)

(c) 90 per cent. of the first yearlspremiums received during the previous {year in ' respect of all other life insurance policies; .......... ..

in respect of all renewal premiums received during the previous year, an amount calculated at such percentage thereof as is permissible under sub- section (2) of section 40B of" the Insurance Act, 1938, as reduced by any expenditure not deductible under? sectionai 30 to 40 [sections regarding business deductions] in computing in- come chargeable unddr the hdad "Proﬁts and gains of business, profession or vocation".

(d) In computing the surplus for the purpose of rule 2, [Schedule, rule 2]---- .

(a) four-fifths of the amounts paigdito or reserved for or expended on behalf of policy-holders shall be allowed as a deduction: 2 tti *** t** **t Provided .......... ..that if any amaéunt so reserved for ,policy-holders ceases to be so' reservejd, and is not paid to or expended on behalf of policy-holdqrs, that proportion of such amount (one-half or four-ﬁfths.-s;a's the case may be) if it has been previously allowed as as deduction under this Act or under the Indian Incp,rne-tam' Act. 1922, shall be treated as part of the surplus' for thd period in which the said amount ceased to be so reserved: V j

(b) any amount either ' itten gor reserved in the accounts or through e act ' 1 valuation balance sheet to meet deprec" tion of loss on the realisa- tion of investments all be ' lowed as a deduction. and any sums taken écredit ii in the accounts or actuarial valuation balance heet on account of appreciation of or gaiiis on t realisation of invest- ments shall be included in t e" surplus :

Provided that if upon investigati] it appears to/ the Income-tax Officer after consultation _ th the Controller of Insurance that having due regard {of the necessity making reasonable provision; for bonuses to participating policy-holders and for contin encies, ' he rate of interest or other factor employed in de rminif the liability in res- pect' of outstanding policies mater} inconsistent with the valuation of investmenﬁ! as for -

cially to redujce the I . ' 3 ;

Sen. I which is 4 of 1938 l Rycg.

H x i i uctions {' cdule, 1c 31 of 1922 . Scn. I 274 surplus, such adjustment shall be made to the allowance for depreciation or to the amount to be included in the surplus in respect of appreciation of such investments as shall increase the su lus for the purposes of these pro- visions to a ﬁgure whic is fair and just;

(c) (i) interest received during the inter-valuation A period in respect of any securities of the Cen-

tral Government which have been issued or declared to be income-tax free, shall not be excluded, but

(ii) no income-tax shall be payable on the annual average of the amount of such interest ....... ..

Rule 4. Where for any 'year an assessment of the proﬁts of life Adjustment insurance business is made in accordance with the annual of tax Pflid average of a surplus disclosed by a valuation for an inter- :'3's;'$1:e°"°"valuation period exceeding twelve months, then, in com- S h ' puting the income-tax payable for that year, credit shall [ ° "Rule 4] not be given in accordance with section 207 [Section 18 (5), main para, part regarding credit for tax deducted at source] for the income-tax paid in the previous year, but credit shall be given for the annual average of the income-

tax paid by deduction at source from interest on securities ' or otherwise during such period.

B--Other insurance business.

Rule 5. The profits and gains of any business of insurance other Computation than life insurance shall be taken to be the balance of g{h§r'°§::ur:f thﬁ pﬁlroﬁts disclosegl bg theh airinual _accXunts1,9§gpi¢s gt

- . w ic are require un er t e nsurance ct, , ' ye me busmcss furnished to the Controller of Insurance, subject t the [S°h" R"}f5 following adjustments---- --

earlier alf 93"] (a) any sum written oﬂ"in the accounts as representing 40? I933« depreciation 0 any building, machinery, plant or [New] furniture use for the purposes of the business shall be allowed as a deduction, whether such-f sum is or is not admissible under the provisions 0 sec- tion 32(1) clauses (i) and (ii) [10(2) (vi)'l, s feet to the condition that the aggregate of all such d duc-

tions allowed under this Act or under the Indian 11 of I922 Income--tax Act, 1922, or under any Act repealed by that Act or under executive orders issued whe' the Q of 1335 . Indian Income-tax Act, 1886, was in force, sh l, in no case, exceed the original cost to the assesspe of the building, machinery, plant or furniture, at the case may be; ' '[Sch.,Ru|c 6, -(b) subject to the other provisions of this rule, any de- <=a'"°T ha" duction which is not admissible under the provi-

ness deductio ] in c u my the profits and aims of a business 1 ll be d back: .

Pam sions of sections 30 tﬂlﬂ Sections regarding ' usi. .. $1.

4"-

275 a sea. I

(c) any amount either written off or reserved in the [Sch-.Ru1¢5 . accounts to meet depreciation of or loss on the rea- 'I33' lisation of investments shall be allowed as a deduc- Rule Mb) 1 tion, and any sums taken credit for in the accounts on account of appreciation of or gains on the rea- lisation of investments shall he treated as part of the proﬁts and gains.

C~Other provisions.

(1) The proﬁts and gains of the branches in India of Rule 6.

.a person not resident in India and carrying on any business P'°ﬁ'3 and gains of non-

of insurance, may, in the absence of more reliable data, resident pep (be deemed to be that proportion of the world income of son, such person which corresponds to the proportion which 1115 [sclhkuxe 3, premium income derived from India bears to his total para x] premium income.

(2) For the purposes of this rule, the World income in [Scl_|.,Ru1c 8, relation to life insurance business of a person not resident Part 2] in India shall be computed in the manner laid down in this _Act for the computation of the proﬁts and gains of life insurance business carried on in India.

(1) For the purposes of rules 1 to 6 [other rules regard- t _ ing insurance business] and of this rule,-- tic" ma

(i) "gross external incomings" means the full amount [Sci-, Rule of incomings from interest, dividends, ﬁnes and 5(ii)] fees and all other incomings from whatever source derived (except premiums received from policy-holders and interest and dividends on any annuity fund), and includes also proﬁts from re- versions and on the sale or the granting of annui- ties, but excludes proﬁts on the realisation of in- vestments:

Provided that incomings, including the annual value of 'the property occupied by the assessee. which but for the \ , provisions of section 44 [10(7)] would have been assessable under the head "Income from house property", shall be computed in the manner applicable to income chargeable under that head, and that there shall be allowed from such gross incomings such deductions as are permissible in res- *pect of income chargeable under that head;

-- «- » - -- [sc1i., Ru|c5 (11)S}z]r:'1;g:tments includes securities, stocks and (V) mdiﬁed]

(iii) "management expenses" means the full amount R"'''' of expenses (including commissions) incurred ex- "

clusively in the management of the business of life insurance. and in the case of a company carry- ing on other classes of business as well as the business of life ' , lin addition thereto . a fair proportion of} he ex _ _ incurred in the

- . general manageme t of t e! whole business.

v, SCH. II [Sch., 5(iV)l 4 of 1938 [New] Rule [New] 4 of 1938 31 of 3956 Rule I .

Deﬁnitions .

[s- 3(4), Bengal Public Dc-

mands Reco-

very Act, 1913 (Bengal Act 3 of 1913]' 276 Bonuses or other sums paid to or reserved on behalf of olicy-holders, depreciation of, and losses on e realisation of investments, and any expenditure other than expenditure which may under the ﬁrovisions of sections 30 to 40 [Sections regarding usinesstdeductions] be allowed for in computing the proﬁts and gains of a business, are not management expenses for the purposes of rules 1 to _6 [all other rules regarding insurance business] and of this rule;

"life insurance business" means life insurance- busmess as deﬁned in clause (11) of section 2 of

(iv) the Insurance Act, 1938;

(v) "rule" meams a rule contained in this Schedule.

(2) References in rules 1 to 6 [other rules regarding in-

surance business] and in this rule to the Insurance Act, 1938, or any provision ther ,shall, in relation to t e Life Insurance Corporation of Ind a., be construed as ref : ences to that Act or provision as read with section 43 of the Life Insurance Corporation Act, 1956. % THE SECOND' SCHEDULE' PROCEDURE FOR RECOVERY OF TAX [See section 231 (1)] PART I General provisions. =, In this Schedule, unless the context otherw e re- quires,--- e 2

(a) "certiﬁcate" means a certiﬁcate received by t e Col- lector from the IncoIhe--tax Officer for the r overy of arrears under this Schedule ; --

(b) "defaulter" means the assessee mentiond in the certiﬁcate ;

(d) "movable property" includes growing crops '

(e) "oﬁicer" means an officer authorised to m 'ke an attachment or sale under this Schedule; a p

(f) "rule" means a rule contained in this Schedule.

' The provisions contained in this Schedule, though new, have underlined for facility of re 'ng.

' This Act will heron r be xeferhe to as the "Bengal Act". 5 ' Cf. S. 2(x3), C. P. 3 5 z trot been -

277 sex. II When a certiﬁcate has been received by the Collector Rule 21. Issue from the Income-tax Oﬂicer for the recovery of arrears °fN°"°e- under this Schedule, the Collector shall ?cause to be served [5~ 7. Bengal upon the defaulter a notice requiring the defaulter to pay c' the amount speciﬁed in the certiﬁcate within ﬁfteen days from the date of service of the notice and intimating that in default steps would be taken to realise the amount under this Schedule.

No step in execution of a certiﬁcate shall be taken Rule -When until the period of ﬁfteen days ;has elaghsed since the date f:;'"i,'§:° of the service of the notice required by t, e preceding rule : ,,xecu,ed' A [ S. 13, , Bengal Act 1 Provided that, if the Collector is satisﬁed that the defaulter is likely to conceal, remcgie or dispose of the virholle or any part of such of his move e property as wou d e liable to attachment in execution of af decree of a civil court, and that the realisation of the amount of the certi- ﬁcate would in consequence be delayed or obstructed, he mayat any time direct, for reasons to be recorded in E writing, an attachment of the whole or any part of such 3 property 2 -- 7 Provided further that if the defaulter whose property has been so attached furnishes 'securit to the satisfaction of the Collector, such attachment shall be cancelled from the date on which such security is accepted by the Col- E ector.

If the amount mentioned in the noti 's not paid within R1119 51% M°d¢ the time speciﬁed therein or within s\$l<l1 further time as ° "3 '°"°'V' the Collector may grant in his discretoin» the Collector 311;' 'h'?' shall proceed to realise the amount by tune or more of the R36" Rc_ following modes :-- cover" Act, x864 (2 of 1864) I.

(a) by attachment and sale of the movable property of [5- [14 3618*!' the defaulter; ~ ' A")

(b) by attachment and sale of tlle' immovable pro- 5- if" Th' perty of the defaulter ; 1 3°" '' Rove ue

(d) by arrest and detentiorl of thegdefaulter in civil prison. 'E S - -

There shall be recoverable,.in the proceedings in exe- Rule 5- Inte- cution of every certiﬁcate,-- . 7 '°-"'» °°"5 » and charges a recov' table.

(a) such interest upon the tax to which the certiﬁcate [S-I55 Bengal relates as is payable under this Act, and Act] ;

1 This Act will hereafter be referred to as the 't l Act" , ' This Act will hereafter be referred as the ' . bay Act". , l E c SCH. II ' 278

(b) all charges incurred in respect of--

(i) the service of notice upon the defaulter to pay the arrears, and of warrants and other pro- cesses, and

(ii) all other proceedings taken for realising the arrears. \ ' .

Ru"? 5- _ (1) Where property is sold in execution of a certiﬁcate, fimchaseas there shall vest in the purchaser merely the right, title [3 '20 (I) and interest of the defaulter at the time of the sale. even Bengal Ac, 1' though the property itself be speciﬁed.

;[s. 20 (2), (2) Where immovable property is sold in execution of Bensalﬁ-ct] a certiﬁcate, and such sale has become absolute, the pur- chaser's right, title and interest shall be deemed to have vested in him from the time when the property is sold, and not from the time when the sale becomes absolute.

\ Rule 7. Suit (1) No suit shall be maintained against any person *'§3"'3' W" claiming title under a purchase certiﬁed by the Collector nag'; in the manner laid down in this Schedule, on the ground on ground 0;' that the purchase was made on behalf of the plainti or on purchase behalf of some one through whom the plaintiff claims. being made .

":,';lati'§:';§!_{ of (2) Nothing in this section shall bar a suit to obtain [S. 21,Bcngal a declaration that the name of any purchaser certiﬁed as Act] aforesaid was inserted in the certificate fraudulently or without the consent of the real purchaser, or interfere with the right of a third person to proceed against that property, though ostensibly sold to the certiﬁed purchaser, ;on the ground that it is liable to satisfy a claim of such third per- son against the real owner. 9 R5116 ﬁ- , (1) Whenever assets are realised, by sale.or ot erwise 3:32:35 in execution of a certiﬁcate, they shall be dispose' of in .cxm,t;0,,_ the following manner :-

[S. 26, Bengal Act] (a) there shall ﬁrst be paid to the Income-tax'Ofﬁcer the costs incurred by him ; . .

(b) there shall, in the next place, be paid to the Income-

tax Officer the amount due under the certiﬁcate in execution of which the assets were realized;

Ofﬁcer therefrom any other amount recoverable under the procedure provided by this Act' which may be due upon the date upon which the assets were realized; and

(d) the balance (if any) remaining after the payment of the am nt (if '£1130 referred to in clalise (c) shall be pai {to the _ faulter. , ' 1! 279 Son. II _ (2) If the defaulter disputes any claim made by the Income-tax Olﬁcer to receive any amount referred to in clause (C), the Collector shall determine the dispute.

Except as otherwise expressly provided in this Act. Rule 9. every question arising between the Income-tax Oﬂicer and Geneytl, bar the defaulter, or their representatives, relating to the exe--ﬁ'on J:f"d'°' cution, discharge or satisfaction of a certiﬁcate duly ﬁled awn under this Act, or relating to the conﬁrmation or setting save where aside by an order under this Act of a sale held in execu- ff3ud3l1cged- tion of such certiﬁcate, shall be determined, not by suit, but [S-37. Bengal by order of the Collector before whom such question Am] aI'lSE'S I ' Provided that a suit may be brought in a civil court in respect of any such question upon the ground of fraud.

(1) All such property as is by _the Code of Civil Pro- Rule lo.l'ro- cedure. 1908, exempted from attachment and sale in execu- Fem' excmﬁt tion of a decree of a civil court shall be exempt from attach- '°m am" ' ment and sale under this Schedule. [s_ (2) The Collector's decision as to what property is so A'7' Bcngal entitled to exemption shall be conclusive. [Sit] ,55_ Bombay Act [S. i56,[ Bombay Act], (1) Where any claim is preferred to, or any objection Rule _u.. is made to the attachment or sale of, any property in execu- {)"""li§3't'°"

tion of a certiﬁcate, on the ground that such property is V 0° °° °"

not liable to such attachment or sale, the Collector shall gléﬁlei ﬁg' proceed to investigate the claim or objection : Be,,'ga'q Ag"

Provided that no such investigation shall be made where the Collector considers that the claim or objection was designedly or unnecessarily delayed.

(2) Where the property to which the claim or objec-

tion appiies has been advertised for sale, the Collector ordering the sale may postpone it pending the investigation of the claim or objection, upon such terms as to security or otherwise as the Collector shall deem ﬁt.

(3) The claimant or objector must adduce evidence to [Rule 4,0, show that-- ' Sch-

(a) (in the case of immovable property) at the date of the service of the notice issued under this Schedule to pay the arrears, or c

(b) (in the case of movable property) at the date of the attachment, , he had some interest in, or was possessed of, the property in question, Bengal Ahtj (4) Where, upon the said investigation, the Collector is [Rule 4:, satisﬁed that, for the reason stated in the claim or Qbjec- 5611- 11, tion, such property was not, aﬁ the sat ,date, in the pos- B''"31 A'''] session of the def/aulter or of scgme per in trust for him' Courts,' SCH. II 280 or in the occupancy of a tienant or other person paying rent to him, or that, being in the possession of the defaulter at the said date, it was so in his possession, not on his own account or as his own property, but on account of or in trust for some other person, or partly on his own account and partly on account of some other person, the Collector shall make an order releasing the property, wholly or to such extent as he thinks ﬁt, from attachment or sale.

[Rule 42, (5) Where the Collector is satisﬁed that the property Sch- IL was, at the said date, in the possession of the defaulter as B°"3°1 A°'] his own property and not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Collector shall disallow the claim.

[Rule 43, (6) Where a claim or an objection is preferred, the Sch- 11. party against whom an order is made may institut ' a suit Bengal Act] in a civil court to establish the right which he cl ims to the property in dispute; but, subject to the result of such suit (if any), the order" of the Collector shall be conclu-

sive.

Rule 12. Where''' R I r .

,,,';',';§',I,",',,,,,° (a) the amount due, with costs and all charges and ex- on satisfac- penses resulting from the attachment of any pro- 3:1; lfrt, perty or incurred in order to hold a sale, are paid I] C 3 101'] ' I ' of ceniﬁcam _ to the Collector, or 9 R 1 ,S h- . .

ix," °2134en§a1 (b) the certiﬁcate 1S cancelled, ;

A-"3 the attachment shall be deemed to be withdrawn nd, in the case of immovable property, the withdrawal all, if the defaulter so desires, be proclaimed at his expe e, and a copy of the proclamation shall be afﬁxed in the anner provided by this Schedule for a proclamation of sal of im- movable property. .

Rule ,3_ The attachment and sale of movable property and the Ofﬁccr enti- attachment and sale of immovable property may be made tledto attach by such officers or class of officers as the Collector may and "IL from time to time direct. E [S- 154.

latter part, i gom]bay § ct.

Rule W Any deﬁciency of price which may happen 0 a re- De-faulting sale by reason of the purchaser's default, and all e penses purchaser attending such re-sale, shall be certiﬁed to the C llector 3"5W°'3b1° by the officer holding the sale, and shall, at the inst nce of f';:a1:f'S' °" either the Income-tax Officer or the defaulter, be r cover- [Ru1.,5,,sc},_ able from the defaulting purchaser under the procedure II, Bengal provided by this Schedule : C Act ] i Provided that n such C lication shall be ente tained unless ﬁled within b een ' us from the date of r sale.

281 SCH. II (1) The Collector may, in his discretion, adjourn any Rule 15- sale hereunder to a speciﬁed day and hour; and the ofﬁcer Ad-l°:"""°"' conducting any such sale may in his" discretion adjourn Sf-331;'? pagc the sale, recording his reasons ﬁor such adjournment :

Bengal Act] Provided that, where the sale is made in, or within 'the precincts of, the office of the Collector, no such adjourn- ment shall be made without the leave 'of the Collector.

(2) Where a sale of immovable property is adjourned under sub-rule (1) for a longer period than one calendar month, a fresh proclamation of sale under this Schedule shall be made unless the defaulter consents to waive it.

(3) Every sale shall be stopped it, before the lot is knocked down, the arrears and costs (including the costs of the sale) are tendered to the officer conducting the sale, or proof is given to his satisfaction that ,the amount of such arrears and costs has been paid to the Collector who ordered the sale.

Where an attachment has been made under this Sche- Rule 16. dule, any private transfer or delivery of the property ?."' °. 1, attached or of any interest therein and any payment to the if 33%,; defaulter of any debt, dividend or otlnr monies contrary am.¢_5,mcm to such attachment, shall be void as against all claims tobdvoid. 'enforceable under the attachment. [$.64 C.P.C.] [s. it}, Bengal . Act] No officer or other person having any duty to perform Rule _;7. in connection with any sale under tﬂis Schedule shall, Pr°!1b1"°n either directly or indirectly, bid for, aqquire or attempt to ag"F§ 01' acquire any interest in the property sold. bidd C by pure oﬂic 1'.

[R111 52, Sch. II Ben I Act.] N 0 sale under this Schedule shall take place on Sunday Rul :8. or other general holiday recoggiised by he State Gov:ern- Pl'°h-biti°n ment or on any day which ha been npiﬁed by the State :§"}':"l'ida'"'° Government to be a local holiday for} the area in which P ya' the sale is to take place. :35,' Act] Any oﬂicer authorised to attach or ;sell any property Rul_ 19- or to arrest the defaulter or ;charged',: with any dut to b &f:"°° be performed under this Schedule, mayéra ply to the officer. Y : '°°' in-charge of the nearest police; station? r such assistance - as may be necessary for preventing dbstruction to such officer in the discharge of his duties, and the authority to whom such application is ma e shallydepute a sufﬁcient number of police officers for mishiijhsuch assistance.

sea. 11 232 PART II Attachment and sale of movable property. Rule 20. Except as otherwise provided in this Schedule, when. Warrant any movable property is to be attached. the officer shall be [5-,3 (First) furnished by the Collector (or other oﬂicer empowered '13V3I';;1('£;sPa1'*»by him in that behalf) a warrant in writing and signed.

Am] with his name specifying the name of the defaulter and the amount to be realised.

Ru"? 21- 56* The officer shall cause a copy of the warrant to be serv-

vicc of copy - 7, of wanam ed on the deraulte-.

[S. 8 (First) ' latter part Madras Act] R 1 All:chmcnf,2 is not paid forthwith, the_ officer shall proceed to attach

- the movable property of the defaulter. V Rule 23. Where the property to be attached is movable pro- Property' in perty (other than agricultural produce) in the possession d°fa"1"?'-5 of the defaulter. the attachment shall be made by actual P°5S°Ss1°"' seizure, and the oﬁicer shall keep the property in his own giggle custody or the custody of one of his subordinates and shall ' ' be responsible for due custody thereof :

Bengal Act] Provided that when the property seized is subject to- speedy and natural decay or when the expense of keeping it in custody is likely to exceed its value. the officer. may sell it at once.

Where the property to be attached is agricultural pro- duce, the attachment shall be made by afﬁxing a copy of the warrant of attachment-

(a) where such produce is' growing crop,--on the land on which such crop has grown, or

(b) where such produce has been cut or gathered,-on the threshing ﬂoor or place for treading out rain-

or the like. or fodder-stack, on or in which it 5 de-

posited. _ ' and another copy on the outer door or on some other con- spicuous part of the house in which the defaulter ordinarily resides, or with the leave of the Collector on the outer' door or on some other conspicuous part of the house in which he carries on business or personally works for :gain,. or in which he is known to have last resided or carried on business or personally worked for gain. The produce ﬁshall thereupon be deemed to have passed into the possession of the Collector.

Ru! e 24.

Agricultural produce.

[Rule 16, Sch. ll, Bengal Act] f*"l°.'.5- (1) Where agricultural produce is attached, the, Col- ,or°:;.'f;?,s,,ff lector shall make such arrangements for the custody, watch- ral produce ing. tending, cutting and gathering thereof as he may deem under a.tta.ch- suﬁicient ; and the Income-tax Oﬂicer shall bear such sum m°"'- as the Collector shall' require. in order to defray the cost glclxtllle 1117. of such arrangements» A Bengal Ann If, after service of the copy of the warrant the amount _ 283 SCH. II (2) Subject to such conditions as may be imposed by the Collector in this behalf, either in the order of attach- ment or in any subsequent order, the defaulter may tend, cut, gather and store the produce and do any other act necessary for maturing or preserving it; and, if the default- er fails to' do all or any of such acts, any person appointed by the Collector in this behalf may, subject to the li e con- ditions, do all or any of such acts, and the costs incurred by such person shall be recoverable from the defaulter as if they were included in the certiﬁcate.

(3) Agricultural produce attached as a growing crop shall not be deemed to have ceased to be under attachment or to require re-attachment merely because it has been severed from the soil.' (4) Where an order for the attachwmnt of a growing crop has been made at a considerable time before the crop is likely to be ﬁt to be cut or athered, the Collector may suspend the execution of the or r for such time as he thinks fit, and may, in his discretion, make a further order prohi- biting the removal of the crop pending the execution -of the order of attachment.

(5) A growing crop which from its nature does not admit of being stored shall not be attached under this rule at any time less than twenty days before the time at which it is likely to be ﬁt to be cut or gathered. ' '(1) In the case of-- . Rule

(a) a debt not secured by a negotiable instrument, '9': f

(b) a share in the capital of a corporation, or ; 1;, Ben Act;

(e) other movable property not in the possession of the defaulter except property deposited in, or in the cus- tody of, any court, the attachment shall be made by a written order prohi- biting,----- '

(i) in the case of the debt---the creditor from recovering 9 the debt and the debtbr "from: making thereof until the further order ofthe Collector ;

(ii) in the case of the share:--the person in Whose name the share may be standing transferring the same or receiving any dividend thereon;

(iii) in the case of the other moveable property (except as aforesaid)----the person in possession of the same from giving it over to the defaulter.

(2) A copy of such order shall be aﬂixed on some conspi- cuous part of the office of the ollect _ and another co y shall be sent, in the case of debt, I he debtor, in t e caseof the share, to the proper of} j corporation, and , 19-1 Law Com.I58 J '. V " - = SCH, , 11 Rule 27 Attachment of decree.

[S.19, Bengal Act] 5 of 1908 Rule Share movable property [Rule 19.

Schedule H, Bengal Act] Rule 29. Sal-

ary of Goverment servants.

5 of 1908 [Rule 20, Schedule II, Bengal Act] Rule 30.

Attachment of negotiable instruments.

[Rule 21, Schedule II, Bengal Act] Rule 31.

Attachment of property in custody of Court or 28 in public oﬂicer.

[Rule 22, Schedule II, Bengal Act] 284 in_the case of the other moveable property (except as afore- said), to the person in possession of the same. .

(3) A debtor prohibited under clause (i) of sub-rule (1) may pay the amount of his debt to the Collector, and such payment shall discharge him as effectually as payment to the party entitled to receive the same. ' (1) The attachment of a decree of a civil court for the payment of money or for sale in enforcement of a mortgage or charge shall be made by the issue to the civil court of a notice requesting the civil court to stay the execution of the decree unless and until-- .

(i) the Collector cancels the notice, or

(ii) the Income-tax Officer or the defaulter applies to the court receiving such notice to execute the decree, (2) Where a civil court receives an application under clause (ii) of sub-rule (1), it shall, on the application of the Income-tax Officer or the defaulter, and subject to the provi- _ sions of the Code of Civil Procedure, 1908, proceed to execute the attached decree and apply the net proceeds in satisfac- tion of the certiﬁcate. ' (3) The Income-tax Oﬂicer shall be deemed to be the re- presentative of the holder of the attached decree, and to be entitled to execute such attached decree in any manner lawful for the holder thereof. ' -' Where the property to be attached consists of the share or interest of the defaulter in movable property belonging to him and another as co-owners, the attachment shall be made by a notice to the defaulter prohibiting him from transfer- ring the share or interest or charging it in any way.

Attachment of the salary or allowances of servants of the Government or a local authority may be made in the manner provided by rule 48 of Order 21 of the First Schedule to the Code of Civil Procedure, 1908, and the provisions of the said rule shall, for the purposes of this rule, apply sub- ject to such modiﬁcations as may be necessary.

Where the property is a negotiable instrument not depo- sited in a court nor in the custody of a public oﬁicer, the attachment shall be made by actual seizure, and.the instru- ment shall be brought before the Collector and held subject to his orders.

Where the property to be attached is in the custody of any court or public officer. the attachment shall be made by a notice to such court or oﬁicer, requesting that such property, and any interest or dividend becoming payable thereon, may be held subject to the further orders of the Collector by whom the notice is issued :

Provided that, where such property is in the custody of a court, any question of title or priority arising b tween the Income-tax Officer and any other person, not be" g the L' 1' 285 SCH. II defaulter, claiming to be interested in such property by virtue of any assignment, attachment or otherwise, shall be determined by such court.

In the case of attachment of movable property by ac- Rule 32. tual seizure, the officer shall. after attachment of the pro- ""'°"'°'Y- perty, prepare an inventory of all the property attached. [S-9,.Madras specifying in it the place where it is lodged or kept, and A°'] shall forward thelsame to the Collector. A copy of the in- ventory shall be delivered by the ofﬁcer to the defaulter. .

Rule 33.

The attachment by seizure shall not be excessive, that Attachment 'is to say, the property attached shall be as nearly-as pos- not to be .«or other customary mode.-

sible proportionate to the amount speciﬁed in the war- excessive. rant. ' l5- 14:

Madras Act] Attachment by seizure sliall be made after sun- §:'41zf"e3%-et_ rise and before sunset and not otherwise. ween Sumrise and sun-set.

[s. 15, Madras Act] _ 4,17, Bengal CI.

The oiﬁcer may break open any inner or outer door Rule 35 or window of any building and enter any building in order Power to to seize "any movable property if the officer has reason break open able grounds to believe that such building contains mov-- d°°"°'°' able property liable to seizure "under the warrant and the [S- 19 & 20» olﬁcer has notiﬁed his authority and intention of breaking Madras A"] Open if admission is not given. He shall, however, give all 47.B6nsa1 reasonable opportunity to women to withdraw. °'] Sale The Collector may direct that any movable property R"1°36'Sa'°'.

attached under this Schedule or such portion thereof as may gﬁfgaulﬁi, seem necessary to satisfy the certiﬁcate shall be sold. Bengal Act] When any sale of movale property is orderedby the Rule 37-158116 Collector, the Collector shall issue a proclamation, in the ".f P'°°'a'""' language of the' district, of the intended sale, specifying ﬁrs, the time and place of sale and whether the sale is subject pa;-a,%,o;nbay to conﬁrmation or not. _ Act] (1) Such proclamation shall be made by beat of drum R0163? F'°' clamanon how made.

(a) in the case of property attached by actual seizure-- [s_ ,%, and

(i) in the village in which the property was seized, Pm': °'"baV or if the property was seized in a town or city, then in the locality in which it was seized. and

(ii) at such other places as the Collector may direct;

(b) in the case of property attached otherwise than by actual seizure, in such places, if any, as the Col-

lector may direct. [Rm Head (2) A copy of the proclamation shal T lso be afﬁxed on,'§:Ll;d 3 4:31' a conspicuous part of the oﬁicezlof the qllector. , Bc_ _,Act] SCH. II 286 Ru1c39=5a1c Except where the property is subject to speedy and 3&3: ﬁf'°°" natural decay or when the expense of keeping it in custody [R,,1;,48,Sch_ ls l1kely_to exceed its value,' no sale of moveable p1_!o_p'er1:y II, Bengal under this Schedule shall, without the consent in writing of A<=t-lb,[s- 167. the defaulter, take place until after the ex iry of at least B°"' "V AC" ﬁfteen days calculated from the date on w ich a copy of [,",',,',"§_'c,1,'f'd' the sale--proclamation was aﬁixed in the Collector's oﬂice.

l0{;"l°,fg°,,.}c'?fﬁ° (1) Where the property to be sold is agricultural pro- tural produce. duce, the sale shall be held,-----

[Rule 55:

Sch. II, Bengal Act.]

(a) if such produce is a growing crop----on or near the land on which such crop has grown, or

(b) if such produce has been cut or gatheredo-at or near the threshing-ﬂoor or place for treading out grain or the like, or fodder-stack, on or in which it is deposited :

Provided that the Collector may direct the sale to be held at the nearest place of ublic resort, if he is of opinion that the produce is thereby ikely to sell to greater advant- age.

\ (2) Where, on the produce being put up for sale,---

(a) a fair price, in the estimation of the person holding the sale, is not offered for it, and

(b) the owner of the reduce, or a person au horised to act on his beha 1, applies to have the s e post-

poned till the next day or, if. a market is held at the place df sale, the next market day, l the sale shall be postponed accordingly, and shall be then completed, whatever price may be offered for the produce.

Rule 41, SW (1) Where the property "to be sold is a growing crop c;a1p,-opgsi- and the crop from its nature admits of being storedzbut has ons relating not yet been stored. the day of the sale shall be 0 ﬁxed *0 8'°"'"'3 as to admit of the crop being made ready for storing before °'°P" the arrival of such day, and the sale shall not be h ld until §§1':1;ulc 5%' the crop has been cut or gathered and is ready forfstoring.

B°"5a1A°t'] (2) Where the crop from its nature does not admit of being stored or can be sold to a greater advanta e in an unripe state (e.g., as green wheat), it may be sol before it is cut and gathered ; and the purchaser shall be:entit1ed to enter on the land, and to do all that is necessary for the- purpose of tending or cutting or gathering the crop.

Rule 42: Sale The property shall be sold by_ public auction in one or mbeby a,uc- more lots as the officer may consider advisable, and if the tion. amount to be real ed by ale is satisﬁed 'by the ale of a [s. 23, Mad- portion of the pr rty, t ' l'e shall be immedint ly stop- rﬂ A"-l ped with respect the ﬁnder of the lots.

C'.

287 V sou) II (1) Where movable property is sol by public auction, Rulc.43= _Sal.e the price of each lot shall be aid at ,_ time of sale or glvmggbllc as soon after as the oﬂicer Ia ding , _ sale directs, and , in default of payment the property all forthwith be [R"'° 57' resold. ' S°h°d"1° Us Bengal Act.] (2) On payment of the purchase-money, the officer holding the sale shall grant a certiﬁcate specifying the property purchased, the price paid an the name of the purchaser, and the sale shall become a solute.

(3) Where the movable property to be sold is a share in goods belonging to the defaulter and a co-owner, and two or more persons, of whom one is such co-owner, respec- tively bid the same sum for such property or for any lot, the bidding shall be deemed to be the bidding of the co- owner. .

No irregularity in publishing or conducting the sale Rule44: Irre- of movable property shall vitiate the sale, but any person $E'1.""i'V "°'l'° sustaining substantial injury by reason of such irregularity 'fflﬂafny at the hand of any other person may institute a suit in a sonigjug-Cd civil court against him for compensation, or (if such other may (sue. person is the purchaser) for the recovery of the speciﬁc pro- gRule 58, perty and for compensation in default of such cheﬂulc IL recovery. B°"3Pl ["'°"] Notwithstanding anythin contained in this Schedule, ﬁnk. Ag = where the property to be sol is a negotiable instrument or ins°§$;:c:§s a share in a corporation, the Collector Ina , instead of direc- and g,am in ting the sale to be made by public aup ion, authorise the corpqarations.

sale of such instrument ¢>r share through a broker. [order 2,, , Rule 76, C.P.C.] Where the property attached is current coin or cur- M15346: Ord- rency notes, the Collector may, at any time during the genfof continuance of the attachment, direct that such coin or 0, Vlcurrcncy notes, or a part thereof sufficient to satisfy the certiﬁcate, notes to the be paid over to the Income-tax Oﬂicer. g'§g:=~1aX $3' :5:

PART III . 0-P-C-1 Attachment And Sale of Immovable Property. ' Attachment. 1 Attachment of the immovable property of the defaulter Rule; 4,7:

shall be made by an order prohibiting the defaulter from A""h'"°"'- transferring or charging the property in any way and pro_- hibiting al persons from taking any beneﬁt under such transfer or charge.

A copy of the order of attachment shall be served on Rule 48: Str-

vice of notice the defaulter. V I p of" hmem [s. ,Mad-

ras ct.] SCH. II 288 1]}r11;;=1am-ti9o= The order of attachment shall be proclaimed at some of alfachf place on or adjacent to the property attached by beat of mm,' drum or other customary mode, and a copy of the order shall be affixed on a conspicuous part of the property and on the notice board of the Collector's oﬁice.

R1116 50: Al- Where any immovable property is attached under this lrifmlcntbaéi Schedule, the attachment shall relate back to, and take fmmlhe date effect from, the date on which the notice to pay the arrears, ofmvgce of issued under this Schedule, was served upon the defaul-

notice. er'.

Sale E3" (1) The Collector may direct that any immovable pro- mamm of perty' which has been attached, or such portion thereof as salt may seem necessary to satisfy the certiﬁcate, shall be sold. [Rule 4.4, Sch. II, Bengal Act.] [Rule 46(1)! (2) Where any immovable property is ordered to be IS3ch- 1!, sold, the Collector shall cause a proclamation of the intend-

°"ga1A°"] ed sale to be made in the language of the district.

Rule ' 52: A.proclamation of sale of immovable property shall be Contents pmclammogf drawn up after notice to the defaulter, and shall state the Rule 6(2); time and place of sale, and shall specify, as fairly and ac- ~ch_ 4 U, curately as possible,-- ' B°"galA°"] (a) the property to be sold;

(b) the revenue, if any, assessed upon the property or any part thereof;

(c) the amount for the recovery of which the sale is ordered; and

(d) any other thing which the Collector consglers it material for a purchaser to know, in or er to judge the nature and value of the property.

Rule 53: (1) Every proclamation for the sale of immovable pro- M0533 Of perty shall be made at some place on or near such property §f:n::§0n?'°' by beat of drum or other customary mode, and a copy of [Rule the proclamation shall be affixed on a conspicuous part of sch the property and also upon a conspicuous part of the office Bengal Actj', of the Collector.

(2) Where the Collector so directs, such proclamation shall also be published in the Official Gazette or in a local newspaper, or in both; and the cost of such publication shall be deemed to be costs of the sale.

(3) Where the property is divided into lots for the purpose of being sold separately, it shall not be necessary to make a separate proclamation for each lot, unless pro- per notice of the sale cannot, in the opinion of the Collec- tor, otherwise be given.

1. Cf. section 28(7), Provincial Insolvency Act, 1920, and section 51 Presidency Towns insolvency Act, igog. 5 ~ be entitled to make or prosecute an app 2389 SCH. II No sale of immovable property under this Schedule R916 54:" ' shall,' without the consent in writing of the defaulter, take T"'}° °f5"1°- place until after the expiration of at least thirty days cal- [R016 48, culated from the date on which a copy of the proclamation Bib' l A "' of sale has been affixed on the property or in the ofﬁce of "Ea CL] the Collector, whichever is later. ' The sale shall be by public auction to the highest bid-- Rule 55:

der and shall be subject to conﬁrmation by the Collector. b'' [S. 36 (First part Madras Act.

(1) On every sale of immovable property, the person Rule 56:

declared to be the purchaser shall pay, immediately after Deposit by such declaration, a deposit of twenty-ﬁve per cent. on the §:3°};:'s:';ein amount of his purchase money, to the officer conducting default_ the sale; and, in default of such deposit, the property shall [Rule 68,' forthwith be re-sold. Sch. II, Bengal Act.] (2) The full amount of purchase money payable shall Rule 59, be paid by the purchaser to the Collector on or before the Sch, II.

ﬁfteenth day from the date of the sale of the property. 360831 Act-l In default of payment within the period mentioned in Rule 57,:

the preceding rule, the deposit may, if the Collector thinks.(I;"f'a':°ﬁd"" 1'} ﬁt, after defraying the expenses of the sale. be forfeited to pzymctm ° the Government, and the property shall be re-sold, and the [Rule 0 defaulting purchaser shall forfeit all claims to the property sch 7 fj, gr to any part of the sum for which it may subsequently Benga1Act.] e sold.

All persons bidding at the sale shall be required to Rule 58:

declare if they are bidding on their own behalf or on behalf Authority to of their principals. In the latter case they shall be required hm- to deposit their authority, and in default their bids shal1[S- 6(Fifth) be rejected. Ma '''5A''''] (1) Where immovable property has been sold in execu-- Rule 59:

tion of a certiﬁcate, the defaulter, or any person whoseAPP1iCati°P interests are affected by the sale, may, at any time within '°1 ff'. 35":

thirty days from the date of the sale, apply to the Collector 3:5,, 'gym, to set aside the sale, on his depositing-- rty on depo-

(a) for payment to the Income-tax Ofﬁcer, the amount 5"

speciﬁed in the proclamation of sale as that for the g3 , recovery of which the sale was ordered, with inter- ""33 °"] est thereon at the rate of six' and a quarter per cent. per annum, calculated from the date of the proclamation of sale to the date when the deposit is made; and

(b) for payment to the purchaser, as penalty, a sum equal to ﬁve per cent. of the purchase-money, but not less than one rupee.

(2) Where a person makes an application under the next rule for setting aside the sale of his immovable pro- perty, he shall not, unless he withdraw? that application.

ication under this rule. , IE ' ' SCH. II 290 gukr 650: Where immovable property has been sold in execution 10%;? gfdc of a certiﬁcate, the Income-tax Officer, the defaulter, or any sale ofimmo. person whose interests are aﬁected by the sale, may, at vable proper- any time within thirty days from the date of the sale, ap- tst: on gronyld ply to the Collector on the ground that notice was not gf":;';ff:V'g: served on the defaulter to pay the arrears as required by imgulariw this Schedule or on the _ground of a material irregularity gs. 213,36" al in publishing or conducting the sale :

ct. --

Provided as follows :--

(a) no sale shall be set aside on any such ground un-

less the Collector is satisﬁed that the applicant has sustained substantial injuiry by reason of the non- ' service or irregularity; and

(b) an application made by a defaulter under this rule shall be disailnwedunless the applicant d sits the amount recoverable from him in execut, n of the certiﬁcate.

Rule 6_1: At any time within thirty days of the sale the pur- Scmns aside chaser may apply to the Collector to set aside the sale on jﬁgultxhﬁgi the ground that the defaulter had no saleable interest in no saleable the property Sold-

interest.

[s.24., Bengal Act} Rule 62: (1) Where no application is made for setting aside the Conﬁrmation sale under the foregoing rules or where such an a plica- °"31°~ tion is made and disallowed by the Collector, the Colector [s- 25,Bcnsa1 shall (if the full amount of the purchase-money ha been "'°"] paid) make an order conﬁrming the sale, and, ther upon, the sale shall become absolute. « (2) Where such application is made and allowe , and where, in the case of an application made to set asi e the sale on deposit of the amount and penalty and charg . the deposit is made within thirty days from the date of the sale, the' Collector shall make an order setting aside the sale 2 Provided that no order shall be made unless notice of the application has been given to the persons aﬁected Rule 53=R¢- thereby.

éhhzeofmgxigy Where a sale of immovable property is .set aside, any in certain money paid or deposited by the purchaser on account of °aS°S- the purchase, together with the penalty, if any, deposited 551:1' for payment to the purchaser, and such interest as the Benga1Act,]' Collector may allow, shall be paid to the purchaser.

Rule 64.: Sale f§'lﬁf;'°a'°'74 (1) Where a sale of immovable property has become sch. 11, absolute, the Collector shall grant a certiﬁcate specifying Bengal Act.] the property sold, and the name of the person who at the E54-ad:;:;3s time of sale is declared to be, the purchaser.

£,_ ,3" 30m. (2) Such certiﬁe 4 e shallﬁ hear date the' day on hich ay Act.] the sale became abso te. :5 ' a 5 a person as receiver to manage the, 281 ' SCH. II (1) Where an order for t sale of immovable roperty Rule 55:

has been made, if the defa ter can. satisfy the ollector 1'°"P°"°' that there is reason to believe that the amount of the cer- $""'c';:jﬁ:° tiﬁcate may be raised by the mortgage or lease or private d.;fau1,e,to .sale of such property, or some part thereof, or of any other raise amount immovable property of the defaulter, the Collector may, dlI=_"nd°' on his application, postpone the sale of the property com- °°"'ﬁ°a'°' prised in the order for sale, on such terms and for such [R:1° 5% gggctilcrlltas he thinks proper, to enable him to raise the Bing", Acq' (2) In such case the Collector shall grant a certiﬁcate to the defaulter, authorising him, within a period to be men-

tioned therein, and notwithstanding anything contained in thlis Schedule, to make the proposed mortgage, lease or .sa e:

Provided that all moneys payable under such mortgage, lease or sale shall be paid, not to the defaulter, but to the Collector :

Provided also that no mortgage, lease or sale under this rule shall become absolute until it has been conﬁrmed by the Collector. -

Every re-sale of immovable property, in default of pay- Rule 56, ment of the purchase-money within the period allowed for Fresh procla- such payment, shall be made after, the issue of a fresh nation before proclamation in the manner and for the period hereinbefore "'.'"1°- Lprovided for the sale. ' W éliule 71*':

, h. .

Where the property sold is a share of undivided immov- 35"! Ac" able property, and two or more persons, of whom one is a 1';')f6g;_sh'_ rco-sharer, respectively bid the same sum for such property N5. to have or for any lot, the bid shall be deemed to be the bid of the preference. 'co-sharer. gklflc 72, c , . PART IV BéngalAct.] Appointment of receiver.

(1) Where the property of a defaulter consists of 21 RM: 53, 'business, the Collector may attach thg business and appoint Arpointmcnt , usiness, 0, receiver fct business.

(2) Attachment of a business under this rule shall be made by an order prohibiting the derfaulter from transfer-

ring or charging the business in any way and prohibiting all persons from taking any beneﬁt under such transfer or charge, and intimating that the business has been attached under this rule. A copy of the order of attachment shall be served on the defaulter, and another copy shall be affixed on a cons icuous part of the remis i which the business iésmcéxerri on and on the o tice bﬂxa of the ColIector's . L a SCH. II 292 Rule .69: Where immovable property is attached, the Collector

-;\fPP°;§;§i1::; may, instead of directing a sale of the property, appoint a.

for immow person as receiver to manage such property.

able property [s.28, Madras Act.] [s. 159, BombayAct.] , Rule 70: (1) Where any business or other property is attached.' Powers of and taken under management under the foregoing rules, "'°"'°" the receiver shall, subject to the control of the Collector. have such powers as may be necessary for the proper management of the property and the realisation of the proﬁts, or rents and proﬁts, thereof.

(2) The proﬁts, or rents and proﬁts, of such business or other property shall, after defraying the expenses of' management, be adjusted towards discharge of the arrears, and the balance, if any, shall be paid to the defaulter.

Rule 7:: The attachment and management under the foregoing "¥"hdTa"'31 rules may be withdrawn at any time at the discretion of ° manage' the Collector, or if the arrears are discharged by receipt :::'MadraS of such proﬁts and rents or are otherwise paid. A°"] PART V Arrest and detention of the defaulter.

113"'? 7'-'° (1) No order for the arrest and detention in civil pri- sh':)';,°';ausc'° son of a defaulter shall be made unless the Collector has. [3 29(1) 02;) issued and served a notice upon the defaulter calling upon ab) & (,0), him to appear before him on the date speciﬁed in the notice Bengal Act.] and to show 'cause why he should not be committed to the [5, 43, pm, civil prison, and unless the Collector, for reasons recorded Madras Act.] in writing, is satisﬁed---

(a) that the defaulter, with the object or effect of obstructing the execution of the certiﬁcate, has after the receipt of the certiﬁcate in the Collec- tor's ofﬁce dishonestly transferred, concealed, or re- moved any part of his property, or

(b) that the defaulter has, or has had since the receipt of the certiﬁcate in the Collector's office, the means to pay the arrears or some substantial part thereof' and refusesor' neglects or has refused or neglected to pay the same.

(2) Notwithstanding anything contained in sub-rule (1), a. warrant for the arrest of the defaulter may be issued by' the Collector if the Collector is satisﬁed, by afﬁdavit or otherwise, that with the object or effect of delaying the execution of the certiﬁcate the defaulter is likely to abscond or leave the local limits of the jurisdiction of the Collector.

(3) Where appearance is not made in obedience ;to an notice issued and served under sub-rule (1), the Collfctor may issue a warrant for the affrest of the defaulter.

293 I SCH. II.

(4) Every person" arrested in pursuance of a warrant of arrest under sub-rule (2) or sub-rule (3), shall be brought before the Collector as soon as practicable and in any event within twenty-four hours of his arrest (exclusive of the time required for journey):

_ Provided that, if the defaulter pays the amount entered in the warrant of arrest as due and the costs of the arrest to the officer arresting him, such officer shall at once release him.

When a defaulter appears before the Collector in Ru1e_73= obedience to a notice to show cause or is brought before H°='*""g- the Collector under the preceding rule, the Collector sha1l[S- 29 (2), proceed to hear the Income-tax Officer and take all such B°"ga1A°'-1 evidence as may be produced by him in.support of execu- tion by arrest, and shall then give the defaulter an oppor- tunity of showing cause why he should not be committed . to the civil prison.

.Pending the conclusion of the inquiry, the Collector Rule 74:

may, in his discretion, order the defaulter to be detained C."5t0dypen- in the custody of such ofﬁcer as the Collector may think dmg h°'"'"g' fit or release him on his furnishing security to the satisfac- E" 02? A(3)" tion of the Collector for his appearance when required. m°a CL] (1) Upon the conclusion of the inquiry, the Collector Rule 75:

may make an order for the detention of the defaulter in E1361. °f the civil prison and shall in that event cause him to be °°"'°"' ' arrested if he is not already under arrest: E:'):*']9('gcx'l';'jj Act.

Provided that in order to give the defaulter an oppor- tunitv of satisfying the arrears, the Collector may before making fhe order of detention. leave the defaulter in the custody of the oﬁicer arresting him or of any other oﬁicer for a speciﬁed period not exceeding 15 days, or release him on his furnishing security to the satisfaction ofthe Collec- tor for his appearance at the expiration of the speciﬁed period if the arrears are not so satisﬁed.

(2) When the Collector does not make an order of de-

tention under sub-rule (1), he shall, if the defaulter is under arrest, direct his release.

(1) Every person detained in the civil prison in execu- Rule 76;

tion of a certiﬁcate may be so detained.-- Detention in and release from prison;

(a) where the certiﬁcate is for a demand of an amount [s,3,,1;c,,g,,r exceeding ﬁfty rupees--for a period of six months, Act.] and ' -

(b) in any other case--for a period of six weeks:

Provided that he shall be released from such detention--

(i) on the amount mentipned inthe warrant for his detention being paifl to the jofﬁcer-in-charge of the civil prison, or l | I i Son. 11 Rule 77:

Release.

[s. 30, Bengal .Act.] Rule 78:

Release on ground of ill-

ness.

[s. 32, Bengal Act.] Rule 79:_ Entry Into dwelling-ho-

use.

[s. 47: Bengal .ACt.] 294

(ii) on the certiﬁcate being otherwise fully satisﬁed, or cancelled, or

(iii) on the request of the Income-tax Oﬁicer or of the Collector :

Provided, also, that he shall not be released from such detention under clause (11) or clause (iii) without the crder of the Collector.

(2) A defaulter released from detention under this rule shall not, merely by eason of his release, be discharged from his liability for t e arrear ' but he shall not be liable to be re-arrested under the cert' cate in execution of which he was detained in the civil prison.

(1) The Collector may order the release of a defaulter who has been arrested in execution of a certiﬁcate upon being satisﬁed that he has disclosed the whole of his pro-

perty and has placed it at the disposal of the Collector and that he has not committed any act of bad faith.

(2) If the Collector has ground for believing the dis- closure made by a defaulter under sub-rule (1) to have been untrue, he may order the re-arnest of the defaulter in execu- ' tion of the certiﬁcate. but the period of his detention in the civil prison shall not in the aggregate exceed that authoris- ed by the preceding rule.

(1) At any time after a warrant for the arrest of a de- faulter has been issued, the Collector may cancel it on the ground of his serious illness. _ (2) Where a defaulter has been arrested, the Collector may release him if. in the opinion of the Collector, he is not in a ﬁt state of health to be detained in the civil pnison.

(3) Where a defaulter has been committed to the civil prison, he may _be released therefrom by the Collector, on the ground of the existence of any infectious or contagious desease, or on the ground of his suffering from any seri-

ous illness.

(4) A defaulter released under this rule may be re- arrested. but the period of his detention in the civil prison shall not in the aggregate exceed that authorized by this Schedule.

'For the purpose of making an arrest under this Sche- dule--

(a) no dwelling house shall be entered after sun-set and before sun-rise;

(b) no outer door of a d _lling house shall be b -ken open unless such dwe' g house or a portion t ere- of IS in the oecupan ' the defaulter and e or .

= 2 i f 295 SCH. I1 other occupant of the house refuses or in any way prevents access there'to;but, when the person exe- cuting any such warrant has duly gained access to any dwelling house, he may break open the door of any room or apartment if he has reason to believe that the defaulter is likely to be found there;

(c) no room, which is in the actual occupancy of a woman who according to the customs of the coun- try does not appear in 'public, shall be entered into unless the officer authorised to make the arrest has given notice to her that she is at liberty to with-

draw and has given her reasonable time and facility for withdrawing.

The Collector shall not order the arrest and detention Nule,89=. in the civil prison of---- P'°§';:'t";':cu 0 WOIIIOD. 01' minors etc.

(a) a woman, or [S- 33» 3011831 _ . Acti[s. 4.8,

(b) any person who, in his opinion, is a minor or of M3 a8Act-1 unsound mind.

mar VI Miscellaneous. "Jim med to he Every Collector or other officer acting under this Sche- judi- dule shall, in the discharge of his functions under this ﬁlly- Schedule, be deemed to be actingjudicially within the E{'ct4']3'B°"3'J meaning of the Judicial Ol'ﬁcer's Protection Act, 1850. ,8 ,;,~,35o_ Every Collector or other oﬂicer acting under the provi- ',1. ' 3, , sions of this ﬁchedule shall have the ._'powers of a civil court owcrto tale for the purpose of receiving evidence, administering oaths €'"d°"°°-

enforcing the attendance of witnesses and compelling the 42.361301 production of documents. "'1 No certificate shall cease to be in force by reason of ule 8 :

the death of the defaulter. 3 ontinuance f certgiccatgi . 42, 118 If at any time after the issue of the certiﬁcate b3' the 84 , Income-tax Officer to the Cbllector 'the defaulter dies, the 1>,oc¢du,¢.,', proceedings under this Schedule (except arrest and deten- death of tion) may be continued against the legal representative of '1°f3"1'°'- ' the defaulter, and the provisions of this Schedule shall k;:;f]"'B°"3"

apply as if the legal representative were the defaulter.

(1) An appeal from any original order passed by the Rule 85:

Collector under this Schedule shall lie to the revenue au- Appeals- thority to which appeals or aﬁlyf against the orders of Fmf" B°"3"' the Collector under the law' relatin t land revenue of the -1 State concerned. .

._ScH. II «9 of 1908.

[s. 52, Bengal Act.] Rule 86 :

Review.

_[s. 54, Bengal Act.] Rule Recovery from surety.

[s. 50, Mad-

ras Act.] Rule Penalties.

[s. 58, Bengal Act.] -

87:

88:

45 of 1860.

Rule Subsistence allowance.

[Rule 78:

Schedule II, Bengal Act.] 89:

Rule 90 :

Forms.

[(Contrast) s. 84, Bengal Act.] Rule Power make _ .

[s. 39, Bengal Act.] 91 :

to 3 consistent with the provisions of Q0 1 296 (2) No appeal shall lie from any order of the Collector which is, under any rule in this Schedule, conclusive.

. (3) Every appeal under this rule must be presented within thirty days from the date of the order appealed against.

(4) Section 5 of the Indian Limitation Act, 1908, shall apply to appeals under this rule.

(5) Pending the decision of any appeal, execution of the certiﬁcate may be stayed if the appellate authority so di- rects, but not otherwise.

(6) No appeal shall lie from any order passed on appeal under this rule.

Any order passed under this Schedule may, after notice to all persons interested, be reviewed by the officer 'who made the order, or by his successor in oﬁice, on account of mistake or error either in the (making of the order or in the course of any proceeding under this Schedule in which the order was made.

Where any person has under this Schedule become surety for the amount due by the defaulter, he may be pro- ceeded against under this Schedule as if he were the de- faulter.

Whoever fraudulently removes, conceals, transfers or delivers to any person any property or any interest therein, intending thereby to prevent that property or therein, from being taken in execution of a certiﬁcate, shall be deemed to have committed an offence punishable under section 206 of the Indian Penal Code, 1860.

(1) When'a defaulter is arrested or detained in the civil prison, the sum payable for the subsistence of the defaul- ter from the time of arrest until he is released shall be borne by the Income-tax Officer. A (2) Such sum shall be calculated on the scale ﬁxed by the State Government for the subsistence of judgment- debtors arrested in execution of a decree of a civil court.

(3) 'Sum payable under this rule shall be deemed to be costs in the proceeding:

Provided that the defaulter shall not be detained in the civil prison or arrested on account of any sum so payable.

The Central Board of Revenue may prescribe the form to be used for any order, notice, warrant, or certiﬁcate to be issued under this Schedule.

(1) The Central Board of Revenue may make rules.

this Act, regulating' the ectors and other 0 ers T?

% procedure to be followed by acting under this Schedule.

interest 297 SCH. III (2) In particular, and without prejudice to the genera- lity of the power conferred by sub-rule (1), such rules may provide for all or any of the following matters, namely-

'(a) the manner in which any property sold under this Schedule may be delivered:

(b) the execution of a document or the endorsement of a negotiable instrument or a share in a corporation, by or on behalf of the Collector, where such execu-

tion or endorsement is required to transfer such negotiable instrument or share to a person who has purchased it under a sale under this Schedule;

(C) the procedure for dealing with resistahce or ob- struction offered by any person to a purchaser of any immovable property sold under this Schedule, in obtaining possession of the property;

(d) the fees to be charged for any process issued under this Schedule ;

(e) the scale of charges to be recovered in respect of any other proceeding taken under this Schedule;

' ' (f) recovery of poundage fee;

(8) the maintenance and custody, while under attach- ment, of livestock or other movable property, the fees to be charged for such maintenance and cus- tody, the sale of such li.vestock or property, and disposal of proceeds of such sale;

(h) the mode of attachment of a business.

Nothing in this Schedule shall affect any provision of Rule :this Act whereunder_ the tax is a ﬁrst charge upon any Saving .622}- .asset_ . ding charge.

THE THIRD SCHEDULE PROCEDURE FOR DISTRAINT BY INCOME-TAX OFFICER [See section 235(5)] Where any distraint and sale of movable property are Rule 1 , to be eﬁected by any Income-tax Ofﬁcer authorised for the Dist:-aint and purpose, such distraint and sale shall be made, as far as 531°-

may be, in the same manner as attachment and sale of any movable property attachable by actual seizure; and the pro- [New] visions of the Second Schedule relating to attachment and , sale shall, mutatis mutandis, apply in respect of such dis. 4

-traint and sale._ 1 , 4 _ ' .

298

Draft Report on the lnccnne-tax Act.

APPENDIX II.

Table showing the provision in the existing Act and the corresponding provision, if any, as proposed' in Appendix I. Existing provision Corresponding provision as proposed II). Appendix I SCCIIOII. I .

Section 2(1) Section 2(2) . a . . .

Section 2(3) Section 2(4) Section 2 (4A) .

Section 2(4B) Section 2(5) . . . .

Section 2(5A) .

Section 2(5B) .

Section 2(6) Section 2(6A) Section 2(6AA) . .

Section 2(6B) . . . .

Section 2(6C) . . .

Section 2(6D) .

Section 2(6E) Section 2(7) Section 2(7A) - . - .

Section 2(8) Section 2 (SA) Section 2(9) Section 2(xo) Section 2(I 1) Section 2(12) Section 2(I3) Section 2(I4) Section 2(I4A) .

Section 2(1 5), part Section 2(15), part Section 2(16) Section 3 .

Section 4(1)-

Clause (:2), part Clause (a), part .

Clause (b) (2') . . .

Clause (6) (ii)

1. The provision in Appendix I de dfutinguisl: it from the existing provisiomﬁ which is ' das''Clause........'',in ' to _. 'bedas"Section......... ....".

Clause I Clause 2(1) Clause 2(5) Clause 2(3) Clause 2(9) Clause 2(xo) Clause 2(1 1) Clause 2(12) Clause 2(1g) Clause 2(I4.) Clause 2(x5) Clause 2(x7) Clause 2(18) and Explanation.

Clause 2(I9) Clause 2(ao), items(i)Qo (vii) and Explnnafwn.

Clause 2(23) Clause 2(24.) Clause 2(21) Clause 2(22), sub. Clauses (i) and (ii).

Clause 2(25) Clause 2(x 5) _ Clause 2(27), Sub- Clnusu(i) to

(vii) Clause 2(28) Clause 5 Clause 2(3o) Clause 2(31) Clause 2(32) Omitted.

Clause 2(36) Clause 2(37) Clause 2(38) Clause 3 Clause 4(1) ((4) Clause 4(2) Clause 4(x)(6) Clause 4(1)(c) I 299 Clause (11) (iii) Clause (c) First proviso Second proviso .

Third proviso Fourth proviso .

Fifth proviso Explanation 1 .

Explanaiion 2 .

Explanation 3 . .

Explanation 4 . . . .

Section 4(2) Section 4(3)-

Clause (i), main para . .

Clause (1'), proviso (a) opening line . Clause (1'), proviso (a) (i) Clause (1'), proviso (a) (ii) Clause (1') proviso (b), part Clause (1'), proviso (b), part Clause (1'), proviso (b), part Clause (1'), proviso (c) Clause (ii) Clause (iii), part .

Clause (iii), part . . . . .

Clause (iv) Clause (v) Clause (vi) Clause (via) para. (a) . .

Clause (via), para. (b) (Se: Finance Act, 1958) .

Clause (vii) . . . .

Clause (viii) . . . . . .

Clause (ix) Clause (:1) (a) Clause (x) (b) _ Clause (x) (c) . . . . .

Clause (at) (d) 1 Clause (x) (2) Clause (xi) . . . . .

Clause (xia), (See Finance Act, 1958) Clause (xii) . . .

Clause (xiii) . . .

Clause (xiv) . . . . . .

Clause (xiva), main para Clause (xiva), 1st Prov. . . . .

Clause (xiva), 2nd Prov. . . ., Clause (xiva), Explanation . . .

Clause (xv) . . . . . .

Clause (xvi) . . . . . .

Clause (xvii) . . . . .' Clause (xviia) . .' .' . .' Clause (xviib) . . .' . .' I 2o--11.awcom.15s. ' -;, Clause 4(1) ((1) Clause 4(2) ' Omitted, see notes.

Clause 11(4) (iv) Clause 1 1(4)(1') Clause 11(4) (ii) Clause 11(4) (iii) Clause 4(3) Clause 9(i1') Clause 9(iii) Clause 4(1) (e) (f) (E) Clause 10 Clause 12(1)(i), main para.

Clause 12(1)(i), proviso, part. / Clause 12(1)(i1') (b) Clause 12(1) (ii) (:1) Clause 12(2) Clause 12(3) Clause 12(4) Clause 12(1)" (1'), proviso, part_ Clause 12(5) Clause 1 1 (22) (1') Clause 11(22) (ii) Clause 1 1(26) (1') Repealed.

Clause 1 1 (15) Clause 1 1(7) (1') Clause 1 1(6) Clause 1 1(3) Clause 1 1(1) Clause 1 1 (26) (ii) Clause 1 1(21) Clause 11(7), items (ii) to (v) Omitted: see notes.

Clause 1 1(25) Clause 1 1 ( 18) Clause 1 1 (23) Clause 1 1(8) Clause 1 1(9), opening part.

Clause 1 1(9) (ii) ' Clause 1 1(9) (1') Clause 1 1(9), Explanation 2.

Clause 1 1 (10) I Clause 1 1(5) (1') Clause 1 1(16) (1') Clause 1 1 (1 6) (ii) Clause 1 1/(1_6) .(1'v) Clause (xuiii) Clause (xix) . . . . S .

Clause (xx) Clause (xxi) Clause (xxii) .

Last para, part Last para, part \ .

Section 4A--

Clause ,(a) (1') Clause (a) (ii) Clause (a) (iii) Clause (a) (iv) Clause (b) Clause (0) Section 4B (a) .

Section 4B(b) Section 4B(r) Section 5(1) Section 5(1A), earlier part .

Section 5(1A), latter part .

Section 5(2), earlier part .

Section 5(2), latter part Section 5(3), earlier part Section 5(3), latter part Section 5(3A) Section 5(4), earlier part Section 5(4), latter part Section 5(5), earlier part Section 5(5), latter part Section 5(5A), earlier part .

Section 5(5A), latter part Section 5(6) Section 5(7), words "for the purposes of this Act".

Section 5(7) (1') Section 5(7) (ii) .

Section 5(7A), main para, earlier part Section 5(7A), main para, latter part Section 5 (7A) , Explanation Section 5(7B), earlier part .

Section 5(7B), latter part Section 5(7C), main para Section 5(7C), 1st Prov. , Section 5(7C), 2nd Proviso Section 5(8) . . .. .~ Section 5A Section 6 . . . .

'Section 7(1), main para, part .

Section 7(1), main para, part . .

Section 7(1), main para, part . , L Clause 1'1(16) (iii) Clause 1 1 (1 9) Clause 1 1 (5) (ii) Clause 1 1 (27) Clause 1 1 (20) Clause 1 2 (6) Clause 1 2, Explanation (a) Clause 6(1) (a) Clause 6(1) ((2) Clause 6(1) (5) Omitted; see notes.

Clause 6(2) Clause 6(3) Clause 6(6), part.

Clause 6(6), part.

Omitted as unnecessary.

Clause I27 Clause 128(1), part.

Clause 131(1) Clause 128(1), part.

Clause 131(2) Clause 128(1), part.

Clause 128(2) Clause 128(3) i Clause 129(1) Clause 131(3) (a) Clause 131(4) Clause 131(5) Clause 131(6) Clause 129(4) Clause 131(7), 1st para. _ Omitted; see notes.

Clause 129(2) Clause 129(3) Clause 132 (1) Clause 132(4), main para.

Clause 132 (4), Explanation Clause 130 (2) Clause 140 Clause 133, main para. \ Clause 133, Prov.

Clause 160, Explanation I. Clause 130(1) Omitted, in view of the p1'opo' sed abolition of the Appellate Tribunal.

Clause 14 Clause 15 .

Clause 17(1) l Clause 17(2) ' Q 301 Section 7(1), 1st Proviso.

Section 7(1), 2nd Proviso. .

Section 7(1), Expl. 1 .

Section 7(1), Expl. 2, main part .

Section 7(1), Expl. 2, Prov., part Section 7(1), Expl. 2, Prov., part Section 7(1), Expl. 2, Prov., part Section 7(1), Expl. 2, Prov., Part Section 7(2) (1') .

Section 7(2) (ii) «Section 7(2) (iia), main para.

Section 7(2)(iia), Prov.

Section 7(2)(iii) .

Section 8, 1st Para.

Section 8, 1st proviso, earlier part Section 8, 1st proviso, latter part Section 8, 2nd proviso Section 8, 3rd proviso .'Section 8, Explanation--

Clause (a), part Clause (a), last lines 'Clause (b), ﬁrst line Clause (12), part Clause (b), last lines Section 9(1)-

Opening para.

Clause (2'), part Clause (i), part Clause (ii), main para.

Clause (ii), Proviso Clause (iii) Clause (iv), main para.

Clause (iv), proviso Clause (:2) Clause (vi) Clause (vii) Explanation .

Section 9(2)-

First para.

151; Prov. . _.

2nd proviso, except last line 2nd provisoflast line 3rd proviso Section 9(3) .

Section 9(4) (a) . 7 .

Section 9(4) (b) . . .

Section 9(4) (0) (See Finance Act, .19?8).

i ii'.

l l Clause 88'(1)(c} Clause 213 Clause 17(3) Clause 17(4) Clause 1 I (1 1) Clause 1 1 (12) . Clause 1 1 (14) Clause 296; See also clause 1 1 (1 3).

Clause 16(i) Clause 16(_ii) Clause I6(ii1'), earlier half.

Clause 16(iii), latter half.

Clause 16 (iv) Clause 18 Clause 19 Clause 2 1 Clause 87(i) Clause 188.

87(ii) also.

Compare ' clause Clause 20(1) (i) Clause 20(2), main paira. part and clause 4o(rl), part.

Clause 20(2), Expl.

Clause 20(1)(ii) Clause 20(2), main para, and clause 4o(d), part.

part Clause 22 Clause 24(I)'(u') (a) Clause 24(1)(ii)(b) Clause 24(1)(z'ii) Omitted, as obsolete.

Clause 24(1) (iv) _ Clause 24(1), items (11) us (viii) Clause 25 1 Clause 24( 1) (ix) Clause 24(1) (x) Clause 24(1) (xi) Clause 27( iii) Clause 23(1) ' Clause 23(3) Clause 23(4) Clause 24(2) Clause 24(1)(i) and Expl.

Clause 26 _ Clause 27(i) Clause 27(ii) _ Clause 27(0) 244(1).

.....a .

302

Section 10, Sub-section (1) . . .

Section 10, Sub-section (2)--

Opening paragraph . .

Clause (1'), without the proviso. . . Clause (i), proviso . . . . . '.

Clause (ii), without the proviso . .

Clause (ii), proviso Clause (iii), main part Clause (iii), proviso, part . .

Clause (iii), proviso, part (last 17 words) Clause (iii), Explanation Clause (iv), part (for buildings) Clause (iv), part (for machinery etc.). Clause (iv), part (for stocks etc.) Clause (v), part (for buildings) Clause (v), part (for machinery etc.) Clause (vi), ﬁrst para, part Clause (vi), ﬁrst para, part Clause (vi), second para., with its clauses (a),(b) and (0) Clause (vi), proviso ((1) Clause (vi), proviso (b), part Clause (vi), proviso (b), part (referring to pre. x939 years).

Clause (vi), proviso (5) Clause (via), part Clause (via), part Clause (via), part Clause (nib), main para. .

Clause (vib), proviso (a) .

Clause (vib), proviso (b), earlier part Clause (vib), proviso (b), latt"r half . Clause (vib), proviso last para.

Clause vii), first para.

Clause (vii), ﬁrst proviso Clause (vii), Second Proviso, part Clause (vii), Seeond proviso, part Clause (vii), Third proviso Clause (vii), Fourth proviso, part Clause (vii), Fourth proviso, part Clause (vii), Fifth proviso Clause (viii) . . .

Clause (ix), earlier part .

Clause (ix), latter part Clause (x), main para. . .

Clause 28, opening paragraph and sub-clause (i) Omitted, w deductions been listed in separate clauses.

Clause 3o(a) (i) (a) Clause 38(1) (a) Clause 30(a) (i) (b) Clause 38(1) (b) Clause 36(3), main part Clause 4o(a) (i) Omitted, m repeated in existing section 10(4) (b) : See notes to Clause 40.

Clause 36(3), Explanation Clause 3o(c) Clause 31 (ii) Clause 36(1) Clause 3o(a) (ii) Clause 31 (i) Clause 32(1)(i') Clause 32(1)(ii) Omitted, as obsolete.

Clause 34(1), part Clause 32(_ 2) Omitted Clause 34(2) Clause 32(1)(i'ii), main para.

Clause 32(I)(iii), Explanation-

Clause 34(2) (ii) Clause 33 Clause 34(1), part Clause 34(3)(a) Exception.

Clause 34(3) (a), main para.

Clause 34(3)(b) Clause 32(I)(iv) main para.' pan;

Clause 32(1) (iv), part.

D main para., Clause 41(2), main para.

Clause 41(2), Explanation 2. ' Clause 32(1)(iv), Explanatim.

Clause 41(2), main para. and Explanation 1.

Omitted in View of pi-oposcd_ draft for s. 10(2) (vii), 3rd.

proviso.

Clause 41 (2), Explanation 3.

Clause 36(5) Clause 3o(b) Clause 38(2) Clause 35(2), opening paré.

303

Clause (x), proviso Clause (xi), main para. . .

Clause (xi), proviso earlier half . ' Clause (xi), proviso, latter half Clause (xii) Clause (xiii), part .

Clause (xiii), part . . .

Clause (xiv), ﬁrst para., earlier part . 'Clause (xiv), ﬁrst para, latter part Clause (xiv), 1st proviso . . .

Clause (xiv), 2nd proviso (:1), opening lines Clause (xiv), 2nd prov., (a) (i) .

Clause (xiv), 2nd proviso, (a) (ii) Clause (xiv . Second proviso, (b) Clause (xiv), Second proviso, (c) Clause (xiv), Second proviso, (Q Clause (xiv), Second proviso, (e), earlier part Clause (xiv), Second proviso, (5), latter part Clause (xiv), Second proviso, (f), part . Clause (xiv), Second proviso, (f), part . Clause (xiv), Second proviso, (f) part Clause (xiv), Second proviso, (g) . Clause (xiv), Explanation at the end Clause (xv) . . . . . .

Section 10, Sub-section (221) . . .

Section 10, Sub-Sections (2B) and (2C) Section 10, Sub-section (3) Section 10(4), ﬁrst para Clause (a) Clause (b) . . .

Clause (6) . . .

Section 1o(4A), Clause (a) . .

Clause (b) . . . . . .

Explanation . . .

Section 10 (4B) (See Finance Act, 1958) Section 10(5), ﬁrst para----

"paid"

"plant"

Clause (a), main part Clause (a), First proviso . . . .

Clause (a), Second proviso Clause (b), main part Clause (b), ﬁrst proviso .

Clause (b), 2nd proviso . . .

Clause (6) . . . . . .

Explanation, earliar part Explanation, latter part .

Section 10 (5A), opening line . . , ' C|a9s¢8(a).(b).(¢).(d)~- . .

Clause 32(2)(s) Clause 36(6), main para.

' Clause 41 (4) Clause 36(6), First proviso.

Clause 35(!)(i) Clause 35-(1) (ii) Clause 35(1) (iii) Clause 35(1)(iv) Clause 35(2) (i), main para.

Clause 35(2) (i), Explanation.

Clause 3 5(2) (ii) , opening lines.

Clause 3 5(2) (ii) (b) Clause 35(2) (ii), (:1) Clause 35(2) (iii) Clause 41 (3) Clause 35(2) (iv) Clause 35(2) (v) Clause 42(1), Explanation 1.

Clause 35(4) Clause 73(3), part Clause 74(3), part Clause 35(3) Clause 42(5) Clause 37 Clause 41(1) Omitted.

Clause 33(3) Clause 4o(a) (ii) Clause 4o(a) (iii) Clause 4o(b) Clause 4o(a) (iv) Clause 40 (0) (1') Clause 40(5) (ii) Clause 40 (c) Explanation Clause 34 (2) (iv) Clause 42 (2) Clause 42(3) Clause 42 (7) (a) Clause 42(1), Expl. 3 Clause 42 (1), Exp]. 4 Clause 42 (7) (b), main para Clause 42 (7) (b), Proviso Clause 42 (7) (b) Explanation Clause 42 (1), Explanation 2 Clause 42 (1), main para Clause 42 (7), Explanation 3.

Clause 28 (ii), opening lines, part.

Clause 28 (ii). ta), (b). T). (:1) 304 last para, earlier half . . .

last para, latter half . . . .

Section 10(6) . . . , .

Section 10 (7) .

Section 1 1 Section 12 -

Sub-section (1) Sub-section (IA) Sub-section (IB) Subsection (2) ---

main para, part . . . .

main para, part Proviso . .

Sub-sections (3) £9' (4) --

part .

part . . . . . .

Sub-section (5) -

part part Section 12A Section r2AA Section 12B Sub-secti0n(1)----

main para, earlier part main para, latter part Ist proviso, part 1st proviso, part 2nd proviso, earlier half 2nd proviso, latter half, part 2nd proviso, latter half, part Sub-section (2)-

opening lines . ' Clause (1') Clause (ii), part Clause (ii), part Clause (ii), part Ist proviso 2nd proviso, part 2nd proviso, part 3rd proviso, part 3rd proviso, part 3rd proviso, part 3rd proviso, part 3rd proviso, part 4th proviso Sub-section (3)--

main para, earlier half, part main para, earlier half, part . .

rnain para, earlier half, part ' Clause 28 (ii), opening lines, part. .

Clause 123 (1), main para.

Clause 28 (iii) Clause 4,4, part.

_ Repealed.

' Clause 58 (1) Clause 58 (2) (1') Omitted, as spent. - 4 Clause 60 (1') Clause 60 (iii) .- ' Clause 61 /_a) Clause 60 (ii) Clause 62(2) Clause 61 (b) Clause 62 (1) Clause 39 Clause 187 . Clause 4. 5 Clause 46 Clause 4.7 (1') Clause 47 (ii) Clause 47 (iii) Clause 4.2 (1), Explanation 5.

Clause 42 (7), Explanation 2.

Clause 4.8,' opening lines.

Clause 4,3 (i) ' Clause 48 (ii) (Clause 50 (1) (:1) Clause 57 (b) Clause 54 Clause 51 (1) Clause 51 (2) Clause 50 (i) (b';

Clause 50 (2) (i) (c) clause 50, (3) <5), pan Clausc 50 (3) (ii) (5) Clause 50 (4) (bl Clause 52 Clause 50 (2), opening tints.

Clause 50 (2)'(i) (4) . ' Clause _50 (3) (i).'part- "

.4 ' 305 main para, earlier half, part . .

main para, earlier half, part. . , main para, lattter half .

Proviso (z), part \ V Proviso (3'), part Proviso (1'), part .

Proviso (ii) Sub-section (4)----

Clause (4) Clause (b) Section 13, main para Section x3, Proviso, part Section 13, Proviso, part Section 14 (1) Section 14(2) to (5) :-

' For income-tax Subsection (2), Clause (a) Sub-section (2), . .

Clause (M)-, main para Sub-section (2), .

Clause (b) Sub-section (3), main para Sub-section (3), Explanation Sub-section (3), Proviso .

Sub-section (4) Sub-section (5) For Super-tax Sub-section ( 2) (aa), main para Sub-section (2) (aa), proviso Sub-section (3) Sub-section (4) Sub-section (5) Section I 5 Sub-section (1) Sub-section (2) Sub-section (2A) Subsection (3) Section 15A, earlier part Section 15A, latter part . .

Section x5-B :--

For income-tax Sub-section (1), main para Sub-section (1), 1st Proviso 2nd Proviso (a) 2nd Proviso (b) Subsection (2), main para .' Sub-section (2), Explanation .;

;u--u=.r.¢. V .Clause 50 (3) (ii) (a) . Clause 50 (4) (a) Clause 50, Explanation. .

Clause 50 (2), opening line: of sub-clause (1'). --\..

Clause 50 (2)(i) (6) Clause 50(3) (:1), part.

Clause 50 (2) (ii).

Clause 55 Clause 56.

Clause 150 (x), main part.

Clause 150 (1), Proviso.

Clause :50 (2) Clause 11 (2) As given below.

Clause 87 (iii) Clause 87 (iv) Clause 87 (:2) Clause 82 (x) Clause 82 (2) Clause 82 (3) Clause 83 Clause 84 Clause 1 I 1 , part.

Clause x 1 1, part.

Clause 105 Clause :06 Clause :07 Clause 88 (1) (a) Clause 88 (1) (b) Clause 88(2) Clause 83 (3) 9 Clause 8: 7 Omitted.

As given below :-----

Clause 89 (1), part.

See "For Super-tax", below.

Clause 89 (2) Clause 89 (3) Clause 89 (5) 'f Clause 89 (6; 1 Sub-section (2.4) . . 1 .

Sub-section (3) For Super-tax Section 15-B, Part Section 15-B (1), 1st Proviso Section 15C---

For income-tax Sub-section (1) . .

Sub--section (2), main para Sub-section (2), Proviso Sub-section ( 3) .

Sub-section (4) . . .

Sub-section (5) Sub-section (6) For super-tax----

Section 15--C . .

Section 16(1), (a), earlier half . Section 16 (1) (a), latter half Section 16(1) (b), main para. Section 16 '(1) (I2), Proviso Section 16 (1), (c)----

Main para, earlier half .

Main para, latter half 1st Proviso 2nd Proviso, part 2nd Proviso, part 3rd Proviso, earlier half .

3rd Proviso, latter half Section 16 (2), main para, part Section 16 (2) main para, part Section 16 (2), main para, part Section 16(2), Proviso Section 16 (3) Section 17 (1), main para . .

Section 17» (1), 1st Proviso, earlier part Section 17 (1), 1st Proviso, latter part Section 17 (1), 2nd Proviso.

Section 17 (2), part .

Section 17 (2), part Section 17 (3), part Section 17 (3)., part Section 17 (3), part 'Section 17 (4) .

Section 17 (5) .

o\ o 0' -

Omitted, as spent.

Clause 89 (4) Clause I09 (1), part Clause 109 (2) As given below :-

Clause 8 5 (1) Clause 85 (2) Clause 85 (3) Clause 85 (4.) Clause 86 Clause 82 (5) Clause 82(6) Clause 110, part.

Clause 68 Omitted. See Section 15 A latter half.

Clause 69(1) Clause 69 (4) Clause 63 Clause 64 Clause 66, (a) Clause 66, (b) Omitted.

Cluase 65 (1) Clause 65 (2) Clause 8 Clause 59 (1) Clause 59 (2) Clause 59 (3) Clause 67 Clause 124. (1) Clause 124. (2) Clause 124. (3) Clause 124. (4) Clause 88 (1), opening lines. Clause 89 (1), part.

Clause 121 Clause 109 (1), part Clause 110, part Clause 1 1 1, part.

Omitted, as s. 14. (2) (c) is no' longer on the statute book.

Omitted, consequent on omission of section 15A, latter half.

Contrast deﬁnition of "average rate of income-tax" (an expression which has been used in the Chaptd "on Reba es).

307

Section 17 (6), opening lines, part . . . Clause 125, opening line: Section 17 (6), openinglines, part,r_(.worda "includ- Omitted ing super tax"). ' Section 17 (6), clause (1'), . . . . . Clause 125 (a) Section 17 (6), clause (ii), main para . . . Clause 125 ((2), main para Section 17 (6), Clause (ii), Proviso . . . Clause 125 (b), Prov. Section 17 (7), part . . . . . . Clause 126 Section 17 (7), part . . . . . . Covered by clause 126 Section 18 (1) . . . . . . . Repealed Section 18 (2), main, para . . . . . Clause 201 (1) Section 18 (2), Proviso . . . . . Clause 201 (3) 'Section 18 (211), earlier part . . . . OS1ni§t<Ed5 as repeating existing

-1 2 .

'Section 18 (2A), latter part ' . . . . Clause 201 (6) 'Section 18 (2B), main para . . . . Clause 201 (2) 'Section 18 (2B), Prov., part . . . . Clause 205 (1), part 'Section 18 (2B), Prov., Part Clause 205 (2) tsection 18 (2B) Prov., part (re: order by Income- Omitted, as unncessary. tax Ofﬁcer). ' Section 18 (3), main para . . . . . Clause 202 (a) Section 18 (3), Prov. . . . . . . Clause 205 (1), part Section 18 (3A), main para . . . . Clause 202 (b) ' 'Section 18 (3A), Prov. . . . . . Clause 205 (1), part Section 18 (38), main para. . . . . Clause 204, (1), main para Section 18 (3B), 1st Prov. . . . _ . . Clause 205 (1), part Section 18 (3B), 2nd Prov. . . . . Clause 204. ( 1), Prov. '.Section 18 (30). . . . . . . Clause 204 (2) .'Section 18 (3D), main para . . . . Clause 203 Section 18 (3D), Prov. ' . . . . . Clause 205 (1), part .'Section 18 (4,) . . . . . . . Clause 206 Section 18 (5), main para earlier half, part . . Claulse 207, main para, earlier a .

?Section 18 (5), main para, earlier -half, part Clause 246 (1), earlier half 'Section 18 ( 5), main para, latter half, part . . Clause 207, main para, latter lul f . . _ part. -

'Section 18 (5), main para, latter half, part . . Clause 246 (1) "latter half. 'Section 18 (5), 1st Prov . . . . . Clause 207, main para, latter half, part. ' Section 18 ( 5), 2nd Prov., part . . . , . Clause 207, 1st Prov. | Section 18 ( 5), 2nd Prov., Part . . . . Clause 246 (1), 1st Prov. Section 18 (5), 3rd Prov., Part . i . . . Clause 207, 2nd Prov. Section 18 (5), 3rd Prov, part . . . . Clause 246 (1), 2nd Prov, 'Section 18 (6) . . . . . . . Clause 203 ' Section 18 (7) . . . . . . . Clause 209 Section 18 (8) . . . . . . . Clause 210 Section 18 (9) . . . . . . . Clause 211 Section 18, Expl. . . . . . . Clause 212 'Section 18A (1) (a), main para, earlier half, part . Clause 215 (1) Section 18A (1) (a), main para, earlier half, part . Clause 216 ( rsection 18A (1) (4),, main para, carrier half, pqt . Clause 217 (a),.ear1ier :Section 18A (1) (a), main para, earlier half, Clause 2-18 (1). ~ ls.

308

J Section 18A (1) (a), main para, earlia half, part' . Clause 218 (2) Section 18A (1) (a), main para, earlier half, part '. Clause 219 (1), main para. Section 18A (1) (a), main para, latter half, part . Clause 217 (a), latter half Section 18A (1) (a), main para, latter half, part 7 . Clause 217 (b) Section 18A (1) (a), 1st Prov . . . . Clause 219 (1) Prov.

Section 18A (1) (a), 2nd Prov. . . . . Clause 217. Expl.

Section 18A (1) (a), 3rd Prov. . . . . Clause 218 (3) Section 18A (1) (b) . . . . . . Clause 219 (2) Section 18A (2), main para . . . . Clause 220 (1) Section 18A (2), Prov. . . . . . Clause 220 (2) Section 18A (3) . . . . . . Clause 220 (3) Section 18A (4) . . . . . . Clause 221 Section 18A (5), main para part i.e. cl. (i) . . Omitted, as spent Section 18A (5), main para, part. . . . Clause 222 (1), part Section 18A (5), main para, part. . . . Clause 222 (1), part Section 18A (5), main para, part. . . . Clause 2 (33) Le. deﬁnition».

"regular assessment". .

Section 18A (5), 1st Prov . . . . . Clause 222 (2) Section 18A (5), 2nd Prov. . . . . Clause 222 (1), part Section 18A (6), main para . . . . Clause 223 (1), part Section 18A (6), 1st Prov . . . . . Clause 223 (1), part Section 18A (6), 2nd Prov. . . . . Clause 223 (2) Section 18A (6), 3rd Prov . . . . . Clause 223 (3) ' Section 18A (6), 4th Prov . ' Omitted, as the draft prpposefi. for S. 18A (6) main para; appli- es the rule contained in the"

Prov. for all cases.

Section 18A (6),'5th Prov . . . . . (Clause 223 (4) Section 18A (7) . . . . . . Clause 224 7 Section 18A (8) . . . . . . Clause 225 (1) Section 18A (9), main para Section 18A (9), Proviso Clause 282, earlier half.

. . . - . Clause 282, latter half 1 Section 18A (10) . . ._ . . . Clause 226 - Section 18A (1 1) . . . . . .- Clause 227 Section 18A (12) . . . . . . Clause 228 Section 19 . . . . . . . Clause 200 (1) Section 19A . . . . . . . Clause 166 (4) Section 20 . . . . . . . Clause 167 Section 20A . . . . . . . Clause 166 (1) Section 21 . . . . . . . Clause 166 (2) Section 22 (1) . . . . . . . Clause 143 (1) Section 22 (2) . . . . . . . Clause 143 (2) Section 22 (2A), part. . . . . . Clause 143 (3) Section 22 (2A), part . . . . . . Clause 80 Section 22 (3) . Clause 143 (4) Section 22 (4) .

Section 23 (4), main para, earlier half . '. .3 Clause 146 (1) Clause 146 (5) Clause 147 (1) Clause 147 (2) Clause I47 (3) Clause 148 (1)' ., -.....--,._.. ..

309

Section 23 (4), main para, latter half, part . . Clause 193 (2), part Section 23 (4), main para, latter half, part . Clause 192 (6) Section 23 (4) , Proviso ' Section 23 (5), opening lines Section 23 (5) (a), main para Section 23 (5) (a), 1st Prov.

Section 23 (5) (a), 2nd Prov.

Section 23 (5) (a) 3rd Prov.

Section 23 (5) ([1) Section 23 (6) Section 23-A-

Sub-section (1), part Sub-section (1), part Sub--section (1), part Sub-section (2) Sub-sections (3) to (7) Sub-section (8) Sub-section (9) Explanation 1- Clause (a) Clause (b) (1'), main para Clause (b) (i), Proviso Clause (b)(iz') half Clause (b)(iii), main para, earlier Clause (b) (iii), main para, latter half, part Clause (b) (iii), main para, latter half, part Clause (b) (iii), Proviso Explanation 2----

Section 23B(1), earlier part Section 23B(1), latter part .

Section 23B(2) .

Section 23B(3) .

Section 23B(4) .

Section 23B(5) .

Section 23B(6) .

Section 23B(7) .

Section 23B(8) .

Section 24(1)------

main para 1st Proviso .

2nd Proviso, earlier half 2nd Proviso, latter half-

Expl. 1 . .

Expl. 2 Section 24 (2)--

main para, part main para, part main para, part .

main para, part .

Clause 193 (2), part.

Clause 189 (1), opening lines:

Clause 189 (1) (i) and (if) Clause 189 (2) Clause 189 (3) Omitted, as unnecessary Clause 190 Clause 165 Clause 1 1 3 (1) Clause 1 13 (2) Clause 1 18 Clause 1 14 Repealed Clause 1 1 5 Clause 1 16 Clause 1 17(1), part Clause 1 17(1), part Clause 95(1), part Clause 117(1), part Clause 117(1), part-

Clause 117(2), main para Clause 1 17(2), Explanation Clause 95(2), Proviso Clause 120 Clause 145(1) Clause 145(2) Clause 145(3) Clause 145(4), part Clause 145(7) Clause 244 Clause 245 Clause 145(5) Clause 145(6) Clause 73( 1) Clause 74(1) ' Clause 78/ 1) Clause 76(1) Clause 28, Expl. 2 Clause 42 (6) Clause 7312':

Clause 73(4) Clause 74( 2 ;

Clause 74(4- Proviso (a) Proviso (b), part Proviso (b), part Proviso (c), earlier part Proviso (c), latter part Proviso (d) Proviso (e) Proviso (f) .'Section 24, (2A) Section 24, (QB) part , .

part Section 24(3) 310 Section 24A( 1), main para, earlier half Section 24A( 1), main para, latter half, part . 8 Section 24A(1), main para, latter half, part .

Section 24A( 1), Prov.

Section 24.A{2) .

Section 24B( 1) , part .

Section 24.B( 1), part .

Section 24B(1), part .

Section 24B'2) .

Section 24B(3) .

Section 25(1), part Section 25(1), part Section 25(2), earlier part . Section 25(2), latter part Section 25(3), part Section 25(3), part (applicable to income-tax) Section 25(4), part Section 25(4), part (applicable to income~tax) Section 25(4), Proviso (a) Section 25(4), Proviso(b) Section 25(5) Section 25(6) Section 2 5A( 1) , main para, earlier part Section 2 5A(1), main para, latter part .

Section 2 5A(1), Proviso Section 25A! 2), main para, part . Section 25A(2), main para, part . Section 25A(2), main para, part . Section 25A(2), main para, part .

Section 25A(2), Prov.

Section 25A(3) .

Section 26(1) Section 26(2), main para .Section 26(2), Prov. earlier half .

Section 26(2), Prov. latter half Section 26A(1) . _. .

Repealed.

Clause 73(3), part.

Clause 74(3), part.

Clause 76(2).

Clause 78(2)(b).

Clause 77.

Clause 79. "

Omitted, as obsolete.

Clause 75(1).

Clause 75(2).

Clause 75(3).

Clause 164.

Clause 184(1).

Clause 184(2).

Clause 184(3).

Omitted, as unnecessary in the draft as framed.

Clause 184(4).

Clause 168(1),.part.

Clause 168(6).

Clause 168(5).

Clause 168(2), part.

Clause 185(1).

Clause 185(4).

Clause 185(3).

Clause 281.

Clause 13(1).

Clause 91(1), part.

Cla.use'13(2).

Clause 91(1), part.

Clause 100.

Clause 13(3).

Clause 91 (2).

Clause 322.

Clause 181(2), part.

Clause 181(3).

Clause 181(2), part.

Clause 180(4).

Clause 181(4), (a).

Clause 181(4), ([2) part.

Clause 181(6).

Clause 181(4), ([7) part.

Clause 181(1).

Clause 194(1).

Clause 180(1).

Clause 180(2). 1 Clause 180(3).

Clause 191(1).

Section 26A(2), part .

Section 26A( 2), part .

Section 26A(2), part .

Section 27 Section 28(1), main para Section 28(1), Prov. (a) Section 28(1), Prcv. (b) Section 28(1), Prov. (c) Section 28(1), Prov. (:1) Section 28(2) .

Section 28(3) Section 28(4) Section 28(5) Section 28(6) Section 29 Section 30(1), main para Section 30(1), 1st Proviso Section 30(1), 2nd Proviso .

Section 30(1), 3rd Proviso .

Section 3o(1A) .

Section 30(2), part Section 30(2), part Section 30(3) Section 31(1), earlier part . Section 31 (1), latter part Section 31(2) . .

Section 31(2A) .

Section 31 (3), opening lines Section 31(3), main para, clause(a) Section 31(3), main para, clause(I:) Section 31 (3), main para, clauses (c), (d) and (2) Section 31(3), main para, clause (f) Section 31(3), main para, clauses (g) and (II) Section 31(3), 1st proviso Section 31(3), 2nd proviso .

S ecticn 31 (4) Section 31(5) Section 32 Section 33(1), part Section 33(1), part Section 33(1), part Section 33/ 1), part Section 33 (2), earlier part . Section 33(2), latter part Section 33(2A) .

Clause 191(3).

Clause 191(4).

Clause 191(5).

' Clause 191 (6).

Clause 192(1).

Clause 151.

Clause 280(1).

Clause 280(3) (a).

Clause 28o(3)(b) .

Clause 28o(3)(c).

Clause 280(2).

Clause 280(4). I Clause 283(1).

Clause 284.

Clause 283(3).

Clause 283(2).

Clause 163.

Clause 254.

Omitted, as under the draft' proposed for existing section 46(1),penal interest runs with- out any speciﬁc order by the-

Income-tax Oﬁicer.

Clause 255.

Omitted, in view of section 23 A. as amended uptodate.

Clause 256.

Clause 257(2).

Clause 257(3).

Clause 257(1).

Clause 258(1).

Clause 258(3).

Clause 258(4).

Clause 258(5).

Clause 259, opening lines.

Clause 259(1)(a), part.

Clause 259(1) (a), part.

Clause 259(1)(c), pan.

Clause 259(1)(b).

Clause 259(1)(c), part.

Clause 259(2).

Clause 258(2).

Clause 275, part.

Clause 258(7). \ Repealed. , Clause 260(1), opening li:_tes.. Clause 26o(1)(a).

Clause 26o(1)(b).

Clause 261(1), part.

Clause 260(2).

Clause 261 (1), part.

Clause 261(2), part.

:

312

Section 33(3) .

.Section 33(4) Section 33 (5) .Section 33(6) Section 33A(1), main para Section 33A(1), pr0viso(a), part . Section 33A(1), proviso (a), part. Section 33A(1), proviso (b), part. Section 33A(1), proviso (b), part . Section 33A(1), proviso (0) Section 33A( 2), main para, part . Section 33A(2), main para, part . Section 33A(2), lst proviso (a), part Section 33A(2), 1st proviso (a), part Section 33A(2), Ist proviso(b) Section 33A(2), 1st proviso(c) Section 33A(2), 2nd proviso Section 33A(2), Explanation Section 33A(3) .

Section 33B(1) .

Section 33B(2) .

Section 33B(3), part .

'Section 33B(4), part .

Section 333(4), part . . . .

Section 34(1), 1st para, clause (a), part Section 34(1), 1st para, clause (a), part 'Section 34(1), 1st para, clause (b), part Section 34(1), 1st para, clause (b), part Section 34(1), 2nd para, part Section 34(1), 2nd para, part Section 34(1), 2nd para, part Section 34(1) 2nd para, part Section 34(1), 1st proviso, clause (1') Section 34(1), 1st proviso, clause (ii), earlier half Clause 262, part.

Omitted.

Clause 275, part.

Omitted.

Clause 272(1), part.

_Clause 272(5)(a), part.

Clause 272(5)(b), part.

Clause -272(5) (c), part.

Clause 272(5) (cl), part.

Clause 272(3).

Clause 272(1), part.

Clause 272(4).

Clause 272(5)(a), part.

Clause 272(5) (b), part.

Clause 272(5)(c), part.

\Clause 272(5)(d), part.

Clause 272, Explanation 1.

Clause 272, Explanation 2.

Clause 272 (6).

Clause 271(1).

Clause 271 (2).

Clause 260 (1) (d).

Clause 261 (1), part.

Clause 262, part.

Omitted.

Clause 152 (a).

Clause 153. part.

Clause 152 (b).

Clause 153, part. 5 Clause 152, paragraph' below sub-

clause (b).

Clause 154(1). I Clause 155, (1) opening lii es and para (a), opening lin .

Clause 155(1) (1)).

Omitted, as obsolete.

Clause 155(1) (a) (iii).

Section 34(1), 1st proviso, clause (ii), latter half, part Clause 155 (1) (:1) (ii).

Section 34(1), 1st proviso, clause (ii), latter half, part.

Section 34(1), 1st proviso, clause (iii), part . Section 34(1), 1st proviso, clause (iii), part .

Section 34(1), 1st proviso, clause (iii), part Section 34(1), 2nd proviso .

Section 34(1), 3rd proviso .

Section 34(1), Explanation . Section 34(1A) .

Section 34 (1B) .

.'Scction 34(1C) . . . . .

\ Clause 155 (1) (a) (1').

Clause 1 54(2).

Clause 157(1).

Clause 157(2).

Clause 155(2).

Clause 158(1).

Clause 152, Explanation. _ Omitted, as obsolete.

Omitted, as not applicsﬂale for future years. :

E. Omitted, as not applicable for future years. i 313 Section 34(1D) .

Section 34(2) Section 34(3), main para, part 'Section 34(3), main para, part Section 34(3), main para, part [reiating to sment under section 34(1) (a)] .Section 34(3), 1st proviso . _ . . Section 34(3), 2nd proviso, earlier half Section 34(3), 2nd proviso, latter half, part .

Section 34(3), 2nd proviso, latter half, part .

Section 35(1), main para, part Section 35(1), main para, part Section 35(1), main para, part Section 35(1), main para, part Section 35(1), 1st Prov.

Section 35(1), 2nd Proviso .

Section 35(2) S ection 35(3) Section 35(4) Section 35(5) Section 35 (6) Section 35(7) 'Section 35(8) Section 35(9) Section 35(1o) .

Section 35 (11) (See Finance Act, 1958) .

Section 36 Section 37(1) Section 37(2) Section 37 (3) Section 37(4) Section 38 Section 39 Section 40 (1), part Section 40(1), pa.rt Section 40(1), part Section 40(2) Section 41 (1), main para, part . . Section 41(1), main para, part 6 Section 41 (1), main para, part . Section 41(1), main para, part"

Section 41(1), 1st Prov., earlier half, part Section 41(1), 1st Prov., earlier half, part Section 41(1), 1st Prov., latter half 5 , . Section 41(1), 2nd Prov. . . . I , . Section 41 (2) .. . ..

Omitted, as not applicable for future years.

Clause 158(2).

Clause 160(1) (:1).

. _Clause 160 (2) (b) (1').

asses-

Replaced by clause 160 (2) (4).

Clause 160 (2) (b) (ii).

Clause 160 (3) (1').

Clause 156.

Clause 160 (3) (ii). 1 Clause 161 (1) (a) and (5).

Clause 161 (1) (5).

Clause 161 (2).

Clause 161 (7).

Clause 161 (3).

Omitted, as not applicable for future assessment years.

Omitted, as the Trigtnal is proposed to be aboli ed.

Clause 161 (5).

Clause 161(6).

Clause 162(1).

Omitted, as not applidable for future assessment yeﬁs.

Omitted, as not applidzble for future assessment years.

Clause 162(3).

Clause 162(4).

Omitted, as not applicable for future assessment years.

Clause 162(5).

Repealed.

Clause 136(1).

Clause 1 37.

Clause 136(2).

Clause 136(5).

Clause 138.

Clause 1 39.

Clause 169 (1) (ii).

Clause 170 (1) part.

Clause 170(1), part.

Clause 173(1) (:1).

Clause 169 (1) (iii).

Clause 169 (1) (iv).

Clause 170(1), part.

Clause 170 (1), part.

Clause 174, opening part.

Clause 174(u), part.

Clause 174(a), part.

Clause 175. . f Clause 177, part.

314' Section 42(1), main para, earlier half . Section 42(1), main para, latter half, part Section 42(1), main para, latter half, part . Section 42(1), main para, latter half, part Section 42(1), Ist Prov.

Section 42(1), 2nd Prov.

Section 42(1), 3rd Prov.

Section 42( 2) Section 42(3) Section 43, main para Section 43, 1st Prov.

Section 43, 2nd Prov.

Section 43, Explanation . . .

Section 44(1), part (See Finance Act, 1958) .

Section 44 (1), part (See Finance Act, 1958).

Section 44(2), Part (Sec Finance Act 1958) . Section 44 (2), part (See Finance Act, 1958) . Section 44(3), part (See Finance Act, 1958) .

Section 44(3), part (See Finance Act, 1958) .

Section 44(3), part (See Finance Act, 1958) . Section 44A, earlier part .

Section 44A, latter part Section 44B (1) . . .

Section 44B (2), earlier half, part Section 44B (2), earlier half, part Section 44B (2), latter half .

Section 44B (3), earlier part Section 44B(3), latter part .

Section 44C .

Section 44D.

Sub-section (1), part Sub-section (1), part Sub-section (2), part Sub-section (2), part Sub-section (2), part Sub-section (3) ' Sub-section (4) Sub-section (5) Sub-section (6) . . . . .

Sub-section (7 ) (a) Sub-section (7) (b) Subsection (7) (c) Subsection (7) (d) Sub-section 7 (2) . .

Sub-section (8) . . . . .

Sub-section (9) . . . V . .

Clause 9(i), main para.

Clause 169 (1) (1').

Clause 170 (1), part.

Clause 177, part.

Clause 183.

Clause 171(2).

Clause 171(3).

Clause 95.

Clause 9(i), Expl.

Clause 173(1) (a) (b) (c).

Clause 173(1), Prov.

Clause 173(2).

Clause 173(1), Expl.

Clause 186(1), opening lines and?

sub-clause (a). .

Clause 196(1), opening lines and! sub-clause ((1).

Clause 186 (3), part.

Clause 196 (3). part. _ Clause 186(1) (b).

Clause 186(3), part.

Clause 196(1) (.5).

Clause 196(3), part.

Clause 182(1).

Clause 182(8).

Clause 182(3).

Clause 182(4), part.

Clause 182(5).

Clause 182(2).

Clause 182(4), part.

Clause 182(6).

Clause 182(7).

Clause 96(1) (a).

Clause 96(6) (f), part.

Clause 96(1) (b). ' Clause 96(6) (o).

Clause 96 (6) (f), part.

Clause 96(2).

Clause 96 (3).

Clause 96(4).

Clause 96(5) .

Clause 96(6) (a).

Clause 96(6) (b).

Omitted, in view of S. 23A as-

amended uptodate.

Clause 96(6) (:1).

Clause 96 (6) (e).

Clause 96(7).

Clause 96(8).

Section 44E---

Sub-section (1) . . .

Subsection (2) . . .

Subsection (3) . . .

Sub-section (4) Sub-section (5) Sub-section (6) Section 44F-----

Sub-section (1) . .

Sub-section (2) . __ . .

Sub-section (3), main'para Sub-section (3). proviso .

Subsection (4) Sub-section (5) Subsection (6) Section 45, main para, part Section 45, main para, part .

Section 45, 1st Prov. (printed with the ma Section 45, 2nd Prov.

Section 45, Expl.

Section 46(1) Section 46( 1A) Section 46(2) . . . .

Section 46(3) & (4) . . .

Section 46(5) _ . . . .

Section 46(5A), 1st paragraph part Section 46(5A), 1st paragraph, part Section 46(5A), 2nd paragraph . Section 46(5A), 3rd paragraph . Section 46(5A), 4th paragraph Section 46(5A), 5th paragraph . Section 46(5A), 6th paragraph . Section 46(6) . . . .

Section 46(7), main paragraph Section 46(7), 1st Prov. .

Section 46(7), 2nd Prov. . .

315

Section 46(7); Explanation, earlier half Section 46(7), Explanation, latter half, part .

in para) Section 46(7), Explanation, latter half, part .

Section 46(7), Explanation, latter half, part .

Section 46(8) . .

Section 46(9) . . . .

Section 46(1o) . . .

Section 46A(1.) . . . .

Section 46-4(2). min P-nsnph ; Section 46A(I). I'-aplautioa i 21-: Law CoIn.I58. .

-..u--Lu.~.l,~ o Clause 97(1).

Clause 97(2).

Clinic 97 (5)-

Clause 97 (6).

Clause 97(8).

Clauses 97(7) and 279..

Clam 97(3), pa"-

Clausc 97(3) Pm-

Clausc 97(3). part-

Clause 97(4).

Omitted.

Clause 229 (1).

Clause 229 (3).

Clause 229 (5).

Clause 229 (6).

Clause 229, Expl.

Clause 230.

Omitted, as under the draft for 246(1) as proposed; penalty (interest), runswtthput any order.

Clause 230(1).

Clause 235(5)-

Clause 235(2).

Clause 235(3) (5).

Clause 235(3) (ii).

i.' Clause 235(3) (iv).

Clause 253 (3) (1).

Clause 235(3)(1n').

Clause 235(3)(m's').

Clause 235(3)(t'z'1').

Clause 236.

Clause 242, main pars.

Clause 242, Prov. i Omitted. See in Prowl as propo-at - % .

Clause 242, Expllanti+n.

Clause 231(2).

Clause 235(1).

Clause 243.

Clause 237. _.

Clause 238.

Clause 239.

Clause 241(1). g Clause 241(2) Cl-In -41.. _ 316:

Section 46A(3) .

Section 46A(4) .

Section 47 Section 48(1) Section 48(2) Section 48(3) Section 48(4) Section 48A Section 49 Section 49A Section 49AA Section 49B(1), part .

Section 49B(1), part .

Section 49B(2) .

Section 49C Section 49D--

Sub-section (1) Sub-section (2) Sub-section (3) Sub-section (4) Explanation Section 49E Section 49F Section 50, main paragraph Section 50, 1st Prov. .

Section 50, 2nd Prov.

Section 50A Section 51, opening lines Section 51(a) Section 51(b) Section 51(c) Section 51(d) Section 51(2) Section 51, last part .

Section 52 Section 53 Section 54(1) .

Section 54(2), earlier part .

Section 54(2), latter part Section 54(3)-

Clause (a) Clause (b) Clause (c) Clause (d) lause (9) Clause (f) Clause (g) 4. .2 Clause (gg) -.

qa_u:e4(b)v. ._ . a 4 «w, Clause 241(3).

Clause 241(6). ' Clause .240.

Clause "247.

Clause 25o.

Clause 248(1).

Clause 2 5 1 .

Repealed.

Clause 92.

epealed.

Omitted, in view of redtaft of Section 3.

Clause 246(2).

Clause 246(3).

Clause 94.

Clause 93(1).

Omitted, as spent.

Clause 93(2) Omitted, as spent.

Clause 93, Exp].

Clause 253.

Clause 248(2).

Clause 249(2).

Omitted, as spent.

Repealed. , Clause 285, opening linesl Clause 285(d).

Clause 285(9).

Clause 285(6).

l 1 Clause 285 (a).

Clause 285, last part.

Clause 286. ' Clause 287.

Clause 141(1).

Clause 141(2).

Clause 288(1).

Clause 141(3)(a)_ Clause 141 (3) (1)).

Clause 141 (3) (d), Clause 141(3) (¢)_ Clause 141(3) (g).

Clause 141(3) (h), Clause 141 (3) (i), Clam I4r(3)(:')-

Claw -141(3) (k) -~ .3121 Clause (1') Clause (j) Clause (k) Clause (1) Clause (m) 8 .

Clause (n) Clause' (0) Clause (p) Section 54(4) Section 54(5) 'Section 55- Main paragraph 1st proviso 2nd Proviso Section 56 .Section 56A--

Sub-section (1), opening lines .

Sub-section (1), Clause (i), part Sub-section (1), Clause (i), part Sub-section (1), Clause (ii) _Sub-section (2) 'Section 57 . . . .

Section 58, Sub-section (1), part Section 58, Sub-section (1), part Section 58(2) Section 58A Section 58B(1) .

Section 58B(2) .

Section 583(3) Section 58B(3A) Section 58B(4) .

Section 58C(1), opening lines Section 58C(1)(a), main paragraph Section 58C(1)(a), Proviso.

Section 58C(1)(b), main paragraph Section 58C( 1 ) (b), Proviso.

Section 58C(1)(c) . .

'Section 58C(1)(d), main paragraph Section 58C(1)(d), Proviso. .

"Section 58C(1)(e) Section 58C(1)(f) .

'Section 58C(1») (g), earlier part . Section 58C(1)(g), latter part .

Section 58C(1)(h), 'Section 58C(2) . . . .

'Section 58D . .

Section 58E Section 58F . - v .

Section 58G(1), earlier part .

!1 i

-'Section58G(1),1atterpa1-t . . .

J. .4- Clause 141(3) (1).

Clause 141(3) (m).

Clause 141(3)(a).

Clause 141 (3) ([7).

Clause 141(3)(q).-

Clause 141 (3) (r).

Clause 141 (3) (5).

Clause 141(3)(!).

Clause 141 (4).

Clause 288(2).

I Clause 98(1), main pairs.

Clause 98(3). ' Clause 104.

Clause 99.

Clause 108(1), opening lines.

Clause 108(1),(i).

Clause 108(3).

Clause 108(1)(:'z').

Clause 108(2).

Repealed.

Clause 102(1).

Clause 102(2).

Clause 200(2).

Clause 305.

Clause 289(1).

Clause 289(2).

Clause 289(3).

Clause 289(4).

Clause 301. 4 Clause 290, opening limes"

Clause 29o(a). : ' Clause 291(1).

Clause 290(b).

Clause 291(2).

Clause 290(5).

Clause 290(d).

Clause 291 (3)(b) Clause 290(2).

Clause 29o( f).

Clause 29o(g).

Clause 291(3)(a).

Clause 290(h) Clause 292.

Clause 291(4).

Clause 294.

Clause 295.

Omitted,' as covencd daft clauses.11=(13)§1nj 5.

Clause 29'']( ). ' ' Section 530(2)' Section 58G(3) Section 581-! Section 581 .

Section 58_]'(1) .

Section 58_](2) .

Section 58_]'(3) .

Section 58J(4) .

Section 58_](5) .

Section 58K Section 58L Section 58M Section 58N .

Section 580 . . .

Section 581', main paragraph Section 58P, Proviso . . .

Section 58Q . . . .

Section 58R, main paragraph, part Section 58R, main paragraph, part Section 58R, main paragraph, part Section 58R, 1st Prov.. .

Section 58R, 2nd Prov. . .

Section 588(1) .

Section 585(2) .

Section 58T Section 58U' Section 58V Section 59 Section 60(1) Section 60(2), for income-tax Section 60(2), for super-tax Section 60(3) Section 60A Section 61 (1), part Section 61(1), part Section 61(1), part Section 61(1), part Section 61 (1), part Section 61(2) (1') Section 61 (2)(1'i) Section 61 (2) (iii) Section 61(2) (iv) .

Section 61(3), main paragraph, part Section 61 (3), main paragraph, part Section 61(3), Prov. .

Section 62 . . . .

Section 63 . . . .

Section 64(1) . . . .

818

Clause 296.

Clause 297(1).

Clause 298.

Clause 300.

Clause 299(1).

Clause 299(2).

Clause 299(3).

Clause 291 (5).

Clause 299(4)-

Clause 302.

Clause 303.

Clause 304.

Clause 318.

Clause 306.

Clause 307(1).

Clause 307(2).

Clause 308.

Clause 309.

Clause 310, main paragraph.

Clause 311, part.

Clause 310, Prov.

Clause 312.

Clause 313.

Clauses 314 and 166(3).

Clause 315.

Clause 316.

Clause 329.

Omitted as obsolete. See a1ist--

ing S. ' Clause 90.

Clause 1 12.

Omitted as inapplicable 'to fu-

ture usessment years. ' Omitted, as not required for fu-

ture assessment years.

Clause 324(1).

- Clause 324(2), opening linﬁ.

Clause 324(2) (1').

Clause 324(2) (iv) .

Clause 324(2)(n), part.

Clause 324(2) (ii) .

Clause 324(2) (iii) .

Clause 324(2), Exp].

Clause 324(2) (0) ,-part.

Clause 324(3).

Clause 324(4), main pa.ra..

Clause 324(4), Prov..

Clause 325. 1 Clause 320.

Clause 135(1).

Section 64(2) , Section 64(3), main paragraph Section 64(3), 1st Prov. . .

Section 64(3), 2nd Prov. earlier part Section 64(3), 2nd Prov. latter part Section 64(3), 3rd Prov.

Section 64(4) Section 64( 5) Section 65 . , , .

'Section 66(1), main paragraph, part Section 66(1), main paragraph, part 'Section 66(1) , Prov. .

Section 66(2) 'Section 66(3) 'Section 66(4) 'Section 66(5), part - .

Section 66(5), part Section 66(6) .

Section 66(7), main paragraph Section 66(7), proviso Section 66(7A) .

Section 65(8) . . . .

Section 66A(r), main paragraph Section 66A(1),. Proviso .

Section 66A(2) . . .

Section 66A(3), main paragraph .

Section 66A( 3), 1st Proviso, part Section 66A(3), 1st Proviso, Part Section G6A(3), 2nd Prov.

Section 66A(4) .

Section 67, Section 67A Section 67B Section 68 Schedule Rule 1 .

Rule 2 . . .

Rule 3 . . .

Rule 4 . .

Rule 5(i) Rule 5(ii) Rule 5(iii) Rule 5(iv) .

Rule 5(v) . .

Rule 6, earlier half, part Rule 6, earlier half, part Rule 6, latter half Rule 7 .

Rule, 8, para 1 Rule, 8, para 2 Rule 9 .

319

Clause 135(2).

Clause 135(3), main para.

Clause 135(3), 1st Prov.

Clause i35(4)(a) Clause I35(4)(b).

Clause 135(5).

Clause 135(6).

Clause 135(7).

Clause 326.

Clause 261(1), part. I Omitted.

Omitted.

Clause 263.

Clause 265.

Clause 266.

Clause 273, part.

Clause 267(2), part.

Clause 261(2), part.

Clause 278(a).

Clause 264(1).

Clause 264(2).

Clause 268.

Clause 269(1), main para-

Clausc 269(1), Prov. , Clause 273, part.

Clause 274,.

Clause 269(4).

Clause 327.

Clause 276.

Clause 328.

Repealed, Rule 1, First Schedule.

Rule 2, First Schedule.

Rule 3, First Schedule.

Rule 4, First Schedule.

C13-use 5(1) (8)1 L' Rule 7(1)(i), First Schedule.

Rule 7(1) (iii), First Schedule.

Rule 7(1) (iv), First Slchedule.

Rule 7(|)(ii), First _hedu.le.

R1351 5, opening lines; First Sche- e. -

Rule 5(b), First Rule 5(c), First Omitted, as not Rule 6(1) First Rule 6(2), First Schedule.

Clause 44., part.

1 It is understood that there are jgno carryi ment business.

ng on dividing societicf or assess-

320

NOTES ON CLAUSES CHAPTER I PRELIMINARY Notes to clause 1.

The word "Indian" has been omitted in consonance with the recommendation made by the Commission in res- pect of other Acts, and in conformity with recent legislative practice.

Notes to clause 2, The words "unless here is anything repugnant in the subject or context", appearing in existing section 2, have been retained, in View of the opening lines of section 3, General Clauses Act, though recent Central Acts use the formula "unless the context otherwise requires".

1. {\gricultu- Till recently there was a conﬂict of judicial op nion ""1'"°°m°- regarding the interpretation of the word "agriculture . In the latest pronouncement of the Supreme Court', all the decisions have been reviewed and the conﬂict in the judicial pronouncement resolved. Hence it is not necessary to ex- plain what is meant by "agriculture".

2. Annual Since existing section 9 has been broken up, the ''*'"'''~ draft, into various clauses, it appears useful to have? this deﬁnition pointing to the relevant provision. I

3. Appellate No change has been made in the existing provision.

Assiw-nt C0- Only, it has been placed before the deﬁnition of 'asses$ee'. mmissioncr. ' 4- Approved Since these two expressiolns occur frequently in} the

5."P°""m""' Act, a reference has been made to them here. tlon fund etc.

5. Assesscc. The existing definition of 'assessee' has been rep ced in the draft by a more comprehensive deﬁnition, so s to include all the possible categories of assessees, i.e., i) a person who is himself liable to pay the tax on incom be- longing to him, (ii) a persop liable to pay tax. on in ome belonging to 'another person, and (iii) a person who is d em- ed under the sections of the Act to be an "assessee" or§"as- sessee in default". '

- Wherever necessary, drafting changes have been ade in the substantive provisions (particularly in the Ch ter entitled "Liability in Special c ses") to bring out the r sult that any person on whom a li ility to pay tax etc. i im- posed by the Act, becomes am'; assessee. It is hoped hat the deﬁnition of 'assessee', as drafted, when read wit the substantive provisions, will cover all cases of vicarious: lia- bility falling under any of the following categories (1) One person's income included in another's totag in- come-vide existing sections 4(2)', 16(1)(c), 1g(3), 44D, 44E and 44JF, as Well as %ect1on 42(2). :

' C.I.T. vs. Raja Benny K at Saha V (I957) 32 I. T.R. 466.» S: also C.I.T. vs. Jyoti Karla Clwwdﬁur , (1957):-3 IjT-R- 705, and Kalli!-"twat 3' V5- C.I.T. (1957) 32 I.T.R. 58. i ii ~ -

"321 ' (2) One person liable tolbe assessed as representing an- 3 other person under existing sections 40, 41, 42(1).

and 44B(3).

(3) -One person ceasing to exist,: and thereupon ano-T ther becoming liable, to be assessed for or to pay tax for which the f rmer is ".liable--12ide existing sections 24B, 25A, 26 ,2), Prowiso and 44.

(4) One person liable to pay (without the formality of assessment) tax normally payiable by another-/vide existing sections 18(7) and 4ﬁA§(2) and (3).

(5) Cases where procedure for recovery of tax may be applied against one person, (Who is not himself the assessee) for tax r overable from another--/vide existing section 46( A) 5th para and also draft Second Schedule, Rule 87. 1 ' (Existing section 8, 3rd Proviso and section 58-U need not be speciﬁcally dealt with here).

Since the deﬁnition of "assessee" is made comprehen- sive, the words "or other person liable to pay such tax, penalty or interest" occurini' in existing section 29 have been omitted in the draft'. his will remove the difficulty created by a decision of the Madras High Court'.

A deﬁnition of assessment, as including re-assessment, 5; Aim!-

has been inserted on the lines of the Canadian Income-tax Act'. T Ill'.

' i This is new. Though the Act uses the expression "as- 7 sessment year" there is no deﬁnitiop. of that expression anywhere in the Act. We have, thenefore, included a deﬁ- nition which conforms to the existing practice. In the In- come-tax Acts of other countries, e.g.', Ceylon, there is a deﬁnition of 'assessment year'.

This is new. Instead of givinggan elaborate formula' 8 Am.ge to arrive at the average rate wherever it becomes necessary, °f tax.

we thought it more convenient and conducive to clarity to add a deﬁnition.

existing section 17.

Mention of earned income relief has not been made in the deﬁnition, in view of the ifact that the provisions of the Act relating to earned income relief' ave now Hecome ob- solete. Since successive Finance Acts ﬂor the last two years have not provided for this relief,-it bvpuld seem to be the coiiﬁgmed policy of Government to abolish earned income re 1e . 2 This is also a new provision intended to arrive at the A, This isl based on sub-section .(5)' of t year.

(201116- yieragc rate average rate of super-tax; (compare the deﬁnition of "ave- rage rate of income-tax" referred to above).

' Vida draft clause 163.

cf supcrtax.

= E. Alffed vs. Addl. 1.7.0., (1955) 29 I.T.R. 708 See also Abdul irasim ' vs. C.I.T. (1g58)33»I.T.R. 466.

~ 3 ' See the (Canadian) Income-wdAct., x39(x)(d).

9. Business.

I 0.

3886!.

Capital

11. Central Board of Re-

venue.

12. Commis-

sioner.

13. Compa-

ny.

14. Co-opera' tivc Seciety. ' 1 5. Director, Manager, Managing Agent.

16. Director of Inspec-

tion.

17. Dividend.

18. Earned income.

322

No change has been made in existing section 2(4).

Item (iii) of the existing deﬁnition, which excludes "any.

land from which the income derived is agricultural income", has been redrafted and replaced by the words "any agricul- tural land in India". The general scheme of the constitu- tional provisions relating to taxation is to exclude agricul- tural land from taxation by the Union, and it would, therefore, be in conformity with that scheme to express this exclusion, not in terms of "agricultural income" but in terms of land. Agricultural land which has been cultivated, say, for 5 years and then remained fallow for 2 or 3 years during which it is sold, would, under the existing deﬁnition, attract capital gains tax. This anomaly will now be remov- ed by the proposed redraft.

No change; it corresponds to existing section 2(4B). No change; it corresponds to existing section 2(5).

There is no substantial change in the draft. which fol- lows the existing deﬁnition in section 2(5A).

2 No change; it follows the existing deﬁnition in section (5B). ~ We have included in the existing deﬁnition [sec. 2(8A)] the word "Director" also, and we have substituted fct the "Indian Companies Act, 1913", the "Companies_Act, 1956". To make the meaning clear, we have also introduced the words "in relation to a company'T. No change; it corresponds to existing section 2(6).

There is no change in the existing deﬁnition in section 2(6A), except that we have added another explanation to the effect that the accumulated proﬁts "shall include all proﬁts of the company up to the date of distribution or: pay- ment referred to in this clause". ' -

The reason for this alteration is this. In the case of Girdhar Das and Co. Ltd. vs. C.I.T.', the Bombay ' Court observed that in this section, "accumulated pr ﬁts"

have been used in contra-distinction to current proﬁts; In our opinion, the intention of the legislature was to in lude the current proﬁts also in the deﬁnition; and to mak this clear we have made the proposedalteration.

We have adopted the existing deﬁnition [section 2(6AA)]' with the following changes. To make the meaning of clause

(b) clear, we have split it up into two clauses and number-

ed them as (b) and (c). The existing clause (c) is renum- bered as clause ((1). We have added an explanation to « } ET (1957) 3: I.T.R. 82. .3 *1 . I 1 ~ 323 overcome the 'difficulty introduced by the Madras High Court in Mari Muthu. Nadar v. C.I.T.' V -

No change; it follows the existing deﬁnition in section :9. Firm. 2(6B). - Fem" ,and partnership.

We have included in the existing deﬁnition other proé visions which treat income as deemed income for the pur- 9°- "'°°'"°- pose of the Act. ' The Act uses at several places the lengthy expression "income, proﬁts and gains". To simplify the matter and to avoid repetition, we have included 'proﬁts and gains" in 'the deﬁnition of income, and throughout the Act we have "used, as far as possible, the word "income". Suggestions have been made that we should give an exhaustive deﬁni- tion of income. It is not possible to do so.

The provision within the brackets» in existing sub-

-clause (iii) (relating to the meaning of; "person having sub- stantial interest in a company") has been transposed as an explanation.

Item (vii) of the existing deﬁnition of income relates to the proﬁts and gains of insurance business carried on by a mutual insurance association or by a Co-operative :Society. What is described as "proﬁts and gains" in this item is, in fact, merely a siitplus. The deﬁnition simply artiﬁcially extends the conception of income so as to cover

-such surplus. The existing words "computed in accord- ance with Rule 9 in the Schedule" indicate this clearly, when read with existing rule 2(b) of the Schedule. An attempt has been made to bring out this aspect still more «clearly in the draft." _ .

No change, in the existing deﬁnition in section 2(7).

We have revised the deﬁnition of 'Indian company', in 22.:'1ndian the light of the Companies Act, 1956, and the abolition of Co-tzpanh 'the distinction between Part A and 'Part B States. The :

existing position relating to companies registered in the State of Jammu and Kashmir is retained.

i No change; it follows existin section 2(6D), and has ?,?,;i',';ﬁ°,§,,, been placed after "Income-tax O cer". Co mission- CI'. ,= No change; it follows existing sehtion 2(6E), and has :3-i'"SP°°'°f 'been placed after "Income-tax Ofﬁcer". ' tax: '"°°"'°' ' (I956) 30 I.'I'.R. 670. For the corresponding provision in the U. K. Act, see Section 525(1) last para, of the Income-tax Act. 1952.

' For a general discussion of the 'position regarding mutual insurance associations, see the recent Privy Council case of English and Scottish Joint Ca- operativc Wholesale Society Ltd., v. Assam 'cultural I a§n¢--tax Commi5sioner,(t948)

2 A. E. R. 295. See also I. '1'. I. C. Re , I918, 13.: 126, page 54, and compare section mi, Australian Inc ' tax etc. ,'1936-1953. ,

25. Magistra-

te.

26. Non--resi-

dent.

27. Person.

28. Prescrib-

ed .

29. Previous / year.

30. Principal Oﬁiccr.

31. Public servant.

32. Register-

ed ﬁrm.

33. Regular assessment. \ e 324 ._Under the existing deﬁnition, second--class magistrates specially empowered by the Central Government are also authorised to try offences under Act, and in the State of J ammu _and Kashmir the State Government may7 autho- rise a Magistrate of the second class to try offences under the Act. We are, however, not in favour of second-class» Magistrates trying offences ,under the Act, and we have therefore, conﬁned the power to ﬁrst class Magistrates throughout India. Incidentally, this will lead to simpliﬁca- tion of the deﬁnition and uniformity.

The Act uses various resident of India.

"non-resident"

cable, 'and has phrases for a person who is not a For the sake of uniformity, the,phrase has been used in the draft wherever practi- been deﬁned here.

The deﬁnition of "person"

in existing section 2(9) has:

been ampliﬁed. ' The existing deﬁnition includes (a) Hindu undivided family and (b) a local authonity. The General Clauses Act,' deﬁnes "person" as including a company or association or body of individuals whether incorporated or not. The charging section (section 3) of the Income-tax Act enume- rates the units for taxation as "individual, Hindu un 'vided family, company, local authority, ﬁrm and other ssocia- tion of persons, or the partners of a ﬁrm or the m mbers of the association individually". Section 4 of the Act refers to a "person". » .» It seems desirable to havea comprehensive deﬁnition of the word "person" in the .'Act so as to cover all entities mentioned in-- «

(i) the existing deﬁnition. [s. 2(9)],

(ii) the existing charging provisions and

(iii) the General Clauses Act.

The deﬁnition has therefore been ampliﬁed on thei above lines". 9 i [sections 3 iand 4] ,.

i No change, vide existing section 2(10). .

The expression is deﬁned separately in clause No change, videeexistingf; section 2(12).

No change, vide existing; section 2(13).

No change, vide existing' section 2(14). ' The expression is at present deﬁnedionly casually in-.

the Act in S. 18A(5). Since the expression occurs in some sections, it is desirable to place its deﬁnition in this clause.

v 1 Section 3(4«.»), Gene iciame-'pug. ' See also notes to d e 3.

325

The deﬁnition refers back to the,» proposed clause' 34.1qesidcm. which reproduces S. 4A with modiﬁcations. . » The deﬁnition is new. Wherever bbth inc'ome-talx and 35- Tax- super-tax are intended to be covered, the simple word "tax" . ' would be sufﬁcient. The substantive prdvisions_in the draft. therefore, use the word "tax" wherever. convenient, and it has been deﬁned here. i No change; vide existing section 2(15), ﬁrst para. 36. V Total UICODIC.

The existing deﬁnition in section 2(15) (second para) 37. Total is reproduced with one change. ;The existing words "except "'°'1d "100-» income to which .......... .. this Agzt does not apply" are not '"°' , happy and have been replaced V y more appropriate words ' which bring the wording in line; with existing section 4(3).

No change; vide existing section 206). _ ~ gfédlirggglste Existing section 2(14A), deﬁning the expression "tax- Taxallc tcro x able territories", has been omitted in the draft, as the use "it°Vi,3- of that expression is no longerinecessary and can be con- veniently replaced by the word "India' .' CHAPTER II h BASIS OF CHARGE;

Notes to clause 3.

Sub-clause (1)----

(1) The word "person" has been substituted for the words "individual", "Hindu undivided faimily" etc. and the deﬁnition of "person" is being jwidenedl' for the following reasons :-- : .. '

(a) As already explained'. the co ined effect of the T deﬁnition of "person" in section,'2(9) of he Income-tax Act and section 3(42) of the Generali Clause 'Act is that a "per- son" includes (a) Hindu undivided fam' y; (b) local autho- rity; (c) company; and (d) assbciationotr body of indivi- duals whether incorporated or riot. No eciﬁc mention has been made of corporations othdr than dmpanies included within category (d). i » The problem which has troubled the courts is whether such corporations are withinithe ch ing section. It can be met by the suggested mend ,t by introducing 7 the word "person" in the se tion. I 'Commissioner of Income-tax, Madras vs. Salem iDist'rict*Urban Bank Ltd.' a co-operative bank was treated as an individual by an ' Clause 6.

' As assessments for_ the period prior to the Commencement of the new Act will continue to be governed by the existing Act, there will be no need to lay down separate periods for the various a as. J .

' See notes to clause 2 deﬁnition of " non". pg ' (194.0) 8. I.T.R. 269.

326

'artiﬁcial interpretation of the word "individual". Similar-

ly, in Commissioner of Income-tax, Madras vs. The Bar Council, Madras', a bar council_ and in the Baronetcy case' a corporation sole, were treated as individuals. It seems desirable to make the position clear.

(b) There is also the problem of private religious trusts in favour of deities or mutts which are treated as artiﬁcial jurisdical person in law, vide existing S. 41. The point for consideration is whether it is proper to bring them under "individual" by a strained construction or whe- ther it would be more appropriate to include them under "person". These difficulties can be solved if we adopt the word "person" in S. 3, the charging section. It may be noted incidentally that in the existing S. 3 it occurs only in the expression "association of persons".

(c) All the foreign Acts employ the term "person" in the charging section, and it is better to resolve all doubt about the chargeability of particular classes of persons by using the comprehensive term "person" in section 3.

(2) The next point for consideration is the,difﬁculty noticed in sustaining the legality of the recovery of the tax on the current income under S. 18 and 18A. The charge created under section 3 applies to the income of the pre- vious year, while the provisions of sections 18 and 18A apply to the income of the assessment year also. To meet this difficulty a proviso has been added on the lines of the Ceylon Income-tax Ordinance to cover the provisions of the Act relating to charging the tax in particular cases in respect of income, proﬁt and gains of a period other than _the previous year. This will cover S. 24A, 25(1) and 44B (3) of the Act, whereby the income of the assessment year itself is made.chargeable at the rates prescribed by the Finance Act of the assessment year.

Sub-clause (2) is intended to make it clear that there is some kind of liability to pay tax in cases where tax is xdeductible at source or payable in advance. It seems desir- able to make a reference to this obligation to pay tax in advance etc. in the charging section itself, so as to bring out more directly a position which is implied in existing sections 18 and 18A.

(3) After the phrase "in respect of the total income of the previous year" the words "or years, as the case may be" have been added. Under the deﬁnition of "previous year ' in the existing section 2(_11) a person may have separate previous years in respect of each separate source of in- come. The proposed addition is intended to meet such cases'.

' (1943) II I.T.R-x. I 0 ' Currimbhhy Ibrahim Bzrenetqy Trust: vs. C. I. 71, 5 I. T. C.-4.84, (Bombay). ' Cf. CIT vs. Savumiamurthy (194.6) in LT. R. i 5 32'?

Notes to clause 4.

(1) The income of_ residents and. non-residents ha been dealt with separately for the sake of simplicit and clarity. ' (2) The ﬁrst proviso to S. 4(1) has been omitted; as it concerns the assessment year 1939-40 and is now unneces-

sary.

(3) The second proviso to S. 4(1) relating to persons not ordinarily resident should be omitted, as it is proposed to abolish the category and the exemption granted in res- pect of such persons'. If, however, the provision is to be retained, it can be .kept as shawn in the relevant clause on the subject'.

(4) The third proviso to section 4(1) concerni g the exemption for unremitted foreign income upto. R 4,500 has been transferred to the clause relating to income which does not form part of total income.' 1 (5) The fourth proviso to S. 4(1)" relating to residents who are not resident in two out of three preceding' years has also been transferred to that clause.' (6) The ﬁfth proviso to S.4(1) relating to exemption' for foreign income of residents who deposit tax etc: with- in three months (where the fourth proviso does not apply) has also been transferred to the clause relating to 'exclu- sions from total income. after omitting portions whic have become obsolete.' ' (7) The words "by or on behalf of" have been used in respect of foreign income received in India [vide : draft sub-clause (1), (a), (d), (e), (f) and (g)] to cove cases where the income is received not by the assessee imself but by any other person on his behalf.

(8) Explanation 1 to S. {(1) has been incorporated in draft sub-clause (3). * (9) Explanation 2 to section 4(1) is transferredffto the new clause' relating to deemed income'. = (10) Explanation 3 to S.4(1) has also been transferred to that clause'. ' (11) Explanation 4 to existing s. 4(1) relates to come which accrued in a Part B $t:ate or merged territo be- fore the extension of the Income-tax Act thereto énd is Vide notes to draft clause 6.

Draft clause 11 (4) (iv).

Vida draft Clause 11 (4) (i).

Vida draft Clause ll (4) (ii).

Vida draft Clause 1} (4) (iii).{ . E Vidc draft c1au.e' (ii). . i Vida draft Clause 3 (iii).

COODIDF 328' brought into any other part of India after the extension of the Indian Act. These provisions, it appears, have be- come almost obsolete. . -

The Explanation provides that proﬁts accruing in 5 a merged territory after 1-4-1933 shall be chargeable under section 4(1) (b) (iii) only if such incomeiis remitted into another part of India other than the merged territory. Para. 8 of the Merged States (Taxation Concessions) Order, 1949, enacts that Explanation 4 would not apply if the assessee was not a resident in at least three outiof six assessment years viz.,~1943-44 to 1948-49. Even in the case of persons who were resident in at least three out of six years, Ex- planation 4 would not operate,' if the income had been assessed under the State law on accrual basis and had also been included in the total income for rate purposes [under section 14(2)(c)]. Thus, Explanation 4 to section 4(1) would apply only in the case of persons who were resident in In- dia in at least three out of six assessment years 1943-44 to 1948-49 and whose income accruing in the State has escap- ed assessment either in the State or in India.

The Explanation should therefore be omitted. If, how- ever, it is deemed to retain it, it 'should appear in a simpli- ﬁed form. Draft sub-clause (1), (e), (f) and (g) have been drafted to indicate how the Explanation Should be incor- porated. The language has, however, been altered so as to make the provisions easy ofi applic ion. The existing Explanation uses the words "taxable te : itories" and the deﬁnition of these words in S. 2(14A) does not show in clear words the background in which the special provisions relating to merged territories and Part B States were in- troduced. The provision has now been .50 drafted as to relate it to the assessment year with effect from which the Indian Act was extended to merged territories and Part B ' States. A provision may be inserted inithe Miscellaneous Chapter to guard against the possibility bf any income be- ing taxed twice----once under the existing Act and again under the provision as proposed. . 1 (12) Existing section 4(2) is transferred to the new clause on deemed income'. ~ ' (13) Existing section 4(3) forms the'subject--matter of a separate clause dealing with income which does not form part of total income'. 1 4 Notes to clause 5.

The deﬁnition of "previous year" has been embodied in a separate clause, since it is a lengthy one. No change of substance has been made, but drafting changes have been attempted to achieve simplicity, and to state the po- sition regarding various situations separgately. Further, the R V _ .

' Vida draft clause 10, g' ' Vida draft clauses 11,12 and 13.

' the previous year.

329

provision at present contained--.«'Rule 5'(i) o-frthe Schedule, regarding insurance iusinessi has been brought here for the sake of comprehensiveness; ' Notes to clause 6.

(1) The clause relating to category "not ordinarily re- sident" has been retained in thedraft but is recommended to be omitted in order _to simplify the law. This recom- mendation was made by the Income-tax Investigation?Com- mission' and also by the Taxation Enquiry Commis- sion'. The only difference in the taxation between r- son who is ordinarily resident and not ordinarily regii ent is relating to the foreign income, and provision for V eter- mining the tax on foreign income in the case of a person not ordinarily resident is containedin second proviso to section 4(1). But for this diﬁerencep both of them stand dn the same footing for the {purpose of taxation. The retention of persons not ordinarily resident as a separate category is unnecessary. ' ' ' , .

(2) The condition' for residence in the case of a erson who has been in India Wit n the four preceding years has now been someiwhat tiered so as to requir the presence of the persdn in In is! for at least thirty d s in 'The a iguity caused by the rase "otherwise than by an occasional or casual visit" in the existing section 4A(a) (iii) will now be avoided. » 9 (3) Section 4A(a) (iv) oﬂ_- the Act, authorising t e In- come-tax Ofﬁcer totifeat a 'on as a resident if he "sa- tisﬁed" that the person, havi %arrived in India du ' g'the year, is "likely to remain" to not less than three years, has been omitted, as. it gives; a vague discretion to e In- come-tax Officer. The words';"_has maintained", in e isting section 4A(a) (ii), have beers' replaced in the draft y the words "causes to be; maintaﬁried", which express e in- tention better. I (4) Draft sub-clause (4).-1-This is new and has b en in- serted to make provision foi ﬁxing the residence o "per- sons" who are not lndividuﬂs, Hindu undivided f ilies, ﬁrms, associations of compaiiiies. ' (5) Draft -sub-clause (5).---This is new. In C.I.T.a£1s. Sa- vumiamurthy', the Madras Hi h Court has held th since there can be a sep 'ate prdvous year for, each so rce of income, the residen?a1 stat of the person has als to be ource.

plica-

separately determin d with reference to each such As this procedure w J 11 be cumbersome and entail co ' J' J ,1:g.1.q=' pan, 194a , 1 \ 3953~1°5+w,o#-;?1- '. .V='d..~m¢-15» W.-

' Vida pages 28-29. V, ' (I946) 14- I.T.R. '1 1 330 tions in practice, the newly added sub-céhuse provides that a person who_is resident for one source of income shall be treated as resident for all such sources'.

(6) Existing section 4A(c), latter part,' dealing with the determination of the residence of a company on the basis of its income in India, is proposed to be omitted, since such test does not appear to be a proper one. (After the draft was prepared the Finance Act 1958, by section 4. has omitted it).

(7) Draft sub-clause (6).------Though the category of per- sons not ordinary: resident is recommended for abolition, the existing special provisions applicable to such per- sons are retained in the draft. (For example, see section 4(1). 2nd proviso. See also sections 42(2) and 44D, which treat such persons on the same footing. as non--residents). These sub-clauses will. therefore, be useful for the pur- poses of the provisions just referred to.

Existing section 4B (c) which provides that a com- pany, ﬁrm or other association is ordinarily resident if it ' is resident, has been omitted in the draft, as unnecessary.

The distinction between "ordinarily resident" and "not or- dinarily resident" is signiﬁcant only when there is a pos- sibility of an entity being resident and yet not ordinarily resident. In the absence of anything to ﬁle contrary, a resi- dent would have to be regard as ordinarily resident, and no express provision is necessary for the purpose.

'" Notes to clause 7.

According to section 4(1) the chargeable income of every person whether resident or non-resident includes in- come "which is deemed to be received" in India in the previous year. There is, however, no enumeration at any one place of these 'receipts which are deemed to be received in India in the previous year. This clause mere- ly collects together the relevant provisions, without effect- ing any substantial change in language'.

[The deemed income referred to in section 18(4) (tax deducted at source) will be dealt with inthe clause corres- ponding to that section, as it merits special treatment.] Notes to clause 8.

It seems desirable that all provisions relating to income "deemed" to be of a particular year, or deemed to be received in a particular year should appear in pro-

ximity to each other. Hence a part of section 16(2) has.

been embodied in this clause. No change of substance has been made. ' 7 ' A similar recommendation was . _ bytl; '1' -tax lnvcstiption ' ' - ('f903)~ "'10 "S |'43'i4a- ' 33+ "S0c|l:onotestodnﬁ'clau:c8. , 331 Notes to clause 9.

According to section 4(1) the chargeable income of a person whether resident or non-resident includes income, proﬁts and gains which "are deemed to accrue or arise to him in the taxable territories" in the previous year. Income is deemed to accrue- or arise under various provisions scat- tered all over the Act. All these provisions which deal with income which is deemed to accrue or arise in India have now been grouped together.

The changes made are all of a drafting nature, and are intended to remove ambiguity and simplify the expres- sion'. 1 S"u.b--cluu.se'(i).--The words "sale ....... .. of a capital as- set in the taxable territories" in the existing section 42(1) are slightly ambiguous, since "in taxable territories" can be read either with "sale" or with "capital asset". To re- move this ambiguity, the word "situate" has been added after "capital asset". (It is not necessary to make any such addition in the earlier phrases referring to business con- nection etc._. since the language there does not end itself to any ambiguity.) The words "that part of the operations", inthe existing section 42(3) have been replaced by "the operations", for two reasons; ﬁrst, the word "that" in the existing section is not happy, since it is not 'followed by any pronoun, and secondly, the existing words are not in symmetry with the opening words "in the case of ....... ..all the operations".

As to the meaning of the word "operation", see the decision of the Supreme Court, in the Anglo French. Teaco title Co., vs. C.I.T.' -

_ Sub-clause (ii).---An attempt has béen made to simpli- fy the language, by omitting unnecessary words such as "if payable in the taxable territories vlherever paid". The substance is not affected by the deletion of these words, since the proposition sought to -be enacted is only this, that saléiry earned in India is deemed to accrue or arise in In ia.

Notes to clause 10.

This embodies S. 4(2). The section is based on a double ﬁction. While the income of the non-resident husband and is treated as the income of the residentwite, it is also treated as income which is deemed to accrue to her in India.

The provision has been embodied in the draft, with a slight verbal change (see the words 'for on her b'el_1alf"

which have been added to make it comnoehensive). * __ 1'(Ig53) 23 I. '1'. ll. 101.

22,-] Law Qou.I58 332 CHAPTER 111 .

INCOMES WHICH DO NOT FORM PART OF, TOTAL INCOME Notes to clause 11.

(1) This clause deals with the various kinds of income excluded in computing the total income of an assessee.

'Simpliﬁcation has been sought to be achieved by the follow- ing devices: '

(i) re-arrangement of the various clauses of section 4(3) so as to bring out their common features (e.g., existing section 4(3) (x)(b), section 4(3) (xiv) etc. have been placed in proximity to each other, as they deal with income of foreigners or employees of foreign Governmcnts\etc.)';

(ii) analysis of the essentials of each clause, and their restatement in a form that can be easily followed; e.g., vide the draft sub«-clause' dealing with casual receipts and the draft sub-clause' relating to local authorities;

(iii) incorporating in the draft clause, provisions re- garding exclusions from total income at present contained in other sections of the Act'; ~

(iv) omission of obsolete provisions; (1)) general simplification" of language.

(2) Provisions relating to income from propertyi held

-on trust for religious or charitable purposes, and income of religious and/or charitable institutions has been? dealt -

with in a separate section on account of its importance'.

Income of a business chargeable under the Act of 1918 and discontinued after the commencement of the p esent Act is, under section 25, sub-sections (3) and (4), ex uded from total income. _This has been dealt with in another separate section'. A (3) The changes' made by the Finance,Act 1958} have been given effect to at the appropriate places.

(4) The changes made are (mainly of a drafting ' ture, designed to simplify the expression as explained i para (1) "above. The following aib-clauses, however, d serve special notice, as the changes made there are not urely formal :-- ' f I c. g., Vida clause 11 (5) to (9). . ' ' Clause 11 (3).

' Clause 11 (22).

' e. 3. Clause 11 (11) to (14).

5 Sn draﬁ clause 12. ' _ g _ _ 'sudnftclmncls. -' p A - ; _~ ' 333 Sub--clause (7).---Items (ii)- to (v) of this sub-clause correspond to sub-clauses (b)-:to (e) of section 4(3) (x) of the existing Act. The requirement that the recipient must not be an Indian citizen is contained, at present, only in two sub-clauses of-section 4(3) (x). Sub--clauses (b) and

(d) relating to Consuls etc., and Trade Commissioners do not mention it. In the draft, however, this has been made applicable to all cases, for the sake of uniformity.

Sub-clause (8).------In the existing section 4(3)(xiv), the exemption is conditional on the stay of the'emp1o ee of a foreign enterprise for a period not exceeding in e ag- gregate "ninety days in any year". The words "any year"

are, in the context, vague. It has, therefore, been made clear that the stay should not exceed ninety days in the previous year, and it should not have exceeded ninety days in any ﬁnancial year prior to the previous year.

There is no reason why this exclusion should be avail- able to Indian citizens. The provision has therefore been altered so as to conﬁne it to foreigners.

O Sub-clause (9).--It seems desirable to extend the bene- fit of this clause to services rendered by a foreigner even before the actual commencement of the business. Explana- tion' is intended to achieve this object.

Sub-clause (15).--"Wholly and necessarily" has been re- placed by "wholly and excl ively";-, cf. existing section 7(2)(iii) as redrafted.' The ject is"to liberalise the al- lowance. See the recommendation of the U.K. Royal Com- mission on the Taxation of profits and income'-'.

Sub-clause (17) and (24,).---These correspond to certain exemptions enjoyed, at present, under .a notiﬁcation issued under section 60. In view of the importance of the subject- matter of the exemptions, they have 'been included in the draft sub-clauses. -

Exemption for members of Nepalese; Forces [Existing clause (.7:1'.)].--This has been omitted. ere are no Indian .State Forces now, and there isno meniber of the Nepalese Armed Forces now serving in" India.

Sub-clause (18).--This item will, of course, have to be omitted if it becomes obsolete by the time the new Act comes into force. ' Notes to clause 12.':

1. This clause is based on" section"4(3)(i) and (ii) of the Act. There are' certain anomalies which we have noticed in the existing provision and we have attempted in the proposed draft to put an end to sI.'x:h anomalies as far as possible. ' ~

-,; " VHO also notes to draft clauses 15- ,' pa:-a,6.V' 3 'U.K.RoyalCommiuoinonthcT tionof_ Report June, I955, (Cmd. 9474). Q7, , tsandlncome Final ﬂp ' p 5,?! 334

2. Before the Amendment Act of 1939, there was in the Act only the provision which corresponds to the exist'-

mg provision in 4(3) (1), main era. The instruction in the Income-tax Manual issued by e authority of the Govern- ment of India at that time was, that the word "property" in clause (i) does not bear the restricted meaning that it bears in section 9 of the Act, but includes securities or business or share in a business. In view of the recommen- dations made in the Income-tax Enquiry Report, 1936' (to give statutoryeﬁect to this practice, subject to the condi- tions to be observed by the business) an amendment was introduced by adding clause (via) which was as follows :--

» "Any income derived from business carried on, on be- half of a religious or charitable institution, when the in- coréie is applied solely for the purposes of the institution an

(a) the business is harried on in the course of the car-

rying out of a primary purpose of the institution, or

(b) the work in connection with the business is mainly carried on by beneﬁciaries of the institution."

(After the amendment in 1939, the Government chang- ed the instructions in the Manual, expressing the view that in the case of business, the conditions laid down in clause (ia) should be fulﬁlled before exemption could be grant- ed).

9 3. The meaning of the word "property" in clause (i) was judicially considered and it was held that it includes even business if the business was subject-matter of a trust. This was the view taken in Charitable Gadodia. Swaideshi Stores vs. C.I.T., Punjab by the Lahore High Court'. Deal- ing with the contention that the word "property" in clause

(i) does not include business. their Lordships of the Lahore High Court held that the two clauses were intended to apply to different situations and that the word " roperty"

in clause (i) was wide enough to include all kin s of pro- perty including business. It was also pointed out that clause (ia),dealt with a business conducted by a religious or charitable institution without any reference to ?trust' whatever. In an instructive judgment, Din. Mohammad J. in that case also pointed out the distinction between an institution and a trust. He held that an institution may be religious or charitable and may still. not be held under trust. Clause (ia), according to him, does not in any way subtract anything from the sub- ject and provides immunity for a certain kind of business which in the view of the legislature had not already, been rovided 'for. From this decision it follows that where gusiness, which is property within the meaning of elause

(i), is impressed with the character of trust, the income from such business is altogether exempt and it is not obli-

gatory that in the case of. suchbusiness the conditions laid

-' Page 6, I. T. Enquiry" c_port, 1936 ("also known "as V 1 . I I I I', 7 " 1 « Export)-V _ .. p , A

-(x944)121.r..n.u:..- ,4 335 down in clause (ia) should be fulﬁlled. (Clause (ia) thus applies to a different situation, namely, where there is an institution and that institution 'carries on business which is not subject to a trust. In such a case the remiisites of the section must be complied with. The income must be applied solely to the purpose of the institution and the charitable or religious institution must also fulﬁl the con- ditions in sub-clauses (a) and (b). As to the distinction between an institution and a trust, see also the discussion in a recent Privy Council case,' and Gunn's commentary on the Australian Income~tax Act.')

4. That "property" in clause (i) includes business has been well established not only by a decision of the Judicial Committee' but also by the latest pronouncement of the Supreme Court in J. K. Trust Case'. . This aspect there- fore does not present much difficulty. (The dilﬁculty as to in which set of circumstances clause (ia) applies still remains, though the View in Gadodia Swadeshi Stores' case has subsequently been followed and conﬁrmed by the High Courts -of Allahabad' and:Bombay'.

5. In view of the recommendations. made by Din. Mohammad J. in Gadodia's case and by the Income-tax In- vestigation Commission [Report (1948) at pages 56-57, paragraph 131] the legislature in 1953 [vide the amending Act of 1953 (Act 25 of 1953)] converted clause (via) into a proviso to clause (i), and by subsequent legislation it was made clause (b) of the proviso to clause (i) (vide the amending Act of 1955). 'The object of this legislation was to restrict the operation of clause (i), where the property consisted of business impressed with the character of trust, by applying the limitation imposed by clause (b) of the proviso'.

But in carrying out this object, the immunity which was granted under clause (ia), (as it stood before 1953), in the case of business carried on' 'by a religious or charit- able institution and not subject to trust, was negatived. The linking up of old clause (via)_ to clause (i) had the effect of taking away the separate exemption granted by clause (ia). In other words, the conversion of clause (ia) in- to a groviso has led to the op osite result of depriving the bene t (limited though it be , which; was intended to be _ 1 Minister of National Revenue vs. Tmsts and Guarantees Co. Ltd. (1932) 4-A. E. R. 149 P, C. See also 2". M. C. A. vs. F. C. off'; E1926} 37 C. L'. R. 351 at pp. 350, 361. g I ' ' 4th edition, p. 114, para 292. l .' Tribune cast, (1939) 7- I. T. R. 4:5 p. Q.-:61. A: 241. _

- - [1957] 32 I_:r.R. 535 (Bombay H. C. on-remand 11933333 I.T.R. 32).

" (1944) 12 I. T. R. 385. - j -

i ' C.I.T. vs. Radlzaswm-u"Sat:ang Salim. (.1934) 25 I. T. R. 472. r" 21 J. K'. Trust w.C.j".,'(l958) 33iI..'l'.'R.32. . . . _ . ' . y= ' C . 'Report of-the Tﬁntloa-'1 _ y' Os?on,_'(}953-3954). Vol. II, Ch.:V'I I..;1aIrIII'!|Phs 1,aud~3,']nge;- '3 " vi'; a -1.,

-4 336 conferred by clause (ia) on charitable and religious instit- tutions which carried on business which was not subjected to trust (provided they fulﬁlled the conditions laid down in paragraphs (a) and (b) of that clause). We think that this result was not intended by the legislature. If the intention is----as undoubtedly it has been from 1936----to impose restrictions in the case of business whether carried on by a trust or by a religious or charitable institution, the intention should be clearly stated in the Act. But the im- munity itself need not be taken away. In order to avoid the anomaly the clauses should be so drafted as to bring about the real intention of the legislature, and this we have done in the proposed draft. '

6. Incidentally, it may be noted that the legislature really wanted the conditions contained in paragraph (b) of the Proviso to apply not only to cases where business is carried on by the institution, but also Where the business was the subject-matter of a trust (i.e., even if there was no institution). This object has also not. been properly car- ried out, and some redrafting is desirable on this point also. On this assumption, it has been made clear in the draft that the restrictions in paragraph (b) of the Pnoviso will apply to both the cases. ~ ,

7. In short, the redraft makes clear the two points that require clariﬁcation, namely :.--- '

(i) Exemption under section 4(3) (i) is (in the case of a business) subject to the conditions given in@ Pro- visio (b), irrespective of whether the business is carried on by a trust or an institution. =

(ii) The exemption is also available to institutionf not subject to trust, (subject to the same conditons).

8. For the sake of clarity, a__ trust carrying on a busi- ness is dealt with separately in draft sub-clause (2), and draft sub-clause (1) is conﬁned to other properties, wide the draft Explanation thereto. 1

9. Besides this important change, the following pbints may also be noted :----

(a) The phrase "religious or charitable purposes?' oc- curring in the existing Act has been replacetl by the phrase "charitable or religious purposes", to give more prominence to charitable purposes.'

(b) The existing section 4(3) (i) opens with the words "subject to the provisions of clause ((3) of %sub- section (1) of section '16". The limitation expres- sed by these words has been retained in draft sub- clause (1), but it is to be considered whether there is any sound reason for this limitation. '111e eﬁect of the words ' ques .seems to be that ev n in cases of t er tor. ' itable purpose th in- come of the ansfe A assets is regarded " the ~33?

transferor's_income.' It would be more consistent _ with the spirit of the law if such income were ex- cluded from total income, at least so long as the income is applied for a charitable purpose. The words "subject to the provisions of clause (c) of stab-section (1) of section 1'6" "deserve to be delet- 6 . » Notes to clause 13.

Section 25, sub-sections (3) and (4) provide for two things. One is the exclusion from total income of income of certain businesses, and the. other is the right to claim substitution of the income of the year of discontinuance etc., in place of the last year's income.

The ﬁrst part (exclusion from total income) has been

-- (f%il'n(;)Odied in the present clause, with the language simpli- e .' CHAPTER 'Iv ~ .

COMPUTATION OF TOTAL INCOME Notes to clause 14.

1. This corresponds to section 6 of the present Act. The opening words of the section, have, however, been mo-

diﬁed so as to 'make it clear that the section merely classi-.

ﬁes the chargeable income into different heads for the pur- pose of computation of tota1.income.. fThat section.6 con- cerns itself with classiﬁcation and seqtions 7, 8; 9 etc. with computation is clear from the' disaussion in Kothari vs. C.I.T." and. in United Commercial Bank Ltd., vs. C.I.T.f

2. Item (c) relating to "Income from property" has been changed into "Income from House Property". Sec- tion 9 is essentially concerned with''' House Property and the description now adopted will clearly indicate the .

nature of the head.

Another variation in the present section is the men- I tion of the head "Income ﬂrom ot er sources" after the 3 head "Capital gains", indicating _"Income from other :

sources" continues to be the residpafy head as hereto- 1 fore.

' These words were introduced in 1953 in pursuance of the recommenda- tion made by the Income tax Investigation, Commission; see its Rcport (1948), para 129, page 56. -

.1 Sac notes to clause 91 for comments on the retention of existing section 25 (3) and (4). ' = (1951) 20 r.tr.n. 579. i ' ' 4 (1957) 32 1.r.n. sea.

338

Notes to clauses 15 to 17.

A--Salarics:' Simpliﬁcation of the present section 7 has been at-

tempted in the following ways :-- V

(i) only the substantive provision specifying the charge in respect of _"salaries" paid or payable by afi employer has been dealt with in the main c ause'.

(ii) the extended meaning given to the expression "sa- laries" is omitted from the substantive clause and separately deﬁned in the interpretation clause;

(iii) similarly, instead of mentioning the different types of employers'in the substantive part, the term "Employer" alone has been used, a deﬁnition hav- ing been given separately to cover the various txpes; 7 (ivj the permissible deductions are placed in a separate clause;

(v) the present Explanations about "perquisites" (Expln. 1) and "proﬁts in lieu of salary" (Expln. 2) have been placed in the interpretation clause.

V 2. Provisions dealing withincome classiﬁable as salary, scattered elsewhere 'in the Act, have been collected together, e.g., draft clause'----dealing with notional payments from provident funds etc.

3. The existing section makes a distinction between salary which is "due" to an employee and other salary "paid" which is not due to him. The former is taxable on "due" basis whether actual payment has been made or not, while the latter is taxable on the basis of actual payment. This aspect is more clearly brought out in the present draft. (See the decision of Calcutta High Court in Bhuban Mohan Banerjee vs. C.I.T.' though in an earlier decision' it was held that an amount due in one year could be taxed in a later year in which it was received).

4. Arrears of salary would, at ﬁrst sight, appear to be delayed "payments" for amounts which had already ac- crued "due'-' in thelyear or years in which the employee had rendered service. Looked at from this angle, they do not present much difﬁculty.

But the arrears of salary which call for speciﬁc treat- ment are those where Services are rendered in a past "ear but the quantum of payment to be made is not determpned till the year of receipt of the amount by the employee in a subsequent year, or where the emoluments of the post are revised or 'a promotion is made'retr_ospectively. In these case-s"it will be difficult to include in the regular original assessment the arrears sanctioned and paid subsequently, ' Cl c 15. V ' Viftusdx-aft clause 17 (2) gi) and (vii). ,- .- - _j I (1956) 29 I.K.R. 229,_2 . A ; ﬂ ' Uslmraui R0] Clwudhuralu, In re. (1911). I0. [..'I.'3R. 199.

'339 since in many cases the determination may take years. It would also not be possible to keep the assessment pending until such determination is made. The Departmental prac- tice has been to include such arrears in the total income

-of the year of receipt. Relief is aﬁorded against the hard- ship involved in the taxation of the lump-sum by means of an order under section 60, sub-section' (2), the effect of which is that the arrears are attributed to the periods to which they should reasonably be related. Assessment in the year of receipt is in accordance with the decision of the Calcutta High Court in Usha Ram' Roy Choudhuran'i.'s case.

The recent decision of the Calcutta High Court in Bhuban Mohan Bane'rjee's case,' however, contains obser- vations which may be taken to mean that a salary pay- ment made in a subsequent year would still be taxable 'only on due basis in the ﬁrst year. The decision does not create any diﬁiculty if the word "due" is interpreted as relating to the point of time when the amount is actually «quantiﬁed by the employer. On this view the claim for relief under section 60(2) may not be admlssible. But if it is intended that such amounts should be related to the back years and subjected to tax under section 34, diffi- culty may arise in the initiation of such proceedings be- cause of limitation. It can even be argued that these are not cases of escapement of -income, there being no omis- sion or commission by the assessee or by the Department. 'There will be further difficulty for the employer in the matter of making deduction of tax at source, and some confusion is bound to arise as to whether the tax so deduct-

ed at the time of payment should be' given credit for the year for which the assessment under section 34 is supposed to be made. .

On the whole the present Departmental practice seems to be a reasonable compromise and is fair to the assessee and the Department. It is fair to the Department because the complication of section 34 is avoided, and even when .an. order under section 60(2) is passed the consequential' ad- justment of tax is made in that assessment itself and not 'by reopening past assessments. It ispftnir to the assessee, because if the amount were to be treated as due only when it is paid, the question of relief under'section 60(2) would not.arise, while the Departmental practice ensures that the assessee is to be in the same position as if he had been "taxed in the respective years after spnead-back of the ar- rears to the relative period. » There may, of course, be cases when the assessee will be worse off by the arrears being related back than when he is taxed on the arrears. This will happen when the ar- rears of salary are received after retirement or after rever- sion from a higherpost. In those cases-tl'ie'ass'essee will not apply for relief under section 60(2) and no action is taken by the Department itself 'section :34..o,r otherwise.

.'-M (1942) I0'l'.=-T. An. 199."=- - t (1956) 29 I. 'r. R. 229,236. .~ 340

-- In view of the position discussed above draft sub-clause

5. Section 60(2) was placed on the statute book at a time (in the-"yea,r" 1939) when the chargeability of salary was not on due basis but on freceipt" basis, under sec- 'lc1on 7 as it stood then. Accordingly it continues_to emp- oy language appropriate to a_higher tax burden in conse- quence of the employee "receiving" a payment as salary in arrears or for more than twelve months. This contin-

gency will not arise on the present "due" basis of taxation on salary.

It is, however, proposed notto make any changes in that section, since the section will be useful in so far as it gives relief in respect of lump-sum payments received by the employee and treated as pmﬁts in lieu of salary nder explanation 2 to section 7(1). It may also be use 1 in view of the fact that. a provision for charging arrears not already taxed has been added in the draft.

6. A few minor points also deserve notice; These are ~ as follows :--

(i) Draft sub-clause 16 (ii) :----The provision relating to deduction for entertainment allowance has been made more logical in one respect. Where a person was in receipt of entertainment allowance at a lower rate before 1stfApriE 1955, his claim for deduction will not be tofally forileited, but will be reduced to that previous lower rate. The pre-

sent section 7(2) (ii)' does not make this clear.

The changes made by the Finance Act, 1958, have been given effect to.

(ii) Draft clause 16 (iv) :---The allowance for expenses- incurred by an employee in the performance of his duties has been made exclusive not _only of entertainment allow- ance (as at present), but also of the allowance for ex nses for books etc. and conveyance allowance. The existin pro- vision; section 7(2) (iii), does not include these latte . cate- gories. The change has been made in order to make' the provision comprehensive. 3 The wording has also been changed so as to make it precise. The word "necessarily" has been omitted,§ as it is unduly restrictive. We have followed the language of existing section 10(2) (xv). ~ It may also be pointed out that the Royal Commission on the Taxation of Proﬁts and Income (United Kingdom)' examined the corresponding. provision in the UK.' »Act (Schedule E or old Rule 9)' aid has recommended that the allowance should be made liberal'. It has proposed' the '';'Now see the U. K. ngaome-may-.'g 1952, mun. schedule, Ru! 7. ' non: Commiuionon' Tan! 'ofhoﬁts udtlnoolue, Final c. Juner955.(C-ml-941>.P-se4 p g 140-. . r ' - M:

5 fl '341 wording "all expenses reasonably incurred for the appro-

priate performance of the duties of the oﬁice or employ- ment". This, the Commission has pointed out, would re- move the complaint that the legislature imposes upon those in employment a narrower form of allowance for expenses than it accords to persons deriving a private in- come from their own efforts. The wording suggested by the Royal Commission is worth consideration as an alter-' native.

(iii) Draft clause 17(1) :--'1'-he deﬁnition of "employer" as now adopted includes a foreign Government, reference to which is not to be found in the present section 7. It is for consideration whether the mention 'of foreign Govern- ment as employer is acceptable; It has been suggested that by such inclusion the assessee'will not be subject to any heavier tax burden but on the other hand may qualify for relief under section 60(2) which will be advantageous to him. The possibility of an employee of a foreign Govern- ment being required to make an actual payment of tax (on "due" basis) without actually receiving the salary will not arise, because section 7(1), 2nd roviso, lays down that where tax is deductible at source, t e sesessee shall not be called upon to pay the tax himself unless he has received salary without deduction. How far the procedure for de- duction (section 18) will be enforceableagainst a foreign Government will also be a matter for consideration.

(iv) Draft clause 17(2) :---Item (ii) relating to annui- ties has provoked some discussion. It has been suggested that annuities paid by the Government or local authorities should be taxed as salary irrespective of Whether the payee is an employee or not. This cannot be accepted, as it goes against the basic scheme of the section.

Notes to clauses 18 to 21 The existing section 8 is now covered by four clauses.' The first clause relates to the: charge, the second relates to deduction, the third relates to deductions in the case of banking companies and the last clause relates to amounts not deductible.

Clause 18 The word "receivable" in the present section 8(1) has been interpreted to mean ''reoeived''.' : is decision has been given effect to and the word "rec ed" has been subs- tituted for the word "receivable" in e draft clause to make the intention clear.

Clause 19 This clause and draft clause 21 incorporate the subs- tance of existing section 8, first proviso. Thelanguage of ' Clame:_x8 to 21. ' 9; . -

'SctIaLdbh'Dd 1:' .c.1.r' w %I.T.R. Jr" ' Clwuiar v:C. I. .M:lrav:. (1953) 'P . '.13., 33"!"

. E ' B -f-Interest on securities.

- .. .9 g¢qu1z,Co¢apnativc Ltd. vs.- C'-. I. T. (1949) 1-7 II. Tfk.

342

the present proviso is involved'. A rough analysis will 'show that it deals with three things :-- V

(i) Allowance for realisation expenses and interest on money borrowed for investment;

(ii) Exception to the allowance at (i) above, in respect of dinterest payable outside the taxable territories;

an ,

(iii) Counter-exception to the exception at (ii) above, for interest for which tax is deducted at source or an agent can be appointed under section 43. * In the draft. therefore, the proviso has been split up. Item (i) above has been incorporated in this clause, while itlems (ii) and (iii) have been embodied in a subsequent c ause.

The provisos to existing section 8, which exclude cer- tain items of expenditure incurred for realising interest etc., do not express the exclusion as "deductions". Since, in the draft. these have been treated as deductions, it is possible that the deductions might. in a particular case, exceed the total gross income. In such cases, the excess will be treated as a loss. We do not think that this result should be avoided. Deductions under the head "Interest on securities" should be treated on the same lines as de- ductions under other heads; if the income is a loss, it should be dealt with as a loss under any other head.

Clause 20 This embodies the Explanation to section 8, recast in form so as to make it less complex and state the.various aspects distinctly. ' -

'Clause 21 Item (i) gives effect to the latter part ofvsection 8. ﬁrst proviso (see notes to the clause relating to deductions, above) Item (ii) is new. The Madras' and Bombay' High Courts have held that expenditure pertaining to interest on tax-free securities is not deductible, while the Nagpur High Court has taken a contrary view in C. P. and'Berar Provincial Co-operative Bank Ltd., vs. C.I.T.'. Effect has been given to the view taken by the Bombay and Madras High Courts. ' Item (iii) is also new and seeks to make it clear that interest paid on money borrowed for investment» in tax- free securities isnot deductible. « 'See the criticism in'Um't¢d Commercial Bank vs. C.1. T. (1953)

241. T. R. 425.

' Madras Provincial Co-operative BONE'! case (1942) to I, T. i '(!94.6) I4I.T.R.].7¢:. ,: 5..-' .

'I 343 Notes to clause 22 to 21 . _ Section 9 of the existing Act has been split up into separate clauses'. The title of 'the head has been charged into '"Income from house property", because the section deals only with that property 'and not any other immova- able property. --

In the draft, after having stated that the annual value is the basis of chargeability, the expression "annual value"

is deﬁned. The basis of computation of annual value in the case of a tenanted building and in the case of owner- occupied building is set out separately'. The main drafting changes are the omission of provisos and re-arranging the section on a more logical basis. An interpretation clause has been added. ' The detailed changes made in each clause are explain- ed below :--

Clause 22 ' The head has been changed into "Income from House property" as already explained. In the expression "bona- tide annual value" the words "bona-ﬁde" have been omit- ted. The section deﬁnes only "annual value" and not

2. "bona-ﬁde annual value". Section 9(2) also uses "annual value'' only. Moreover the words "bona-ﬁde" do not in any way make the meaning clearer.

Clause 23 Sub-clause (1) :--The sub-clause corresponds to sec- tion 9(2) and no change has been made.

Sub--clause (2):--This is new. It seems desirable to embody some rules in the Act to furnish guidance in deter- mining the annual value of tenanted property. The draft sub-clause tries to set out the considerations to be borne in mind in such cases. The sub-clause, of course, does not purport to be exhaustive, and refers only to fac- tors of importance. « Sub-clause (3) :---Deals with property occupied by the owner. The ﬁrst para sets out, in a simple form, the provi- sion contained in section 9(2), first proviso for reduction of the annual value. The form has been changed in order to avoid all ambiguity. The second para corresponds to the last line of section 9(2), ﬁrst proviso. The existing sec- tion provides that the annual value shall not exceed 10 per cent. of the total income of the assessee. Now the total income of the assessee will naturally include income from such occupied property. The calculation of the an- nual value thus becomes a complicated mathematical pro- blem (see formula below). It will be evident from the formula given below that the annual value so calculated comes to 6/55 i.e., roughly 11 r cent. of the other income of the assessee. The draft, t erefore, provides that this 11 per cent. shall be taken as the annual value. No addi- tional liability is saddled on the assessee.

. "Cllll.I:¢S.2_2 t_o27. T y ' _ _' I"

'7H«dI&'l3-I . .L-'El '3 '- .' --\.,_;

C. Income from house P1'°P<=|'tY-

The draft seeks ..removig_this defect. The pro A ion has also been made ' ler jremoving the'referen eg to the law authorising 4 evy o 13 etc., as A : It 344 i The formula referred to above is derived as under :-

Suppose AV is the annual letting value of the sélf-oc- cupied property. Now, according to section 9(2) first pro- viso, the annual letting value 1'..e., AV is 10 per cent. bf the total income; or in other Words the total income is 'ten tiomﬁsv the annual letting value. Thus the total income' is If Y is the other income of 'the assessee, then--.

Total income 10AV=Y+(AV--AV/6) i.e., 60 AV =6Y+(6AV--AV) i.e., 60 AV=6Y+5AV z'.e., 60 AV--5AV=6Y 'i.e., 55 AV =6Y i.e., AV=6/55Y i.e., AV=10'9 per cent of Y (roughly 11 per cent). -

Sub-clause (4) :----This corresponds to section 9(2), 2nd proviso. The following changes have been made-- 3

(i) the word "occupied" has been replaced by "actual-

ly occupied" at all places, since the proviso is meant only for cases where, the property, though occupied, is not actually occupied by the ovéner;

(ii) the case where the property remains un-occupied for the whole year and the case where it remains un-occupied for a part of the year have beengdealt with as separate items, for the sake of 'clarity, and the formula for computation of annual value in the latter case has been deﬁned in clear language. The existing expression "computed proportiqnate- ly" sounds abrupt and does not fully express 'what is intended. ' ' Clause 24.

Sub-clause (1), Item (i):----This corresponds to s V tion '9(2), 3rd, proviso. The existing provision bis defecti e in form, because it brin s about in a rounda out way re- sult which can be stagted directly. The gist of the c ause is that inl the casehofulai telzjnargafsl ptr<:lpert%'},1_one half at tlge rnunicipa axes s o e uc e . is nee n e expressed in the form- of a "deeming" provision (as s.;9(2), 3_rd proviso, clause (a) appears to do) regarding the tenant's liability, followed by a provision (clause (b) of the movi- so) for deduction if the tenant's liability is borne by?' the owner. i Z:

i 345 may be added here that as a general rule, such laws make the tax payable Wholly by the owner-and not by the ten- ant. -

Item (ii) :--The existing section' 9(1) (i) -has been split up into two parts (a) where the property is occupied 'tained in section 9(2), 2nd Proviso, last by the owner and (b) where it is occupied by the tenant. The two parts have been dealt with separately since in the latter case the annual value has to be reduced by the one ' half of the deduction for municipal 'taxes. The expres- sion "reduced annual value", has been, therefore, used for the purpose; it has been explained in the explanation at the end of the clause. It is also made clear that the existing allowance of the one-sixth of income is in respect of re- pairs.

Item (iii) :-The existing provision, section 9(1). (ii), is ambiguous, since the words "not exceeding one sixth of ' such value" can be read either as applying to the "differ- ence" or to "rent". This has been avoided by splitting up the sub-clause. The Proviso for assessment year 1951-52 has been omitted as spent.

(As to "reduced annual value", see notes under item

(ii) above).

Item (iv) :--No change has been made in the exist- ing provisions [Section 9(1) (iii)].

Item (v) :--Existing section 9(1) (iv), has been split up into four items (v) to (viii) for clarity. The proviso is transferred to a separate clause'.

Item (vi): ---See notes to 'item (v) above.

Items (vii) and (viii) :---See notes to item (v) above.

Item (1'.r)--~No change has been made in the existing section 9(1) (v). .

Item (x)--The percentage for collection charges, as prescribed by rules, has been embodied in the Act itself. (As to the expression "reduced annual'-value" see notes un- der item (ii) above). I Item (xi)--Verbal changes have made to im-

prove the language. (As to the expression "reduced annual value" see notes under item (ii); above.) I Item (a:ii).---This incorporates- the: substance of the notiﬁcation providing for dedpction of irrecoverable rent.

Explanation :--(See notes:under item (ii) above). Sub-clause (2)----This gives effect to the principle con- pline, putting it in a more conspicuous form;

1 Clause 25.

D-Proﬁts and 3.46 Clause 25.

The amounts not deductible have been put 'in one clause.

Clause 26.

This clause reproduces the provisions of sub-section (3):

of existing section 9 without any change.

Clause 27.

_Sub-clause (i)-----reproduces the existing provision in section 9(4) (a).

Sub-clause (ii)--reproduces the existing provision in section 9(4) (b) with the addition of the words italicised as even a part of a building such as a ﬂat may be allot- ted on ownership basis, as very often happens in Bombay.

Sub-clauses (iii) and (iv)---The deﬁnitions of "annual charge" and "capital charge" have been taken from the decision of the Supreme Court in New Piece Goods Bazar Co., Ltd., Bombay vs. C.I.T., Bombay.' Sub-clause ('v)---gives effect to the change made by the Finance Act, 1938.

Notes to clause 28.

-. Section 10 of the existing Act, relating to proﬁts and gains" ''"5'' gains of business, profession or vocation is cumbersome in 11653 CIC.

form and illogical in arran ement. It is proposed to split up the section, so as to dea separately with the charging provisions, deductions, amounts not deductible, and provi- sions in the nature of interpretation.

The opening clause' deals with the charging provi- sions and enumerates the various categories of income to be classiﬁed as proﬁts and gains of business. In order to make the enumeration exhaustive, the provisions at pre- sent contained in section 10(5A) for treating payments re- ceived for termination of managing agency or other agen- cy etc. as proﬁts and gains of business, have been trans- ferred to this clause as~sub-clause (ii). For the same rea- son, the provision in existing section 10(6) regarding in- come of a trade association rendering services to its mem- bers has been transferred to this clause as sub-clausei (iii).

Draft Explanation 1 is intended to clarify the position regarding classiﬁcation of proﬁts of managing agency, and does not mark any departure from the present practice Draft Explanation 2 incorporates the Explanation 1 in sec- tion 24(1), as it should be appropriately placed here.

Notes to clause 29.

This clause gives the general scheme of arrangement of the sections in the draft dealing with proﬁts and? gains of business etc. The object '3 to give a bird's-eye viewof S '»...a,' ' (1950) :8 I. -T. R.» 5168. G. ' Clause 28.

34: b the main provisions and to enable the reader to know at a glance how they are arranged. The inspiration for this kind of arrangement is derived from the U. S. Internal Revenue Code. ' Notes to douse 30.

This clause deals with deduction for rents, repairs and. insurance charges for buildings.

The expression "building used for the business" has been used throughout the whole clause for uniformity (as in the existing Section 10(2) (iv) and (ix); in contrast to "building in which business is carried on" used in section 10 (2) (i) of the existing Act).

Draft Clause (a) (i)--C~ol1ects together the deductions allowable for premises used for the business, where the as- sessee is a tenant.

Cases where, only a part of the premises is so used, have been dealt with separately.' Draft clause 30(a)(ii)----Dea1s with the deduction for repairs to a building, where the assessee is not a tenant.

Draft clause 30(b).----Corresponds to section 10(2)(ix), earlier part. Cases where ong a part of the premises is. used for the business, are de t with separately.' Draft clause 30(c)--needs no comments.

Notes to clause 31.

This clause collects together the deductions for repairs,' etc., of machinery, plant, etc. and does not need any com- ments, as the changes made are verbal and consequential on the scheme adopted in the draft.

Notes to clause 32.

Sub-clause (1)--The various allowances in the nature of depreciation have been grouped together in this clause. To simplify the clause and make it brieﬁ, the conditions for depreciation allowance have been dealt-iwith in a separate clause'. In the interest of clari , the various classes ofas-V sets have been dealt with separa 1y. i a Draft clause 32(1) (1) & (ii)--Toget '1i exhaust the first para of existing section 10(2) (vi). V e second para of section 10(2)(vi), beginning with "andnvhere ....... .." and ending with the words "cost thereof to:11he assessee" has been omitted, as its operation is Eimited tab the year of erec- tion of a. building erected during the assessment years 1945- 46 to 1955-56. .

1 Sec draft clause 38 (1).

3 See draft clause 38 (2).

3 Vida draft clause 34,.

2$--l Ltw Gom.[58 348 As regards the proviso to existing section 10(2)(vi), clauses (a) and (c) of the proviso have been transferred to the draft clause on conditions for depreciation'.

Clause (b) of the proviso has been transferred to the Chapter on Aggregation of income and Set off of loss, being relevant thereto.

Item 32(1) (ii)--See notes under item (i) above. Item 32(1)(iii)---Existing section 10(2) (via) has been simpliﬁed as follows :--

(i) The main proviso finds a place in clause (iii) while the second parenthesis (for exclusion of extra allowance for double shift working) has been framed,as an Explanation;

this will avoid interruption in reading.

(ii) The ﬁrst parenthesis-----containing the words "(which shall be deductible in determing the written down value)" has been omitted. Since clause (via) now forms part of "depreciation", the allowance will naturally be de- ducted in determining the written down value under exist- ing section 10(5) (bi).

(iii) The time for the allowance--ending on the 31st day of March 1959, has been transferred to the clause relating to conditions for depreciation". If this deduction becomes obsolete by the time the new Act comes into force, it may be deleted.

Clause 32(l)(iv)----The propositions embodied in sec-

tion 10(2)(vii) are these :--

1. A loss on the sale of an asset is allowed as a deduc-

tion. "Loss" here means the difference between the written down value and the sale price when the latter is lower than the former;

2. A proﬁt on such sale is counted 'as income. "Proﬁt" here means the excess of the sale price over the written down value. (If the sale price exceeds even the original cost, then such excess is a capital gain.)

3. In the case of asset not sold, but discarded, eto., the place of sale price is taken by its scrap value, as increased by insurance moneys, etc., if received.

Of these propositions, No. 2 has nothing to do with deductions, and relates to income by way of balancing

-charge.

An attempt has been made to simplify the section so as to embody these propositions in_a simple form. Simpliﬁ- cation of the section has proceeded on the following lines :-

(i) Only the "Loss" aspect has been dealt with. here.

The proﬁt aspect (2nd, 4th and 5th provisos) has been dealt with in a separate clause relating to deemed proﬁts'.

' Vida draft clause 34. (1) and 34 (2) (iii). ' Vida draft clause 34. (2) (ii).' ' Vidc draft clause 4.1 (2), 349

(ii) Unnecessary repetition has been avoided. The 3rd proviso and the main para of section 10(2)(vii) have been combined in the draft in clause 32(1) (iv), since the princi- ple is the same.

Much of the existing 4th proviso repeats parts of the 3rd proviso. The draft clause 32(1) (iv) expresses the prin- ciple behind these two provisons in such a manner as to render repetition unnecessary in the draft for the fourth proviso'. .

(iii) Simplicity in expression in general has been at- tempted. For example, the 3rd proviso at present says that where insurance, etc., moneys are received, then the amount by which the difference between the written down value and the scrap value exceeds the amount of insurance moneys is allowed as a deduction. This merely embodies the simple proposition (vide proposition 3rd above), that in- surance -moneys are added to the scrap value.

Thus--the existing formula is--

Written down value minus scrap value minus Insu- rance--Allowed deduction (Shifting "scrap value", this be- comes) ~ ' Written down value minus' (Scrap value+Insurance)= Allowed deduction.

The draft adopts the second formula. Sub-clause (2)--needs no comments.- Notes to clause 33.

Existing section 10(2)(vib) has been incorporated here. An important change has been made with reference to the year in respect of which the development rebate is to be allowed. The existing section allows it only for the year of acquisition or installation; but it seems desirable to allow the rebate in the next year, if the ship or machinery is ac- tually put to use in the next year.

The proviso to existing section 10(2)(vib) has been transferred to a separate clause relating to conditions for depreciation and development rebate'.

The changes made by the Finance Act, 1958, have been given effect to.

Notes to clause 34. .

Sub-clause (1)--The' provisos to section 10(2) (vi) and section 10(2)(vib) of the existing Act lay down that the de- duction under these clauses is to be allowed only if the pres- cribed particulars are furnished. Thedraft embodies this requirement and extends it to deductions under existing section 10(2)(via) and 1G(2)(vii) also, since these cases should stand on the same footing so far as the point under discussion is concerned. ' ' Draft clause 4.1 (2).

' Vida draft clause 34. (3).

350

Sub-clause (2)--1t2m (i)----Is new. It embodies a provi- sion contained at premnt in the rules [vide Rule 8, First and Second Provisos, Indian Income-tax Rules, 1922], as to depreciation for user for part of the year.' Item (ié)----Incorporates the limitation contained in the last line of existing section 10(2) (via). If the deduction it. self becomes obsolete, this might have to be deleted."

Item (11ii)--Corresponds to existing section 10(2)(vi), proviso (C), under which the aggregate allowance for de- preciation should not exceed the original cost. The existing section applies to the allowances under section 10(2) (vi) and 10(2)(via) only. The draft will cover section 10(2)

(vii). also, since it culd not have been the intention of the legislature to exclude that allowance from the rule that the aggregate of such allowances should not exceed the original cost.

Item (iv)--Where an asset is sold etc., in the previous year, the allowance under section 10(2)(vii) will be suffici- ent and there will be no need for an allowance under:exist- ing section 10(2)(vi) or 10(2)(via). The draft provision has therefore been added to avoid a double allowance. Since the draft was prepared. the Finance Act. 1958, has also in- corporated this provision. in the Act. But it would, seem that "furniture" should not be subject to the restriction em- bodied in this clause, since existing section 10(2) (vii) does not apply to furniture. The draft retains "furniture" in view of the Finance Act. but the matter requires to be con~ sidered. ' Sub-clause (3)--A part of existing section 10(2)§(vib), as amended by the Finance Act, 1958, has been inco orat- ed here. The changes are mostly verbal and 'cons,quen-- tial; but an important point which requires to be mdntion- ed is, that, the words "and if any gush ship, machinery or plant is sold .......... ..", occurring in the latter half of the proviso to existing section 10(2)|(Vib) have, in the draft, been taken as applicable to all ships etc., in respect of which development rebate has been obtained, and not conﬁned to the ships etc. to which clause (b) of that proviso applies. This wider interpretation seems in consonance With section 35(ll) (as inserted by the Finance Act, 1958) which is appli- cable to all ships etc. The provisions contained in existing section 10(2l3) and (2C) have been omitted in the draft. It is understood that Government does not want to enforce these provisions for the future: in any case. the 'changes made in existing sec- tion 10(2)(vib) render these provisions superﬂuous, at least so far as development rebate ls concerned.

1 See also last para of qotcs to claquse 38. ' See also notes to draﬂ clause 32 (iii). ' .3 'J 351 Notes to clause 35.

Subsclauae )(1)--Item (i) needs no comments. Items

(ii) and,(.iii) represent section 10(2) (xiii), which has been broken _ for' clarity. Item (iv) corresponds to section 10(3)(x1v , re ating to allowance for capital expenditure o_n scientiﬁc research. For simplicity, the broad principle for allowing such expenditure as a deduction, embodied in existing section 10(2)(xiv), first para, earlier portion, has been embodied here. The rest of the provisions of section 10(2)(xiv), and its provisos deal with (i) detailed conditions and provisions for deduction, or (ii) rules regarding proﬁt on sale of the asset or (ii) interpretation. These have been dealt with separately.' Sub-clause (2)---Item (i) & Eacp1anat1l<m.----These cor- respond to the existing provisions in section 10(2)(xiv), ﬁrst para and first proviso. An attempt has been made to simplify the expression and make it direct. No change has been made in the substance. As the allowance is granted in both cases (t'.e., whether the expenditure was incurred before or after commencement of business), it will suffice to say so. without making separate elaborate provision for the two cases.

The draft Explanation states the ﬁrst Proviso in a different form, which is positive.

Item (z'i)----needs no comment, except that the affirma- tive provision in existing section 10(2)(xiv), 2nd Proviso

(a) (ii), has been made to precede the negative provision in section 10(2)(xiv), 2nd Proviso, (a) (i). The deduction allowed under this item takes the lace of the 1 /5th in item

(i). This is made clear in the dra t.

Item (tii)--Language has been simpliﬁed. Item (iv)--Needs no comments.

Item (v)--Correspondens to the earlier portion of sec- tion l0(2)(xiv), 2nd Proviso (e). The latter portion has been transferred to the interpretation clause.' Sub-clause (3)--needs no comments. The contents of the Explanation to section 10(2) (xiv), have been transfer- red to the interpretation clause.' ' Sub-clause (4)--needs no comments. Notes to clause 36.

Sub-clause (1)--deals with deductions for insurance of stocks and stores.

Sub-clause (2)--Item (i)--needs no comments except that the wording in the existing section >10(2)(x), proviso, has been sought to be improved. The existing phrase, "the 1 Vid d ft clause 35(2) and d aft clau ' 41(3) S '2(5) respectively. ' Vid: drift clause 42(1), Explﬁnation I?! * ' Vida draft clause 42(5). 4 352 amount is of a reasonable amount" unnecessarily repeats the word "amount".

Item (iz)--This is new and has been added to help an assessee to get a deduction where bonus is paid in ursu- ance of any award of an industrial or other tribuna even if the amount is not reasonable, that is to say, even if the condfiitigns in the existing section 10(2)(x), proviso, are not satis e .

Sub--clause (3)----corresponds to existing section 10(2)

(iii). The proviso has been transferred to the clause on amounts not deductible', in order to simplify the sub-clause and make the arrangement logical.

Sub-clause (4)--Section 58R, ﬁrst para, which pertains to the deduction of the contribution of an employer to an approved superannuation fund, should really ﬁnd a refer- encfe amongst deductions, and has therefore been referred to ere. = Sub-clause (5)--needs no comments.

Sub-clause (6)--corresponds to existing section 10(2): 5 changes made are explained

(xi) for bad debts.

below:----

The Opening lines--Instead of the words "bad and doubtful debts" the words "debts or parts thereof that are estab- lished to have become bad debts" have been used. The word "doubtful" is unnecessary and does not add anything to what is conveyed by "bad".

Item (i)----A condition has been added that the debt must have been taken into account in computing the in- come for an earlier year. This follows section 11(1)(e) of the Canadian Income-tax Act and section 63(1)(a) of the Australian Income-tax Act.

Item (ii)----The requirement expressed by the _words "not exceeding the amount actually written off" etc.. ap- pearing at the end of existing section 10(2) (xi), ﬁrst para, has been given here the shape of a condition.

First Proviso--This embodies the latter half of the existing proviso. [The earlier half of the existing proviso deals with "proﬁt". not "deduction", and is therefore trans- ferred to a separate clause".] Second Prom'so--is intended to meet a case like this :

A debt is written oﬁ in the accounting year 1957-58. At the time of the assessment for that year, the Income-tax Ofﬁcer does not allow it as a deduction, on the ground that it is not yet established to have become a bad debt. But when the assessment for a subsequent accounting year, say 1958-59, takes place, the Income-tax Oﬂicer has no- doubt 1 Draft clause 40(3) (i). l ' Draft clause 41(4).

353

left as toits irrecoverability then. The debt will be treat- ed as a bad debt for the account year 1958-59, and the mere fact that it was written off in an earlier year should not bar the grant of a deduction.

This result could have been brought about by suitable words in draft item (ii) also (e.g., by adding "or earlier previous year" there). But a proviso has been preferred in order to avoid obscurity.

Notes to clause 37.

This embodies section 10(2)(xv).

The existing section uses the words "not being an al- lowance of the nature described" elsewhere; the word "al- lowance" has, in the draft, been replaced by the word "ex- penditure" which is more appropriate in the context.

Notes to clause 38.

Sub--clause (1)--The limitation contained in existing section 10(2), Proviso, regarding deduction for rent where a part of the premises is used as a dwelling house, has been incorporated here in para (a). Similar limitation regard- ing deduction for repairs, contained in existing section 10(2_)(ii), Proviso, has been embodied in para (b).

In draft para (a), the annual value of the part used for the business has been mentioned, in preference to the an- nual value of the part used as a dwelling house men- tioned in the existing section, as the former seems to be a more direct way of stating the rule.

The words "as the Income-tax Oﬁicer may determine"

do not occur in the existing section 10(2) (ii), proviso, but have been added in draft para (b) to make the matter clear and to have uniformity (Cf. existing section 10(2)(i), Pro-

viso).

See also notes below under sub-clause (2).

Sub-clause (2).--Existing section 10(2) (ix), provides for deduction for» land revenue etc. and says that the deduc- tion is for that "part" of the premises which is used for the business. The provision for deduction has already been dealt with in the draft clause on deductions. The present draft sub-clause deals with the limitation regard- ing "part".

The provision has been made more elaborate, on the lines of existing section 10(2)(i), Proviso (See notes to sub-clause (1) above).

[Logically speaking. draft sub-clause (1), for section 10(2) (i) and (ii) Proviso (for deduction for rents and re- pairs where a part of the premises is used as residence) should also be framed on the same lines as draft sub-clause (2). The existing provision op these bints is conﬁned to cases where a part is used as ;a "dwélyiflg house". It does 354 not deal with a case where the part is used not as a dweI- ' ling house but for some otherpurpose not connected 'with the business. However, no change has been made in this respect in draft sub-clause (1), in order to avoid any al- teration in tax liability.] Sub-clause (3)--corresponds to existing section- 10(3). The word "wholly" has been replaced by the word "exclu- sively". It has been held' that the words "not wholly .... .." mean that the building is not used exclusively for the purposes of the business, but for other purposes also. (These words, the court held, have nothing to do with the period of user during the previous year.) The draft gives effect to this decision.

The section has also been made more elaborate: by providing that the Income-tax Officer is to determine' the amount with reference to the extent to which the user was for the purpose of the business.

It must have been noticed that the Act does not deal with all cases of partial user in the context of deduc- tions.

User may be partial in point of--

(i) Space, i.e., only a part of the building is used for the business; 3

(ii) purpose, i.e., only some of the purposes of the user are business purposes; or .

(iii) duration, i.e., the building is used only for a part of the previous year.

(Moreover. there may be. partiality both in point of space and time, time and duration, and so on.) The Act deals with (i) and (ii) only, and that too only for certain kinds of deductions. It does not deal in so many words with (iii). The draft also does not gt) be- yond the Act, except that a earlier clause' embodies a provision contained in the r es regarding user which is partial in point of duration.

Notes to clause 39. _i No change has been made in existing section 32 Notes to clause 40.

This clause collects together all amounts"not deduc- tible in computing the proﬁts and gains of business, etc. The scheme adopted is to proceed from the general to special. Thus, rules common to all assessees come ﬁrst ' [para. (a)], while those applicable to particular kinds of assessees are placed after them. ' z ' C. I. T. vs. Dalmia cnt Ltd. ;I(Ip4.5) r3 l.'P.R. 415. ' Sec draft clause 34(2) ). ,4 P

- I i ' (Q?

m% .

Para (a)-

Item (t)--An attempt has been made to simplify the language. The last 17 words of the existing section 10(2)

(iii) Proviso, relating to interest paid to a partner have been oitnitted, as para (b) of present draft clause will cover 1 .

Item (ii)--needs no comments.

Items (iii) & (iv)---need no comments except that zslight verbal changes have been made to secure clarity.

Para (b)--Needs no comments.

Para (c)--The words "expenditure _or" have been add-

-ed in item (ii) in order to make it clear that moneys ac- tually spent (by a person having a substantial interest in .a company) are also excluded from deductions.

Para (d)--embodies the last line of clauses (a) and (b) of the Explanation to existing section 8. The bar against double deduction of such amounts has been embodied in "the draft for that section,' but has been repeated here in order to make the list exhaustive.

Notes to clause 41.

There are provisions scattered 'at. various places in :section 10, enacting that a certain amount shall be treated as a» proﬁt of business and taxed accordingly. An attempt has been made here to collect all of them together.

Sub-clause (1)-Needs no. comments.

Sub--clause (2)--is an attempt to state in a simple form "the propositions embodied in the second and the fourth "provisos to section 10(2)(vii). The second proviso is con- ﬁned to assets which are sold and bling proﬁts, while the fourth proviso deals with assets which are discarded etc., and bring proﬁts. The' draft sub-clause (read with the draft Explanation 1) combines both th'ese_cases.

It must, of course, be noted that the existing fourth proviso is highly involved in language, and does not dis- close easily the rule that is to be ap lied. But there can 'be no doubt that the true rule is is--t-hat if the scrap value plus the amount of insurance 'moneys etc., exceeds the written down value, then the excess is taxed as a "business proﬁt to the extent to which the original cost is not exceeded.

The proviso as drafted is faithful,to this rule. More- »over, it avoids the ambiguity arising from the existing words "so much of the excess as does not exceed the dif- fference between the original.cost a .the written down ~v_alue less the scrap valug". [Th flmbiguity arises by E . -.

4 Draﬁ clause 2o(ii). 7 'll E «>.»..:.: .

356

reasonof the fact that the word "less" can be read either with (1) excess, or with (11) difference, or with (iii) written

- down value.] The following analysis of the fourth' proviso is intend-

ed to show how each part of the proviso has been dealt with in the proposed draft.

Existing section. How incorporated.

1. "Provided futher . . . . . .exceeds the I. The italicised words are unneces- diiference between the written down sary, since deduction is allowed only value and the scrap value no amount where the written down value is not shall be allowed under this clause." exceeded. (See existing Sec. 10(2)

(vii), 3rd Prov.)

0. "and so much of the excess shall be 2. Incorporated in the} present draft deemed to be profits".

3. "and so much of the excess as does not exceed the deference between the orz'_gz'nal cast and the written down value less the scrap value."

sub-clause (2).

3. 'l'het:ue rule behind the italicised words has been incorporated in a..

simpliﬁed form in the present draft sub-clause (2), as already explained in the notes.

The function of draft Explanation 1 has been explain--

ed above. Draft Explantions 2 and 3 do not need any com- ments.

Sub-clause (3)----needs no comments. The changes"

are only verbal. The words "Whether during the conti- nuance of the business" have been added in order to clarify the scope of the provision, on the lines of the existing sec- tion 10(2)(vii), 2nd Proviso.

Sub-clause (4)------The addition of the words "or part of' debt" is consequential on the draft adopted for the main para of section 10(2)(xi»). Other changes are verbal.

Notes to clause 42.

This clause groups together all provisions in the na- ture of the deﬁnition or interpretation, relevant to profits. and gains of bdsiness etc. Sub-clause (1)--

First para--needs no comments.

Explanation 1--needs no comments.

Explanation 2.----Existing section 10(5) (c) provides that in the case of an asset acquired by the assessee by gift or' inheritance, its written down value shall be the Written down value in the case of the previous owner or the market value (whichever is less). The provision thus appears as' a part of the deﬁnition of "written down value"; but it would be more appropriate to place it as a part the deﬁnition of actual cost. What is intended is the ﬁ tiom of a notional ﬁgure of actual cost and not a notional rgure t 357 of written down value as such. The written down value of an asset is an amount that is constantly diminishing, and"

cannot be frozen at the ﬁgure of written down value of the previous owner, as the existing section purports to do. The real object is to invent an "actual cost" (because a. person acquiring property by gift and not paying anything for it does not, actually, incur any cost).

The provision has therefore been placed as an Expla- nation under the deﬁnition of actual cost, with suitable verbal changes.

Explanation 3: The only change made in existing sec- tion 10(5)(a), lst Proviso, is to add, after the word 'busi- ness', the words 'profession or vocation' to make the pro- vision comprehensive. (Cf. existing section l0(5)(a), 2nd Proviso).

Explanation 4: Existing section 10(5)(a), 2nd Proviso, has been transferred to the deﬁnition of actualcost, since it pertains to that topic. A few verbal changes have been:

made to simplify the language.

Proviso.

Sub-clauses ,(2) and (3)----need no comments, except that it is made clear that ships are included in "plant".

Sub--clause (4)----is new. The word "received" has been sought to be deﬁned on the lines of the existing deﬁnition of "paid" in section 10(5), ﬁrst para, so as to cover not only cash receipts, but also receipts according to the method of accounting. The deﬁnition is, of course, conﬁned to the provisions dealing with proﬁts from business [e.g. section

-10(2A)].

Sub-clause (5)--Corresponds to existing section 10(2)'

(xiv), Explanation. ' The only change made is in item (iii)(b), where, at the e3d_, tthe' Vif1O11')dS _"businesfs tohf 'thalt classf' hczlalvelbeen %hang- e in o a usinesses o a c ass on e ines o ara.

(a) of the same item. , - p Sub-clause (6)--needs no comments Sub-clause-(7), Para (a)---The provisos to existing sec-

tion 10(5)(a) have been shifted to the deﬁnition of "actual cost", for the reasons given above in the notes relating to draft sub-clause (1), Explanations 3 and 4.

Para (b) and Prom'so--need no comments. « Explanation 1.--Corresponds to the second proviso to section 10(5)(b)_. The form has been changed. The exist-

Explanation 5: This is based on section 12B(l), 2nd.

ing provision says that in cases of succession to business, ' the actual cost referred to in the main part (deﬁnition of "written down value") shall be the costto the predecessor in business. The effect of th' is, the written down value that would have been adopte¥ in the , lie of the predecessor 'E--Capital :gall'lS.

358

.in business will be regarded as the written down value of the asset even in the hands of She successor. This effect has been sought to be brought about more directly in' the 'pro- vision as drafted.

. Explanation 2.--is based on section l2B(1), 2nd pro- 'VlS0.

Clause (c)--of_the existing deﬁnition of written down value has been shifted to thedeﬁnition of "actual cost"-

.See notes above relating to draft sub--clause (1), Explana- tion 3.

Eacplanatton 3.--embodies existing section 10(5), Ex- planation, latter half, without any change. , ' Notes to clause 43.

This is a new clause. There is some doubt as to whe- ther the residences constructed for employees are buildings used for the purposes of the business or not. The adminis- trative instructions appearing on page 447 of the Income-

"tax Manual, 10th Edition, are as follows :--

"Buildings belonging to the owner of a business and used by him in order to house his employees are buildings used for the purpose of business where the occupation by the employees of property owned by the employer who carried on a business is subservient to and necessary for the performance of their duties. In any other event such buildings would be chargeable under section 9 irrespective of the fact whether any rent is paid by the employees or not."

The instructions. which appear to be in accordance with the strict legal position, aresought to be codiﬁed by this clause.

Notes to clause 44.

The provisions regarding insurance business, contain- ed in the existing Schedule, have been placed in the ;draft First Schedule, but Rule 9 of the existing Schedule has been placed here in view of its importance. [For a deﬁ- nition of "mutual insurance company", see the South African Income-tax Act, 1941, First Schedule, para 2(ti).] Notes to clause 45.

General----

Existing section 12B has been split up into several sec- tions in the draft, in order to facilitate its understanding. The charging provision comes ﬁrst, followed by the year of charge and mode f comp' ' tion of the gains. D ailed provisions for ﬁxing e cost' the asset follow nex , and provisions, in the no of 1 mption come at the e 359' Draft clause 45.--The changes made are verbal only. The existing words "the tax shall be payable" have been replaced by the words ....... .."shall be chargeable to in- come-tax" as in other sections. The words "save as other-- wise provided" have been added merely as a drafting im- provement. ~ The existing reference to the date 31st March, 1956, has been omitted as obsolete.

But it has been made clear that the transaction must have been effected "in the previous year". Though this might amount to a repetition of a provision already con- tained in the Act, namely, that income chargeable as capi- tal gains is deemed to be the income of the previous year in which the transaction took place,' still such clariﬁca- tion appears to be useful in the main section also.

Notes to clause 46.

This clause ﬁxes the previous year to which the income should be related.

Notes to clause 47.

Existing section 12B(1), 1st proviso, and earlier part of the 2nd proviso, have been combined together. The latter part of the 2nd proviso really appertains to the deﬁnitions. of "actual cost" and "writtendown value" and is placed there. ' Sub-clause (i)--needs no comments.

Sub-clause (ti)--The existing provision reads "any dis-- tribution ............. .. under a deed of gift". The term "dis--

tribution" may not, it is apprehended, cover a gift to a single donee. It has, therefore,_ been replaced by "transfer". The words "deed of" have been omitted, so as to include- oral gifts.

Sub--clause (iti)--The existing provision requires that' the subsidiary company should be "registered under the In- dian Companies Act, 1956". (Before it; amendment in 1956, the wording was "registered under the Indian Companies Act, 1913".) Obviously, however. the intention is that the subsidiary company should be an "Indian company". The wording has been changed acdordingly. (It may be noted, that the existing wording wogild, if "construed strictly, ex» clude companies registered under a pie-1956 law, and this"

narrows down the scope. On the other hand, it would slight- ly widen the scope by being? silent about the- registered office being in India--a requ ementimentioned expressly in the deﬁnition of "Indian co'rnﬂpany".) 7 Notes to clause 48.

Sub-clause (1)---Item (i);-The wards "wholly and ex- clusively" have been substituted for the existing word' "solely". This will secure uniformity: in language with analogous provisions, e.g., exifting seqtiion 10(2)(xv).

' ' See existing section r2B(1), main Fa, latterihflf.

360

Item (ii)--Existing section 12B(2)(ii) speaks of "the actual cost to the assessee of the capital asset" (with certain inclusions and exclusions) being deducted from the consideration. But there are cases where "actual costs" is replaced by written down value, e.g., see existing section , 12B(1), 2nd proviso. In some cases, it is replaced by the fair market value, see section 12B(2), 3rd proviso. Further. the amounts to be added to the actual cost (as representing improvements) vary in various cases, according to the date of acquisition of the asset etc. In order to cover all these cases, it seems desirable to use some convenient expression to denote the deductible cost. The expression "statutory cost" has been used for the purpose. The manner of arriv- ing at the statutory cost is dealt with separately for' the sake of simplicity.

As to the amounts spent on improvements (additions and alterations), they have not been mentioned in the draft in the present clause, but have been dealt with elaborately in the draft clauses to follow,' explaining in detail what is "statutory cost" in various situations. The reason is, that the date after which the improvements should have been made will vary in various situations. To take an example, where the fair market value of the asset on 1st January, 1954, is substituted under existing section 12B(2), 3rd pro- viso, it is only improvements made after 1st January, 1954 that can be taken into account, and it would not suﬁice to say that improvements made after acquisition by the as- sessee will be added to the actual cost.

Notes to clause 49.

This clause enumerates the various modes by which a person might have acquired a capital asset which he sub- sequently transfers for consideration. The various modes enumerated in this section are contained in section 12B it- self and are grouped in the clause for the purpose of clarity.

In the following clauses' the method of calculating the statutory cost of the capital asset is laid down.

Assets for which depreciation allowance is admissible have been dealt with separately. The rules for depreciable and non--depreciable assets differ; e.g., (i) in the case of de- preciable assets, the written down value is taken as the ac- tual cost in ordinary cases; (ii) even where the assets are ac- quired before 1-1-1954 and" the market value on that date is substituted. subsequent depreciation has to be adjusted in the case of such assets.

Item (iv)(d) of the draft clause uses the words "revo-

-cable or irrevocable trus ", since there is no reason for differ- entiating between the two;

1 Vida draft clauses 50-51.

361

Notes to clause 50.

General----

The cost of an asset to be allowed for the purpose of computing capital gains can be described as made up of the following ingredients :--

(a) The basic amount. This is (i) cost of acquisition or

(ii) written down value or (iii) in certain special cases, the fair market value on a certain date.

(b) Addition for expenditure on improvement to the assets.

(c) Reduction for depreciation.

(d) Adjustment for proﬁts assessed or losses deducted under section l0(2)(vii), 3rd and 4th provisos.

Items ('c) and (d) are not applicable to non-deipreciiable assets.

The existing section mentions all these ingredients while dealing with the normal situations covered by section 12B (2)(ii) and 2nd proviso, but does not do so when dealing with certain special situations. In the draft. however. it has been considered desirable to make the provision for each situation elaborate and to state all the applicable ingredients.

Scheme-

The scheme adopted in the clause is to deal in separate sub-clauses with the mode of statutory cost according to the mode of acquisition. (The modes of acquisition have been classiﬁed in a preceding clause).' Sub-clause (1)----

Para. (a)----the words "cost of acquisition" have been

-substituted for the existing words "actual cost", as being more appropriate. Incidentally, the expression "actual cost" might give rise to the impression that the deﬁnition of that expression in section 10(5) is applicable here also.

As to the expression "cost of improvements" see the interpretation clause at the end of this group.

Para. (b)----The existing section creates a slight diffi- culty in understanding it, because it combines two things in one, namely, (1) where the capital asset became the property of the assessee before 1st January, 1954, and (2) where it became the property of the previous owner be- fore the 1st January, 1954. The draft separates these two situations and deals with them separately for the sake of clarity.

The existing provision requires that the fair market value should be "proved" to the satisfaction of the Income- tax Oﬁicer. This requirement has been omitted, as it is im- plied in all proceedings before the Income-tax Oﬂicer.

1 Sec draftclausc 4,9 and notes thcmtg.

/ 362 Sub-clause (2) and subsequentsub-clauses----do not need any detailed comments. The various ingredients constitu- ting the statutory cost have been embodied,' here.

Notes to clause 51.

This relates to the determination of statutory cost of depreciable assets. The expression "adjusted" has been coin- ed as a short expression to convey the proﬁts assessed and losses deducted under existing section 10(2)(vii), 3rd and 4th provisos. It has been deﬁned in the interpretation section pertaining to this group of sections.' We think however, that it would be more convenient to adopt a simple formula for arriving at the actual'cost instead of the elaborate provisions now contained. Either the market value on the date of acquisition if acquired be- fore 1-1-1954 or the market value on 1-1-1954 at the 0 tion of the assessee may be adopted, whatever be the mo e of acquisition. In other cases the market value on the date of acquisition may be taken. Adjustments may be made to arrive at the statutory cost.

Notes to clause 52.

The verbal changes made are consequential on the. pro- visions for arriving at the cost of the asset as re-drafted.» Notes to clause 53.

This is new.

Where a capital asset is given in exchange, the qonsi- deration received by the assessee will itself be an asset;(i.e., in kind and not in cash). Some rule for estimating the value of such consideration appears to be necessary. _ The draft clause takes the fair market value of the asselt re- ceived by the assessee, as the basis.

Paragraphs (a) and (b) are intended to deal with cases where the transaction is not a pure exchange of asset; and the assessee receives or gives something (usually money) in addition to the thing received or' given in exchange.

Notes to clause 54.

This deals with the case where the consideration stated in the deed of sale etc. is low. a An important departure has been made from the exist- ing provision. Existing section 12B(2), 1st proviso, applies to cases where the transaction entered into with a person 'directly or indirectely' connected with the assessee. This does not appear to be necessary and has been omitted.

1 See notes above " Cenaal ". , I The elaborate provisi ofscct' ' fa B, (3), Brevin at an ' for improvements are regarded impplitﬁieafor dcpreciablé assets. \ \ . 2 The draft clause has, further, been limited to cases where the actual consideration is not correctly give-n in the deed. The power should not extend -'to cases where the gogsiideration, though law, has been correctly recited in the e . .

Notes to clause 55.

The question of transferring this to the chapter on "Exclusions from Total Income" was considered, by us, but we thought it more appropriate to retain it here.

Notes to clause 56.

No change of importance has been made in existing section 12B(4) (b).

Notes to clause 57.

"Adjusted"-----Existing section 12B(2), 2nd proviso says that in the case of depreciable assets, the cost of the assets (Le. the written down value) has to be adjusted by losses deducted or proﬁts assessed under existing section 10(2)(vii), 3rd and 4th provisos. Even in cases where the fair market value on a certain date is substituted, this deduction has to be made. ' In order to avoid the necessity of repeating the words "diminished by losses and increased by proﬁts" frequently, the substantive draft clauses' for calculating the statutory cost use the short expression "adjusted", and the present clause seeks to deﬁne it.

"Cost of improvement".--Existing section 12B(2)(ii) says that the actual cost of an asset shall include expendi- ture of a capital nature on additions or alterations to the asset. Even in cases where the actual cost is to be replaced by the. fair market value as on a certain date, improvements subsequent to that date have to be taken into account.

In order to avoid the necessary of repeating the lengthy expression "expenditure of a capital nature" etc., the sub- stantive draft clauses use the short expression "cost of any improvements", and the present clause seeks to deﬁne it.

The existing provision, section 12B(2)(ii), last lines, speciﬁcally excludes expenditure deductible under other heads. * ' Notes to clause 58.

'Clause 58 This clause deals ith income taxable under the resi- F. I duary head "Income rom other sources". Sub-clause' (1) (,0; "$12:

embodies the general principle, while sub--clause (2) lists sourées. some speciﬁc items deserving special mention.

~v

1. Vida draft clauses 50-51.

24---l Law Com. 58 364 Sub-clause (1)--The language adopted is in conformity with that adopted in the draft for the other heads i(e.g., Salaries). The words "which may be included in his 'total income" have been omitted, as unnecessary. Under exist- ing sections 3 and 4, it is only income forming part of "total income" that is subject to tax. V Therefore the words "Which may be included in the total income" are to be read into each section dealing with a head of income, and need not be repeated in every section.

Sub-clause (2)----Item (i) needs no comments.

Items (ii) and (iii) are, in form, new; but sub-sections (3) and (4) of existing section 12 imply that such income is taxed under the residuary head. This implication has' been made express in the draft.

Section 12(1B) is omitted,' as it is not relevant for as-

.--sessments to be made hereafter. -

Notes to clause 59.

Existing section 16(2) provides for two things :--

(1) The proposition contained in the earlier p it tion, providing that a dividend is deemed to be the income 'f the previous year in which it is paid, credited etc. ' (2) The provision for grossing up of dividends contain-

ed in the latter part and proviso.

The proposition at No. (1) above has been em ' died in a separate draft clause,' being one of the clauses deal- ing with deemed incomes. § The provision at No. (2) above forms the subject- 1 tter of the present draft clause. . § Sub-clause (1)--is introductory in nature. ~ , Sub-clause (2)--The grossing up of dividends is ' diffi- cult procedure. The question of requiring comp es to deduct tax from dividends can be considered, on th lines of S. 184-186 of the U. K. Act:a:nd sections 43 and 49 f the Ceylon Act. The recommendations of the Taxatio En- quiry Commission on the subject' may also be seen.3;

On the assumption that the present provision is to be retained, sub-clause (2) attempts to state the rule g - ing grossing up in the formfoif a formula. The e ' ting section states the rule in an indirect manner; the w rding "such amount as would. if i1_loome--tax etc. were d ucted therefrom, be equal to the amount of the dividend " eates some difficulty in actual application, because itbegin with an unknown. The draft formula, though appearin com- plex on account of symbols, is not so difﬁcult to app y.

' Vida draft clause 8. ,7 l ' T. E. Report, Vol. 111., Chapt1} ix, Paragraphs :8-'25, :56-:58 . I 5 ' ' 365 The draft expresses the meaning of the clause in the form of a simple mathematical formuia, (The method of adopting such formula is not novel and is to be found in the South African Income-tax Act.) The formula is explained below 2--

\ "If G is the amount as grossed up, D the amount of the . :

net (zle. actual) dividend, and R the rate of income-tax ap- 5.

plicable to the company expressed as a percentage, then, the existing rule is that-

R G ---- (G x ---- = D 100 0 GR :'.e., G minus ---- = D 100 R B §transpo-

it D =. G( I ---------- sizalcft and 100 ng hand D sidd_. .

.. = __ (byi transpo- ' :e., G ------R------- 3. D I --_ 10.0 ioo--R ' Now G is composed of the net amount of the dividepd, plus the increase; a ' roo)<D i.e.-, G = D + Increase = roo---R , ' xooD gr posit-3 or Increase = ------------------ ---- D . _ ) , 1oo--R Now, if D on the extreme right hand is expressed in terms of fraction of 100-R, then, 100D D (roo--- R) Increase = --j----- . -- -----~--------'

- roo-R roo--R 100 D ---[1ooD--RD i.e., Increase = -------------:-----------+,- 1 . roo----R 'L RD ' i.e., Increase = roo--R Therefore the gross dividend is the actual dividend plus the increase so arrived at. -

Sub-clause (3)-----This is based on the existing proviso to section 16(2). The expression 'sum" been replaced in the draft by the expression " d" p i h is more appro- priate in the context. _ ' . 2 366 Notes to clause 60.

Deductions (pertaining to income from other sources) have been made the subject--matter of a separate clause, as has been done in the case of income under other heads, e.g. proﬁts of business.

Item (i)--needs no comments.

Item (ii)--Existing sections 12(3) and 12(4) provide that where machinery etc. is let on hire, the assessee shall be "entitled to allowances" in accordance with the provisions of section 10(2), clauses (iv) to (vii). Now, these clauses of section 10(2) provide for two things :--

. (1) Deductions for certain expenses, depreciation and loss on sale;

(2) Charging of 'tax on proﬁts on sale, destruction etc. of assets (Section 10(2)(vii), 3rd and 4th provisos).

' Logically, therefore, section 12(3) and 12(4) are to be construed as adopting not only the provisions for deductions but also those for proﬁts, in the clauses referred to. ' The provisions for deductions are incorporated in the draft item under discussion. The words "so far as may be"

have been added, since these provisions may not ﬁt in, word ' by word in respect of income from other sources. ther verbal changes are consequential on the scheme a pted in the draft for existing section 10(2)(iv) to (vi).

So much of section 10(2)(vii) as deals with the charging of tax on proﬁts arising from sale etc. has been em 'odied in the separate draft clause to follow, entitled " roﬁts chargeable to tax". ' \ Item (iii)--Instead of the present wording "solely for the purpose of ..... ..... .." the words "wholly and exclu- sively" have been used, to secure uniformity with the lan- guage of existing section 10(2)(xv).

Notes to clause 61.

Amounts not deductible have been dealt with separate- ly in this clause. 1 Sub-clause (a)--Item (i) needs no comments'. 'In items (ii) and (iii) minor verbal changes have been made on the lines of changes in the corresponding provisio s for income under other heads, (e.g. see the draft for existing section 10(2)(iii), Proviso). 3 ' Sub--clause (b)----Section 12(5), in part, provides that the provisions of existing section 10(4A) apply to income; from other sources as they apply to income from business. Since section 10(4A) relates to amounts disallowed as deductions, this part of section 12(5) ﬁnds a place here.

. The rest of exist" g secti n 12(5) is incorporated the clause, to follow, dez:fi'.r\g wit; proﬁts chargeable to 1 fl :' -- V 367 Notes to clause 62.

Sub-clause (1)---needs no comments. Sub-clause (2)--See notes under draft clause entitled "Deductions".

CHAPTER V INCOMES OF OTHER PERSONS, INCLUDED' IN ' ASSESSEE'S TOTAL INCOME Notes to clause 63.

Existing section 16(1)(c) deals with two kinds of trans- fers: '(1) transfer of income only, without transfer of the corpus, and (2) revocable transfer of the corpus. In order to prevent the two kinds of transfers being mixed up, it is ' considered desirable to separate the two into two sec-

tions.

The draft clause under discussion deals with the ﬁrst kind of transfer. The existin section uses the words "set- tlement or disposition" and en goes on to deﬁne these words as including, besides other things,' "disposition" (see second proviso). For the sake of brevity, only the word "transfer" has been used in the draft throughout the group of clauses incorporating section l6(1)(c). The word 'trans- fer' has been deﬁned separately.

The existing section contains the words "from assets re- maining the property of the settlor or disponer".. These words do not easily convey the exact meaning. The obvi- ous intention is to refer to a case where there is no trans- fer of the property from which the income arises. This is made clear in the draft.

Provisos 1 and 3 to the existinglsection l6(l)(c) are framed in wide language so as to convey the impression that they are applicable to transfers of mere income also. But since transfers of mere income Gthat is, transfers co- vered by the draft clause under discussion) fall within the section "whether revocable or not", it seems incongruous to give any deﬁnition of "revocable" in respect of such transfers. It could not have been the intention that if the transfer'of income is itself irrevocable, then the section will not apply. The ﬁrst and third provisos should therefore' be conﬁnedlto transfers of cor us, being revocable. The cor- responding draft clauses' ac ordingly narrow down the scope. -

Other changes are verbal.

Notes to clause 64.

One or two verbal changes have been made, which do not need any comments. ' .-

' Sec draft clauses 65, 66. i - ' ':

368

Notes to clause 65.» The existing provision, i.e., section 16(1)(c), third provi- so, applies only to "settlement or disposition". It does not mention "transfer", but obviously all transfers of corpus are also covered by the proviso, since the main para. of section 16(1)(c), latter part, speaks of "revocable transfer of assets", and the proviso is intended to save certain trans-

fers which, though revocable, are not revocable for a certain period. Hence the draft mentions transfers.

Sub-clause (1)--The existing provision speaks of a set- tlement etc. which is not revocable during the life-time of the "person". This "person" is obviously the transferee (see the opening line of the existing section 16(1)(c) which be- gins with "all income arising to any person"). This has been made clear in the draft in para. (a). In the case-of a transfer by way of trust, the transferee, that is, the person to whom the income arises, is in theory, the trustee, but in substance the beneﬁciary. This has also been speciﬁcally ' provided for in the draft.

Sub-clause (2)--The verbal changes made are conse- quential. - / Notes 'to clause 66.

The small verbal changes made are consequential".

Retransfer of "income", mentioned in the existing sec- tion and also in the draft, will be applicable Where, though the transfer is of corpus, the income is retransferable or resumable.

The deﬁnition of "settlement or disposition", contained in the second proviso, has beenreplaced by a deﬁnitio' of transfer. The deﬁnition of "settler or disponer" co ain- ed in the existing second proviso, does not seem to be necessary. The intention behind the deﬁnition, probably, was to clarify that in the case of a settlement by two or more persons, each of the settlors is regarded as asettlor. It is unnecessary to have such a provision by way of specific deﬁnition.

Notes to clause 67.

The words "being a male" have been added afte "an individual". The reason is, that the provision in que tion applies only to males as is now settled by the Sup eme Court". , Item (i)----The existing sections 16(3)(a) and 16(3)(b) both begin with the words "so much of the income". This is provided in the draft clause, opening lines, by the Words "all such income", and repetition in the item corresponding to section 16(3)(b) has been avoided. 6 ' Sec notes to draft clause' 63 and 6 - l

- C.I.T. us.' Sodro Dem' (197) 32 1.1%. pm s.c.

' S 369 The signiﬁcance of section 16(3) lies in the principle that the income of one person (wife, child etc.) is regarded as the income of another person. In other words, the income arising to A is attributed to B. This has been brought out directly in the draft by commencing each item with words "to his wife" etc. (The existing items begin with words de- noting the property and not the person).

The words "her husband" have been replaced by "such individual" for the sake of precision.

The Words "of which" a person is a partner, have been replaced by "in which", as being morehappy in the context. ' Items (ii), (iii) & (iv)--See notes to item (i).

Item (v)--The existing section 16(3)(b), while speak- ing of "minor child", does not exclude the case of a married daughter. But an exception should be made for married daughters here also, as has been made by the existing sec- tion 16(3)(a), item (iv), since there is no reason for not having the same provision in both the cases. The words "not being a married daughter" have, therefore, been ad- ded in the draft. -

CHAPTER VI AGGREGATION OF INCOME AND SET-OFF OR CARRY FORWARD OF LOSSES Notes to clause 68.

Incomes on which income,-tax is not payable have been dealt with in a separate Chapter. Sin'_ce_ such incomes form part of the total income for purposes of rate etc., this clause states'that rule clearly. V Notes to/clause 69.

Sub-clause (1)---Existing section 16(1) (b), dealing with the method of computing the share of the partner in the income of the ﬁrm, presents some difficulties. In the ﬁrst place, the words "increased or decreased respectively by his share in the balance of the proﬁts or loss after the deduction of any interest, salary, commission or other re- muneration payable to any partner, in respect of the pre- vious year" create some ambiguity. 38 it is not clear whe- ther the words "after the deduction" are to be read with "his share" or with "ba1ance"ror with "proﬁts or loss of the ﬁrm". Secondly, the Words "increased or decreased res- pectively" leave some scope for impyqvement and simpli- ﬁcation. Lastly, the section is a bit ﬁrvolved. An attempt has, therefore, been made to recast the provision and 'state the mode of computing the share step by step.

The direction to deduct interest etc. payableto any partner, contained in the existing section, is obviously necessary, in view of the fact that existing section 10(4)(b) disallows the deduction of any payment by way of interest etc. made by the firm to a artner.,What section 16(1)(b) does is to authorise this ded ction positive provision, when computing the partner' share. ' V i E :

370

The existing expression "proﬁts or loss"_ has been re- placed by "total income", which is more precise.

The word "paid" has been used in paragraphs (a), (b),

(c), instead of the existing word "payable". The word has been deﬁned in the clause. This will secure uniformity with existing section 10(5).

Sub-clause (2)-----'I.'his clause is newand is intended to make it clear that the classiﬁcation of income under the various heads as given in existing section 6 is applicable to the share of a partner, in the same way as it applies to the ﬁrm. In other words, just as a ﬁrm's income can be classiﬁed under "Income from house property", "Income from business" etc., similarly, even after the apportion- ment of the income to. the partner, the amount apportion- ed t-o a partner is classiﬁed under various heads.

Sub--clause (3)----This is new. It gives effect to a deci- sion of the Bombay High Court' which holds that interest paid on money borrowed by a partner and utilized by him for investing as capital in the ﬁrm is allowable as a deduc- tion in computing the partner's total income, in so far as the total income comprises his share in a ﬁrm's income.

For the sake of comprehensiveness, it has also been made clear that no other deduction is allowed in respect of the share.

Sub-clause (4)----Existing section 16(1)(b), proviso, has I been reproduced in this sub-clause. Strictly speaking,' this provision should be placed along with provisions for set off. However, it serves a useful purpose as indicating that there is, scope for set off. It has therefore been allowed to remain here. The words "in accordance" would, of course, make it clear that a partner's right to set off is not absolute, but is subject to the provisions of existing section 24. ' ' Notes to clause 70.

This clause is new and is intended to give eifel to the legal principle that unexplained cash credits appe 'ng in the "books of accounts of the assessee are assessab e as income'. ' Under the decision of the Patna High Court cited, above', such cash credits are treated as the income oﬂ the ﬁnancial year preceding the assessment year, as the asses- see could not have opted for any other previous year! for such items. We have by this clause deﬁnitely laid down that the previous year to which the income represented by such cash credits could be related is the previous year for which the account books are maintained and the cash credit is entered. l l T' I Shanta' irum Mormjeamll'. err (.95 ) 27-ITR-69. ' Cf:-C.I,.'1'. Vs. P. Daralia ;& Son:-(1 27-I FR --~515(Patna High ). See also page 557 of Kanga and Pulkfu N , 1958 Edition. _ - E 1 5 ( 371 Notes to clause 71.

This is new. Investments not appearing in the books and not explained satisfactorily are made assessable for the ﬁnancial year in which the investments have been made. < ' Notes to clause 72.

This is new. It deals with set off of a loss from one business against pnoﬁts under any other business.' The principle is well accepted by courts', and has been codiﬁed for the sake of comprehensiveness.

Notes to clause 73.

General----The scheme of section 24 of the existing Act has, in the draft, been altered by a redistribution of its pro- visions. The existing section deals separately with---

(1) set off in the same year, ahd (2) set off in succeeding years.

But an alternative method of arrangement of the pro- visions would be to deal ﬁrst with set off of losses, whe-

' ther in the same year or in succeeding years and then ' see Kanga. and Palkhiva.la's commentary $11 the Act state the exceptions in both cases. This would giveto a lay- man a complete picture of What is to be done with regard to the losses sustained by him. The draft, therefore, pla- ces the provisions contained in the existing section 24 in separate sections in the following order-

(i) General provision regarding set off in the same ' year and set off in the succeeding years;

(ii) special provisions regarding speculation losses;

(iii) special provisions regarding set off of losses «under capital gains;

(iv) special provisions for registered ﬁrms;

(v) special provisions for unregistered ﬁrms assessed as registered ﬁrms;

(vi) sfpecial provisions for partners of unregistered rms; ~

(vii) change in "constitution of ﬁrms; and

(viii) submission of returns in respect of losses. 'Sub-clause (1)----As already explained above, the gene-

ral rule relating to set off; whether in the same year or in succeeding years, has been dealt with in the beginning.' 'Anglo-French Textil;t3'a L¢d.,V. C.I.T.§ 09;), 2 LT.R. 82. For other cases 31958 Edn., p. 322. _ 'Draft clauxc 73. i i .

372

Sub-clause (1) states the rule relating to set elf in the same year (from one head to another). The existing expression "loss of proﬁts or gains" is slightly inappro- priate, as it speaks of "loss-" of "proﬁts". It has, therefore, been replaced by the words "net result is a loss... .... .." The words "subject to the other provisions of this Chap- ter" have been added in order to make it clear that there are special provisions regarding ﬁrms, capital gains, specu- lation losses etc. Whichappear in the subsequent clauses.

Set off is allowed, not with reference to the previous year, but with reference to the assessment year. Previous years may be different according to the source of income, but the Income-tax Oﬂicen is concerned only with the as- sessment year for which the loss is to be computed. This is the position for carry forward also. Suitable verbal chan- ges have been made on this point in the draft clauses concerned.

Under the existing law a loss arising under any head is to be set off against income under the head "Capital gains". Now it is well understood that the taxation under the head "Capital gains" is at a lower rate than the taxa- tion under other heads, by the operation of existing section 17(6). The result is, that an assessee is forced to set off a loss against capital gains. He thereby obtainsa "reduc- tion of his taxable income which does not fetch the g same beneﬁt as it would have fetched if the set off had beeh con- ﬁned to other heads. For example, if a loss of Rs; 2,000 under the head "Income from property" is set off against capital gains, then, assuming that the tax on capital gains works out at 10 N.P per rupee, the reduction in tax §WhiCh the assessee would obtain by such set-off would be R33. 200. While, if the assessee is to set off the loss only against in- come other than-capital gains, then, assuming that the rate of tax,under other heads is 25 N.P per rupee, the educ- tion in tax which the assessee "would -obtain by su_h set off would be Rs. 500. It would seem that there is rea- son for driving the assessee to *a course which cau$s pe- cuniary loss to him. It may be noted that in the converse case when a loss is sustained under capital gains, the'asses- see is not allowed to set off the loss against any othe head, vide existing section 24(2A). The position regarding et off against income under the head capital gains has th%§efore been altered on the lines indicated above. The nec sary cussion, and the draft clause corresponding to existi sec- tion 24(2A) has been made comprehensive so as to es body the law relating to set off otfa loss under other.' head against capital gains, and 'vice versa, with the change dis- cussed above. - ' changes have been made inthe draft sub-clause und'%"dis--.

Sul-J--clause (2)---- raftingcfianges have been ma e on the lines of the. ch ges e in existing section 24(1). See notes to sub-cla e (1) ve. , 373 The words "had no other head of income" 'have beeen replaced in the draft by the words "had no income under any other head", in order to make the intention clear that carry forward of the whole loss is allowed because there is no income againstlwhich the loss could be set off in the year in which the loss arose. .

Section 24(2), Proviso (a_); has been already repealed.

Section 24(2), Provisos (c), (d) and (e), are dealt with in succeeding clauses.

Section 24(2), Proviso (f), has been omitted, as its ope- ratgén was conﬁned to assessment years which have all ex- pir . , Section 24(3) is being transferred to the Chapter on Procedure for Assessment.

Sub-clause (3)----Does not need any comments'.

Sub-clause (4)--Carry forward of losses is allowed for a maximum period of eight years now See the amendment made by the Finance (No. 2) Act, 957]. Sub-clause (3) embodies this rule. In' the existing Act (as amended in 1957), the words "but no loss shall be so carried forward for more than eight years" appear as a part of section 24(2), clause (iii). This causes an ambiguity as to whether the limit of eight years is to be counted with reference to the carry forward referred to in section 241(2)(iii) or whether in counting eight years the year of first carry forward under section 24(2)(ii) is also. to be counted. The latter construction is, obviously, what was intended. In order to make this clear the limitation has beeneplaced in a separate sub-clause. ' .

Notes to' clause 74.

Genev-al--.Speculation losses have been dealt with se- parately in this clause. . ' Sub-clause (1)--The expression "speculation business"

has been substituted for the expression "business consisting of speculative transactions _etc.", since the draft clause relating to chargeability of income under the head "'Proﬁts and gains of business etc."' niagkes use of the ex-

pression "speculation business".

Sub-clause (1) relates to the very; previous year which the loss was incurred and is bafsed on the first pro-

_viso to existing section 24(1). ~ Sub-clauses (2) and '(3) and (4)-;~The carry forward and set off of speculation losses has been dealt with here. The clause has been made self-contained, for the sake of convenience, though this has necessitated a slight' amount '-

of repetition.' 1 Ana the correct interpretation' this pr is'o_n see now Aluminium Corporation qf India vs. C.I.T. West B , A.'R?1x*58) Cal. 404.. I ' Draft clause 28, Explanation 2.

' See also notes to draft clause 73 ( 374 _ Notes to clause 75.

The 'changes made are verbal and do not need any comments. Notes to the main clause dealing with set off' explain the drafting changes made in the existing section 24(2), and the draft clause under discussion has also been framed keeping in view those changes.

As alreadyexplained in the notes to that clause, the position regarding set off against capital gains has been dealt with comprehensively in this clause.

Notes to clause 76. , Sub-clause (1)----does not need any detailed comments.

Sub-clause (2)--The prohibition against carry forward by a registered ﬁrm, contained in existing section 24(2), proviso (c), earlier half, has been embodied in this clause _ with a few drafting changes explained below.

The existing provision refers to the loss of a registered ﬁrm "which has been apportioned". These words are mis- leading; in the case of a registered ﬁrm apportionment is compulsory and universal. and no question of conﬁning the provision to a loss which "has been" apportioned can arise. The language has, therefore, been slightly altered, and the words in question omitted.

As a matter of fact, it is not necessary to have any pro- vision at all to the effect that a registered ﬁrm cannot carry forward its losses. The reason is, that when the loss of A is apportioned between B and C, it no longer subsists as the loss of A, and the question of its carry forward by A should not arise. The proviso is, however, useﬁul by way of clariﬁcation, particularly in View of the péculiar nature of the provisions for assessment of ﬁrms and part- ners in the Act, and has, therefore been retained.

The prohibtion is presumably applicable to the' carry forward and set off of losses under capital gains also, and the draft has been framed on this assumption. ' Notes to clause 77.

Existing section 24(2), proviso ((1.), says that w en an unregistered ﬁrm is assessed under existing section 2 5)(b), its losses shall "also be carried forward and set oﬁ??under this section as if it were a registered ﬁrm". This is not an accurate way of stating the position. A registered ﬁrm is never allowed to carry forward its loss [see existi sec- tion 24, sub-section (2), proviso (c), earlier half], and there- fore, to say that the loss may be "carried forward as if it were a registered ﬁrm" is meaningless. The language has, therefore, been altered.

Notes to clause 78.

Gene1'a.l--The second proviso to existing section 24(1) consists of two parts, the earlier part dealing with unregis- tered firms and the latter part dealing with registered ﬁrms.

1 Clause 73 (I).

375

This,c1ause deals with unregistered ﬁrms, while registered ﬁrms have been already dealt with'. ' Sub-\clause (1)--The existing provision, for unregistered ﬁrms, says that the loss of the ﬁrm shall be set off only against that income of the ﬁrm and not againt the income of any of the partners. When analysed, this gives the fol- lowing propositions :--

(1) The loss of the ﬁrm shall be set off only against the income of the ﬁrm. This proposition has been se-

parately dealt with in the draft, though it follows from the principal provision in the draft" i.e., any assessee is entitled to have loss under one head set off against the income under any other head. That provision applies to unregistered ﬁrms, just as it applies to the other assessees.

(2) The loss shall not be set off against the income of "any of the partners".

What is really meant is that where an assessee is a partner in an unregistered ﬁrm and his share is a loss, the loss cannot be set off against his other income. Draft sub- clause 2(a) embodies this proposition.

Sub-clause (2)--As to para. (a), see notes above. As to para. (b), minor changes have been .made. ' Strictly speaking, this provision is also unnecessary. The main provision in section 24(2) applies to all assessees, including unregistered ﬁrms. Therefore, any loss incurred by the ﬁrm is to be carried forward in computing the ﬁrm's income. ' The question of its carry forward in a partner's income cannot arise. The provision is, however, useful by way of clariﬁcation, as it emphasises the propo- sition that a partner in an unregistered-ﬁrm cannot claim a separate set off and that all that is allowed is the collec- tive set off available to the ﬁrm as a whole.

Notes to clause - 79.

This clause does not need any detailed comments, ex- cept that the draft makes it clear that the limitation im- posed by the existing section applies in respect of set off under existing sections 24(1) and 24(2A) as well as under

section 24(2) and section 24(2B).

Notes to clause 80;

A part of existing section'22, sub-(section (2A), has been incorporated in this clause, since it germane to the set _ off of losses. -

The limitation should apply not only to carry forward under existing section 24, sub-section 62), but also to carry forward under existing section 24, sub-section (2B). This has been made clear in the draft.

' Draft clause 76.

', Draft clause 73 (1).

376

CHAPTER VII INCOME ON WHICH NO INCOME-TAX IS PAYABLE Notes to clause 81.

General-

1. It should be remembered that exemption from tax is totally different from exclusion from total income dealt with in Chapter III. In the latter case the income excluded does not form part of the total income, while in the former case it forms part of the total income but no tax is payable thereon though for other purposes such as rate, etc., it con-

tinues to be part of the total jncome.

2. Exemptions from income-tax strictly so called can be classiﬁed as follows :--

(i) Exemption. enjoyed by an income which, though it forms part of the total income, is not subject to tax. (Such income would count for determining the rate; but once the rate is determined, the in-

come is not itself taken into account in calculating the quantum of tax). ' T

(ii) Sums on which rebate of tax is allowed at the ave:

rage rate of tax. '

3. The existing Act does make adistinction between categories (i) and (ii) above. But the distinction is obviously necessary. The draft, therefore, deals with the two categories in separate chapters. .

4. In the draft, exemptions which are really in the ' nature of rebates in respect of expenditure have been placed under category (ii). *

5. The case of earned income relief presents some spe- cial features and has been discussed in the notes tog the clause relating thereto.

6. Exemptions in respect of super-tax have for th ; sake ' of clarity, been dealt with separately in Chapter , on super-tax. -

Clause 81. Existing section 15A, earlier part, has'been embodied in this clause, with minor verbal changes.

The latter part of the section has of course been mit- ted, as it becomes obsolete in view of the recent" legis ative practice not to provide for earned income relief.

The earlier part has however been retained here,§leav- ing it to the Government to omit it if it is decided perma- nently to abolish earned income relief. ;

Notes to clause 82. . '.

The clause does dot neediahy comments.

377

The exemption from super-tax has been dealt with in the Chapter on super-tax.

Notes to clause 83. -

The clause does not need any comments.

The exemption from super-tax has been dealt with in the Chapter on super-tax.

The question of providing for grossing up of dividends of co-operative societies [on the lines of the provision for companies--existing section 16(2)] hasnot been considered, as the provision in respect of companies has itself provoked a lot of controversy.

Notes to clause 84.

The clause does not need any comments.

The exemption from super-tax has been dealt with in the Chapter on super-tax.

Notes to clause 85.

Existing section 15C has been embodied in this clause.

The few verbal changes that have been made are explained below :

Sub-clause (2)-----The conditions speciﬁed in existing sec- tion 15C(2) are cumulative. This is clear from the existing language and has been made stizll moreTc1ear in the draft.

Sub-clause (6)--Existing section 150(6)' uses the expres- sion "financial year". This hasfbeen r laced in the draft by the expression "assessment year" w ich is more appro- priate. . -

The existing sub-section speaks of the four "assess- ments" immediately succeedin . What is meant is, the four "assessment years". The T aft makes this clear. An assessment made in a particular year is not necessarily identical with that assessment year, sinte sometimes an as- ' sessment is made late, after the assessment year has expir--_ ed.

The exemption fromsuper-gtax hasibeen dealt with in the Chapter on super-tax. ' ' Notes to clhuse This merely reproduces existing 3 tion 15C(4) and as the subject matter is different it is mad a separate section.

Notes to cﬁause 87;.

Items (i) 'and (ii)--The second third provisos 'to existing section 8 have been embodied in these items with slight verbal changes. The expression "receivable" has been replaced by the ward "received".' I 1 l 2 ' Compare draft glausc :8. 1 E if 378 Item (iii)--embodies existing section 14(2)(a), -with slight verbal changes.

Item_ (iv)--deals with the exemption contained in exist- ing section 14(2)(aa). The existing wording is slightly involved. An attempt has been made in the draft to sim- phfy the expression by making a few verbal changes, and splitting up the provision into clauses.

Item (v)------does not need anyacomments.

CHAPTER VIII REBATES AND RELIEFS 9 Notes to clause 88.

Generalv--The provisions contained in the existing Act which are in the nature of rebates of income-tax on cer- tain expenditure have been collected together in this Chapter. (The discussion at the beginning of notes to the previous Chapter explains the scheme adopted in the 3 draft in respect of exemptions from tax.)' Sub-clause (1),' paragraphs (a) and (b)---These deal with rebate in respect of _life insurance premiums. The following drafting. changes have been made-

(i) The words "in the previous year" have been added in the draft for existing section 15(1), for the sake of precision. i

(ii) The existing section 15(1) speaks of sums paid "to effect" an insurance, but when speaking of d&erred annuities it uses the words "in respect of" a; con- tract, for a deferred annunity. For the. sake of uniformity, the e ression "to effect" has, in the draft, been used for th the cases. See items (i) and (ii) of paragraph (a). '

(iii) While sums paid as ordinary premium might be co- vered by the existing words "to effect" an insu- rance, sums paid for the purpose of keepin T alive a policy or preventingit from lapsing may ot be covered by those words. In the draft, the efore. the words "keep in force" have been adde both in respect of insurance and in respect of co tracts for deferred annunities. See items (i) and ii) of paragraph (a) and also paragraph (b).

Sub-clause (1), paragraph (c)--'l'he words "in the pre- vious year", have been added to secure precision.

The words "provided that the sum so deducted shall not exceed one-ﬁfth of the salary", existing in section 7. sub-section (1), First Proviso have in the 'draft been re- placed by the words "in so far as the sum so deducted I. See notes to draft clqisc 8x-- "¢3¢mral". a "5 = ' 1 " =

-3'79 dpes not exceed one-ﬁfthof saIaJ}"T. Where the deduc- tion exceeds one-ﬁfth of the salary, -the existing language would, if construed strictly, exclude the deduction in toto. The obvious intention, however, is to limit the exemption to one-ﬁfth and not to completely dixllow the exemption in -such cases. ' ' The limit of one-ﬁfth cogéained in the existing section has been repeated in the dr ; but, tiirice existing section 15(3) has been amended recently (vide Finance No. (2) Act 1957) so as to raise the limit under that section from one- ﬁfth to one--fourth. it would be desirable to make a corres- ponding increase in the limit under existing section 7(1) First Proviso, also.

Sub-clause (1), paragraph; (d) & (e), do not need any comments.

Sub-clause (2)----Existing section 1§(2A) has been split:

up for the sake of simplicity; Further, the negative form of the existing provisions has been converted into a positive one, vide the opening lines. . -

The words appearing at the end the existing provie sion, "and which is not the sum actually assured" really indicate a beneﬁt over and above the: assured sum. This ' is made clear in the draft. The existing words "either be-» fore or after death" unnecessarily inortease the length of = e the provision; the woods in , draft; 'Tunder the policy"

will meet both the situations. (It is "air that the (existing: words "which is to be or znaygbe rece vied" are to be con-- ﬁned to payments made by the company under the policy.

The existing words "either by person 'paying the premiums or by any other person" haje heen replaced by' the words "by any person", simplicity. p Sub-clause (3)-----ExistiI|g =ctinn 1ii(3) has been re- produced here in a simpliﬁed piorm. ; .

The existing sub-section \oes no expressly mention sums exempt under section 58 _for t' 'purpose of count- ing the maximum aggregate the t can ﬁxempted; but the effect of the words at the en M of s _o .5813, main para. "in the case of an employee bef treated = or all the purposes of this Act as if it were a sumgto whi' ;'_the provisions of section 15 apply" is that the employ contributions are also to be counted for the p es of' ﬁction 15(3). For this reason, sub-clause (3) 1 s a re ence to all the sums exempt under any item of the will include sub-clause (1) (cl) also.

Notes to clause 39..-

General-----What the Act contemplates in section 15B is really a rebate (at the ave ge rate ' 2.1_I'?.e$pect 9;', tax. The provision has, therefore, ' pl the pqeaent Chapter on Rebates. ' ' a"

25-47 Law Com.i58 V an clause, which 380 The First Proviso to existing section 1513(1) hasbeen dealt with in the Chapter on Super-tax, where the exem tion for super-tax in respect of donations has been (1 t with separately'. ' Sub-clause (2)---does not need any comments.

Sub-clause (3)--The changes made are all verbal and consequential on the scheme adopted in the Act in respect of exemptions.

Sub-clause (4)--does not need any comments, since the changes are minor and verbal.

Sub--clause (5)--The existing section 15B(2) requires that certain conditions should be fulﬁlled by an institution or fund to which the section applies. Condition No. (iv) contains the word "or" at the end and is followed by con- dition No. (v). It is not clear whether the "last condition No. (v) is an alternative to condition No. (iv) only, or' whe- ther it is to take the place of all the conditions (i) to (iv). Since condition No. (iii) contains the word "and" at the end, it can be argued that conditions Nos. (i) to (iv) are to be taken together and condition No. ,(v) is to be taken s'ep- arately. But thisdoes not seem to have been the inten- tion; the result of such construction would be to eliminate a very important requirement, namely, the requirement in condition No. (i) that the income should be exempt under the category for "Charitable Institutions". The ﬁrst three 4 conditions should be fulﬁlled by all the institutions or funds, While the fourth and ﬁfth conditions are alterna- tives to each other. This intention has been brought out in the draft by combining the contents of existing condi- tion No. (v) with condition No. (iv). ' Condition No. (i) at present requires that the institu- tion should be one "the incmne whereof is exempt iunder clause (i) of sub-section (3) of section 4". But in: cases where an institution has no property, the applicati n of this condition becomes difficult. The wording has, . here- fore, been slightly altered. _ Further, institutionst ough not strictly falling under section (4) (3) (i), such as iver- sities or educational institutions not existing for jproﬁt, should be regarded as standing on the same footin as purely charitable institutions, and they have, thefefore, been included in the draft (just as their income ha' been exempted----See the draft clause inserted on the s 'ect'. Institutions depending on voluntary contributions ; ave also been included in the draft. i Existing condition No. (iv), when mentioning univer- sities, requires that they should be established by law, but when speaking of other educational institutions recognis- ed by or aﬂiliated to universities, it does not add the re- quirement that the university should be established by law.

I Vida draft clause :09 (3). - g ., 'bnftclauae n(24). T , - i , .

'.,_V 381 The intention, obviously, is to require. that the afﬁliating or recognising university must itself . be established by law. This has been made clear in the draft.

Sub-clause (6)--does not need any comments.

The exemption in respect of super-tax has been dealt with separately in the Chapter. on super-tax'.

It would be conducive to simplicity and will lessen the.

work of the administration, if I provision is made for the issue of a certiﬁcate (after enquiry by the Income-tax Offi- cer or the Inspecting Assistant Commissioner having juris- diction over the institution or trust) that the institution or trust satisﬁes the conditions of this section. Donations made to such institutions or trusts will automatically be' entitled to the exemption if the other'conditions of the section are fulﬁlled. This would obviate enquiry every year by differ-

-ent Income-ftax Officers before whom the exemption is claimed by donors in different jurisdictions.

Notes to clause 90.

The existing provision is conﬁned to "Proﬁts in lieu of salary". In the draft it has been extended to "Perqui- sites" also. Perquisites may sometimes be in cash, and the provision might be useful in such casa;

The power to grant relief in respect of super-tax has been dealt with separately in the Chapter on Super-tax".

Notes to clause 91_.

Existing section 25, sub-sections (3) and (4), deal with two things}-

(i) total exemption for income of the year in which a business is discontinued or succeeded to,

(ii) substitution relief, whereunder. the income of the year of discontinuance or succession can be substituted for the income of the immediately preceding year. . ' ' The ﬁrst concession has been alredw dealt with in a previous _chapter;' the second oncessi n has been dealt with in the clause under discus 'on. A f W drafting changes have been made in order to secure cla'°ity.

As to the position concerning super-tax, see the Chap- ter on super-tax.' ' Vida draft clause :09.

5 Vida draft clause H2. , 8 Via dun cluue :3 in chapter 111.; 'r 'Vihdritclmuroo. , 882 The provision embodied in the draft is applicable only to a business assessed under the 1918 Act. It is for consi- deration whether this concession is at all necessary after the lapse of such a long time'.

CHAPTER IX DOUBLE TAXATION RELIEF Notes to clause 92.

This clause does not need any comments. Notes to clause 93.

The following drafting changes have been made in the existing sections-- w

(i) The word "previous" has been added before: the word "year", since residence is deﬁned with ;&'efer- ence to previous year.

(ii) The existing words "country with which there is no reciprocal arrangement" have been replaced by the words "country with which there is no' agree- ment under section .......... .. [49A]" for their sake of precision. The "reciprocal arrangement" }refer- red to in the existing section could only be an agreement under section 49A. ' E

(iii) Sub-sections (2) and (4) of existing section} 49D have been omitted, as their operation is now epent.

(iv) Suitable words have been 'added at the en" of sub-clause (1) to cover a case where the ndian rate and the foreign/rate are equal. 5 Notes to 'clause 94. - \ Existing section 49C(1) contains a reference to ction

49. But section 49 has been 'repealed by the Inco e-tax and Business Proﬁts Tax. (Amendment) Act, 1948 ( 8 of 1948). The reference to section 49 has, therefore' been omitted in the draft. - i No other change' has been made.

CHAP{I'ER x PROVISIONS AGAINST :AVOIDANCE or T

- Notes to: clause 95. i ' 9 V Sub--section (2) of sectidn 42 has been redrafte with a" view to bringing out What was really intended. he ob- ject is to catch the income of the resident where busi- ness is_ carried on between a resident and a non-residdnt and the proﬁts of such business are camouﬂaged_.in such7a way A . El 9 ' 1 Cf. the discussion info Report 'athe Incbinc-tax Invcstigqtiqp sion (:948).pases :53-I55-1:-ram ' -35o- " ' 1 I 383 that the resident receivesteither. no proﬁts or less than nor- mal proﬁts. In such a case the Income-tax Officer ~ has to determine the true proﬁts of the 1'?-sident attributable to such camouﬂaged transactions. This is now brought out clearly in the draft. ' ' The existing section says that the income of the non- resident shall be chargeable "in the name of the resident who shall be deemed to be..." .......... .. the assessee". These words have been replaced in the draft by the words "and include such amount in the total income of the resident". This verbal change has been made for the sake of unifor- mity, and for emphasising the true construction of the sec- tion as explained above.

Notes to clause 96.

The existing section 44D "relating toitransfer of assets to non-residents is considerably involved in its expression. It is difficult to understand the section ias a whole and its grammatical structure without some effort.' The section has been slightly recast en thefllines of section 412 of the U.K. Act.' The importantpioints of difference between the existing section and the draft clause are ex- plained below :--

(1) Sub-sections (1) and (2) of the existing section 44D repeat the words "transfer of assets by,.virtue or in con-

sequence whereof, either alone or in conjuction with asso- ciated operations, any income ......... becomes payable"

etc. This condition precedent gas been: transferred in the draft clause to the opening lin , thus saving the repetition appearing in existing sub--section (2). ' ' of assets must be one whereby "any ncome which, if it were the income of such persqn, woul be chargeable to income-tax" becomes payable to a non-resident. This re- quirement of potential chargeibility ig thus applicable to the income arising from the transfer. Elﬁn the draft, how- ever, it has been removed from that p ace and shifted to the income over which the rqsident as power to «enjoy [See draft sub-clause (1) (a)]. :This c Iige is in "hat-mon'y= with (the more important change dis y$ed below under item 5).

(3) In existing section 44D(1), the: reference to" asso-

ciated operations occurs only in the beginning of the sec- tion, that is,. the portion refenring to ','a; transfer whereby certain income arises. This .1-qeferencegis.-not repeated in the subsequent portion deali wih qcguisition of rights- by the transfer. In other ' A ords, the rights giving the-_ power to enjoy' certain: income must, at present, ﬂow from (2) The existing section 44D(1) sags that a transfer' . .'.Fo'r--a criticism of 3.1412 of the U. Act coimsponding to s; '4.4D of our Act, s_cg_: p. gr 1-, am. 1029(5) of the _, :1 of thci Royal 'Commission on. thcf"_l:axation of ts and.Incomc"(Fi_ , Rcpoxjt). E, i 1 . - ' -

' U. K. lncométax Act, 1952. Cf._' I K. F" ' e1Act, 384 the transfer itself. Under the clause as drafted, however, these rights might ﬂow either from the transfer or from its associated operations.

(4) The words "m consequence of whic " occurring for the second time in the existing section 44D(1) have been omitted in the draft. These words related to "rights .......... ..in consequence of which he _has.........power to enjoy". It seems sufficient to have the words "by virtue of" in this context. ' (5) Under the existing section 44D(1), the income to be taxed as the income of the resident is "that income", that is, the income earlier referred to as arising from the transfer to a non-resident, which the resident has power to enjoy. Thus, two ingredients are required for taxing the income at present: (i) the income must arise from the transfer, and (ii) -it must be income which the resident has power to enjoy. The draft clause, however, makes an im-' portant departure here. All that is required in order to tax an income is that (other conditions being satisﬁed), it must be income which the resident has power to enjoy. Under the draft it is not necessary that the taxable i ' me should coincide with the income arising to a nonire (dent from the transfer. Thus the power to enjoy must arise from the transfer, but the words "power to enjoy ésuch gtcome" have been replaced by "any income of a noti-resi-

ent". ' (6) The existing section 44D(2) suffers from on) im- portant ﬂaw, in that it does not state how the'sum re rred to therein is to arise. The section says: "Where any rson receives or is entitled to receive ....... ..any sum pa by way of loan etc ....... ..such income shall ....... ..be deemed to be the income" of the resident. One would hawe ex- pected the section to say, like sub-section (1), "when any person by means of any tra er .......... ..receives any" um"

etc. The draft sub-c1_ause (1 (b) makes it clear th t the capital sum must be one "the payment whereof is ' any way connected with the transfer '. . 1 This is merely a condition to be satisﬁed. ' What! is to be charged to tax is a different matter, discussed the next item. E (7) The existing section 4g4D(2) says that "such income shall be deemed to be the income" of the resident: It is with some effort that one is able to locate the income to which this word "such" is a licable; it is the inconie be coming payable to a non-resi eht under the transfer": This has been expressed in a more intelligible form in the draft.

(8) The length of the existing section 44D(2) has been reduced in the "draft, by replacing the words "any sum paid ....... ..otherwise an_ hig~income", by the words 'capi-

tal sum" which has _ n.s+(i-ately defined in dr sub-

clause (6).

I 385 Notes to clause, 97. A _ Existing sections 'i4E and.44F have been combined in this clause, and certain important changes of substance have been made as follows:--- ' (1) Existing section 44E(l) applies where the owner of the securities, having agreed to sell or transfer the securities, "by the same or any collatoral agreement"

agrees to buy back etc., the securities. In" practice, however it is difficult for the Department to prove that there was an "agreement" to buy back the securities. Moreover, as a matter of substance, it does not appear to be necessary to insist on the requirement of "same or collateral agree- ment". The object of the section is to ' revent avoidance of tax, and the provision should exten to all cases where the transaction of sale and re-purchase of securities results in such avoidance. The sco of the section has, accord- ingly, been extended in the raft [seelsub-clause (1)].

(2) It has, however, been made clear in the draft that the provision in the existing section 4413 will not apply if there was no avoidance or if the avoidance is not sys-

tematic; see draft sub-clause (4) which mentions sub- section (1) speciﬁcally. .

(3) Existing section 44F, operative part, deals with the cases where a person transfers securities before the dec- ' laration of the dividend, thus' shifting the right to receive the dividend to another person. The operative part of this section has been incorporated- in draft sub-clause (3). An important departure from the existing section has, how-' ever, been made; the existin' section provides for appor- tionment, vide sub-section (2 , latter "half read with sub- section (3). Under it, only the inconmelattributable to the period upto the transfer is deemed to The the income of the transferor. Under the draft, however', the income for the full year will be deemed to be the income of the trans- feror, vide sub-clause (3), lat line. - Since the rovision is intended to stop avoidance, it should ;go the ful way.

ance is "more than 10 per t of t amount of income- tax" for the year. This requkement as been omitted in the draft, in order to make the provision against avoidance more stringent.

(4) While the operative "portion of section 44F thus ﬁnds a place in the draft, the machin¢"ry,provisions in sub- sections (4), (5) and (6) of thatsection have been omit- ted. The notice under section 44F(1)swill now be covered by draft sub-clause (7). ' Apart from these important cha s, the other cha es are of very minor nature and n *n_o_ comments. e existing section 44D(7)(c) relatinghtgidzmdends deemed to have been distributed to a pe , n omitted in._v_iew of the form in which section,_23A ,_ its mend-

Existing section 44F(2) a' plies 9%?' where-the avoid- ' :

ment in 1955.

. . ....4--_..-,... _.

3'86 CHAPTER' 'XI 'SUPER4TAX Notes to clause 98.

Sub-clause (1)--The follovving drafting changes have been made :--.

_ 1. Drafting changes made in the charging section for income-tax (section 3) have been followed in drafting this clause also. Thus------

(i) the word "year" has been replaced by "assess-e ment year",

- (ii) after. the words "previous year", the wordsl "or previous years", have been added,»

(iii) the enumeration of v rious classes of ass_e sees ("individual", "undivi ed family" etc.) has g replaced by person",

(iv) a proviso has been added to deal with cases were tax is charged in the year of income or ded cted in advance. ' :

een .

. 2. The words "save as otherwise provided in this 3 ct"

have been added to make it clear that the charging.p ovi- sion is subject to Gtherprovisions, e.g., provisions to re- bates etc. Cf. the words "in. accordance with. and su ject to the provisions of this Act," in existing section. 3. '

3. The words "a Central Act" have_been replaced by "any Central Act"; Cf. existing section . , Sub-clause (2)---does not need any comm\ents.

Sub-clause (3).--The existing. section deals only' ith the case of a ﬁrm assessed under section 23(5)(b). The more frequent .case of a ﬁrm which is actually regis red has not been treated elaborately in the section. The raft sub-clause sets out the' positioi} comprehensively.

V The second proviso to existing section 55 is transf L 'ed to a separate clause', under the group of clauses de ling with income not forming part of tota_1__income for super tax.

. _ Notes to. clause 99; ' ' K V_ The -changes' made are' consequential On the:Chal|.geS made in existing section 55. main para. 4 A ~ » v; As regards earnedaincome the language of the draft clauses -on-.the subject ,«wil1;suﬂice_ to exclude existing §sec-- 'tion-15A..for. super-tax'; ..: g e ' -:. T :_'5::-

l l a.. ,.

y if Draft"cla'.u'S§ '£504.: , 1' N 97"", draft cladst s'i"r££d' ii'h"'&'rar'£'§ ' i ; .,v

- i ., u:.'; x.._ - .

e102 (2). ,_;,_=5 F _.,...';._.. 'Q 387 ' A Notesto [clause _ This corresponds to the proviso (at); appearing below «existing section 25(4). . e - - , - The existingprovision says that the provisions of sec- tion 25(3) & (4) shall not apply 'to 'super-tax'. The word "'super-tax" has, in the draft, been replaced by the words "determination of total income" etc. which are more ap- propriate. ' Notes to clause 101..

This is new. Interest on income-tax free securities is chargeable to' super-tax. It is fair that' reasonable sums

-spent on realising such interest, and interest paid on mo- 'ney borrowed for investment in such securities, shall be 'allowed as deductions. (Cf. existing section 8,' 1st Proviso, tearlier half.) - V The provision becomes particularly necessary in the 'draft, because so far as the computation of total income for income--tax is concerned, the draft clause for section 8 contains an express prohibition against deducting such sums.' . _ I Notes to clause 102; , Sub-clause (1)--Existing section $(1) has, in the draft, been split up' into two;='The general rule that the provisions for income-tax shall' apply ﬂoathe charge etc. of super-tax has been stated in sub-clause --(1), while; the ex- ceptions are dealt with separately in sub-clause (2).

The words "save as otherwise provided in this Act", added in the draft, point to draft subgclause (2) and are also intended to make it clear that there might be cases where a provision is applicable to income-tax only, e.g.-, «existing section 49C(1). . -

Sub-clause (2)----Existing section 5§_(1)_ excludes seve- ral sections of the Act in relation to st r-tax. Most of these sections are, in" the draft; placed; ther in' the 'Chap- ter on Income on which no iimcome-t it _is payable or in the Chapter on Rebate and Re ief of icbme-tax. It would, therefore, suﬁice to say that these twtof chapters do not apply for super-tax. : . . - . -

So far as sections not contained 1' these chapters are 'concerned, they 'have been mention 'in.' the draft sub- rclause under discussion [except section-j 5,8G".(2)' as to which see discussion below]. _ ' ' ' , Section 58G(2) has been mentioned in existing section '58 as one of the excluded sections. Butjreally speaking, the substance of'it applies for s_. r-'tax_' What section '58G(2) provides is that the a "?mu1at'€ii' alance in an ap- proved. superannuation fund ﬁnall be "' udéd from" the I Vila draft clause 2. (ii) and (iii). ' ' As» . 4.

total income and exempt from income-tax. This does not apply in terms for super-tax; but section 58G(1). earlier part, says that such balance shall be exempt from super-e tax. This "exemption" from super-tax has, under the sche- me adopted in the draft, to be treated as exclusion from total income'. Therefore the ggsition regarding the ~ ba-- lance in question is the same. th for income-tax and su- per-tax, when section 58G(2) is read together with section: 58G(1), and there is no point in saying that section 58G(2) does not apply for super-tax.

The words "Save as expressly provided in the- Chapter" are meant, for cases where a provision in the super-tax Chapter (e.g., clause regarding exemption of' donations from super-tax) expressly refers to the condi- tions specified in the corresponding clause for exemption from income-tax.

Existing section 58(2) will be dealt with in the Chap- ter dealing with Collection and recovery of tax.

Notes to clause 103.

This clause, which is- new, has\ become necessary in: the scheme followed in the draft, which deals separately with income-tax and super-tax. The object of the clause is merely to facilitate the application, for super-tax', of certain provisions contained in the sections dealing' with avoidance of tax. Those provisions. as reproduced in the draft, use the expression "income-tax" only and hence it. becomes necessary to repeat them for super-tax.

Notes to clause 104.

General.4--The eidsting provisions for exem tions from super-tax say that super-tax "shall not be vpaya£le".i_h res-T pect of the income in question; or that the income tshall be exempt from super-tax. This appears like an e emp- tion from tax. not an exclusion from tot -- in- come. But it seems that. in the case of super-tax,; the- exemptions_ should be treated as cases of exclusionsé from total income (except in cases where section 17(3) e2$ress-- ' ate).

1y directs the exemption to be treated as a case of .1' Though section 16(1) says that "in computi the total income" the exempted incomes are to be inclu ed in- the total income, and though section 56 would apply sec- tion 16 for super-tax. also, still. section 16 has to b con- ﬁned to cases dealt within section 17(3). The draft, ere- fore, treats such exemptions as exclusions from total in- come. Drafting changes have, wherever necessary, been made to carry out this scheme. ' [So far as the sections expressly referred to in ;exist- ing section 17(3) are concerned, they have to be treated as cases of rebatem] 2 ~ 31 ' Soc 'note: to draft elude I04.' E i 389 Clause 104 The words "proﬁts and gains" have been replaced by the term "income" which is more precise. The provision is, obviously, applicable to all income and not only income from business. Other changes are consequential" on this- change and on the scheme adopted in the draft to treat. exemptions from super-tax as exclusions from total in- come.

Notes to clause 105.

The verbal changes made are consequential on the scheme adopted in the draft to treat exemptions from. super-tax as exclusions from total income'.

Notes to clause 106.

This clause does not need any comments, since the changes are only verbal and consequential.

Notes to clause 107.

The changes are verbal and consequential.

Notes to clause 108.

General.----Existing section 56A, s'u'b-section (1), item,

(ii) says that one of the conditions for iavailability of the exemption under the section is that the income of the In- dian company (which pays the dividend) "would have been exempt under the operation of section 15C if the ro- visions of that section had been applicable thereto". t is. not clear from these words how much of section 15C is to be read into section 56A. In the inierest of clarity, it seems desirable to inco_rporate,,in section '56A itself, what- ever conditions are to be borrowed from section 15C.

The question, therefore, that arises next is, what part. of section 15C should be repeated in section 56A? Section 15C requires the following conditions to be fulﬁlled :--

1. The proﬁts must be derived from an industrial un--

dertalzing to which the section applies (sub-sec- tion 1) ). '

2. The profits should not exceed 6 per cent per annum:

on the capital employed in the 'undertaking (sub- section (1) ).

3. The undertaking must not be formed by the split- ing up or reconstruction of a business already in. existence (sub-section (2), item (i) ).

4. The undertaking must not be formed by the trans-

fer of a building etc. used in {business carried on ulzeifore the 1st April, 1948 (sub-section (2), item ' i_). ' , l , 4 ' Soc notes to clause 104..

n ",

-390

5. The undertaking must begin to manufacture? arti- cles in India within 13 years from the 1st April, 1948 or extended period when allowed by the Cen- tral Government (sub-section (2). item (ii)).

6. The undertaking must employ a certain number of workers (sub-section (2), item (iii) ). .

7. The exemption must not have been withdrawn by the Central Government (sub-section (2), item

(iii) Proviso).

8. The exemption is applicable only to the assessment for the previous year in which manufacture com- menced and for the four immediately succeeding assessment years (sub-section (6) ).

Taking these conditions one by one, it seems that con-

-dition No. 1, is applicable for section 56A only to the ex- tent to which it is introductory, as intended to draw atten- tion to S. 15C(2). (Section 56A does not require that only dividends attributable to proﬁts derived from a particular undertaking should be exempt.) Condition No. 2 cannot be applied for S. 56A, as the intention of section 56A is to confer an exemption in addition to that enjoyed by are- holders under section 15C(4).' Condition No. 3 is _ppli- cable for section 56A, but since section 56A, sub-section (1), item (ii) speaks of "the Indian Company", the condi- tion has to be translated in terms of the Indian Company. Condition No. 4 is applicable, but the mention of the 1st April 1948 is irrelevant for the purpose of section; 56A, which seeks to givea permanent exemption. Condition No.- '5, being of a temporary nature. cannot be applied for section 56A. Condition No. 6 is applicable. Regarding. con-

-dition No. 7, the intention probably seems to be. t dis- regard any such withdrawal of exemption and to pply section 56A to all companies otherwise governed b the applicable part of section 15Q even if in a particula case the exemption under section. 15C has been withd awn. Condition No. 8, being of a temporary nature, can t be applied to section 56A, which does not conﬁne the exemp- 'tion to a particular period. - ' ' i In the draft, therefore, the ingredients of section} 15C have been embodied only to ..the extent indicated. in the discussion above.

As already stated, the applicable conditions of section 'l5C(2) have, in the draft, been treated as condition ' to be fulﬁ1l__ed by the Indian Company and not by its %Ar(;1l.1S- trial undertaking, .Consequential changes have. been a ade in language. ' .

Suli-clause (_1)----Item (i)----The cumbersome ; litst of items has been removed to a.separate sub-clause, éthus simplifying the language of section 56A(1)(i). A Item (ii)--The géneral at the beginning ibove may be persued. " ' ' " ' ' ' I

391. 'Sub-clause (2)--does not need any-_ comments.

Sub-clause (3)--The commodities in question have- béen referred as "items"--a wolrd use-d'in the existing sec-- tion 56A(2) at the end. No other comments are needed.

Notes to clause 109.

No detailed comments are needed.

Notes to clause 110.

Strictly speaking this exemption should in the case of' supertax be treated as an exclusion from total income,- but in view of section 17(3) it had to be treated as a case of rebate'. ~ » Notes to clause 111.

This clause states the rule in existing section 14(2)» (aa) as read with the Proviso.

The exemption has, for purposes 'of super-tax, to be treated as a case of rebate [S. 17(3)], though similar ex--- emptions have been treated. for super-tax, as exclusions. from total income'. ' Notes to clause 11?.

The clause does not need any detailed comments.'The words "in relation to" will indicate tliast the substance of' the relief is the same, both in income-ﬂax and in super-tax-

Notes to ciause 113.:

General--Existing section '23A, even after its amend-« ment by the Finance (No. 2) Act 1957, is lengthy and is. difficult to follow. An attempt.has 1.'eep.made to break up the "section and distribute its rovisionsin several clauses.. The scheme adopted is tosbe n with Ethe operative proviy sions and then to take up provisions irﬁ the nature of inter--- pretation. - ' Clause 113--This reproduces S. 2$A(1). Simpliﬁcation of the provision has been sought to be ttdhieved by splitting' it up into two sub-sections, sogthat t 1 main provision ap-- pears separate from the req ementfrhposing a duty on_ the Income-tax Oﬂicer to co ider cegtain criteria.

The lengthy expression "total indotne .......... .. as re--- duced by", which is fo1lowed&by a 1' tof the deductions, has been replaced by the shonter exp ssion "distributable income" (deﬁned separately)'. C['his hail enabled the simpli-- ﬁcation of the various clauses of S. 23iA(2) also.

1 Cf. notes to draft clause 104..

' See draft clause :18.

392

The lengthy expression "a company whose business

-consists .......... ..in the dealing in or holding of investments ....... .." has been replaced by "investment company'? (de- fined separately)', which has simpliﬁed the draft for Ex- planation 2, Clause (i) also.

The changes made by the Finance Act, 1958, have been

- given effect to.

S. 23A, in effect, taxes undistributed proﬁts and is thus .aimed at a maximum distribution of proﬁts. It is diﬂicult to sustain, side by side with this section, the provision which has been included in recent, Finance Acts for tax- ing excessive distribution of proﬁts. The provision°in the Finance Act aims at encouraging the minimum distribu- tion of proﬁts and goes ill with section 23A which encour- ages the maximum distribution. ' Even the Finance (No. 2) Act 1957, First Schedule, paragraph D, second Proviso, clause (c), though it does not directly tax an excessive distribution, is subject to this cri- ticism; because on that part of the dividends which ex- ceeds 10 per cent of' the paid up capital, there is an in-

-direct tax expressed as a reduction of the rebate otherwise admissible. This indirect tax goes on increasing with the percentage of the dividend in relation to the capital.: The higher the dividend, the lesser the rebate and, therefore. the higher the tax.

In other words, while the Finance Act provision acts .as an incentive to smaller distribution, S. 23A acts as an incentive to higher distribution of proﬁts. It would be desirable to drop the system of taxing excessive distribu- 'tion of proﬁts introduced' in recent Finance Acts, at? least in relation to companies to which section 23A applies.

Notes to clause 114.

The changes made are verbal and consequential. on "the shorter expressions "distributable income" and E "in- 'vestment company" adopted in the draft for S. 23(1)).

Notes to clause 115.

No detailed comments are needed.

Notes to clause 116.

The existing provision has been split up into ' sub- <c1auses (a) and (b) for simplicity.

Notes to clause 117.

Sub-clause (1).---In paragraglei (b) the negative words"

"'not a private company" have en replaced by the 'posi-

'tive words "a public' company"-. While the definition; of -

'Seed:-aftclause I19. 2 l ' 393 public company in the Companies Act is itself a negative one, it seems unnecessary to repeat that negative concept in the provision under discussion. ' In paragraph (b) item (iii), the existing words "less than six persons" have been replaced by "ﬁve or less per- sons" in order to help the understanding of the rovision by removing the negative. 'It must, of: course, e noted that the provision, even as redrafted, retains the negative words "at no time during the previous ear .......... ..". The reason is, that the provision is intend to be satisﬁed in respect of each and every block of share capital; the po- sition regarding holding of shares should be such that any ﬁve or less persons cannot have the control of any bunch of shares carrying more than 50 per cent of the 'total voting power.

The method of computing the number of persons has been included in a separate sub-clause .for the sake of simplicity.

Sub-clause (2)--As already stated, the method of com- puting the number of persons has been separately includ- ed in this sub-clause. The provision has been split up into paragraphs (a) and (b), and an Explmation, for simpli-

> city. \ Notes to clause 118.

The expression "distributable income" has been coin- ed and used in the draft for the ioperatiueportion of S. 23A, aulb-section _(I) grind glso fjlzzllieddrafthforlsub-secI1';%lon (21).

e expression as een e e ln s* c ause. e on y change of substance made is additidni of sub-clause (c), whereunder amounts paid as onations and exempt from tax under existing section 15B will be' excluded from the distributable income. This has already been the practice under a decision of the Central Government.

Notes to clause 119.

This clause seeks to deﬁne "investment company", an-

expression used in the draft at several places as a short substitute for the lengthy expression i"_g:ompany whose business consists" etc.. ' Notes to clause 120.

Though the existing deﬁnition of '-'statutory percen- tage" is complex-, the complexity is due to the complicated nature of the provision in substance. Improvements in form would not have reduced the cbntiﬁliexity and have not, therefore, been attempted, except~ t in item (iv), in sub-clause (a), the words at present appearing at the end ."whichever or those is, ter" have, in the draft, been shifted above and ex , asgtthe greaterof the following". . , =7 f ' 391 .

«CHAPTER XII . , ''DETERMINATIO:N oF.T;9.X IN CERTAIN SPECIAL ' CASES Note} to clause 121.

The main provision of existing section 17(2) has been embodied here, with verbal chargesitalicised, to state the rule in an exact and, accurate manner.

Notes to clause 122.

The clause is new. Reference is made to the provision contained in existing section 58G to make the Chapter self-- contained.

Notes to clause 123.

General--Existing section ,10(5A) provides for two things. The earlier portion deems compensation eto. paid to managing agent etc. to be proﬁts _ nd_ gains of business, and has been incorporated in t e draft chap- ter on computation of totalincome. The latter portion gives the method of computing tax..on such income and has been incorporated here. ~ ' etc. is to be dealt with 'in the 'special manner provid d for by the section, the tax on theremaining part of the ivcome has to be calculated at the (average) rate applicable _to.the whole of the total income. This has been made clear ﬁn the draft, by stating the position. separately for the two';kinds- of income.

The Explanation is new and is intended to deal e§/ith a Sub-clause (1)--While the tax on the compezifation case where a ﬁrm, though assessed as an unregister ﬁrm in the assessment year, waszassessed as a registere ﬁrm in any of the three preceding 'assessment years.

Sub-clause (2)--is new. It seems desirable to piovide for a rebate to the partner of -a registered ﬁrm Whe e the ﬁrm is in receipt of the compaisatiqn etc. in question. 1 here is no such provision at present.

Notes to clause 124. I ' The provisions of section' 17 (1) have, in the draft been put into four sub-sections, forsimplicity. These deal 'th-

(i) the basic provision, E

(ii) the option given to the: non-resident, and the[time~ limit therefor. 2 - § .

(iii.) the consequences of the option, and _ :

(iv) power to extend the time-limit for the option.-

_ When using the egxpressiohd"tax", the words "'inc' ding super-tax" have bee 'oniit§e§%, 'las thedeﬁnition of , in the draft, includes s , r-tax. ; , 395 Sub-clause (1)--does not need any detailed comments.

Sub-clause (2)--The openin portion of existing section 17, sub-section (1), 1st Proviso, as been simpliﬁed by stat- ing directly the date 30th June, and omitting the reference to the assessment Year ending on 31st March, 1952, which has become obsolete.

Sub-clauses (3) & (4)---It has been made clear that any option exercised under the present Act will continue to have effect for the purposes of the new Act also. Conse- quential changes have been made.

Notes to clause 125.

The substance of existing section 17(6) has been in- corporated in this clause.

The process of calculating tax has been split up in two sub-clauses, for simplicity.

The existing words in S. 17 (6)(ii), "on the whole ....... .. income-tax equal to the amount which bears to the income- tax" etc. have, in the draft, been replaced by a mathe- matical formula, to make the provision easy, to understand.

It is presumed that, in calculating the income-tax on the amount of capital gains, the total income is to be re- duced for purposes of rate also. Hence, when explainin the symbol Y, the words "had the total income so reduce been his total income" have been added.

The proviso to section 17(6)(ii) has in the draft been split up into two clauses. ' V Clause (i) states the minimum amount that can be taxed. A Clause (ii) embodies the rule relating to the maximum tax to be charged. Where the capitalgains do not exceed ﬁve thousand rupees, the tax will obviously be zero when this clause is applied (see the words "if any"), and it be-

comes unnecessary to deal speciﬁcally with such a case, as has been done in the existing section.

Suggestion--It would be logical if a provision is made in the Act to the effect that capital gains are completely excluded from the total income for t e» {purpose of super- tax. This would simplify the; form of t e provision con- tained in existing section 17, sub-section: (6) and (7).

Notes to clause 126.

Section 17(7), even after its amendment by the Finance (No. 3) Act, 1956, refers to super-tax dnly and is not easy to understand. -

The draft seeks to state the position clearly. The re- duction of the total income bythe amount of capital gains is presumably eﬂective for de ,' V the rate also, as is shown by thewords "calcul , on i Atal income" even 'in the existing section. This ' been , ' ed more clearly in the draft in sub-clause (b). ~ 26-! Law Com./58.

396

CHAPTER XIII INCOME-TAX AUTHORITIES Notes to clause 127.

No comments are needed.

~ Notes to clause 128.

General--Existing section 5 is very lengthy and does not deal systematically with the various matters relating to Income-tax authorities. The section has, in the draft, been split up into a number of clauses and the clauses have been so arranged that each topic' is dealt with sepa-

'rately in the following order :-

(i) appointment,

(ii) control,

(iii) jurisdiction,

(iv) powers and duties of lthellncome-tax authorities.

Clause 128.--The scheme adopted is to deal in separate sub-clauses with appointments by the Central Government, appointments by the Commissioner and appointments of ministerial staff by Income-tax authorities.

Under existing section 5(3), latter part, _the appoint- ment to class II Income-tax Officers and Inspectors'of In- come-tax is made by the Commissioner, but the number is to be sanctioned by the Central Government. This is the statutory provision; but in administrative ractice the sanction of all these posts can be made by t e Commis- sioner. The language has, therefore, been altered to com- form to administrative practice, vide sub-clause (2). ;

Notes to clause 129.

Provisions relating to control of Income-tax authorities have been brought together in this clause.

Sub-clause (1)--needs no comments.

Sub-clauses (2) and (3)--The expression existing in sec- tion 5(7), "For the purposes of this Act" appears unneces- sary and has been omitted.

Sub-clause (4)--It has been made clear that an Inspec- tor of Income-tax is subor ' te not only to the aut ority under whom he is appointed; o work but also to any; supe- rior authority. hi 1 .

397;

The Explanation is new and is intended to conform to the administrative set-up of the Directorate, under which the Deputy Director is an Assistant Commissioner and the Assistant Director is an I.T.O. Notes to clause 130.

Provisions concerning instructions to subordinate au- thorities have been brought together in this clause. Since such instructions sometimes affect the public as a whole, it has been provided that instructions of a general nature should be published. » Sub-clause (2) embodies the existing provisions" in sec- tion 5, sub-section (7B) earlier part, but it is for considera- tion whether this provision introduced in 1953 should be re- tained. ' 4 Notes to clause 131.

General--1¥ll provisions regarding the jurisdiction of Income-tax authorities have been brought together in this section. The only changes that need comments are the fol- lowing :--

Sub-clause (.'5)--Paragraph (b) is new and is intended to give recognition to the existing practice. The practiceis, in a sense, impliedly authorised by existing section 5(6).

Such transfers from one Appellate Assistant Commis- sioner to another are usually made wholesale in accordance with the volume of work before each Appellate Assistant Commissioner', and therefore, it is notpracticableto give notice to the individual assessees whose cases are to be transferred. Hence, this sub-clause does not prescribe the requirement of notice, unlike. section 5(7A) as embodied in the draft.

Sub-clause (5)--Existing section 5(5), latter part, au- thorises the Commissioner to direct that the powers of the Income-tax Officer shall be exercised by the Inspecting Assistant Commissioner in respect 'of any speciﬁed case or class of cases. To this, an addition has been made, in the draft, authorising such orders in respect of any speci- ﬁed person or classes of persons also.

Sub'-clause (7)----Existing section 5(6), last line, pro- vides that when the Central Board of Revenue empowers any particular Income-tax authority to perform functions thereunder, the functions shall cease to be performed by the other authorities "appointed under sub-sections (2), and (3):).

Now, so far as the reference to sub-section (2) is con- cerned, it is to be construed as a reference, not to the opening line of section 5(2), but to the second sentence beginning with.

"and they shall perform their functions ................ ..".

The mere appointment of . persois up a post is not rele- vant; what is important is, ' e allattqaitof functions,» 398' This portion of section 5(2) has, in the draft, been em-

bodied insub-clause (2), and therefore draft sub-clause (7) makes a reference to draft sub-clause (2). A So far as the reference to section 5(3) is concerned, it appears to be inappropriate, because that sub-section does not deal with allotment of functions but only with the ap- pointment. Hence that reference has been omitted.

Existing section 5(4), latter part, and section 5(5), ear- lier part, also deal with allotment of functions and, there- fore, the corresponding sub-clauses (3) and (4) have also been referred to in the draft sub-clause under discussion.

The second part of the draft sub-clause is new. and makes a provision which is 'obviously desirable. _E:¢_isting section 5, sub-section (7A) main para, latter part, may be compared.

Sub-clause (8)--This is intended to make it clear that where the Inspecting Assistant Commissioner performs the functions of the Income-tax Oﬂicer, provisions requiring his sanction etc. cease to have any effect. The position re- garding appeals has also been stated in clear terms. The existing provision in section 5(5), latter half, concluding portion, enacts that references to the Income-tax Ofﬁcerr and the Appellate Assistant Commissioner shall be deemed to be references to the Inspecting Assistant Commissioner and the Commissioner respectively. That has been preserved in draft sub-clause (5); but draft sub-clause (8) attempts merely an application of that principle for certain impor- tant matters.

Notes to clause 132.

Sub-clause (1)----The words "also subordinate to shim"

have been added for the sake of precision. It has also; been made clear that the transferring authority must record its reasons in writing. ' ' Sub--clauses (2) and (3)----Sub-clause (2) is new and gives effect to the following observations of the Supreme Court in a centre case' :--

H ....... .. We may, however, before we leave this topic, observe that it would. be prudent if the prin iples of natural justice are followed, where circu1:stan- ces permit, before any order of transfer under sec- tion 5(7A) of the Act is made by the Commissioner of Income-tax or the Central Board of Revenue as the case may be, and notice is given to the party affected and he is afforded a reasonable opportunity of representing his views on the question and the reasons of the order are reduced, however brieﬂy, in writing ....... ..". ' I 'Puma Lal Binj Raj V. éson afIuY;.4x957_)3i in 565,' 539, 590. iA.I.R. 1951.8-6391,4104:-as' iv! ' F ' X i . 399 The Supreme Court pointed ou_t_that section 64(3) re- quires an opportunity to e given 'to'the assessee of repre- senting his views when any question as to the place of as- sessment is to be determined.

Under draft sub-clause (3), the transferring authority is given the power, in special cases, to dispense with an op- portunity to the assessee before the order is passed. But it has been provided that the assessee shall in such cases have a right to move for a retransfer within one Ih-onth.

E:cplanation.--This embodies the existing Explanation, which was inserted . to get the situation created by a decision of the Supreme Court'= whereby a whole-sale transfer of cases, without reference to the year of assess- ment, was held to be illegal. After the Explanation was inserted, the question of its validity came up before the Supreme Court in a later case'. The Supreme Court up- held the validity of the Explanation and explained its scope by pointing out that when a case of any particular assessee pending before one Income-tax Oﬂicer is transferred to.

another Income-tax Ofﬁcer under section 5(7A), th_en----

(a) all proceedings pending against him in respect of the same year as also previous years are meant to be transferred simultaneously; and

(b) all proceedings which may be commenced after the date of transfer in respect of any year what-

ever are also included thereil.

The result is that the transferee Income-tax Oﬁicer would be in a position to continue pending proceedings and also to institute fresh proceedings.

This aspect of the Explanation, namely, that 'it amounts to a transfer of proceedings' for past assessment years also and that its inclusive part applies to proceedings for any assessment year whether past or future,_ has in the draft been brought out by suitable amendments (thou)gh the existing provision is clear enough on this point .

Incidentally, it will be noticed that the deﬁnition of "case" contained in the Explanation under discussion is conﬁned to section 5(7A). Where the zwhole-sale transfer gf cases, pagt ans. future, (caf) aln assesserjté is to be doge ug-

er section , su section , , atter pa . , or section , su - section (5) latter part, that ﬁan be done, not by calling it a transfer of cases but by reatingiit as a transfer of jurisdiction in respect of "persons". Itmay be noted here that Section 5, sub-section (5), lattei , t, 'has, in the draft. been amended so as to add a r erence to speciﬁed person.

1 Bidi Supply Ca. V. Union of India (1956), S.C.R. 267-AIR. 1956, S. C.

479. 484 (x956).29 I-T-R- 717- y .

' Pnnu Lal Biry'Raj V. Union qf Iqdiu (1951), ,3: I.T.R. 565-A._I.R. 1957, 5-0. 397. 4u- ' f , E y .

< 400 Notes to clause 133.

No comments are needed.

Notes to clause 134.

This clause is new. Some doubt has been felt as to the Income-tax authority which is entitled to prosecute or defend an appeal in the High Court etc. whenever the assessee's case is transferred from one authority to an- other. For example, when one Commissioner ﬁles an appeal, and the case of the assessee is transferred to the jurisdic- tion of another Commissioner, the question arises whe- ther the transferee Commissioner can continue the ap- peal. Provision has, therefore been made to make it clear that the authority for the time being seized of the case would be the person competent to initiate or continue such proceedings.

For the sake of simplicity the cases of Commissioner and of the Income-tax Officer have been dealt with in separate sub-clauses.

The principle underlying the provision is not new. Nor is it conﬁned to the particular provisions referred to in the draft clauses; it should be applicable for all provi- sions of the Act. But, since difficulties have been felt only in regard to certain provisions, the draft clause is conﬁn- ed to these provisions. The provisions of existing section 5, sub-section (7C) cover cases where a proceeding is peéiding before an Income-tax authority who is transfer- re .

Notes to clause 135.

General--This clause corresponds to section 64 of the existing Act. The question whether the section confers a right on the assessees has come up beforethe courts more than once and has now been settled once for all by the Su-

preme Court'. The discussion in the case just cited makes.

it clear that it is too late in the day to say that there is no right to be assessed by the Income-tax Ofﬁcer of a parti- cular area. The earlier decision of the Supreme Court', holding that the beneﬁt conferred on the assessee by sub- sections (1) and (2) of the section 64 is to be regarded as a right, has been reinforced by the later decision' refer- red to above.

The marginal note of the section "place of assess- ment" is, however, slightly misleading, because the section does not deal with the place where the assessment is actu- ally made but with the Income-tax Oﬂicer having uris- diction. The marginal note, has. therefore. been _al ered accordingly.

' Pannalal Biry' Raj V. Union of India A.l. R. 1957, S. C. 397, 4,06, Paras. 20-22;(xg57) 3: I.T.R.. 565. .

' Bids' Supply C . V. Umbnhgflndia (I958) S. C. R. 267, 276; A. I. R.. 1956, S. C. 4.79, 4.88; (1956) 29 I. T. R. 717. _ ' 5 3 401 Sub-clause (1)---does not need any comments.

Sub-clause (2)~----does not need any comments.

_ Sttb-clause (3)---In the proviso, the words "represent- ing his views'? have been replaced by "being heard in res-

pect of the question" which are more appropriate; it has' been also made clear that the opportunity to be afforded to the assessee should be "reasonable".

The second and third provisos to existing section 6i4(3) have, for simplicity, been dealt with in separate sub- c auses.

Sub-clause (4)----Slight verbal changes have been made to secure simplicity and clarity. -

Sub-clause (5)----does not need any comments.

Sub-clause (6)--embodies existing section 64(4), which is obviously intended to make it clear that even where the assessee resides or carries on business within the juris- diction of another Income-tax Oﬁicer, an Income-tax Offi- cer may exercise powers in' respect of income of such as- sessee accruing or arising within his jurisdiction.

Sub-clause (7)--The only change made is the omis- sion of words that were intended to emphasise the retros- pective operation of the provision.

Notes to clause 136.

Existing section 37 has, in the draft, been split up into two. Portions relating to powers of a court that can be exercised by the authorities mentioned in the sec- tion have been dealt with in this clause, while powers of search and seizure have been dealt with in the next clause.

Sub-clause (1)---does not need any comments.

Sub-clause (2)----is new and has been added to indicate the procedure to be followed in exercising the powers.

Sub-clause (3)--needs no comments.

Sub-clause (4)--is new. The existing section does , not contain a provision entitling a person producing a document to apply for return of the same. To make the matter clear, this sub-clause has been added. Compare Order 13, Rule 9 of the Code of Civil Procedure.

It may be noted that section 37(3), proviso (b) does not in so many words deal with the return of documents. Moreover, it is conﬁned to Income-tax Officers. _The sub-

clause under discussion will cover 11 cases, including do- ' cuments retained by an Inuibme-tax.'Oﬂicer. . . .

402

Notes to clause 137.

Item (ii).--The words "have them removed to his office" have been added to deal with cases where the books are voluminous and the Income-tax Officer cannot exa- mine them in the premises.

Item (iii).--The words "cause to be made" have been added to make it clear that the Income-tax Otﬁcer can entrust to an Inspector or ministerial staff the work of taking copies or extracts from the books and documents in question.

Item (iv).----The existing provision relates to a note or an inventory of any 'other' articles or things found in the course of search; this would exclude books and docu- ments which are referred to in the earlier item. Since, however, occasion may arise for making a note of a book or document (without actually seizing it), the word "other" has been omitted in the draft. ' Notes to clause 138.

Sub-clauses (1) and (2)--Existing section 38 (1) has bleen divided into two sub-clauses, to make the provisions c ear.

What the "return" relates to is only names and ad- dresses; Cf. existing S. 38(1).& (2). That has been made clear in the draft. In the case of partners, however, infor- mation regarding their shares may be useful. and that has been added in the draft.

The expression "Assistant Commissioner" has been substituted by "Appellate Assistant Commissioner or Ins- pecting Assistant Commissioner", since these are the ex- pressions used in the Act.

In sub-clause (2), instead of "adult male member". the .

word "members" has been substituted for brevity.

Notes to clause 139.

- It has been made clear that the person authorised for the purpose of this section should be subordinate to 'the officer giving the authority. Private persons should not be authorised under this section.

Notes to clause 140.

The latter part of section 5, sub-section _(7B) has been reproduced here. Presumably, the "enquiries" referred to here are the enquiries under sections 37, 38, 39 etc. Notes to clause 141.

Sub--clause (1)--The existing section provides that the court shall not be entitled to require "any public servant"

to produce the return, accounts, etc. to be treated as con- ﬁdential under this section. There is a conﬁict of i- sions as to whether- these woiia are to be read liter y 408 as prohibiting. any public servant whatsoever from mak- ing a disclosure, or whether the prohibition is confined to the public servants before whom the. documents etc. are produced under the Act. The Bombay High Court' has taken the view that the section is conﬁned to public servants of the Income-tax Department, while the Punjab High Court" has taken the contrary view. Though the "wide language of this section might justify the Punjab view, expediency demands that the narrow view taken by the Bombay High Court should be adopted. It does not appear to be desirable to prohibit other public servants from making such disclosures, and draft sub-clause (5)

-of the clause under discussion therefore gives a restricted deﬁnition of the expression "public servant".

Sub-clause (2).--Existing section 54(2) imposes a pen- alty on a public servant making a disclosure of the parti- culars treated as conﬁdential. What the sub-section achie-

ves is------

(i) making such disclosure an offence, and

(ii) imposing penalty for the offence.

The earlier part of the sub-section really creates the offence, and has been reproduced in this sub-clause. The "penalty portion has been transferred to the Chapter on "Offences and prosecutions". V -

Section 54(5) has also been transferred to the Chapter .on "Oﬂences and prosecutions".

Sub-clause (3)--The various paragraphs of this sub- clause embody existing provisions and do not need any

-comments, except the following :-

Paragraph (a)---The existing provision contains the words "prosecution under the Indian Penal Code". A "pro- secution" is, really speaking, for an ofence under a law Zng therefore the words "for any offence" have 'been ad- . e .

Paragraph (b).--Reference to the Taxation on Income (Investigation Commission) Act, 1947 has been omitted as obsolete. I Paragraph (c).--This is new. Where' an Income-tax au- thority makes a best judgment assesment under section 23 (4), he usually relies on the ﬁguiges of proﬁts made by other persons in a similar business, as gi"ven'~i_'n the income-tax returns of those other persons. In fairness, the information contained in the returns of such other' persons ' should be disclosed to the assessee before making a best judg-

ment assessment'. This paragraph in question has, there- fore, been added to authorise such d'Bclosure. Suitable ' EXn.peIr.0rR\.7. 1942) 10 'IiT.lK. 429;"I.I.R. 1942 Bombay 767; Jullundur V. Thenstate (xg5o)'?;18 I. T. 7- $88, A.l.R."rg5o East 3 Cf. Dhakexhwari Comm Mill: V. C. I. (I954) ugh '1'. R. 775 S. C. ' 4 404 words have been used in order to ensure that the assessee- to whom any information is disclosed under this paragraph is not thereby enabled to trace the other assessees whose ﬁgures are disclosed in such information, ' Paragraph (f).----The privilege conferred by section 54- is sometimes abused by the assessee by claiming it against courts in which proceedings are pending for or against him. For example, when the assessee's accounts contain an entry adverse to his case' in a civil suit, the assessee of- ten refuses to produce the accounts before the court and takes shelter under this section, saying that the ac- counts are lying with the Income-tax Department. This. cannot be supported by any notions of justice or fairness- Paragraph (f) has, therefore, been added to empower the court to enforce production of the accounts in such cases.

Registered documents of which copies can be obtain- ed under the Registration Act, or certain documents pre- pared under the Companies Act (like balance sheet, au-- dit report, etc.) have also been mentioned in this para. Such documents need not be treated as conﬁdential, since they are virtually public documents.

Paragraph (j)--The word "lawyer" has been replac- ed by the words "legal practitioner" which are more ap-- propriate.

Paragraph (k).--Existing section 54(3) (h) is obvious- ly meant for cases where an officer of the Income-tax De-» partment, detecting an unstamped document, desires to communicate that fact to the stamp authorities. His po- wer to "impound" the document "occasions" the further transmission of the document to the Collector under the Stamp Act. The "public servant" referred to in the provi- sion is, therefore, the Income-tax authority impounding and transmitting document, not the stamp authority receiv- ing it. (The stamp authority receiving the document, does not "disclose" any document.) It is the Income-tax au--- thority which makes this disclosure subsequent to the impounding of the document. Slight verbal changes have been made to bring out this intention, Paragraph (l)--Existing section 54(3) (i) refers to offi- cers of the United Kingdom or any part of His Majesty's Dominion. But as section 49A authorises an agreement for e a double taxation iielief with any country outside', India, the language of this provision has been brought into con- formity with that position.

Paragraph (n).--This is new and is intended to autho- rise the disclosure of information required in connection with levy or realization of other central taxes, for exam- ple, estate duty, wealth tax, expenditure _tax etc. Assis- tance has been taken, in drafting the provision, from exist- ing section 54(3) (j). a V 405 To. a_certain extent, this added provision might over~ lap existing section 54(3) (k), dealing with customs and excise duties. But the language of the latter provision is slightly different in two respects :

(i) existing sub-clause (k) refers to ("any authority exercising powers" and not to any Government Officers.

(ii) existing sub-clause (k) authorises the disclosure for enabling the exercise of any powers under the Act (for-

example, conﬁscation of goods) and is not conﬁned to levy' or realization of tax.

For these reasons, clause (k) has been retained in the draft and reproduced in paragraph (0).

Paragraph (o).%:'>ee notes above under paragraph (n).. Sub--clause (4).---does not need any comments.

Existing section 54(5) has, as already stated, been transferred to the Chapter on "Prosecutions".

Sub--clause (5).--See notes under sub-clause (1) above.

Notes to clause 142.

This is new and is intended to make it clear that:

the privilege conferred by section 54 can be waived by the assessee.

CHAPTER XIV PROCEDURE FOR ASSESSMENT Notes to clause 143.

General.--The provisions relating to procedure for assessment have been arranged in this'Chapter in proper' sequence. The proceedings for assessment begin with the notice under section 22 calling for a return, which may be- followed by the provisional assessment, enquiry by the Income-tax Officer and the regular assessment. Reopening"

of the assessment at the instance' of the assessee, or reas- sessment at the instance of the Income-tax Officer under' existing section 34, are subsequent proceedings.

The sections relating to assessmentaliave been placed' in this order in the Chapter. Amendment by way of recti-4 ﬁcation of mistakes is dealt with next, followed by the notice» of demand under existing section 29.

The procedure for assessment proper having been dealt with in the earlier half of the C ter, the latter half of the Chapter goes on to embed pro ions regarding in- cidental matters, or matters wh, are inor importance (e.g., miscellaneous information} and c p tes).

H 406 Sub-clause (1):-The following changes have been "made to improve thelanguage of the section in precision .and clarity :--

An important departure has been made from the exist- ing Act by providing for an automatic submission of re-

'turn of income by all persons who are assessable under the Act. Existing section 22(1) requires the Income-tax Oﬂicer to issue a general notice calling for the Submission of such returns. This provision entails a lot of expense and labour to the department, since a notice has to be issued in identi- cal terms by each Income-tax Oﬁicer. Further, the provi-

sion has no parallel in the taxation statutes of other coun- tries which provide for the primary obligation of the tax-

payer to send a return of income by the prescribed date. Lastly, recent taxation statutes in India, for example, the Estate Duty Act, the Wealth Tax Act and the Expenditure "Tax Act, contemplate the submission of a return for the pur-

poses of those Acts without notice by the Income-tax Ofﬁcer_ It seems, therefore, desirable to make the pro-

vision more rational on the lines of the other taxation' statutes just now referred to.

Apart from this important change, the following «changes have also been made for precision and clarifty--

(i) it has been made clear that the return of income is to be submitted in the ﬁnancial year;

(ii) at present it is doubtful whether a person is liable to make a voluntary return of the income of any other person in respect of which he is assessable.

There are several provisions in the Act, such as sections 40, 41, 42 etc., which make one person assessable in respect of the income of another. This lacuna has been removed by the addition of suitable words ;

(iii) the notice under existing section 22(1) usually provides that the return should be furnished be- fore the expiry of 65 days from the date oftpubli- cation of the notice. This leaves the date indeﬁnite until the date of publication of the notice? is as- certained. It has'been provided, therefore, in the draft, that the return should be furnished on or before the 30th day' of June;

(iv) a proviso has been added to the effect that a person who has already submitted a return in response to an individual notice under sub-section (2) need not furnish a return under sub-section ( 1) ;

(v) the existing requirement that the return should be a return of "total income" and "total eworld income" etc., has been replaced by the . imple requirement»? that it should be a return of come in the prescribed form.' . T .

i 407 Incidentally, it is suggested that it would be appro-- priate to prescribe a separatefarm of return in the case of persons who have incurred loses in business which they would be entitled to 'carry forward.

Paragraph (b) of the sub-clause makes it clear that where a return is sent to the wrong Income-tax Officer, he should forward it to the Income-tax Oﬂicer having. jurisdiction. , -

Sub-clause (2).----~T-he existing section 22 (2) says that- the notice will require the assessee to furnish the return "within such period, not being' less than 30 days, as may be speciﬁed in the notice". The words "not being less than"

create a controversy as to whether a direction to furnish the return "within 30 days" would meet the requirement. laid down in the section. To revent all confusion, the draft sub-clause provides that e return is to be furnished. within 30 days from the date of service of the notice.

A proviso 'has been added to the effect that the notice should be issued before the end of the relevant assessment year, This interpretation of the section is wel1-accepted.-

(EVER HOW.

Other drafting changes are on the same lines as those-- made in sub-section (1).

Sub-clause (3).--The date on or before which the re--- turn of loss should be ﬁled has been 'speciﬁcally mentioned in the draft sub-clause. on the lines of the draft for sub--- section (1). ' The return is meant for losses sustained in the previ-- ous year, and hence the word "previous" has been inserted before the word "year" in the beginning of this sub-clause.

The requirement that if the return is not ﬁled, the loss cannot be carried forward, contained in the middle of the existing section 22 (2A), has already been incorporat-« ed in the Chapter on aggregation of income and set-off of"

losses.

Sub-clause (4).--This dose not require any comments.

Some difficulty has been caused by existing 22 (3) in cases where the assessee ﬁles a return' on the last day of' the period within which the assessment could be complet- ed. It has been held' that if the department takes no~ action at all for the issue of a notice under section 22, and allows time to pass and permits the' assessee to make a voluntary return under section 22(3), the income of the assessee must be assessed as laid down.in section 23 and its is not open to the department to proceed under section 34.- This would lead to the complication that even if the return of income under.section 22(3) is ﬁled cm the last day on which the assessment could be completed, the department"

must complete the assessment without further investiga- tion. To remove this difﬁculty,", an iltnent is proposed".

1 Rauchlwd D4: v.c.1. 1'. (1954) 26 twin. .o5'§ngm.). 3 '1 "

.408 in the draft clause corresponding to existing section 34 (3), main para, whereby the department will be allowed at least one year from the date on Which a return under section 22(3) is ﬁled by the assessee. This'will meet the Jdifﬁculty brought to light by the case cited above'.

Existing section 22 (4) has been removed and placed 'later as a separate section; its present place in the middle of the provision relating to return interrupts the descrip- tion of the substantive provisions dealing with the various

-classes of returns.

Sub-clause (5).--Does not need any comments.

Notes to clause 144.

This is new. The existing Act is silent as regards the person who should sign a return of income.'The draft clause is intended to state the position comprehensively in res- pect of the various kinds of assessees.

Notes to clause 145.

Sub-clause (_1).--Does not need any comments.

Sub-clause (2).--The provision that due effect should be given to certain allowances and losses has been remov-

peed in separate sub-section, for the sake of clarity.

Sub-clause (3).--Does not need any comments.

Sub-clause (4).----Existing section 23B, sub-section (3), provides for the assessment of a ﬁrm as an unregistered ﬁrm unless the ﬁrm fulﬁls the conditions notiﬁed by the

-Central Government; In order to make the provision -self-

contained, the conditions imposed by the notiﬁcation have been incorporated in the section. The words "as if it were an unregistered ﬁrm" in the existing provision are not happy, since they would not apparently cover a case where the ﬁrm is in fact unregistered. The simple phrase "as an ulnregistered ﬁrm" has, therefore, been substituted in their p ace. ' .

Sub-sections (5) and (6)----of existing section 23B have been transferred to the Chapter on Collection of tax.

Sub-clauses (5), (6) and (7).--These do not need any ~=comments.

Notes to clause 146.

Existing section 22 (4), dealing with the enquiry which the Income-tax Ofﬁcer may make before assessment, has been embodied in this clause.

Sub-clause (1).--The words "for the purpose of making an assessment under this Act" have been inserted in the Lbeginning, to deﬁne the scope and object of the enquiry.

' Rachlwdbax V. C. I. (1954,) Q61. T. R. 105 (Bom'.).

409

It has been made clear that after obtaining the pre- vious approval of the Commissioner, the Income-tax. Offi- cer may call upon the assessee to furnish a statement of assets and liabilities. The requirement of approval will prevent undue hardship to assessees.

Sub-clause (2)--This is new, and enunciates a well established proposition. It is intended-to make it clear that an Income-tax Officer may make such enquiries as he con- siders necessary. It will be particularly useful in cases where a "best judgment assessment" is proposed to, be made.

Sub-clause (3)--This is new. It has been held by the Supreme Court' that before any material is used against any assessee, he should have an opportunity to rebut the same. This principle has been codiﬁed in this draft sub- clause. An exception has been made for cases where an assessment is to be made under existing section, 23 (4), since it is an ex-parte assessment.

. Notes to clauses 147, 148 and 149.

General----Existing section 23! deals with the three possible situations that may arise when an assessee is called upon to make a return of income--(1) the return is made by the assessee, and accepted by the Income-tax Officer; (2) the return is made by the assessee, but is not accepted by the Income-tax Officer, who wants to make further enquiry; (3) no return is made.

, Slight verbal additions have been made in the opening portion of Sub-sections (1) and (2) to bring out the fact that these three situations are being dealt with separately by the section.

Clause 147, Sub-clause (1)---Apart from verbal additions already referred to, the only change made is the addition of a reference to "loss" of the assessee so that the assess- ment would determine the amount of loss which can be carried forward under existing section 24(2) read with existing section 22 (2A). It has also been made clear that if any sum is to be refunded, that should also be mentioned in the assessment order.

Sub-clause (2)--The only change made is the verbal addition already referred to. < .

Sub-clause (3)----An assessment under existing section 23(3) is made after a consideration of the material which the Income-tax Oﬂicer has gathered. The draft sub-clause, therefore, makes it clear that in addition to the evidence produced in the case, the Income-tax Oﬁicer is also to take into account such materials. The deﬁnition, given as a separate clause, gives, some indication of the material which the Income-tax Officer is competent to take into account. . ' A x I Dhalruwari Cotton Mill: Vs. 0.1.7'. (1954) 26 1. 1:; 1;. 375 (s_.'c.). _ 410 Apart from this change of importance, the other changes are Ihinor and are on the same lines as those made in sub-section (1). 1 Clause 148 : Sub-clause (1)----It has been made clear that the "best judgment assessment" is to be made after a consideration of the relevant material which the Income- tax Officer has gathered. The deﬁnition, given as a separate clause, will apply for this sub-clause also. ' The other verbal changes follow the lines on which verbal changes have been made in sub-section (1) of exist- ing section 23.

Sub--clause (2)--This is new, and is consequential on the addition of a reference in sub-sections (3) and (4) of existing section 23 to the relevant material gathered by the Income-tax Officer.

Clause 149.--See notes to the main clauses relating to assessment', Sub-section (5) of existing section 23 has been dealt with in the Chapter relating to ﬁrms, in view of its sub- ject matter.

Sub-section (6) of existing section 23 deals with a step consequential on assessment, and has been placed later in this Chapter.

Notes to clause 150. .

Existing section 13 has been embodied here, -with the changes explained below :--

Sub-clause (1)--Section 13, Proviso, provides for the power to compute the income upon such basis and in such manner as the Income-tax Oﬂicer may determine. In a case, however, where the accounts are not correct and coigalete, the assessment is practically a best judgment asses ent. The power to assess under the proviso to Section ' can be exercised only where the accounts are correct an , com-

plete.

This has been made clear in the draft, by dealing in separate sub-clauses with (i) the case where the accounts are correct and complete and (ii) the case where they are not correct or complete.

Sub-clause (2)----See notes to sub-clause (1) above.

Notes to clause 151.

Existing section 27, whidh empowers the reopening of an assessment at the instance of the assessee, is cpnﬁn- ed to cases where the assessment was made under existing section 23(4). This limitation, though not expressly con- tained in the section, follows obviously from the worcls "he was prevented by suﬁcient from making the re"urn".

1 Clause: 14.7 and 148. T 411 The only kind of assessment in such cases would be one -

under section 23(4), which begins with the words "If any person fails to make the return ....... ..". This has been made clear in the draft. -

The existing words "within one month from the service of a notice .......... ..satisﬁes the Income-tax Oﬂicer" are mis- leading; if construed literally, they would require that the satisfaction of the Income-tax Oﬂicer himself must be completed within one month. This is not, however, the intention. It should suffice if the assessee applies Within one month for cancellation of the assessment. The section has been, therefore, slightly redrafted to make the inten- tion clear. ;

It has been held by the Nagpur High Court in a recent case' that where an assessee is called upon by the Income-tax Officer to produce accounts and fails to do so because he does not in fact maintain any accounts, and the assessee is consequently assessed under section 23 (4), he is not bound to make an application under section 27 for reopening the assessment. He can raise the point again in an appeal before the Appellate Assistant Commissioner who is bound to entertain the point. No alteration in the- law is required.

Notes to clauses 152-159.

General.----Existing section 34, relating to the power to» assess an income which has escaped amessment, has been sought to be simpliﬁed in the draft clauses under discus-- sion on the following lines:--1 .

(1) The substantive provision dealing with the power itself, contained in section 34(1) clauses (a) and (b), has been placed in the beginning; the requirement of notice is placed next ; and the detailed provisions contained in the various provisos, dealing with the time-limit for the exer- cise of the power, have been put in separate clause.

(2) Section 34(3), relating to the period within which. assessment should be completed, has been placed as a separate draft clause, since it '5 not conﬁned in its ap li- cation to an assessment under section 34 itself, but app 'es' X) all orders of assessment or reassessment under the ct. ~ (3) l3rovisions that have become obsolete,'such as sub- sections (1A), (1B), (1C) and (ID), have been omitted. Since the new Act will apply only to assessments made- for assessment years subsequent to the commencement of the Act, it is not necessary to repeat these sub--sections in , . . ' ".

Suganshand Kanha: a La! Ratlu, jab V. 01.1'. J dgm t dated 20-9-1957 in Mix. Cizil case No. 115 of] 55 (not yr? on 27-] Law Com.I58 , *5 / 412 the new Act. Any action that might have to be taken with reference to prior years can be taken even after the com- mencement of the new Act.

Clause 152.--It has been made clear that the power to make a reassessment is subject to the other provisions of the various clauses. This has become necessary in view of the fact that the time-limit, at present dealt with in the provisos, has in the draft been dealt with in separate clauses.

Clause 153.--The short expression "income has escap- ed. assessment" has been used in the preceding clause and deﬁned here.

Clause 154.--This does not need any comments, since the only change made is the addition of the words "before making the assessment .......... ..the Income-tax Officer shall'_' serve a notice. This is purely consequential on the scheme adopted in the draft to separate the various provisions at present contained in sub-section (1). ' Clause 155.

General.----The time-limit for the issue of a notice "under existing section 34(1) is dealt with in this clause; An attempt has been made to make the provision easier to understand, by stating the various time-limits applicable to the various situations separately. Thus, cases where no time-limit is prescribed, are dealt with ﬁrst. The case where the time-limit is eight years is dealt with next ; and the residuary time-limit of four years, applicable :when the rfase éalls under existing section 34 (1) (b), is dealt with at t e en . :

Sub-clause (1) Para. (a).-,-Existing section 34(1 , 1st proviso, item (ii)--provides, in effect, that where t e in- come that has escaped assessment exceeds the amo t of one lakh of rupees or more, the assessment can be- made under this section at any time. For the purpose of cdmput- ing this sum of one lakh of rupees, income that has §escap- ed assessment either for the relevant 'ssess- ment year for which the notice is o be issued, or for that year and any other years after :'«#which eightt yearihhavehelafgsed, Calls.' be taken into accpu . The resu is, at t e nger t e period t at is alo ed to elapse, the more. pr able becomes the assessability 'of the assessee under this provision. Thus, where an inc e of Rs. 25,000 hasteicaped asselssmeint for the year 194 4, the income canno e assesse un er 1: is section in, s'y, the year 1953. But if the income. for the intermediateeyears, say 1944-45, 1S also allowed to escape assessme t, the accumulated total of such escaped incomes would give a right to proceed under this section, in, say, the year 1955 (if the accumulated total is one lakh of rupees or more). Since the main object of _ provision for time- mit is to ensure that actiqn is t' as early as possibl , such a situation cannot la? regar d J

- 1.

_' as satisfactory. In_. _ draft, _ 413

-therefore, an attempt has been made: to substitute a simple rule, under which, only the incomezfbr the 16 assessment years prior to the year in which the notice is issued, can be taken into account. The minimum amount of~one lakh of rupees has been preserved in cases where an aggrega- tion is to be made, but it has also been provided that where the income escaping assessment for the relevant assessment year itself is Rs. 50,000 or more, the power to proceed under this section should be available at any time.

The substitution of this rule has, incidentally, facili- tated some simpliﬁcation of the form of this section also.

The reference to the assessment year ending before the 31st day of March, 1941, has been omitted, since the 16 assessment years preceding the year in which notice may issue, which are referred to in the provision as draft-

ed, will all be assessment years later than 1939-40, as the new Act will apply only for assessment years subsequent to its commencement.

It is, however, made clear, that for the purpose of computing the accumulated total that has escaped assess- ment, assessment years under the 1922 Act (i.e. the existing Act) can also be taken into account. » A Sub-clause (2).--The restriction contained in existing section 34(1), 2nd Proviso, regarding the issue of notice against the agent of a non-resident, would seem to apply to a notice under clause (a) as well as clause (b) of section 34(1). For this reason, draft sub-clause (1) begins with the words "subject to the provisions of sub-section (2)" and draft sub-clause (2) is framed so as to make it clear that it applies to all notices under section 34(1).

Clause 156.

Existing section 34(3), 2nd Proviso, operates not only in relation to the period of completion of assessment, but also in relation to a time-limit for an, issue of notice under section 34(1). This is clear from the' Words "nothing con- tained in this section limiting the time within which any action may be taken ............. .." appearing in the beginning of the Proviso. The Proviso thus acts as an Exception not only to section 34 (3), main ipara, _but also to the time- limit under section 34(1). The latter aspect has been dealt with here. : 1' Clause 157.

General.--The verbal changes are' consequential on the breaking up of the section into various sub-clauses.

Sub-clause (2).----Existing section 34(1), 1st - Proviso, clause (iii), says that a notice under clause (a) shall not be issued for any year .......... ..unless .......... ..the Commissioner is satisﬁed that it is a ﬁt casefor thef ue of such a notice. Apparently, this would app?' even' here the notice is issued within four years. Bu since hotice under. clause I i 414

(b) can be issued, within four years, without any such sanc- tion, no harm would be caused if, in cases under. clause

(a) also, this restriction is made to operate only where the notice is issued after four years. The provision in question has been altered accordingly.

Other changes are verbal and consequential as above. Clause 158.

Sub--clause (1).----Does not need any comments. The verbal changes are consequential as above.

Sub-clause (2).--No change has been made in existing section 34 (2).

As to the omission of sub-sections (1A), (1B), (1C) and (ID) of existing section 34, see notes above under this group of clauses under the head "Genera1"..

Clause 159 : This is new. The time-limit for comple- tion of assesssment is at present contained in section 34 itself, Since it is" being transferred in the draft to a sepa- rate section, it seems desirable to have such a clause to draw attention to the provision relating to time-limit.

Notes to clause 160.

General.--Existing section 34 (3) has, in the draft, 'been split up into three sub-clauses. The main provision, impos- ing the time-limit, has been dealt with in sub-clauses (1) and (2), while the various exceptions have been dealt with separately in sub--clause (3), for the sake of clarity.

Sub-clause (1).--Paragraph (a) does not need any'com- ments. The substitution of the words "assessment year?' for 'year' is meant to secure precision.

Paragraph (b) is new and is intended to provide that the time-limit in the case of a notice under existing section 28 (3) read with section 28 (1) (c) is four years counted from the issue of the notice. It seems desirable that there"

should be some time-limit in such cases.

Paragraph (c) is new. As already explained in the notes to the draft clause' corresponding to existing sec- tion 22 (3), some difﬁculty has been felt in cases where the assessee ﬁles a return under section 22(3) towards the end of the period within which the assessment sho d be completed. The Department has to complete the ess- ment without any further investigation, lest the period shall be exceeded. To meet such cases, this paragraph haslbeen added, so that the Department may get at least one? year for completing the assessment.

Sub-clause (2).--Deals with the limitation in case of assessment and reassessments under section 34.

Sub-clause (3).--Th_e various exceptions contained in existing section 34(3) have been embodied in this sub- clause, and each exception has, for the sake of clarity, ' Clause 143(4).

415

been dealt with in a separate item. The various items them- selves do not need any detailed comments, since the ver- bal changes are purely consequential on the breaking up of the exceptions, into different items, as already explained.

One change of substance, however, has to be pointed out. Existing section 34 (3) allows the completion of an assessment under section 34 (1) (a) at any time. It is desir- able that some time-limit should be imposed.' The draft proposes a time-limit of 4 years from the end of the assess- ment year in which the notice is served.

The existing exception for assessments under section 34 (IA) has been omitted in the draft, since no such case can arise under the new Act, whose operation will be conﬁned to assessment years subsequent to its commence- ment.

c Explanation 1.--The second proviso to existing section 5, sub-section (7C) has been embodied here.

Very often, assessment ﬁroceedings are stayed by an order of a court, and in suc cases it becomes difficult to complete the assessment within the period limited by sec- tion 34(3). A provision has, therefore, been added in thee draft to exclude the period during which the proceedings were so stayed, .while computing the period of limitation under section 34(3).

Explanations 2 and 3.--Proceedings by way of appeal, revision etc. sometimes result in an order under which the inclusion of a particular item of income in the total income of a particular previous year is disallowed. As a result. it becomes necessary to count that income as a part of the total income of another previous year. Such recomputation should be regarded as consequential on the proceedings by way of appeal etc., and the time-limit under section 34(3) should not be regarded as applicable in such cases.

Similarly, proceedings by way of appeal etc. some- times result in an order disallowing a particular item of income as forming part of total ineome of A, and it may become necessay to include that item in the total income of B. This process also should not be regarded as subject to the period of limitation prescribed' by section 34(3), since it is consequential on the order passed in the appealetc. All that is necessary. is a safeguard» to the effect that the other person (B) should have been heard before the order was passed'.

The Explanations in question are intended to clarify the position for such cases. ' ' Explanation 3.--This is new and is intended to enable the Income-tax Oﬁicer to make an assessment at any time in the income of another person, whereby an order passed " S. C. Parashar vs. Vasantasen Dwarliada: (1956) 29 J. T. R. 857 (l3om- 3 bay H. C.) p 3 l 416 on appeal etc. such income is held to belong to that person. A safeguard has been provided to the effect that the' pro- vision will be applicable only where the other person against whom the assessment, is now proposed to be made, was given an opportunity of being heard before the basic order (that is, the order passed in appeal etc. on the basis of whichi the assessment is now sought to be made) was passe .

0~ Notes to clause 161.

General.--Existing sec. 35(1) deals with three things :--

(i) the power to rectify mistakes ;

(ii) the period within which such reciiﬁcation can be made; and \ '

(iii) the procedure (i.e., the issue of notice etc.) to be followed.

For the sake of clarity, these three things have, in the draft, been split up'into separate sub-clauses.

' The second Proviso, which bars action _in respect of orders passed more than one year before the comm nee- ment of the Indian Income-tax (Amendment) Act, 939, has been omitted, as obsolete. ' Sub--clause (1).--The various authorities that can amend their orders have been dealt with separately in paragraphs,

(a), (b) and(c) along with the nature of the orders that: can be amended by each authority. , ~ Since the order under this section is essentially in§ the nature of an amendment, the phrase "with a view to eti- fying any mistake .......... ..the ........ .;..may amend" has een used. Incidentally, this has enabled the use of the ort expression "amendment" in subsequent sub-clauses, thus ' avoiding the lengthy expression "rectification of mistakes".

Sub-section (2) of section 35,. relating to the rectifica- tion of mistakes by the Appellate Tribunal, has been quit- ted since the Tribunal is proposed to be abolished.

Sub-clause (2).----The verbal changes are conseque tial on the scheme adopted in the draft to break up section (1) into various sub-clauses (See notes above under the ead "General"). v Sub-clause (3).-----Apart from verbal changes which are consequential, the words "or otherwise increasing the lia- bility of the assessee" have been added to make the ?pro- vision comprehensive.

Sub-clause (4).--This is negvsr. and embodies a pra'tice .fol1owed even now, ami is also mecessary as an appe is now provided. , : » .

413

Sub-clause (5).--does not need any comments. 'Sub-clause (6).---does not need any comments.

,_ Sub-clause (7).--The verbal changes that have been made are consequential. .

Notes to clause 162.

Gene'ral.----'For the sake of_ clarity, the various special cases of rectiﬁcation, dealt with i._n exisggig section 35_(5) and subsequent sub-sections, have been e odied separately in this draft clause.

The wording of existing section 35(5) etc. is not happy. The words "shall be deemed _to bea rectiﬁcation," creating an artiﬁcial ﬁction, have been replaced in the draft by words conveying the substance---that' the Income-Tax Oﬂicer has power to amend. "

The provisions contained in existing sub-sections (6), (7) and (10) of section 35 have--_been omitted, for the reason that no scope for the application of any 'of these provisions would remain in respect of assessments made under the new Act. The new Act will apply only to assessment years subsequent to its enforcement. Thus, any recomputation of total income consequential on assessment or modiﬁed assess-

ment of excess proﬁts tax or business proﬁts tax under sec-. tion 35(6) will be conﬁned to cases arising under the old Act, that is to say, for assessment years prior to the enforce- ment of the new Act. The reason.is,; that neither excess proﬁts tax nor business proﬁt; tax is in force now, and it is only for past assessment years that these taxes have any relevancy. Similarly, the recomputation {Of the total income of the share-holders consequential on the modiﬁcation of the assessment of the company under section 23A, will neces- sarily be in respect of assessment years prior to the new Act. The reason is, that section 23A (as it stands in the pre- sent Act as amended up--to-date and) as embodied in the draft) does not have any relevancy on the assessment of the total income of the share-holders. Any action under sec- tion 35(7) will be conﬁned to past as _ ent years. On the same reasoning, any action unlder sect -on 35(10) will neces- sarily be related to the assessment years prior to the new Act, since the recomputationjof tax (by reduction of the rebate) under that sub-section: is applicable only in respect of the assessment years 1948-49 to 1954-55. These sub-sec- tions have, therefore, been omitted.

Sub-clause (1).--The following dléafting changes may be noticed :-- T (1) Section 35(5), as it stands at present, creates an ambiguity, namely, whether the words "where .......... ..it is found on the assessment or re-assessment of the ﬁrm" are to be linked up with the words "under section 31, section 33" etc. The intention, obvio y, is 't the assessment or re-assessment need not have een 3 under the speciﬁc i i 418 .

sections referred to in the sub-section. This has been made clear in the draft, by separating the situations into para- graphs (a) and (b) in this sub-clause;

(ii) reduction or enhancement of income resulting from an amendment under section 35 itself is not at present covered by section 35(5). This has now been added in the draft ;

(iii) as already explained in the notes under the clause' corresponding to existing section 35(1), action under sec- tion 35 is essentially in the nature of an amendment. Fur- ther, the extension of the provisions of section 35(1) to the special cases dealt with in section 35(5) and subsequent sub-sections is purely artiﬁcial, and it would be better if the word "rectification" is not used in respect of these special cases. Hence the word "amendment" has been used-

in this and the subsequent sub-sections;

(iv) the existing sub-section speaks of the period "referred to" being "computed" in a certain manner. Sec- tions 35(8), 35(9). etc., however, speak of the period "speci-

fied" being "reckoned" from a certain date. For the sake.

of uniformity, the expressions used in section 35(8) have, in the draft, been used in all the sub-clause/s.

Sub-clause (2).----This is new. The existing section is silent on the question whether an order similar to that under section 35(5) can be passed in the case of a member of an association where the assessment of the association itself is revised. It seems desirable to add such a provision, and this sub-clause is intended to achieve that object. Since the provision is new, a proviso has been added t-o save the rule contained in existing section 14(2)(b) which enacts that tax is not payable by an assessee on any amount on- which the tax has already been paid by the association.

Sub-clause (3).--The only change that requires explana- tion is the omission of clause (b) of existing section 35(8). This clause is meant for a -casewhere a company is assessed under section 23A and in consequence it becomes necessary to compute or recompute the: total income of the share- holder. As already explained. above, section 23A (as it stands in the present Act as amended up-to-date and as embodied in the draft) has no relevancy now on the income of the shareholders. Clause (b) of section 35(8) has, there- fore, been omitted. Other changes are consequential.

Sub-clause (4).----Existing section 35(9) provides: that where a company does not ay the tax on its proﬁts "within three years after the ﬁnancial year in which the dividend was declared", the Income-tax Oﬂicer may proceed to re- compute the amount of tax deemed to have been paidby the shareholders. This presupposes that the assessment of the company has taken place and the company has failed to pay the tax. There may, however, be cases where the 1 Clause 16!.

e 4119 V the assessment of the company itself is delayed. In such cases, it would not be proper to insist that the company should pay the tax within three years from the year in which "the dividend was declared". It would seem desira- ble to allow, in such cases, a period of at least one year from the end of the ﬁnancial year in which the assessment of the company is made. Necessary alteration has been made in the draft sub-clause on this point. Other changes are 'verbal and consequential.

Sub-clause (5).--This embodies existing section 35(11) introduced by the Finance Act, 1958.

Sub--clause (6).'----This is new. Cases sometimes arise when an assessee claims deduction for a bad debt in res- 'pect of a particular previous year, and the Income-tax Offi- cer is of opinion that the deduction should have been claimed for an earlier previous year. Under the existing law, the assessee cannot obtain any deduction for such earlier years. The draft sub-clause is intended to remove "this hardship by conferring the necessary power on the Income-tax Oﬁicer.

Notes to clause 163.

'3 This reproduces existing section 29. The words "or other person" have been omitted, since the deﬁnition of "'assessee", even in the existing Act, covers all persons by "whom any tax etc., is payable. Moreover, in cases where A is liable to pay tax on the income of B, A will either be a "representative assessee",' or other person who would fall '-under the deﬁnition of assessee.

Notes to clause 164.

Existing section 24 (3) has been embodied here, since it deals with the steps consequential on the assessment of the income of assessee. Instead of the words "to have set off" the words "to have carriedforward' and set off", have 'been substituted, for the sake-of precision.

Notes to clause 165.

Existing section 23 (6) has been placed here, since that again deals with a step consequential on assessment.

The existing words "wh'ene_V§r theulncome-tax Officer makes a determination in accordance with the provisions of sub-section (5)" have been replaced, by the words "whenever a registered ﬁrm is assessed or an unregistered ﬁrm IS assessed under section .......... ..",= since the existing 'words do notecorrectly describe the nature of the action taken by the Income-tax Oﬂicer. In essence, the Income-

tax Ofﬁcer makes an "assessment", as i; 'clear by the words "the total income .......... ..shall be asse$ed" in section. 23 'Vida Chapter on Liability in spccialécases. Vi '. ' ' «4 '9 420 (5) (a) (ii) and by the words "in the case of an unregistered ﬁrm, the Income-tax Oﬂicer may .......... ..proceed to assess the total income" in section 23 (5) (b).

Notes to" clause 166.

The various kinds of returns submitted in respect. of salary, dividend etc., have been dealt with here in one c ause.

Sub-clause (1).-Existing section 20A, dealing with the return to be submitted by a person paying any interest, says that the return is to be furnished to "prescribed oﬂi-- cer". Rule 43A of the rules made under the Act provides:

that the return should be made to the Income-tax Officer in whose jurisdiction a person responsible for paying in-- terest resides. It would be convenient if this rule is em-- bodied in the section itself. .One modiﬁcation, however, seems desirable to be made in. the rule while embodying; it in this section. The return should be furnished to the Income-tax Officer having jurisdiction to assess the person submitting the return, (that is, irrespective of the residence of such person) so that the Income-tax Oﬂicer can verify the items during the course of his examination of accounts without any additional labour. The necessary addition has, therefore, been made in the draft sub-clause.

Sub-clause (2).--Clause (a) of existing section 21 pro- vides that the return to be furnished in respect of salaries should contain the name etc., ofsthe person who receives the salary from the "authority, company" etc. It is silent ;about a person receiving salary from the Government, 'even though the opening line of the section says that the pres- cribed person in the case of "every Government ofﬁce"

has to submit the return under this section. This lacuna has been supplied in the draft.

No addition is proposed in respect of foreign Go'vern-- ments as it may be diﬂicult toenforce the requirement of return from such Governments. ' Clause (b) of section 21 speaks of the amount (if the income "so received or so due" "by" each such person (that is, the person receiving salary). The clause, ;as it stood before its amendment in 1939, spoke only of income "received by" such person. The words "or so due"iwere added in 1939 to cover the case where salary has b come due. At the time of the amendment, however, a small am- matical inaccuracy. seems to' have crept in. The_i ome was described as income "due by" such person whllelwhat was intended, obviously, was income due "to" such person- Necessary verbal changes have. therefore, been made in the draft to remove this inaccuracy. ' Sub--clause (3).--This does not require any comments- The provision contained in e' isting section 58T hasfbeern referred to here, in vjﬁew of subject-matter.' . VI ' Cf. draft clause 314'.

42-1 Notes to clause 167.

This embodies existing section 20. The words "or that no tax is payable" have been added to deal with a situa-, tion not covered by the Act---namely, where the company' is not taxable for the year concerned.

CHAPTER xv LIABILITY IN SPECIAL CASES Notes to clause 168.' General Existing section 24B is meant to deal with the case of' death of the assessee and the proceedings to be taken against the legal representative. The language of sub--

section (1), however, is not direct enough to bring out in proper perspective the main idea behindthis section. Fur-U ther, it does not deal step by step with the various stages.

at which the proceedings might, stand at the time of death.

In the draft, therefore, verbal alterations have been made in order to make it clear that the following possible situa--

tions are to be covered by thisesection :---

(1) where a person dies before any' proceedings for' assessment of his income have been commenced;

(2) where proceedings for assessment have been com--

menced by the issue of notice, but the assessment ' has not been completed;

(3) where proceedings for assessment have been com» pleted, but the notice of. demand has not been served, so that no "arrears" have come into being; ' and (4) where assessment has already-b en made and the notice of demand also served, ﬂu the actual rea1i--

sation, of the tax has not been"3 completed, so that the amount of the tax is in "arrears".

Sub-clause (1).--It has been made clear that the liabi-~ lity of the legal representative is to be arrived at "in the like manner and to the same. extent? as the deceased.. Compare existing sections 40 (1) and 41(1).

Sub-clause (2).--This is mainly in ended to preserve the continuity of the proceedings andgtp ensure that all the possible situations referredfto in the' beginning of the'- notes to this clause under the head "General" are covered. by the combined operation of sub-clauses (1) and (2)..

Sub--clause (3).--This is intended to remove any doubts. as to whether a legal representative is or is not an assessee, It has to be read with the draft deﬁnition of assessee and? the notes thereto. Compare also the 1 ',words of existing' section. 24B (2), "as if such e1:ecutor;: ........ ..were the- assessee". ' 3 Q 422 Sub-clause (4)--is intended to apply, to lega1-re- zpresentatives, certain useful provisions which havebeén incorporated in the group of sections dealing with "re- presentative assessees".

Subeclause (5)--does not need any comments. Sub-clause (6)--does not need any comments.

Notes to clause 169.

General.--The assessments under existing sections 40, A41 and 42(1) are really "representative assessments" as .they are styled under the South African Income-tax Act. This will be clear from the following analysis :--

(i) Section 40(1) relates to persons under disability.

The persons under disability enumerated in the section are, "minors, lunatics and idiots". In these cases, the guardian etc., of the minor, or the manager or committee of the lunatic or the idiot would have no ownership «in the property or income. The income really belongs to the per» sons under disability, and all that the sections provides is a machinery for enforcing the liability of the incapa-- citated person. The tax is recoverable from the guardian etc. in the like manner and to the like amount as it w c Id be leviable upon the person under disability if of full a e and in direct receipt of the income. This is a case where Income received by the guardian etc., on behalf of the incapacitat- .cd person is taxed in the hands of guardian etc., and can therefore be treated as a representative assessment.

(ii) Section 40 (2), dealing with trustees or agents of non-residents, also limits the liability of the trustee or ':agent by the words "in the like manner and to the same amount" as the liability of the beneﬁciary if in direct receipt of the income. Here again, the income which a trustee etc. received on behalf of the beneﬁciary is taxed in the hands of a trustee etc. It is therefore a representative assessment.

(iii) Secion 41 relates to income received on behalf of :a beneﬁciary by the Court of wards, Administrator-General, the Official Trustee, trustee appointed under a deed of trust etc. The section makes these persons liable: to be assessed in respect of income received by them "on ?behalf of" the beneﬁciary and "in the like manner and ?to the same amount" as the beneficiary. (There are two provisos "which are not relevant for the purposes of the present dis-

-cussion). The assessment is thus a representative one.

(iv) Section 42 relates to the agent of a non-resident and empowers the department to treat the agent as the' .assessee in respect of tax leviable on certain income,of the non-resident deemed to arise in India. The income does not "belong to the agent, but, for facilitating the collection of tax he is made liable and "is (deemed to be the assessee ;for all the purposes" 'of the Act.' He is thus a representative .assessee. - ' l 423 It would, therefore, contribute to clarity if all these:

provisions are simpliﬁed and treated in a uniform manner"

The substance of these provisions is the same, namely, that. the tax is leviable and recoverable from A even though nor- mally it would be recoverable and leviable from B. The treatment of all these provisions in one section will also- avoid the unnecessary repetition of the words "the tax shall be leviable and recoverable" or words like " ....... shall be deemed to be the assessee" etc. The scheme adopted, therefore, is to collect these pro--- visions at one place (in so far as the rules applicable are common to all the cases), under the head "Representative assessees".

General Scheme of sections relating to representative assessees.

The group of sections begins with deﬁnitions, followed by the substantive provisions deﬁning the liability of the representative. Special provisions applicable only to special classes of representative assessees are placed at the end.

Assistant has been taken from the South African. Income-tax Act in framing these provisions. The following sections of that Act have been drawn upon :--

Section 69.--Deﬁnitions.

Section 70.--Liability -of representative assessee.

Section 71.--Right of representative assessee to recover the tax from the beneﬁciary.

Section 72.----Personal liability of representative assessee in cases Where he parts with the estate without making provision for"

tax.

Section 75.--Remedies of the department against pro-~ perty with agent or trustee to be the same as the remedies against the property of the principal or the beneﬁciary.

Sub-clau_se (1) Item (i).--Existing section 42(1), main para, latter part,. making the agent liable for the tax on certain income of non-resident, has been incorporated here. (The earlier part of the main para of the section has already been incorporat- ed in the group of sections relating to deemed income). The first prowiso to section 42(1) has been dealt with in a separate clause in this Chapter, while the second and third provisos have been embodied in another separate clause

-in this Chapter.

Existing section 42(2) has 'already been incorporated in the Chapter relating to provisions gainst avoidance of liability to income-tax, while $ction ) has been incor- porated in the group of section' relatin o deemed incomes.

424

Item (z'i).--This represents a part of existing section 440(1). There seems, however, to be no reason why there should be two provisions, one in section 40(1) and the other in section 41(1), for trustees. Convenience requires that all trusts should be dealt with in one section. Accordingly, the reference to trustees in existing section 40(1) should be omitted. This will, of course, lead to the result that oral trusts not covered by section 41 will not be covered by the new provision. However, this would not create any practical difficulties, as the trustee will be still chargeable under the main charging section, namely, section 3; more- over such instances will be very few. As a matter of fact, it becomes difﬁcult to administer existing section

-40(1) in the case of oral trusts; in the ﬁrst place, it' is not «easy to verify the existence of a trust, and in the second place, even if the trust is ascertained, it is not easy to ﬁnd out with certainty the shares of the beneﬁciaries. Oral trusts should not, it is suggested, be included in the ambit «of the provisions relating to representative assessments.

Existing section 40(2) will be covered by another clause that follows in this chapter, deﬁning "agent" in relation to non-residents.

Items (iii) & (iv).--Existing section 41(1) has been bro- ken into these two items, for the sake of clarity. Trustees or authorities appointed under law. like the Official trustee, the Administrator General, the Court of wards, or receivers or managers appointed by the court have been dealt with in item (iii), while trustees 'appointed under a trust deed have been dealt with in item (iv). In both the items, it has been made clear that income which the trustee, the court of wards etc. receives in fact would be also governed by the item, vide the words "receives or" added before the words "entitled to receive". This change has been made on the lines of existing section 40(1).

Sub-clause (2).-----This sub-clause is intended to make it clear that the persons liable as representative assessees are to be deemed to be assessees. This will place them within the scope of "assessee" as proposed to be deﬁned sin the draft. (vide also notes to clause 2, deﬁnition of "ass ee"). Existing sections 40(1) and 41 (1) achieve this result y pro- viding that the tax shall be leviable from the guardi n etc., while existing section 42(1) main para last words, straight- away provides that the agent shall be deemed to §be an assessee. ; , The sub-clause adopts the method used'in section 42(1).

Notes to clause 170 Geneml.--The liability of the representative ass i see is dealt with in this section. The notes to the clause d' ﬁning "Representative assessee" may also be perused as to the general scheme of these sections. I Sub-clause (1).---rA unif "rtn provision has bee made

-as to the nature and extent the liability of the rep sente-

425

tive assessee. The existing sections on the subject, 1'..e. sec-

tions 40(1), 41(1) and 42(1), ex ress themselves in different ' ways; for example, section 40 =1), after providing that the guardian etc. is to pay the tax (vide the words "the tax shall be levied .......... ..") goes on to say that "all the pro- visions of this Act shall apply accordingly". Section 40(2) also employs the same language. Section 41(1) is also on the same lines. Section 42(1), main para, last line, pro- vides that the agent "shall be deemed to be for all the purposes of this Act, the assessee" in respect of the tax payable by the non-resident.

It is desirable that this diversity of language be replac- ed by the same formula for all these cases, since such diversity unnecessarily causes confusion and gives rise to doubts as to whether any difference in substance is intended or not. Draft sub-clauses (1) and (2), therefore, make it clear that the representative assessee is subject to the same duties, liabilities etc. as if the income were his own income. It further provides that he is liable to assessment in his own name. The category under which he is to be assessed and the computation of _tax, however, are to be governed by the priniciples that would have been applicable to the beneﬁciary himself, and this has been made clear in the draft.

The words "representative capacity? will, incidentally, remove one lacuna existing in the present Act. When _a . 7 trustee is charged in respect of income of the trust in his hand, the question might arise whether his individual in- come derived from his personal properties can be included in the same assessment. In other words, the question is, whether the assessment of a trustee quit-trustee is to be kept completely separate from his assessmerft in his private capa- city. On principle the two should be kept separate as the capacities are different, but there is 110 provision in the present Act giving clear guidance on this point. The words "representative capacity only", as usodi in the draft sub- clause under discussion, will make the position clear. , Existing section 41(1) etc. are limited to "tax". The position regarding penalty or any other sum due under the Act should not, however be different, and the provision as _ drafted will cover penalties and other sums also.

Sub-clause (2).--The provision ﬁh t a representative is liable only to the extent of the asset grith him at present appears only in the case of in legal' _presentative liable under section 24B(1). There iséhowev no reason why this protection should not extend to representative assessees, such as guardians, trustees, agents, etc. It is therefore put in a general form in this sub-clause. (There are, of course, special remedies available against certain representative assessees, which have been saved in the draft clauses on the subject that follow in this Chapter.)_ Sub-clause (3).--Persons 1' ble as representative asses-

sees, especially as trustee, gua 'an or ager etc. (i.e.' the assessees governed by exist' secti 140 and 41) are, at \ 426 present, liable to be charged directly under section 3._also. In any case, the absence of a speciﬁc provision lends sup- port to the opinion expressed by some commentators that the Act leaves an option with the Department to assess the trustee etc. either under section 3 or under section 40 or 41. Since assessment under section 3 might be more onerous than under section 40' or 41, it seems desirable to make it clear that it is obligatory on the Department to apply the provisions of sections 4Q and 41 in cases where they are applicable, leaving the general liability under sec- tion 3 to be applied only in cases which are outside sections 40 and 41. The draft sub-clause under discussion is intend- ed to achieve this object.

Notes to clause 171 Sub-'clause (1).----This is new. The principle of the sub- clause however is not controversial and is therefore embodi- ed in the draft on the lines of section 71(1) of the South African Income-tax Act.

Sub-clause (2) and (3).----Existing section 42, second and third provisos, lay down a procedure whereunder the agent of a non-resident can approach the Income-tax Oﬂicer for the issue of a certiﬁcate stating the amount to be retained by the agent for discharging his estimated liability in respect of tax on the income of the non-resident. This provision can be usefully extended to all cases of representative assess- ment, and has therefore been embodied in the draft sub- clause under discussion.

Notes to clause 172 This is new and is based on section 72 of the South African Income-tax Act. In a sense, it is a corollary of the provision in the main clause' relating to the liability of a representative assessee, to the effect that he is liable only to the extent of the estate and in a representative capacity only. If the representative assessee parts with the assets without making proper payment of tax, it is but fair that he should personally become liable.

(The South African Act, of course, includes even a case where the representative -assessee alienates, char es or disposes of the income in respect of which the tax is. c arge- able; in South Africa the tax is payable on the income of the current year itself. Since, however, the scheme of the Indian Act is different, this partof the South African sec- tion has not been incorporated in the draft clause under discussion.) ' ;

Notes to clause 173 Sub-clause (1).--The deﬁnition of "agent", given in this sub-clause, is based in substance on existing section 43, main para, but assistance has been taken in drafting it from the language of the Ceylon Incometax Ordinance'.

/.

' Draft clause :70. V ' Scctionj35, Ceylon InQomc- tax 1 (2?

Paragraph (d) embodies section 40(2) in a brief form- It seems unnecessary to treat the case of a trustee of a non-resident separately from' the agent of a non-resident or to devote a separate section to it. In subst ce, the lia- bility of the trustee (when the beneﬁciary is a n-resident) should be the same as that of the agent. -

Existing section 43, main para, contains the words "upon whom the Incometax Officer has caused notice of his intention to treat him as agent" to be served. Since a pro- vision for giving opportunity to the agent is already con- tained in section 43, second proviso, (vide draft sub-clause (2)), these words are unnecssary and have, therefore, been omitted in the draft.

The words " .......... ..sha1l .......... ..be deemed to be such agent" have been replaced in the draft by the words "agent .......... ..includes .......... ..". A deﬁnition in the form of enumeration having been adopted in the draft, the form had to be changed, ' Existing section 43, Explanation, has been embodied in the Explanation to draft sub-clause, with the addition of the words "or relinquishment" on the lines bf existing section 12B. The reference to the date 28th day of February, 1947, has been omitted as unnecessary, since the new Act will apply only prospectively, that is, for assessment years subsequent to the commencement of the new Act.

Section 43, 1st proviso, has been embodied in the pro- viso to the draft sub-clause. An attempt has been made to make the language less involved, by Toning the proviso with a reference to the "broker", instea of beginning with the word "transactions" as the existing proviso does.

Sub-clause (2).--Existing section 43, 2nd Proviso, has been embodied here, with the addition of the words "to be treated as such" at the end in order to make the pro- vision more precise.

Notes to clause 174 The ﬁrst proviso to section 41(1) has been split up into paragraphs, for the sake of clarity. The position in respect of income-tax has been stated separately from the position regarding super-tax, since .the provision that the tax shall be levied at the maximum rate does not: apply to super-tax, see existing section 58(1). ' [The latter part of the Proviso, of course, must be taken as applying to superbtax also, and this has been made clear in the draft, vide sub-clause (b).] ' The latter part of the Proviso _is, obviously, an excep-

tion to the earlier part of the para (part) of the sub-section. _ earlier part of the proviso ' not , p' 28-! Law Com. 58 428 also does not apply. The draft makes this clear by treat- ing the latter part as an item--item (i) in the draft--falling under the earlier part, i.e. undér sub-clause (a) of the draft.

One impgrtant change has been made in the substance of the existing provision. Section 41(1), lst Proviso, (dealing with the case where the income is not speciﬁcally receiva- ble for one person or where the shares are unknown) pro- vides that income-tax shall be chargeable-

(i) where the beneﬁciaries have no other personal income, and none of them is an artiﬁcial judicial person, then at the rate applicable to an associa- tion;

(ii) in other cases, at the maximum rate. This provi- sion leads to an anomaly. Where a beneﬁciary has even 1 Rupee of other income, the income becomes chargeable at the maximum rate. More- over, the provision is not simple in its Working. The draft, therefore, proposes a provision where- under the tax will always be at the rate appli- cable to an association, except in cases where the income is received by a beneﬁciary and the Income--tax Olﬁcer desires to charge income-tax at the rate individually applicable to him'.

Notes to clause 175 Existing section 41(1), 2nd proviso, has been embodied in this clause, which does not need, any comments.

Notes to clause 176 This is new and has been introduced on the lines of section 75 of the South ,African Income--tax Act, in order to make it clear that the fact that a person is holding cer- tain property as a representative assessee (and not as the beneﬁcial owner) does not affect the remedies available to the department against the property;

Notes to clause 177 Existing section 41(2) provides, in effect, that though a Court of Wards, Oﬂicial trustee, trustee appointed under a deed etc. is assessable as representing the beneﬁciary. the direct assessment of the beneﬁciary is not barred. There is no reason why this principle should not be applied to all representative assessees, and 'the rule has, therefore. been embodied in this clause, which will be applicable to all cases of representative assessment.

3 The Subject has been 'disccussedby the Taxation Enquiry Commission, which however, did not favo _ y change See T. E. C. Report (1953-31), pt, II,:ch. VIII para. 9 to u, _ .-107. 5 -_ l 429 Notes to clause 178 This is new and is intended to state the position re- garding tax in respect of the estate .of a deceased person in the hands of the executor. The clause, of course will be conﬁned in its application to income derived after death. Income in respect of the period up to death will be governed by existing section 24B, which has already been incorporat- ed in the draft clause in this Chapter relating to legal re- presentatives.

The clause has been drafted on the lines of the relevant provision of the Ceylon Income-tax Ordinance.' Notes to clause 179 This is consequential on the new clause introduced in the draft laying down the liability of the executor, and will authorise the executor to recover the tax from the persons to whom the estate is to be distributed.

Notes to clause 180 General.--Existing section 26(2), which deals with the case of succession to business, profession or vocation, raises a number of difficulties, and the language of the section has not escaped criticism". Some difficulty is created by the words "where a person carrying on a business .......... ..has been succeeded in such capacity". The exact signiﬁcance of the words "in such capacity" is not clear. The observations of the Privy Council' indicate that what is in- tended is, that the business _etc. should continue to be carried on by the successor. A person who becomes merely a successor (in the sense that he gets the legal ownership of the business etc. but does not actively continue the busi- ness etc.) would not be governed by this section, since in his case there would not be any income after the date of succession. The wording of the section, therefore requires some change to make this intention clear.

For the sake of simplicity, section 26(2) has been split up in three sub-sections in the draft.

Sub-clause (1).--Apart from the changes explained above. the following drafting changes have been made :---

(1) The existing words "person succeeded" and "person .

succeeding" cause a slight confusion, since it is not clear whether the predecessor is .intended or the successor is intended, and some effort has to be made to remember the person intended to be covered. The expressions "predeces- sor" and "successor" have, therefore, been used in the draft in place of these words. i ' See Sections n (to) and 11 (u) of the Ceylon Income-tax Ordinance.

' See observations of Madhavan Nair J. in jupudi Kexava Ran vs. C.I.'I'o (1935) 3 I-T-R- 339. 343 (Mad-)- , ' Mahamjadhiraj of Darbhanga vs. C.I.T. Bilut -and Oriua (1934) 2 I.T.R., 34.5, 347, 348 (P.C.)-61 LA. 312-LL. R-. 13! 607.' g 430 (2) In ordergto explain the effect of this section more clearly, clauses (a) and (b) have been added in the draft to provide that the income upto succession is assessable. on the predecessor and the income after successi.on is assess- able on the successor. Incidentally, the use of the words "income of the previous year up to succession" will also make it clear that the previous year talked of is the pre- vious year in which the succession took place.

Sub-clause (2).--The words "year in which succession took place" have, in the draft, been prefaced by the word "previous". For the sake of clarity, the latter half of sec- tion 26(2), Proviso, has been dealt with in a separate sub- clause, see draft sub-clause (3).

Sub-clause (3).--In existing section 26(2), Proviso, latter half. which provides that the tax in respect of the "assess- ment .......... ..assessed on the person succeeded", shall. be payable by the successor, the wording does not sound well ; the recurrence of "assessment" and "assess" can be avoid- ed. The language has, therefore, been altered' in order to make the intention clear, though this has resulted in a slight elaboration.

Sub-clause (4).--Existing section 25A. sub-section (2), deals in part with the case of succession, though that sec- tion mainly deals with the partition of a Hindu family. The portion dealing with succession has been incorporated in this sub-clause, for reasons already explained in the notes to the draft clause' dealing with partition of Hindu families.

The words "where any person has succeeded to a busi- ness .......... ..formerly carried on by a Hindu undivided family whose joint family property has been partitioned on or after the last date on which it carries on such busi- ness .......... .." in existing section 25A(2), do not give out the intended meaning easily. What is intended is, that there is ﬁrst a succession to the business of a family, and simul- taneously with the succession or subsequent thereto there is partition of the family property. This has been stated in more direct language in the draft sub-clause under discus- sion. It has also been made clear that it is the income upto the date of succession which is to be assessed in the manner provided in the section relatin to partition. Income sub- sequent to succession will be t en care of by existing sec- tion 26(2), and this has also been made clear by the words "but without prejudice to the provisions of this section" at the end of the draft sub-clause.

Notes to Clause' 181 General.--Existing section 25A is really intended to lay .down the proposition, that until there has been a complete partition of the joint family pmperty and the Income-gtax Qﬁicer records a ﬁnding to .eﬁe,ct, the family should x Su-notes to dnfcclitne IF!) (4). " . I 431 be treated as joint and assessed as a Hindu undivided -fami- 1y. The way in which the section begins, however, clouds the main proposition, because the section begins with pro- cedural matters and relegates the main proposition to the last sub-section. The various sub-sections have, therefore. been re-arranged in order to emphasise the main proposi- tion contained in the section.

Sub-clause (1).--It has been held by the Privy Council' that section 25A applies only where there is a total parti- tion. This is certainly the position under the existing sec- tion. But it would be desirable to apply the procedure con- tained in the section to partial partition also. The draft, therefore, makes this alteration in the section, with con- sequential changes. ' Sub-clause (2).--The proviso to section 25A(1) has been combined with the main para.

Sub-clause (3).---Provision has been made that the In- come-tax Oﬁicer, while passing an order under this section, should record a ﬁnding as to the date of the partition. This, besides avoiding many complications, will facilitate the assessment for the periods before and after partition.

Sub-clause (4).--Some confusion is caused by the language of existing section 25A(2), Which, while opening with a reference to a case of partition, goes off at a tangent to deal with the case of succession. For the sake of clarity, these two cases should be dealt with separately, even though the substantive rule to be applied may be the same. Draft sub-clause (4) conﬁnes itself to partition. Succession is dealt with in the separate clause' corresponding to existing sec- tion 26(2).

The existing provision in section 25A(2), main para, to the effect that the Income-tax Ofﬁcer shall make assess- ments on the members or group of members accordingly '_'in accordance with the provisions of section 23"' creates an impression that a special assessment for the purposes of this section has to be made, on the member etc. This is, however, not the intention. The section is merely intended to lay down the liability of the members for pre-partition income, and does not require that the assessment made in pursuance of his liability should be made separately from the individual assessment of each member. This part of the sub-section has, therefore, been omitted.

There is some amount of confusion, in existing section 25A(2), as to how far a member (or "group of members") is liable for pre-parti'. ion tax. While the main para. of that sub-section says that each memberis liable for a "share of the tax on the income so assessed" according to the por- tion of the joint family pr erty allotted to him, the pro- viso says that the liability s all be _"g'qint and several". The ' SImdarS:'n_hMa':tln' was: I H 10 I.'I"' J» 'P.C. "

" Sea draft c'l'aune11_$o(4). , ( f) 1457 _ .

432

position is not quite clear. The 'intention, however, seems to be this, that a member is jointly and severally liable, and that for the purpose of computing his "several" liability the property received by him is to be taken into account. To make this clear, the language of the proviso has been modi- ﬁed and the position has been stated in a diﬁerent form in the draft. For clarify, cases of partition during previous year have been dealt with separately from the cases of subsequent partition.

In order to make the section comprehensive, partial par- tition has also been dealt with, as pointed out above in the notes under sub-clause (1). The Words ''total income receiv- ed by... ....... ..the family .......... ..shall be assessed", will, in relation to partial partition, have the effect of including the income received by the family in the assessment of the family even after the partial partition.

Sub--clauses (5) and (6).--See under sub-clause (4) above.

Sub-clause (7).--This is new. The rule embodied in the draft is, that where a family was carrying on a business at the time of partition, the assessment may be made by the Income-tax Officer of the area in which the principal place of business was situated before the partition; in other cases the place of residence of the last manager will govern the decision of the question.

Sub-clause (8).----This is new. The existing section is silent as regards penalties and other sums'. The sub-clause is intended to make the position clear.

Explanation.---Clause (a) of the Explanation is intended to codif a rule already established. Section 25A applies only where t ere is such division of the property as its nature admits of; mere severance of status does not fall under this section". This is also clear from the words "allotted at the partition" in existing section 25A(2).

Clause (b), deﬁning "partial partition", does not need any comments.

Notes to clause 182 General.---All the provisions relating to shipping busi- ness, as contained in sections 44A, 44B and 44C, have been placed in one clause.

The provisions have been re-arranged, so as to state the liability ﬁrst, followed by the method of assessment, excep- tion, and savings.

1 cr. 0.1.7'. vs. Sanichar Sali. (1955) 27 I.T.R. 307, (Pamaij Raju Chettiar and other: V. Collector qfMadras,(i956) 29 I.'[ .R.241 (Madras). M. Subba Ran Vs. C.T.I. Hyderabad, (1957) 31 [.T.R. 867 (Andhra).

' Bansidhar Dhandhaniaand another v. 01.7'. (:94?) I2 I. T. R. :26. Gardhanda: T. Man alda: V. C.l.T. (19413) n .T.R. 183. Jaganaatli Ram, v. .I.T. #5? I9 I. .' R. 353. V Blmn Rn; Barm Dhar v.C _. . I954). 26 I. T. 11.185.

433 ' Sub-clause (1).--The expression "ﬁnancial year" has been substituted for the expression "year", for the sake of precision.

Sub-clause (2).--The existing section is silent about the carriage of mail by the ships covered by the section. It seems desirable to add a reference to mail'.

Existing section 44B(2), latter part, provides that one-' sixth of the amount assessed shall be deemed to be the amount ,of proﬁts and gains accruing to the principal on account of carriage of passengers etc. But since it is only income which accrues in India that is taxable, this part of the section has been re-drafted. It has also been made clear that section 44B will apply whether the amount is payable in or outside India.

Sub-clause (3).--Does not need any comments.

Sub-clause (4).--Existing section 44B(3), earlier part, provides that the Income-tax Oﬁicer shall determine the sum payable as tax at the rate applicable to the total in- come of a company. Since, however, there are different rates applicable to different kinds of companies (by virtue of the annual Finance Act), it seems desirable to make the pro- vision more precise, by indicating exactly the category un- der which such ship-owners are to be placed. The draft sub-section. therefore, makes it clear that the rate appli- cable to a company which has not made the prescribed arrangements for the deduction of super-tax on its divi- dends under existing section l8(3D), will be the rate to be applied under section 44B.

Sub-clause (5).--Does not need any comments.

Sub-clause (6). Section 44B, latter part, provides that a port clearance will not be granted until the officer con- cerned is satisﬁed that the tax has been duly paid under

- this section. In the draft, the words "the tax assessable un- der this section" have been used to make it clear that this sub-section will apply whether the tax has been duly assess- ed and has, therefore, become payable, or whether the tax is "assessable". In other words, this sub-section» will apply even if the tax has not actually been assessed by reason of any default of the master of the ship etc. Sub-clause (7).--The word "year" has been replaced by the words "ﬁnancial year" in the draft, for precision. Fur- ther, it has been made clear that the payment of tax will be treated as advance payment of the tax "leviable in the relevant assessment year", in order to make the provision more precise. -

Sub-clause (8).---Does not need any comments.

As regards the words "relevant assessment year", notes above under sub-clause (7) may be seen.

Notes to clause 183 Existing section 42(1), first proviso, lays down a rule which relates to the recovery of tax on a non-resident. not 1 Cf. Section :5 Subsection (1), Sowh Ai'r_i.can:_I|,eomc-tax Act.

\ 434 from his agent but from his assets in India. The emphasis here IS on the assets; this provision has, therefore; been excluded from the draft clauses dealing with representa- tive assessment, and has been placed here.

The words "without prejudice to .......... .." have been added in order to malre it clear that the remedies confer- red by the other sections referred to are not affected by the special provisions of this section.

The words "whether in his name .......... .." had to be added here, since section 42(1), 1st " Proviso, in the scheme of the existing Act, is connected with section 42(1), main paragraph, and the main para. uses these words.

Notes to clause 184 Section 24A_ has been embodied in this clause. For the sake of simplicity, the provision has been split up into a number of sub-sections. ~ Sub-clause (1).----The provision for assessment in the current ﬁnancial year, embodied in section 24A and other similar sections, really constitutes an exception to the gene- ral principle embodied in section 3 that it is the income of the previous year that is taxable.

The chargeability of the income in the current assess- ment year is made clear by speciﬁc words in this sub-clause, and it is also made clear that to this extent the section over- rides section 3. (As a matter of fact the draft clause for s. 3 is itself subject to the other provisions of the Act»). (See also notes to sub-clause (2) below).

It may be added that the language of this section has also been criticised by the Income-tax Investigation Com- mission'. The alterations made in the draft, though they do not follow the lines suggested by the Commission, re- move the ambiguities and lacunae to which the attention of the Commission was directed.

Since the section will apply only to natural persons, the expression "person" has been replaced by the expression "individual".

Sub-clause (2).--The period, whose income is char_ge~ able is mentioned separately in this sub-clause. The existing provision says that the total income to be assessed is "'of the period from the expiry of the last previous year of which the income has been assessed in his hands to the probable date of his departure from the taxable territories, or where he has not been previously .assessed, on his total income of the period up to the probable date of his depar- ture from the taxable territories". Now, in so far as this period covers a previous year which has been completed before the commencement of the ﬁnancial year in which the Income-tax Officer takes action under this section, the sec- tion has no importance, because assessment for such earlier

1. Sn I.'I'.I.C; Report -094155, page 25, 58. - % Ev ,.

previous years can be made even umier the normal pro- vision in section 3. It is only in respect of a previous year which falls wholly or in part within the ﬁnancial year that the section needs to be relied upon. In the draft, therefore, the words just now quoted have been omitted.

Of course, it is still necessary to cover cases where a completed year of income forms part of the period from the end of the last previous year to the date of departure. For example, a person whose previous ear ends on the 31st December may leave India, say, in ebruary, 1958. The year of income commencing on the 1st January, 1957 has to be covered, because the assessment year for that income will be 1958-59, which has not yet started. In such cases the complete year of income 1957 as well as the fraction from 1st January, 1958 to February, 1958 may be governed by this section. Hence, draft sub-clause (2) does not make any other modiﬁcation as regards the taxable period.

Under the existing section, the position regarding rate

-of tax has been stated in a very elaborate manner. It says that the assessment shall be made. "as regards each com- pleted previous year" at the rate at which such income would have been charged had it been fully assessed. Now, -

as already explained, the incomes of years completed before the commencement of the assesment year in which the In- come-tax Olﬁcer takes action are governed by the normal provision in section 3, and it does not make any difference whether they are dealt with under section 3 or under this section. Under section 3, the rate applicable is the rate for the relevant ﬁnancial year; such cases should, therefore, be left to be governed by section 3, and hence the words just now quoted are unnecessary and have been omitted in the draft. The remaining "previous year", that is, the period' from the end of the previous year for the assessment year to the date of the departure will continue to be governed by this section.

As a matter of fact, the words just now quoted are misleading from one point of view, because, if interpreted strictly, they would mean that a person leaving India in February, 1958 and having his previous year ending with the 31st day of December, 1957 would he chargeable at the rate applicable to the assessment year'1'958--59. Obviously, this is not the intention, and the provision as embodied in the draft will obviate any possibility of any such wrong result being deduced from this section.

Sub-clause (3).--The criticism of the existing section, made above in the notes to sub-clause (2), applies in res- pect of the provisions for estimating the total income also. The power to estimate should not be conﬁned, as in the existing section, to a fraction of aipreirious year; even a completed previous year might fall within the period for which the income has to be ."qstima, ". The sub-clause has therefore been widened to-' -'ve a fder. power to the Income-tax Officer in this respg = _q »_-. - ' 436 Sub-clause (_4).~--In view of the simpliﬁcation made in sub-_section (1), it has become possible to simplify this sub- section by removing the elaborate description of the period for which return is to be called.

The_ words "(along with such other particulars as may be provided in_ the notice)" have been omitted in the draft, since the pI'0VlSl0I1 that it is a notice under section 22 (2) implies that other particulars are also to be furnished, where required. The words "subject to the provisions of' this section" have been added for precision, particularly in view of draft sub-clause (3).

Sub-clause (5).----It appears desirable to make it clear that the special assessment made under section 24A is in addition to any regular assessment which may happen to take place in the same assessment year. This has been made clear by this sub-clause. Existing section 25(1), latter portion, may be compared. ~ Sub--clause (6).--This is new. The special provision limiting the period of hotice to seven days, embodied in sub--clause (4), is applicable to the emergency assessment:

by virtue of the section itself. Where, however, the normal assessment for any. past previous year has not, yet, been made on the assessee who leaves India, it may sometimes. be necessary to ﬁnish the assessment before the assessee leaves India. In such cases the normal period of 30 days- provided for in section 22 may be difficult to be complied"

with. The draft sub-clause, therefore, allows the Income- tax Officer to reduce the period in such cases. This new provision will ultimately be for, the beneﬁt of the assessee,. since he cannot obtain a clearance certificate under exist- ing section 46A until his assessments have beenpﬁnalised.

Sub-clause (7).--A time limit-of three months will be allowed to the Income-tax Officer except where the delay is occasioned by any conduct of the 'assessee.

Notes to clause 185 This clause embodies a part of section 25 of the exist- ing Act. The latter part of section 25 (2), imposing a penal- ty, is transferred to the Chapter on penalties.

The section has been simpliﬁed without affecting the substance. Main drafting changes are :---

(i) The words "notwithstanding anything contained in section 3", have been .added to make it clear that the ordinary rule requiring assessment of the pre-

vious year's income in the next assessment year is modiﬁed in this section;

(ii) the words "discontinued in any year" have been. replaced by "discontiiued in any assessment yyear", for the sake of precision ; ' r ' --- -

. ..._..._........ . -.... ....

437

(iii) words excluding a business etc., charged under' ' the 1918 Act have been added, since section' 25 (1) does not apply to such business, vide the words "to which sub-section (3) is not applicable", in existing section 25 (1) ;

(iv) it has been made clear that the power to charge- tax in the current assessment year is to be exercis- ed at the discretion of the Income-tax Officer;

(V) the existing words "assessment may be made in. that year on the basis of the income .......... ..in addition to the assessment, if any, made on the basis of the income .......... ..of the previous year"

give rise to a controversy, namely, whether the income of the normal previous year is to be com- bined with the income of the current assessment year, when making the assessment. It has been considered desirable to alter the wording on this point to make the intention clear. The draft, therefore, uses the words "the total income ....... .. of the period from the expiry of the previous year to the date of discontinuance", and avoids any"

reference to the normal previous year in sub- clause (1). Draft sub-clause (4), however, makes it clear that any assessment made under the normal' provision will not be affected by the special pro- cedure given in this section.

Sub-clause (2).--Does not need any comments. Sub-clause (3).--Does not need any comments. Sub-clause (4).--See notes under sub-clause (1).

The remaining portion of section 25 has been embodi- ed in the draft at the appropriate places.

Notes to clause 186 Sub-clause (1).--Section 44 of the existing Act deals the assessment in case of discontinuance of business. by ﬁrms and dissolution of associations. The part dealing with ﬁrms is being incorporated in a separate clause (vide separate Chapter relating to ﬁrms). The part dealing with associations has been incorporated here.

A reference to the legal representative of a member who is deceased has been added'to provide for cases where a member dies after dissolution and before assessment.

The changes made by the Finance Act, 1958 have been given effect to.

Sub-clause (2).--This is new. The object is to allow the Income-tax Officer to.contin_ue assesment proceedings already started before the dissolt tion eﬂ} So. that time may not be wasted in the re-issue of n tices eta ' 438 _ Sub--clause (3).---Section 44(3), as inserted by the Finance Act, 1958, authorises the Income-tax Officer etc., to impose a penalty under clause (a) or (b) or (C) of section 28 (1) in respect of a dissolved ﬁrm or association. Instead of rnak1ng_an elaborate provision on the lines of that sub- section, it is considered sufficient to say that the provisions relating to 'tax will apply to penalties also. Sums other thanpenalties have also been covered in the draft. The provision as drafted will, thus be more comprehensive, though less elaborate in form.

Sub-clause (4)----This is new and is intended to make it clear that the limitation on the liability of the legal re- presentative is not to be affected by the provisions of this section. This becomes necessary in view of the fact that in draft sub-clause (1) a reference to legal representative has been added.

Notes to clause 187 Existing section 12AA is applicable in all cases where the time taken by the author of a book is more than twelve months. Clauses (a) and (b) dealing separately with a case where the time taken is "less" than 24 months and a case where the time is "more" than 24 months, are unneces- sary in the opening portion, since this distinction is rele- vant only in connection with the mode of separately allo- cating income. The distinction does not affect the applica- bility of the main principle of the section. A slight recast- ing of the language has, therefore, been attempted in the draft on this point.

Clause (a) of the existing section uses the words "less than twenty-four months" and clause (b) uses the words "more than twenty-four months". For the sake of precision, the former wording has been replaced by "not more than twenty-four months", so that clauses (a) and

(b) can collectively exhaust all cases, including a case where the time taken is exactly 24 months.

It may be observed here that existing section 12AA was inserted in 1953. The Taxation Enquiry Commission' recommended the spread-over of income not only for copy- right but also for patents. The Commission suggested that 'proceeds of sale of patent rights should be spread over a period of six years. Section 318 of the U.K. Income-tax' Act. 1952, also allows such spread-over in the case of patents. It is for consideration whether the section should not be

-extended to patents.

'Notes to clause 188 Existing section 8, third proviso, has been incorpora- ted here with two changes:---

(i) The rate at which the State Government will pay tax should be laid down by the Finance Act spe- ciﬁcally; this has been made clear in the draft.

1 '['.E.C.'Re1§o'rt (xgfg-1954.), II, Ch. 111, par'a'7. page 42.' p 4%

(ii) Since the word "receivable" in existing Section 8, main para, has in the draft been replaced by word "received", necessary drafting changes have been made here also.

CHAPTER XVI ' SPECIAL PROVISIONS APPLICABLE TO FIRMS Notes to clause 189 Provisions relating to ﬁrms have been brought together in this Chapter under the following groups :--

(1) Assessment.

(2) Registration.

(3) Other provisions.

Sub-clause (1).--Existing section 23 (5) (a) provides that the total income of each partner, "including therein his share" etc., shall be assessed and the sum payable by him on the basis of such assessment determined. Since the scheme of assessment in the case of a registered ﬁrm is, that the partner is himself assessed on his share, these words have been replaced in the draft by the words "the- share .......... ..shall be included in his total income" etc., which seem to be more appropriate.

Sub-clause (2).----Does not need any comments. Though this provision is in a sense repetition of existing section 16(1) (b) Proviso, it has been a lowed to stay for the sake of convenience of reference.

Sub-clause (3).--The existing words "his share ....... ..

shall be assessed on the ﬁrm" have been replaced in the ' draft by the words "tax on his share .......... ..shall be asses--A sed on the ﬁrm", which are more appropriate.

Section 23 (5) (a) (i) has been retainedin the draft in the existing form; but it is recommended that it may be deleted.

The Finance Act, 1956, introduced this new provision making a ﬁrm liable to income-tax on its income at a special rate provided by it. The provision for including the shares of the proﬁts of the ﬁrm within the total income of a partner in his individual assessment and levying tax upon it was also retained. This implies,.s that the share of the partners in the proﬁts of the ﬁrm suffers tax twice---- once in the hands of the ﬁrm and again in his own hands. This is really a double taxation of the same income though at different rates. [The same Finance Act, 1956, introdu- ced a new provision [section 14(2) (aa)] under which the proportionate income-tax paid by the ﬁrm on the share of income included in the partners' share is deducted. It means that the partner is not_.liable Ip pay income-tax on the pro orticnate tax; but. it not obviate the diﬁiculty 0 double taxation]. _ .

. 'z 1 440 (No'rE.--It is understood that in the year 1957-58, there were 6651 registered ﬁrms which were assessed to a tax of 1 crore 57 lakhs on a total income of about 51 crores.) Section 23(5) (a), 3rd Proviso, has been omitted, as it is in substance the same as the second proviso. It was introduced for the purpose of enabling persons going to Pakistan to be treated as non-residents, The necessity for any such special provision does not remain now.

Notes to clause 190 Paragraph (a).----Existing section 23 (5) (b) does not directly state the position that in the case of an unregister-

-ed ﬁrm the tax payable by the ﬁrm itself on the basis of his total income is to be determined. This is the primary mode of assessment of an unregistered ﬁrm, and has, there- fore, in the draft, been stated at the opening of the clause in paragraph (a). (The existing words "instead of determin- ing .......... .." are thus covered by this paragraph).

Paragraph (b).--The drafting changes that have been made are intended to state the position in more simple manner.

Notes to clause 191 General.--The provisions relating to procedure for registration of ﬁrms, as contained in existing section 26A, .are sketchy; because many of the important provisions are at present contained in the rules. It seems desirable to «collect together some of the provisions at present contained in the rules, and the draft clause has therefore, been made more elaborate. -

Sub-clause (1).---.The existing words "constituted under" an instrument of partnership are found in practice to lead to unnecessary controversy based on sharp distinc- tions'. They have, therefore, been replaced by the words "evidenced by".

The existing words "specifying the individual shares

-of the partners" have been construed too technicall some- times, so that applications for registration are re used if the shares are not given in the partnership deed speciﬁcally in so many words, or if the partnership deed is not self- contained and has to be read with the deeds relating to subsidiary ﬁrms in which the partners are interested. It is felt that registration should not be refused in such cases "merely on the ground of the existence of such ﬂaws in the partnership deed. Necessary drafting changes have been made to achieve this object.

Sub-clause (2).--It has been made clear that the appli- «cation for registration may be made even after the dissolu- tion of the ﬁrm,

1. Sea the Case citedin Kong; 'and Palkhiwalfs Commentary, [958 Edition, page 650. . .

....._...........» 441 Sub-clause (3).----The persons who should join in an application for registration have been mentioned exhaus~ tively in this sub-clause, which_ incorporates the second paragraph of rule 5 of the Income-tax Rules.

Sub-clause (4).--~Under the existing provisions (rule 2 of the Income-tax Rules), the first app ication for regis- tration has to be made within six months of the constitu- tion of the firm or before the end of the previous year of the ﬁrm, whichever is earlier, if the ﬁrm was constituted in that previous year. Where a firm is already registered under the Partnership Act or the deed is registered under the Indian Registration Act, the application has to be made before the end of the previous year. It has been suggested .

that the 30th day of June of the assessment year "should be ,.adopted as thelast date by which an application for ﬁrst registration should be made. But the adoption of this time-limit would enable the assessee to get registered an' antedated partnership. It seems desirable that, irrespective

-of the fact whether the deed is or is not registered under one or other of the laws referred to above, the application should in all cases be made before the expiry of the pre- vious year. The reason is, that the assessee is claiming an advantage under the Act in respect of proﬁts earned in the previous year on the basis that during that year the ﬁrm came into existence. If that is so, he must be able to make good that plea by a proper application made before. the end of the previous year. If any more time is given, there will be ample scope for the assessee to make up his mind whether to get the ﬁrm registered or not and for that end to invent a partnership antedating the constitution for the entire period and bringing into existence a docu- ment evidencing such partnership.

The draft sub-clause under discussion gives effect to this proposal. A proviso has been added authorising the Income-tax Oﬁicer to entertain an application made after the end of the previous year in proper cases.

Sub-clause (5).--~The provision contained at present in the rules, requiring the application to be accompanied by the instrument evidencing the partnership, has been incorporated in this sub-clause, and it has also been made clear that in ﬁt cases a certiﬁed copy of the instrument may be accepted in lieu of the original.

Sub-clause (6).--The provisions contained in existing rule 3 of the Income-tax Rules and Form I below that rule, relating to particulars to be given in an application for registration, have been incorporated here, with changes intended to secure precision.

Sub-clause (7).--Under existing section 26A (2) an application for registration has to be made "at such times"

as may be prescribed. The use of the word "times" suggests a necessity of renewal of registration every year, and under rule 6 of the Income» Rules"; fresh application has -to be made for any sub uent yepq. This, requirement 43 seems to be rather too hard, particularly in cases where there were no change in the constitution of the ﬁrm after its first registration. So far as renewal is concerned it should suffice' if a declaration is made by the ﬁrm (along with the return of income for the assessment year con- cerned) to the eﬁect that no change in the constitution of the ﬁrm or the shares of its partners has taken place in the previous year; where such a change has taken place, the ﬁrm will, of course, be required to apply for fresh registration vide sub-clause (8).

( Sub-clause (8).----See notes above under sub-clause

7).

Notes to clause 192 Sub-clause (1).--The procedure to be followed by the Income-tax Officer in the enquiry for registration has been elaborately laid down. The ground on which application can be refused has been narrowed down so that if the exist- ence of a genuine ﬁrm with the constitution shown in the instrument is established, registration has to be grant- ed. It has also been made clear that a speciﬁc order grant- ing or refusing registration should be passed by the Income- tax Officer.

Sub-clause (2).----This is intended to prevent the rejec- tion of an application for registration on technical grounds. Where the formalities prescribed by the Act or rules are not complied with, the ﬁrm must be given an opportunity of rectifying the defect, so that the application may be con- sidered on the merits.

Sub-clause (3).--See notes under sub-clause (2) aboye.

Sub-clause (4).----This is intended' to expedite the dis- _posal of applications for registration. f Sub-clause (5).----Existing rule 4(1) of the Income-tax Rules provides that the Income-tax Officer shall record a certiﬁcate of registration on the instrument of partnership. This practice is sought to be codiﬁed in this sub-clause.

Sub-clause (6).------Does not exceed any comment. Notes to clause 193.

Sub-clause (1).--The power to cancel registration, at present dealt with in the Rules, has been dealt with here as it is a matter of substance. This clause is new, but does not depart in substance from the provisions at present con- tained in the Rules. It has been made clear that registration can be cancelled only on the ground of mis-represenihtion. It has also been made clear that the ﬁrm must have an opportunity of being heard before the registration is can- celled; it has also been provided that registration can be cancelled only with the previous approval of the Inspect- ing Assistant Commissioner. .

1.: ma " .::.

1000953-54) Yb 11.

4-I3 Sub-clause (2).-----Does nd. need any comments. Subéciouses» (3) "and (4).---These' are new, but embody provisions which are hardly objectionable.

Sub--clause (5).----This is newand is intended to pres- cribe a time limit after which the registration cannot be cancelled.

Notes to clause 194 The words in existing section 26 (1) "or a ﬁrm has been newly constituted" do not exactly indicate what is intended. The preceding words "cha_nge' in the constitu-

tion of a ﬁrm" would cover cases where the old ﬁrm con--

tinues, in the sense that some but not all the members of the ﬁrm are changed. In other words, where the ﬁrm consists of partners A, B and ,C, the dropping out of A and B and coming in of new partners D and E would merely be a case of change in the constitution of the ﬁrm'. The words "a ﬁrm has been newly constituted" would, there-

fore, appear to be redundant. They have, therefore, been:

omitted in the draft, at the same time giving a deﬁnition of "change in constitution" so as to indicate its exact.

scope.

It may be added that where a ﬁrm. is dissolved and an . new ﬁrm is formed, the case can be left to be governed:

by existing section 26 (2).

Notes to clause 195, This is new in form, but merely provides that in the case of succession to business _etc., of one ﬁrm by another, the provisions in existing section ,%(2)gWi11 apply, unless it. is. a case of a change in the colistitutintrof the ﬁrm. It has been inserted in this Chapter jfor thesake of compréhen-'» siveness.

Notes to clause 196 I Sub-clause (1).--Existing section :44, in so far as it relates to ﬁrms, has been incorporated re. A reference to the legal representative of a édece gpattner has been added for the sake of comprehensiveness.' Sub-clause (2).--Is new and is intended to continuity in proceedings in at wh p ' an assessment has already commenced before ' tin _ 'or dissolution}.

Sub-clause (3).--Needs no continents.' _ Notes to clause-197; ~ This is new and is intended to V}: a list of pnovi- sions specially applicable to ﬁrms, for j sake of, conveni- ence of reference-

1 Qf, 1:ntGngor_7, mica. (1937) 5 I. R. :2 (<h§q'¢t:).

'Qf.dnﬁcla.usc186a.ndnotes . 'E =' 29-! Law Com.]58. g 444 CHAPTER XVII

-SPECIAL PROVISIONS RELATING TO COMPANIES Notes to clause 198 ' This clause is new and is intended to give a list of provisions specially applicable to companies which are .

scattered at several places in the Act. The list has been given for the sake of convenience of reference.

CHAPTER XVIII COLLECTION AND RECOVERY OF TAX Notes to clause 199.

This clause is new and.is intended to make it clear that there is some kind of liability to pay tax in cases where tax is deductible at source or payable in advance'. Such "charge." of tax, which is implied in the obligation to pay tax in advance etc., has been brought out more direct- ly in this-clause.

Notes to clause 200 This clause brings together the provisions relating to direct payment of income-tax and of super-tax respec- tively, contained in existing sections 19 and 58 (2).

Notes to clause 201 General.~The scheme adopted in the draft is to deal in separate clauses with deductions in respect of the" vari- ous classes of income, such as salary, interest, dividends, etc. The substantive provision for deduction has been placed in the first few clauses, while incidental provisions like certiﬁcate, etc., and consequences of deduction like credit, payment of tax by the person deducting etc., :have been placed after those clauses.

Sub-clause (1).-The existing words "at a rate re- presenting the average of the rates applicable" have 4been replaced in the draft by the words "average rate of income- tax and average rate of super-tax respectively, in force for the ﬁnancial year in which the payment is made". 'This change has been made for the sake of precision. Further, the existing words "' plicable to the estimated total in- come .......... ..under tlig head", are slightly unhappy; the expression "total income" should be reserved for the total income from all sources in the previous year. The draft, therefore, uses the words "income of the assessee under this head for that ﬁnancial year".

Sub-clause (2).----The existing rovision to the effect that the person payin salary s al deduct income-tax at the maximum rate an 1 also super-tax under section 17(1) ':7 . "

»w 'Sn also notes to clause 3.

445

(b) has been replaced in the draft, by the shorter expres-

sion "tax .......... ..in accordance with" existing Section 17 (1).

Sub-clause (3).~--Does not need any comments, since the drafting changes made are only consequential, Sub-clause (4).-----This is new and is intended merely to point to the deduction in respect of tax on accumulated balance paid to an employee participating in a recognised_ provident fund.

Sub-clause (5).~----This is also new and is intended to point to the deduction of tax in the case of amounts paid to an employee participating in an approved superannua- tion fund.

Sub-clause (6).----This embodies the latter part of S. 18 (2A). The earlier part of that sub-section does not seem to serve any useful purpose; salary is now taxable wher- ever paid, and it does not seem necessary to make a special mention of the deduction in respect of salary payable to the assessee out of India hy.the Government.

Notes to clause 202 The provision for deducting the tax in respect. of in-

terest on securities has been embodied in this clause with' the following drafting changes :------

(i) the deduction in respect of income-tax and that in respect of super-tax have been stated in sepa- rate sub-clause for the sake of clarity;

(ii) as regards deduction of super-tax in respect of com- panies, it has been made clear that the rate appli-' cable is that in force for a company which has not made the arrangements referred to in existing section 18 (3D). This will remove the uncertainty at present experienced as to the exact rate applic- able in' such cases. (This clariﬁcation is not neces- sary in the case of deduction.frorn salaries, since the situation of a company which receives salary is not likely to arise). -

Notes to clause 203 . _ The drafting changes made follow the lines of those made in existing section 18(3A)'. ' T " ' Notes todclause 204 _ The following drafting changes have been made--

(i) The position_regai-ding income-tax and super-tax has been treated in separate sub-clauses ;

' he notes to clause 202.

446

(ii) in the case of a company, the rate applicable has been stated more precisely as in the case of de- ductions under the head "Interest on securities or on dividends ';

(iii) the concluding words of existing section 18 (3C) provide that the Income-tax Ofﬁcer may deter- mine the appropriate proportion of any sum charge- able to tax, and upon such determination tax shall be deducted "therefrom'?. The word "therefrom" does not clearly give out the sense that the_ deduc- tion is to be limited to the proportion of the sum so determined. Suitable drafting changes have been made to make this clear.

Notes to clause 205 The provision authorising the Income-tax Officer to issue a certiﬁcate for deduction of tax at a lower rate, which has been repeated in the existing Act in the provisos to various sub-sections of section 18, has been embqldied in this Elause, which is applicable for all kinds of inclpme. The drafting changes made are consequential on the scheme adopted in the draft. It has also been made clear that the Income-tax Officer can issue a certiﬁcate not ﬁonly authorising the deduction at a lower rate but also autlior_i5- ing no deduction. ' That part of existing section 18 (2B), Proviso, which relates to an order by the Income-tax Officer requirin de- duction at a particular rate, has been omitted in the aft as unnecessary. In cases where a person desires deduction at a lower rate than the maximum, he can a ply td the Income-tax Officer and obtain a certiﬁcate. De uction,at a higher rate is not contemplated, since the rate applicable for deduction is in most cases the maximum rate. (I ' the case of salary, it is only the rate applicable to the in ome under that head and "deduction at any other rate is not-

contemplated).

Notes to clause 206 This embodies existing section 18 (4) and does not heed any comments. .

Notes to clause 2,07 Existing section 18(5). deals with two topics :--

(i) credit for tax deducted at source ; '

(ii). credit for tan»; in respect of dividends as grossed up under existing sectign 16 (2). . .

1 Sn notes to clause 20¢.

6 2

a v 447 For the sake of clarity, the first topic has been dealt with in this clause, while the Second has been dealt with separate] '. The Proviso to this sub-sebﬂion has, therefore, been bro en up in conformity with the scheme adopted in the draft. ' The ﬁrst proviso to section 18 (5) has been incorporat- ed for simplicity in the main para. of the sub-clause.

The second proviso to section 18(5) has been incor- porated in the 1st Proviso, andgthe Words "or shareholders"

have been added in order to cover a use where tax is de- ducted on dividends under existing section 18(3D). [The existing proviso does not make any speciﬁc mention of shareholders, presumably for the redoh that existing sﬁction]-14E (5) deﬁnes securities as including stock and s ares. .

. The third proviso has been embodied as the 2nd pro- V150.

. The other drafting changes are consequential.

Notes to clause 2%" '4 This embodies existing section (6) with a small drafting change converting the passive voice used in the existing section into the active Voice.

Notes to clause 209 Existing section 18(7) h been 'V embodied in this clause with the following chan S :--- K (1) It has been made clear that _in the case of deduc-

tion of tax on div-it ' under existing section 18 (3D), the principal O cer as " ell as the company .

been considered desir le in few of the fact that the existing section (3D) fuses the expression "person". ' 2 ' ' (2) Since existing section 16(1) relating to the imposi- tion of penalty by ,e ordelt pf the Income-tax Oﬁicer is in the draft propo éto be replaced by provision for automatic runn' gof interest," the proviso has been suitaﬂly altered.

(3) Sub-clause (2) has bin neg? added for impos-

can be treated as in ﬁfault. is clariﬁcation has ing a ﬁrst charge u n the slsets of the person deducting tax, if it is not pd into the treasury oﬂice after deduction. The intention is to ensure speedy transmission of the amount deducted so that the amount may not lie-ighathe custody of the person deducting it'. ' ' 1 ' S¢e'Chapter_ on Tax deemed to have been on dividends. , ' ' 5 .

' Soc clause 230(1). 1 ' -

s Cf. Section 123 (6) of the (Cana5:li+-1) 1913..

448

Notes to clause 210 Existing section 18(8) has been embodied here without any change.

-Notes to clause 211 Existing section 18(9) has been embodied here with- out any change.

Notes to clause 212 Existing section 18 (Explanation) has been embodied here. with a small drafting change. Item (iii) has been ampliﬁed so as to cover all sums not chargeable as salary or interest on securities.

Notes to clause 213 Existing section 7 (1), 2nd Proviso, provides that where tax is deductible at source under existing section 18, the assessee shall not be called upon to pay the tax himself unless he has received the salary without such deduction. This provision is at present conﬁned to salary, but there seems to be no reason why it should not be extended to all kinds of income. It has, therefore, been incorporated in an extended form in this clause.

. Notes to clause 214 This is new and is consequential on the breaking up of existing section 18(5).

Notes to 'clause 215 General.------Existing section 18A is cumbersome and difﬁcult to understand. The difficulty arises by reason of the fact that sub-section (1) cqmbines a number of things which could be dealt with separately. For the sake of sim- plicity, therefore, the section has been split up in the draft, so as to deal separately with the following topics :-

(1) income subject to advance tax;

(2) conditions of 'liability to pay advance tax;

(3) mode of computation of tax;

(4) order by the Income-'tax Oiﬁcer, which ﬁxes the liability;

(5) instalments ;

(6) estimate made by the assessee;

(7) commission receipts;

(8) interest payalile by Government or by assessee; (9) other provisioips. * 9 lI."'5"'"' "

449

Sub-clause (1).----Income subject.to advance tax has been described here, and for the sake of accuracy it has also been made clear that capital gains are not included in that income. Though existing section 18A (12) has been re-

tained in the draft', it appears desirable to make this clari- ﬁcation at this stage also.

Sub--c1a.use (2).---This is new, but is intended merely to enable the use of the shorter expression "income subject to advance tax" and "advance tax" in 'the subsequent clauses.

Sub-clause (3).----This is new and is intended to pro- vide that advance payment of tax will, so far dividends are concerned, apply only for super-tax. So far income- tax is concerned, it is the company which is deemed to have paid the tax, and advance payment should not apply for income tax on dividends .

Notes-to clause 216 The concept that advance tax is payable where the total income of the assessee exceeded a certain limit, or is likely to exceed a certain limit, has been embodied in this clause; for the sake of comprehensiveness, the case dealt with in existing section 18A (3) has also been referred to here.

Notes to clause 217- The mode of computation of advance tax has been dealt with in this clause. For the sake of facilitatin the pro- per understanding of the method to be adopte , the pro- cess has been divided in various steps.'Thus, theﬁrst step is the ascertainment of the total income of the latest pre- vious year assessed. This having been ascertained, the second step is to find out how much of that total income falls under the category of income subject to advance tax. That having been done, the next step is to actually compute the tax on the income subject to advance tax by applying the average rate of tax. The result arrived at is the amount of the advance tax.

There are, of course, two speciai situations, which re- quire mention. One is, the situation where a non-resident chooses to adopt the method of taxation on the basis of the total world income. This is contained in existing section 18A(1)(a) main para, latter half, and has been embodied in the draft sub-clause (b). The second situation is that in which the assessee sends an estimate of his total income etc. Here the tax is calculated with reference to the total income so estimated. This follows from existing section 18A(2} and (3) and has been incorporated in sub-clause (3) in the draft.

Section 18A(1)(a), 2nd Proviso,A_ has been incorporated in the Explanation.

J ' Sudnl'tcinu|e228. E "E" ' 450 Note: to clause 218 A portion of sectioin 18A(1),Tdea1ing with the order of the Income--tax Ofﬁcer, has been embodied in this clause. The worgls "where a pqrson has been previously assessed .......... .. in the opening portion in the draft, merely state what is implied in the existing section.

Sub-clause (2) makes it clear that the instalments are to be mentioned in the notice of demand. That is the existing practice also. i The third proviso to existing section 18A(1)(a), under which the income-tax Officer is authorised to issue an amended order in a case where an assessment of the as- sessee for a_ later previous year is completed in the mean- time, has been embodied in sub-clause (3).

Notes to clause 219 The instalments of advance tax have been stated sepa- rately in this clause. The drafting changes made are con- sequential on the scheme adopted in the draft.

Notes to clause 220 The provision regarding estimate by the assessee is§em- bodied here. The estimate should mention-- *

(i) the total income as estimated for the period';con-

cerned;

(ii) the income subject to advance tax as estimated for that period; and -

(iii) the advance itself. 7 This has been made clear in the draft. in sub-clans (1) & (2). i _ An assessee may desire to ﬁle an estimate under. e 'st- ing section 18A(2) whim the estimated advance -tax is less than the amount demarjded by the Income-tax Oiﬁcer, e . er ;because-- . ' _

(i) the estimated total income is less, or

(ii) the estimated' income' subject to advance is less, than that 'assessed by the Income-tax cer. This is made, clear in sub-clause (1). - ' * , Sub-clause (4).--Is_nevv and is intended to provide A at the estimate of adv tax will be ﬁled in the prescrbed .form and in the pre T 'bed manner.

Notes to clause 221 Section 18A(4) is embodied; here with the following changes z--- -

(i) the words "income to which sub-section (1), (2) or (3) apply" have been aplaced by the "in- come subject V adv a tax" in conformity ' ith the scheme ado?ted in qdraft. - 2

--- i.

\ l it ; i 'l8£:( , 2nd Proviso, -is-ap Hcable , die' ' ex},-5 -. '24? v

450.

(ii) The proviso to the existing sub-section provides for payment of 6 per cent. simple, interest. In view of the fact that the rate of interest in the other sub-sections of section 18A is now reduced to 4 per cent' the rate has, in the draft, been reduced to 4 per cent. in this case also. 3 Notes to clause 222.

Sub-clause (1).--Existing section . 18A(5) relating to interest payable by the Central Government on tax payable 'in advance has been embodied here. The sub-section, as amended in 1953, raises a diﬂicult quation of interpreta- tion. The main part of the sub-section provides that inte- rest should be paid (at 4 per cent.) on any sum paid after 1st April, 1955, "from the date of payment to the date of the provisional assessment" or? to the regular assessment :as the case may be; but the secdnd proviso, inserted in 1953, :says that for the period beginning with"? 1-51; April, 1952, the interest is payable from the beginning of the next finan- «cial year to the date of the r A ar ausdssment. There is thus a change as regards the eriod ﬁr' which interest is to be paid. ,Another change made in 1 _ is as regards the uamou-nt on which interest is pa able. Ie the main para. provides that interest is paya "on ah amount payable in accordance with the provisipns of th section .......... .. and paid accordingly", the second proviso, inserted in 1953. provides that for the period inning with the 1st April, 1952, interest is payable only the amount by which the aggregate of the instalments paid durin the ﬁnancial year ' in which they are payable exceeds the am urfder the regu- lar assessment.

Now the question is, whether, these. changes inserted by the 1953 Act in the shape cf the second proviso are to govern the whole of the post-1 52 periqd: or whether they are to apply only in respect 0 4 the pant-41952 and pre-1955 period. If the second proviso is taken as overriding' the main para, the former view is correct. If, on the other and, the proviso is taken as limited '-to the period between 1952 and 1955 (on the theory that a groviso knot to replace the main section), the second view an be supported. ' The main draft of the clause undertngscussion embodies the former view, which seemsito be , prevailing view. But, if the latter view is adopted. it cant: 'be given effect to

by the alternative draft given below :.~ Alternative draft' "

(1) The Central Government shall pay simple interest .... at four per cent. per annum ;any amount pay-

able as advance tax in accordance wi the provisions of ' See existing section 18A (5), item (ii) and section l'8A (6), 1st Proviso.

9 The alternativcgdraftis intended, 1 inop 1 the view that section

-.t ( §52.--'i9':i5 and does not ovcrricthcmainsub-loch - .-

452

section [18A(1) (2) (3) and (4)] and paid accordingly, from the date of payment to the date of the provisional assess- ment made under section [23B], or, if no such assessment. has been made to the date of the regular assessment ....... ..

Explanation.--Same as in the main draft. (2) Same as in the main draft.

Notes to. clause 223 Interest payable by the assessee has been dealt with in this section. The 1st proviso to existing section 18A(6) has» been combined with the main paragraph. -

One important change made is. that interest is not to run from the 1st day of January of the year in which the advance tax is paid but from the 1st day of A 'l in the _ next ﬁnancial year. This chan e has been ma e in View of the fact that interest payab e by the Central Govern- ment runs from the .1st day of April of the next ﬁnancial year; [vide existing section 18A(5)].

Existing section 18A(6), 4th proviso, which provides» that in the case of a businessetc. newly set up, the interest is computed in certain cases fr_om the 1st April of the ﬁnan- cial year next following, has been omitted, since tlje rule embodied in that proviso has, in the draft, to apply in all cases and no separate provision is necessary.

. V Notes to clause 224 The only change made in the existing section 18A(7) is the reduction of the rate of interest payable by the assessee (in cases of under-estimate). from 6 per cent to 4 per cent. This change has been made in view of the fact that the rate of interest under section ].8A(5) and section 1'8A(6) IS' also 4 per cent. under the existing Act. ' Notes to clause 225 Sub-clause (1).--It would be useful here to summarise- the existing position regarding interest payable by the as- sessee with reference to an advance tax. The position can be analysed as follows 2-

(a) interest in a case of estimate seems to be dealt with in the following provisions for diﬂerent situa- tions :--

(i) faulty estimates (that is. estimated income falling short of E!) per cent. of the income regularly as-

sessed)----Section 18A(6);

i(") deliberate under imate of tax in the ﬁr; t 1.1 imtdm n 18A(7)(.a); 5 . L' ~ 453

(iii) under--estimate, where estimate is necessary- under section 18A(3)----Section 18A(8);

(b) If there is a deliberately false estimate of the in-e come, the assessee may also become liable to a_ penalty under section 18A(9)(a); and similarly, if there is a failure without reasonable cause to file an estimate when required under section 18A(3),. the assessee is also liable to pay a penalty under' section 18A(9)(b);

(c) in cases where the aspect of estimate is not mate-- rial and the emphasis is on non-payment of ad--- vance tax due either by virtue of an order under section 18A(2) or section 18A(3), interest can be charged under section 18A(8) and the assessee is. also liable to be dealt with under section 18A(10).

Sub--clause (2).--This is new. It seems desirable to make it clear that section 18A(6), 3rd and 5th Provisos, ap~ plly to interest payable under this section. Hence this sub-- c ause.

Notes to clause 226.

This clause does not need anycomments.

Notes to clause 227-' The drafting changes are very minor and do not neecﬁ any comments.

Notes to clause 228. -

Existing section 18A(12) has been embodied here, and' for the sake of clarity it has also been provided that the expression "total income" occurring in the previous clauses should not include capital gains. Even though the clause dealing with incomes subject to advance tax' ex- cludes capital gains, the general provision has been repeat- ed here for convenience.

Notes to clause 229 _ Gene'rql.-----The provisions relating t9_ recovery of tax by the Department, contained in the present sections 45 and

46. have been broken up for the sake of simplicity into va- rious clauses in the draft. The general provision relating to dates etc. of payment is placed ﬁrst; ;the penalty provi- sions contained in existing section 46(1).1is placed next. Then follow the various modes of recovery, namely, (1) certiﬁcate, (2) other modes of recovery, (3) recovery by the State Government, (4) slpecial provisions for recovery pf Indian tax in akistan and vice ' 1 Secdnft clause 215 (l). , § . ' 454 Miscellaneous prdvisions 'come at the end.

Sub--clause (1).--Existing section 45, main para, pro- vides that any amount speciﬁed in a notice of demami un- der section 23A(3) or section .29 or section 31 or section 33 shall be paid' within a particular timeietc. Since, however, under section 29, a notice of demand is to be issued in all cases where any tax, penalty or interest is due under the Act, it does not appear to be necessary to mention any sec- tion except section 29. The draft, therefore, mentions sec- tion 29 only. The time-limit for payment has been men- tioned in a simpliﬁed form.

Sub-clause (2).---This is new. It appears desirable to incorporate an express provision in the Act authorising the» Income--tax Oﬂicer to extend"tl1e time for payment or al- low payment by instalments. Hence this sub-clause.

Sub-clause (3).----Refers to the provisions for treating the assessee as in default.

Sub-clause (4).--This is new and is consequential on sub-clause (2) of the draft which is also new.

Sub-clause (5).--It has been made clear that the wer to treat an assessee who has 'appealed as not in defa It, is confined to the amount in dispute and it has also been made clear that this power can be exercised even though the time for payment has expired. ' Sub-clause (6).--Does not need any comments.

N otes to clause 230 Existing section 46(1) provides that where an assessee is in default the Income-tax Officer may lev a p nalty not exceeding the amount in default. Un er e sting section 46(lA), the Income-tax Officer may make the order for an amount lower thahthe total arrears an may go on enhancing the penalty (in the case oﬁ a cont' uing default) subject to the limit that the total penalty sh 1 not exceed the total arrears. These two sub-sections emb y a .

position which is notxsatisfactoty. In the first place they leave the matter to the discretion of the Income-tax In the second place, sub-sectith (1A) is not happily It creates a number cf doubik as to the exact amo _ to which the Income-lax Oﬁioer may impose the pen ty at a particular time. Speedy collection of tax would be aci1i- tated, if interest is to run aiinmatically from the d te of default. Taking into account these considerations, the draft proposes simple interest* at the rate of 10 per cent.§from 1 It may also be po'ntcd out that neqtion 23A (3), referred to in existing section 45, has been repealed by the amendment made in 1957.

' Cf. section 270 of the Australian Income-tax etc. Act, 1936-19 (rate being 10 p. c.). Also see sectign 54- (1) ofthe "Canadian Incomc~taJ5 A , 1948 (where the rate is 6 p. c.) arqi section $195 (I), U. K. Income-tax Ac 1952 (where the rate is 3 p. c.). 3 pi . - . ._,. T :

i Q .

4:55 the date of default to the date of payment, and does away with the necessity of any express order by the lncome--tax Officer. It would also reduce the number of appeals.

Under the scheme adopted in the draft. existing sub- section (IA) becomes unnecessary and has been omitted.

Sub-clause (E.').--This is intended to provide' that if arrears are paid within three months. the interest levied or- leviable on the arrears will be remitted.

Sub--clause (3).--Does not need any comments. Notes to clause 231 Existing section 46(2) provides that the Income-tax Oiﬁcer may forward to the Collector a certiﬁcate of arrears. and the Collector shall then proceed to recover the amount "as if it were an arrear of land revenue". Since the law re-- lating to recovery of land revenue varies from State to State, it seems desirable to state the permissible modes of recovery in the Act itself. Sub-clause (1), therefore, enu- merates these modes. which are taken from the Code of Civil Procedure.

The proviso to existing section 46(2) lays down that the Collector shall. for such recovery, have the powers of a civil court also. Since the various modes of recovery are being listed in the clause itself, this proviso becomes un- necessary and has not been reproduced in the draft.

' Sub--clause (2).--Does not need any comments.

Notes to clause 232 This is new. There are some doubts as to the Collector to whom the Income-tax Ofﬁcer can send the certiﬁcate referred to in section 46(2). The draft clause provides that the Collector within whose jurisdiction the assessee carries on his business etc., or resides or has any property, can be approached.

Sub-clause (2).--Provides for the procedure where the Collector to whom the certiﬁcate is initially sent is not able- to recover the arrears.

The explanation makes it clear that the Collector of any district in India can be approached (even though the dis- trict is situated in other State). (This would avoid the necessity to have recourse to the procedure under the 'Re--- venue Recovery Act (1 of 18%)). ' "Additional Collectors"

have also been included in the definition of "Collectors"

as difficulty was experienced having regard to the provi- sions of the General Clauses Act deﬁning Collector. That. deﬁnition. if strictly construed, would not include an Addi- tional Collector. » _I Cﬁ section 495 (2), U. K. Income-ax Act, 1952. ' . ._.....a..4....._...

456

Notes to clause 233 This is new and is intended to make it clear that the correctness of the assessment shall not be questioned be- _fore the Collector, Sub-clause (2) saves the right of the .assessee to apply to the Income-tax Officer for withdrawal of the certiﬁcate. Sub-clauses (3) and (4) lay down that the Income-tax Oﬂicer may correct the certiﬁcate, in which «case he should inform the Collector.

Notes to clause 234 This is new. The object is (i) to ensure that the In- ~come-tax Oﬂicer and the Collector remain in touch with each other and (ii) to lay down the procedure in cases where, after the issue of a certiﬁcate, time is granted for payment of tax, or the demand is reduced'.

Notes to clause 235 Sub-clause (1).--Does not need any comments.

Sub-clause (2).--The only 'change made is the addition of a restriction to the effect that salary etc. exempt. from attachment under the Civil Procedure Code will be exempt ;for this sub-clause also.

Sub-clause (3).--S1ight verbal changes have been made in existing section 46(5), for the sake of simplicity and pre-

-c1s1on. « , Existing section 46(5A), 5th paragraph, provides that where the person to whom a notice under this sub-section is sent does not ay amount concerned, further proceedings may be taken " y and before the Collector on the footing that the Income-tax Ofﬁcer's notice has the same effect as .an attachment" etc. This language is not very happ and has been replaced in the draft by a simpler provis n to the effect that further proceedings may be taken as if the amount were an arrear of tax and that the notice: shall ."have the effect as an attachment of debt by the Collector.

Sub-clause (4).--This is new and is intended to enable ' the Income-tax Officer to apply to a court holding money belong to the assessee, for payment of the tax duesfrom 'the assessee. ' Sub-clause (5).--Existing section 46(3) contemplates in

-certain cases the recovery of 'arrears by the Inconte-tax Officer by any process authorised by the "municipal law 4 'for the recovery of municipal. takes". One of the processes' 'usually found in municipal laws is, distraint and sale of movable property, Sub-'clause (5) read with the third Sche- rdule deals with this process. It seems unnecessary to re- tain any of the other modes of recovery provided for by Municipal Acts.

'. Séa also duh clause 213(4). - V ' . ' -~ v section 46(7), 2nd Proviso.

457

Notes to clause 236 ~ Doesnot need any comments.

Notes to clause 237 Does not need any comments.

Notes to clause 238 Does not need any comments.

Notes to clause 239 _This clause does not need any comments.

Notes to clause 240 Existing section 47 has been incorporated here. The only addition made is the reference to the provision corres- ponding to section 18A(9) for the sake of comprehensive- ness. ' Notes to clause 241 Sub-clauses (1) to (3).--Do not need any comments.

Sub-clauses (4) and (5).--These are new. Since there are many ships or aircraft which carry passengers outside India, it seems desirable to require the owners of the air- craft or ships etc. to furnish a list of the persons who travel- led by the ship etc. in the preceding months. In the absence of any such provision it becomes difficult to put into force the provisions of section 46A(2), since the Income-tax authorities have no information in their possession as to the persons who travelled in the ship or air-craft belonging to the person concerned against Whom section 46A(2) is direct-

Sub-clause (5).--Provides that the liability enforceable against the owners etc. of such ships etc. will not be en- forced after two years of the date on whichthe list is ﬁled. It gives a concession and wil1'ensure the prompt ﬁling of such list. .

Sub-clause (6).--Does not need any comments. Notes to clause 242 The time limit for commencing recovery proceedings contained in the existing section 46(7), has been dealt with' here. For the sake of simplicity, the limit has been ex- pressed in all cases (vide the proviso in the draft) as com- mencing from the last day of the ﬁnancial year concerned. Under this scheme, it becomes unnecessary to reproduce \ 438 Notes to clause 243 The only addition made is the clariﬁcation in sub- clause (b) to the effect 'shat the Government may also in- stitute a suit for recovery of arrears.

Notes to clause 244 / Existing section 23B(5) has been incorporated; here- The provision was inserted only for the avoidance of doubts; it has, however, not been disturbed in the draft.

Notes to clause 245 This clause does not need any comments. CHAPTER XIX TAX DEEMED TO HAVE BEEN PAID ON DIVIDENDS Notes to clause 246 Existing section 18(5), deals in part with credit'to be given in respect of the tax deemed to have bee paid on dividends. Existing section 49B also contains pro- visions on income-tax. All these provisions have bee com- bined in this clause, without any change of substan . The drafting changes made are consequential on the br aking up of section 18(5). H The opening portion of section 49B(1), i.e., the 'words "where any dividend has been paid ....... ..to any of t per- sons speciﬁed in section 3" etc., has been omitted, un-- necessary, particularly in view of the fact that se ion 3- as proposed in the draft does not enumerate the char eable-

entities.

A proviso has been added to deal with cases whe e the share is held by partners. me existing proviso reg rding persons not constituting partnership may be compa .

CHAPTER xx ?

REFUNDS.

Notes to clause 247 i i General.

Existing section 48, dealing with refunds. is confused in its arrangement. The general right to claim refund, dealt with in existiig sub-section (1), is mixed up with provisions relating to special. situations in sub-section (3). Further, the restriction regarding questions that can be 459 raised in refund proceedings is unnecessarily put in the same section in sub-section (4). An attempt has, therefore, been made, in the draft, to separate these various topics.

Clause 247--The following drafting changes have been made in existing section 48(1) :--

(i) The words "any individual, Hindu undivided family" etc. have been replaced by one word "person".

Existing section 3, as proposed in the draft, uses only the word "person",' and it is felt that the right to claim re- fund should be co--extensive with the liability to tax. In the case of State Governments, it may be pointed out, there is a rohibition against tax being charged from them, under the onstitution. Even in respect of shares held by State Government, refund of tax deemed to have been paid under existing section 49B is allowed only if the dividend is in- cluded in the total income of the person concerned; see existing section 49B(1). There is, therefore, no harm in.

' using the word "person" in section 48(1).

(ii) The existing provision empowers the grant of re-- fund by the Income-tax Ofﬁcer, "or other authority ap pointed by the Central Government in this behalf"; It is. understood that the Central Government has not appoint- ed any such authority and the need for such appointment is not likely to arise. The wards in question have, there- fore, been omitted. . .

(iii) Other changes are minor.

Notes to clause 248.

Sub-clause (1) Existing words "such other person only" have, in the draft,' been replaced by the words "the latter alone", for simplicity.

Sub-clause (2).

Existing section 49F has been embodied in this sub- clause with the following changes 2--

(1) the' Words "who would but for such cause have been entitled to a refund under any of the provi. signs of this Act". have been bmitted, as unneces- sary.

(2) References to sections 48 and 49 have been deleted;

it ma also be pointed out that section 49 was re peale in 1948.

(3) Besides executors etc., a reference to guardians has been added.

T ' See draft clause 3.

30- 1 Law Com./58.

460

Notes to clause 249.

Sub-clause (1). ' This is new and embodies a provision at present con- tained in the rules. ' Sub-clause (2).

The main paragraph of existing section 50 has been embodied in this sub-clause, with slight verbal changes. The two provisos to that section have been omitted, as not applicable to future assessment years.

The starting point of limitation has been expressed in a more simple manner.

Notes t.o clause 250.

Existing section 48(2) has been incorporated in this clause, and it has also been made clear that the Income-tax Officer shall make the refund without any express claim by the assessee.

The words "except as otherwise provided in this Act"

are intended to cover cases where payment of refund is postponed under any express provision of the Act; for example, existing section 66(7), proviso, latter half. j Notes to clause 251.

Existing section 48(4) is unnecessarily elaborate; The propositions enacted in that section can be expressed in simple language, without using the words "nothing, ...... .. shall operate to validate any objection or appeal which is otherwise invalid", or the words "to authorise the revi- sion of any assessment." The concluding lines of the sec-

'tion, dealing with refund of tax payable before the 1939 Amendment Act, are also obsolete now. The draft dlause, therefore, attempts to simplify the section, keeping in' mind the considerations stated above. 5 Notes to clause 252.

This is new. If after a refund application is Tmade under this Chapter, the Income-tax Oﬂicer does notimake an order within three months, the assessee should e en- ' titled to interest at the rate of 2 per cent. on the amo nt to « be refunded. In the Taxation Enquiry Commission port"

the complaint of delays in making refunds was consi ered. After an analysis of the ﬁgures, the Commission p inted out that nearly 86% of the claims for refunds wete dis-

' posed of within the year in which they were received, and of the pending claims as on 1st April, 1953, approximately 60% were less than three months old, while only 13% were over a year old. It was represented to them by the Depart- ment that under administrative instructions it was obliga- tory on the part of the 'Income-tax Ofﬁcer to dispose of 1 .T. E. C. Report, 1958-T954, Vol. II, page 214, Chapter XIII, ma '1 1, , E 2; ~"r'L 461 refund claims within three months. In view-of this, it is obvious that normally the refund applications are disposed of, (at any rate at present) within a period of three months. The Department will not, therefore, be affected by a provi- sion for payment of interest. The provision is intended only to make sure that the representation made to the Taxation Enquiry Commission by the Department would invariably be followed with no exception. The liability to pay interest will act, as an incentive for an early disposal ' of the refund applications and allay the fears of the 'assessees that there might be delay in the disposal of re-

and separately.

fund applications.' Notes to clause 253.

The only change is the addition of a requirement to the effect that the Income-tax Ofﬁcer shall. while making an adjustment under this section, intimate the assessee.

CHAPTER XXI.

APPEALS AND REVISIONS.

Notes to clause 254.

General.

The provisions of the Act relating to appeals and revi- sions are scattered in existing sections 30, 31, 33, 33A, 33B, 66A and 67A. Existing section 66, dealing with reference from the Appellate Tribunal to the High Court, is also in a sense, connected with appeals. There are, also, provi- sions authorising appeals in existing sections 58B(~1) and 61(3), proviso to clause (b). .

An attempt has been made to bring all these provisions together in this chapter. In order to facilitate their proper understanding, the provisions have been arranged accord- ing to the authority to which the appeal lies. Thus, ap- peals, from the Income-tax Officer to the Appellate Assis- ta_nt Commissioner are dealt with ﬁrst, under one group. Appeals from the decisions of the Appellate Assistant Commissioner are dealt with in a separate group and so on. Provisions regarding revision are placed in a separate group, and miscellaneous provisions are placed at the end.

In each group, the order against which appeal is allow- ed is speciﬁed ﬁrst, and the form ofappeal, limitation and procedure are dealt with next; where necessary, powers of the appellate authority have been dealt with speciﬁcally 1 It may be added here that the Incometax Investigation Commission E194-8) had also made a similar recommendation for interest on refunds where isposal of the application is delayed for more than sit months, Lid: its report, page 125, para. 279.

Appeals to the Appellate Tribunal have been replaced .

462

by appeal to the High Court,. for reasons explained in the body of the report.

Clause 254.

The following changes have been made in the existing section 30, sub-section (1), main para 1--

' (i)

(ii) The existing words "any assessee objecting to the amount" etc.' have been replaced by the words "any assessee aggrieved «by ....... ..", which seem to be more appropriate.

The existing section allows an appeal as to the amount of income assessed under section 23 "or section 27". It is, however, unnecessary to men- tion section 27 separately 'in this context, 'since, even when section 27 is used, the ultimate 'assess- ment is really made under section 23 itself; as is clear from the concluding words of existing sec- tion 27, This reference has, therefore, been omit- ted.

(iii) It has been made clear that an objection,7 as to

(iv) (V)

(vi)

(vii) status under which also be raised by way of appeal.

The existing section allows an appeal in res ect of loss computed under section 24. Since, howev r, the computation of loss, is also a part of assessment under existing section 23, this,reference has been omitted. 7 The existing section allows an appeal frbm an order refusing "to make a fresh assessment under section 27. These words have been replaced y the words "to reopen an assessment", which at more easily intelligible. E The existing section. allows an appeal from orders under section 46(1).' Since, however, sectio 46(1) is, in thedraft, proposed to be replaced' by a pro- vision authorising the automatic running of in- terest, the question of appeal does not ari , and this reference has been omitted.' The existing section allows an appeal un sec- tions 49 and 49F. Section 49 was repealed. ' 19%, and section 149F does not authorise any i epen-

dent order of refund,.. but merely enables n exe- cutor etc. to claim refund. The order itself pas- ed under section 48.- The references to see ons 49 and 49F have, therefore, been omitted.

' See draft clause 23_(E(l).

:3 5 i; I the assessee is assesséd can _ E 463

(viii) A new provision authorising appeals in respect of orders under existing section 35 has been added. It is desirable' to allow appeals from such orders passed by the Income-tax Oﬂicer, particularly since an order under section 35 may aggrieve an assessee who desires rectiﬁcation.

(ix) The various orders relating to interest under exist- ing section 18A have also been made appealable in the appropriate cases'.

(x) The sections under which a penalty can be imposed, have been described more elaborately in order to make the position regarding appeals from such penalty clear.

(xi) The following orders have been made appealable :--

(i) an order passed by the Income-tax Officer on an assessee's application for withdrawal or cancella-

tion of a certiﬁcate.

(ii) order passed by the' Income-tax Oﬂicer refusing any assessee's request to treat him as not in de- fault, in View of an appeal.

Notes to clause 255 This embodies existing section 30, sub-section (1), 2nd Proviso. The language has been slightly simpliﬁed.

The ﬁrst Proviso to section 30, sub--section (1) deals with an appeal against an order under existing section 46 (1), This has been omitted as unnecessary in the scheme adopted in the draft'.

The third Proviso to section 30, sub-section (1), prohibit- ing an appeal by a shareholder, in a company in respect of which an order under existing section 23A has been passed, has also been omitted as unnecessary, since, under section 23A as amended up-to--date, the income of a shareholder is not aﬁected directly and the question of his being aggrieved by any such order does not arise.

Notes to clause 256 No comments are needed.

Notes to clause 257 Sub-clause (1).--Does not need any comments.

Sub--clause (2).~--Existing section 30(2), dealing with the time limit within which the appeal may be presented from the order of the Income-tax Olﬁcer, describes in an elaborate manner the date from which the time limit is to be counted. It does not appear to be necessary to have such ' Cf. I. T.I. C. Report, 1948 para. 254-, page 113. ' Vidc draft clause 254 (I) and Explanation. ' See note: to draft clans! 254. 3 0 ' , A 464 elaborate provision, and it would be sufﬁcient if the starting point is described as the date' on which the order is inti- mated. The provision, ha_s, therefore, been simpliﬁed in the draft. Where the appeal is in respect of tax, interest or penalty, it will of course be useful to deal with the time limit speciﬁcally (vide paragraphs (a) and (b) of the draft sub-clause).

Sub-clause (3).--Does not need any comments. Notes_to clause 258 Sub--clause (1).--Does not need any comments.' Sub-clause (2).---The. persons entitled to be'heard at the appeals have been listed; cf. existing section 31(3), 2nd Proviso. "

Sub-clauses (3), (4) and (5)----do not need any com- ments.

Sub-clause (6).----This is new. Some guidance as to the contents of the appellate orders appears to be desirable, and hence this sub--clause.

Sub-clause (7).--Does not need any comments. Notes to clause 259 Sub-clause (1).----Existing section 31(3) deals elaborately with the various kinds of appellate orders that can be passed by the Appellate Assistant Commissioner. It does not,§ how- ever, appear to be necessary to make such an elaborate provision; it should suffice if only the important cases of appeal against assessments or penalties are dealt with speci-7 ﬁcally. In the remaining cases, the power to pass such orders as the Appellate Assistant Commissioner thinks ﬁt should suffice. The draft sub-clause has been simpliﬁed on these lines.

Sub--clause (2).--Does not need any comments.' Eacplanation.--This is new. and is intended to codify a rule which is well recognised, namely, that the Appellate Assistant Commissioner is not conﬁned to the points raised by the appellant in the appeal. ,He may _re-determine any matters which fell to be decided by the Income-tax Officer in the course of the assessment or other proceedings'.

Notes to clause 260 Sub-clause (1l.----The only important change worthimen-H tioning is the addition of paragraph (c).

Since appeals to the Tribunal are proposed to be re- placed by appeals to the High Court,' consequential changes have been made in this and subsequent clauses.

1 See the judgment of Chagla, C._]. in Narandas Manohnrda: v. C.l.'1'., (1957) 31, I.T.R.-909, quoted with approval-in_ C. I. T. V. Mo Millan and 02., r (1953) 33-'l'.T.R.-I82, 193 S.C. ' ' Vida notes to clause 255:, under thd head "General". ' ' 'k 455 It has been held that an order by the Appellate Assis- tant Commissioner, holding that there was no sufﬁcient rea- son for excusing delay in ﬁling an appeal and rejecting the appeal as time-barred, is an order under section 31, and an appeal lies from such order'. It has been observed that,---

"If the appeal is dismissed as incompetent or is rejected as it was ﬁled out of time and no sufﬁcient cause was established, it results in an afﬁrmation of the order appealed against."

To cover such orders, para. (c) has been added in sub- clause (1). (No such addition is considered necessary in the section dealing with appeals to the Supreme Court, since the language of the relevant provisions for these appeals is not likely to raise the question that arose with reference to the appeals from the Appellate Assistant Commissioner).

Notes to clause 261 ' Sub-clause (1).--The time limit for ﬁling an appeal from the order of the Appellate Assistant Commissioner is, at present, dealt with in section 33(1) and 33(2). These have been combined in this sub-clause without any change of substance.

Sub-clause (2).--Does not need any comments.

Notes to clause 262 The form of appeal etc. has been left to be prescribed by rules made by the Supreme Court.

Notes to clause 263 This clause deals with the powers and procedure of the High Court. No detailed comments are needed.

As to rulesiby the Supreme Court, see notes to the relevant draft clause'.

Notes to clause 264 This clause does not need any comments.

Notes to clause 265 ' This clause provides that a copy of the appellate order of the High Court shall be sent to the assessee also, besides the Commissioner and the Appellate Assistant Commis- sioner. This will encourage the speedy implementation of the High Court's judgment. ' ' 1 Mela Ram and Sons vs. C.I.T. (1956)-2&9 ITR. 6u7S.C. 3 C.I.T. Vs. S/whzadi Begum (I952) 21 LTRJ. u. A ' Draft clause 277. ' "

466

Notes to clause 266 , This clause does not need any comments. Notes to clause 267 Sub-clause (1).--This is new and is intended to make it clear that any refund consequential on the decision of the High Court must be made unless the High Court autho- rises the postponement of its payment'.

Sub-clause (2).--This sub-clause provides for postpone- ment, pending appeal, of any refund consequent on an order of the High Court, if the Commissioner communicates his intention to appeal to the Supreme Court.

The rate of interat is at_,present ﬁxed by the Commis- sioner. The draft transfers this powers to the High ~ ourt. Since the appeal is heard by the High Court, it is proper that this power should also rest with the High Court.

Notes, to clause 268 N 0 comments are needed for this clause.

N\otes to clause 269 S1/.b--clause (1).--Does not need any comments.

Sub-clause (2).--Is new; existing section 66(6) may be compared.

ment of the High Court is varied or reversed in a peal, effect should be given to the order of the High Cort in the manner provided in section 66(5) and section 66(7). The reference to section 66(7) is, apparently, not to its imain paragraph but to its proviso. This has been broug 't out in the draft. This is clear from the. words "eﬂect s ould be given" in section 66A(4). ?

Existing section 66A (3), 1st Proviso, says that th ' sub- section is not to affect the provisions of section 66 6) or section 66 (7). This has been incorporated partly i the plroviso to this sub--c1ause and partly in a subse uent c ause'. » Existing section 66A(4) provides that where the 'Fudg-

i ?

Notes to clause 270 This is merely intended to point to the provision autho- rising appeals to the Central Board of Revenue. ' Notes to clause 271 No comments are ' needed. V ' Compare existing scctién 48 (2). ft ' Vida draft clause 273. f 1' 467 Notes to clause 272 General The power of revision by the Commissioner' at the instance of the assessee is at present dealt with in exist- ing section 33A(2). Existing section 33A(1) is also mainly :meant for cases where revision proceedings are started for passing orders not prejudicial to the assessee. There is no harm if both these sections are combined in one sec~ tion. Some of the provisions contained in these two sec- tions are common to the proceedings under the two sec- tions. An attempt has, therefore, been made to combine them in this clause. No change of substance will result from such combination, since, wherever necessary a distinc- tion has been drawn between a revision at the instance of the assessee and a revision at the instance of the Commis- :S10neI'.

Sub-clause (1).--Only verbal changes have been made, apart from the change discussed above.

Sub-clause (2).---Is new and self-explanatory.

Sub-clause (3).--Existing section 33A(1), Proviso (c), has been incorporated here.

Sub--clause (4)--

It has been made clear that the limitation of one year runs from the date on which the order is communicated to the assessee or on which he otherwise comes to know of it. Existing section 33A(2) counts limitation from the date of tlp-2 order, which might cause hardship in some cases.

Sub-clause (5).----Existing section 33A(1), provisos (a) and (b) and section 33A(2), Provisos (a), (b) and (c) have been embodied here. Cases "where an appeal has not been made are dealt with in draft paragraphs (a) and (b), while "the case where an appeal is pending is dealt within para- graphs (c) and (d).

The existing Wording "the order .......... ..has been made the subject of an appeal" is not very clear, since it does not 'show whether it deals with a pending or a decided appeal. The draft makes it clear that thesewords will apply both in a case where the appeal is pending and in a case where the appeal has been disposed of on the merits. Cases' where the High Court has disposed of the appeal otherwise than on merits should not. it is felt, be taken out of the purview

-of the Commissioner's revisional powers.

Sub--clause (6).----Does not need any comments. Explanations 1 and 2 do not need any comments. Notes to clause 273 The substance of existing section 66(7) and of existing section 66A(3), 1st Proviso, part, has been embodied here in simpliﬁed language.' r 2 7 'See also notes to clause 269. l 3

--

468

'Notes to clause 274 No comments are needed.

Notes to clause 275 Existing sections 31(4) and 33(5) provide that where as a result of an appeal the assessment of a ﬁrm etc. is changed ' or a ﬁrm etc. is newly assessed, the Appellate Assistant,Com--

missioner or the Tribunal, respectively, may authorise the Income-tax Officer to amend the assessment of any partner of the ﬁrm or member of the association. This provision has been incorporated here with the following changes:---

(1) The provision has been made applicable for appeals.

to the High Court and the Supreme Court.

(2) It has been provided that the Income-tax Officer' shall make all amendments necessary for carrying out orders of the appellate authority, irrespective of whether the 'appellate authority gives a direction or not.

Notes to clause 276 Existing section 67A has been embodied here,«with slight alterations. The present section authorises the ex--- ' clusion of time taken for obtaining a copy of the order. How» ever, if the assessee is furnished with a copy. of the order, along with the notice of the order, then the concessiongneed not be made available to him. The provision has, therefore, been altered accordingly. Further, the provision has been extended to applications for revision also. I Notes to clause 277 This is new_ The power to make rules regulating the powers and procedure of the High Court (in appealsunder the Act) is proposed to be conferred on the Supreme Qourt, so that there may be uniformity throughout India. ﬁThe' corresponding provision in the Companies Act. 1.956. (sec-

tion 643) may be compared.

' Notes to clause 278 Para (a).----Does not need any comments.

Pard (b).--Is new. Since the word "status" has been used in the draft clause dealing with appeals from the orders of an Income-tax Officer', it is considered that a deﬁnition of that word might be useful. I 1 CHAPTER XXII PENALTIES IMPOSABLE BY INCOME-TAX. AUTHORITIES A Notes to clause 279 This embodies existing section 44F(6). in so far as it deals with imposition of a penalty. The existing section says that if the person concerned failsyto comply with the ndtice 1 Vida draft clause 254. (12). iv '~ 1 { I 469 issued by the Income-tax Officer (requiring him to furnish. particulars relating to securities). "he shall be liable to a penalty" etc. The words "he shall be liable to" have. in the-draft, been replaced bv the words "the Income-tax Oﬂi- cer may direct that such person shall pay" etc. This will secure uniformity with existing section 28(1), main para.

Notes to clause 280 General.

The constitutionality of section 28(1)(c) has been up- held by a Division Bench of the High Court of Madras'. The attack on the validity of this section in that case was based"

on the argument that under sections 28 and 51-52, the Inspecting Assistant Commissioner has a choice as to whe--- ther a penalty should be levied on the' assessee or whether the assessee should be prosecuted under sections 51-52, The course to be pursued by the department is, it was argued, left to the unfettered discretion of the Inspecting Assistant Commissioner and the enactment gives no guidance and prescribes no standard. This argument was rejected by the High Court. which observed that section 28(4) was in the nature of a concession and there was noquestion of article 14 of the Constitution being attracted to invalidate it. Sec- tions 51-52 had been enacted for vindicating public justice and for the punishment of the offender for the deliberate infraction of the law, while section 28 is enacted for the purpose of rendering evasion unproﬁtable and of securing to the State compensation for damage caused by attempted evasion. The two sections do not always overlap; but even where there is overlapping in a concrete instance, the two remedies could have been taken at the same time, but for the provisions of section 28(4). The two remedies are not in their nature mutually exclusive, and the grant of a concession to the assessee in the form of section 28(4) does not alter the situation.

In view of this pronouncement. it is not considered necessary to disturb the substance of section 28, but sec- tion 28(4) has been made into a separate section, in order to bring out its true function. A The words "in the course of any proceedings" also came up for consideration in the case cited above. The' High Court noted that the practice is, that when an In-« come-tax Oﬂicer ﬁnds that an assessee has concealed his income etc., he estimates the concealed income. adds it to the income returned and levies tax on the entirety of the income as thus determined in his assessment ordered. At the same time he issues' notice to the assess' to show cause why a penalty should not be levied un er section 28(1) and (2). But the assessee may not have been heard I and no ﬁnal conclusion is reached at that stage. The assess- ment is completed and a demand is made for the tax. and.

' Siilgaminatha Maopamzr and Sour Vs. I .T.0., II Circle, Madurai and an other (1955) 28 ITR. 601. , ' -

..;.---

470

the Income-tax Oﬂicer waists until the appeals, if any, as regards the assessments, are over. After obtaining the assessment ﬁgures as ﬁnally deterrnind, the Income-tax Ofﬁcer pursues the notice already issued, resumes the penalty proceedings, hears the assessee and passes an order in proper cases under section 28(1) after obtaining an approval of the Inspecting Assistant Commissioner. "This practice", the High Court observed, "appears to be fair to the assessee and not contrary to the language of the enactment"'. In the view of the High Court, "the proceed- ings for the levy of a penalty must be initiated by an authority when such authority was in seisin of the assess- ment or other proceedings in the course of which it is found that the assessee has brought himself within the mis- chief of section 28. When once the notice has been issued, "the jurisdiction of that authority to continue the proceedings is not dependent upon the continuance of other proceedings in the course of which the penalty proceedings came to be initiated."

The purport of the words in question has been cxlifarly explained in this judgment, and it does not appear .eces- sary to make any change in the language. .

Clause 280.

Existing section 28 has been broken up in the draft in the following manner:--- ' (1) The general power to impose penalty has been idealt with ﬁrst. . ' (2) The special provisions applicable to ﬁrms. cont; ined in section 28(1) Proviso (b), are dealt with 'ext.

(3) The special provisions contained in other parts of the Proviso, applicable to other cases, are pilaced . next.

(4) The special provision applicable to partners is§plac- edat the end. , ' s The words "three thousand ﬁve hundred rupe " in existing section 28(1), Prov. (a) have been replaced b able words linked up with the taxable minimum whic may 'Vary from time to time (Cf. para 196, I.T.I.C. Report, 1948).

Notes to clause 281 i No comments are needed.

, Notes to clause 282 Existing section 18A(9) has been incorporated in this clause. The main para. of that sub-section has been em- bodied in the earlier portion of the draft clause, the changes made being consequential on the breaking up of existing section 18A itself, the}! remaining portions of which have, in "(r955) 28 I.T.R. 601, *3.

I suit- ' 471 the draft, been placed in the Chapter relating to collection» and recovery of tax.' The proviso to this sub-section has been placed in the latter half of this clause, with verbal changes which have been made in order to elaborate the provision and make» its understanding easy.

Notes to clause 283 Sub-clause (1).----The words "or the otherperson on whom the penalty is sought to be imposed", have, in the draft, been added to existing section 28(3), in order to make the provision comprehensiv ~ Sub-clauses (2) and (3).----No comments are needed.

Notes to clause 284 No comments are needed as izo the drafting of this par-- ' ticular clause.

As to the attaclr on the constitutionality of section 28 read with sections 51 and 52 of the existing Act, see notes to the clause incorporating section 28(1)'.

CHAPTER XXIII OFFENCES AND PROSECUTIONS Notes to clause 285 _

-This clause does not require any comments. As to the constitutional position relating to existing sections 51 and 52 read with existing section 28(1) _ d section 28(4), see notes to the clause incorporating section 28(1).' - V ' Notes to clause 286 The existing section 52 provides that if a person makes _ ' a false statement in veriﬁcation under certain sections, he should be punishable etc. The existing section gives a long list of the various sections under which veriﬁcation is made;

but it does not, appear to be necessary to give a list of such sections.

Veriﬁcation under any provisions of the Act should. obviously come within the purview of _«.this section. The ﬂaw inherent in giving a list is that the list may not be exhaus- tive and may, moreover, require to be amended Whenever an amendment introduces a new section requiring veriﬁca-

tion. The draft clause, therefore, usg the words' "any veri-- . A ﬁcation under this Act".

Notes to clause 287 No comments are needed.

» ' Vida Chapter XVIII, Clause 215 at seq. ' Notes to draft clause 280.

' Clause 280.

.1 472 Notes to clause 288 The words "on conviction before a Magistrate'; have been added in existing section 54(2), on the lines of the language of existing section 51, last part.

CHAPTER XXIX RECOGNISED PROVIDENT FUND Notes to clause 28.0 General.--The provisions contained in the Chapters on Recognised Provident F.unds and Approved Superannuation Funds have, in some case bearing on other sections also. The scheme adopted in the draft is to make a reference, in other sections, to the provisions relating to such funds, wherever convenient. Though this entailed some repetition, it has been done for facilitating reference. E Clause 289.--Existing section 58B has been reproduced here. The only change made is the addition of the proviso in sub-clause (1). Section 9 of the Employee's Provident Funds Act, 1952, deems a provident fund established under a scheme in accordance with that Act to be a recognised provident fund under this chapter. So far as the funds established under such schemes are concerned, this deem- ing provision is sufficient. But, certain provident funds under that Act have been exempted by Government. under section 17 of that Act, from the operation of the scheme. Such provident funds would not be covered by the deeming provision and it appears to be desirable to enable a relaxa- tion of the conditions in their case. The proviso is intended to achieve this object. [Such provident Fundshave toffu1- ﬁl the condition laid down in section 58 of the Employee's Provident Fund Act and those conditions are strictly in ac~ /cordance with the conditions prescribed by section 58(c)].

Section 58B(4), dealing with appeal, has been placed in a separate clause.

Notes to clause 290 ' Existing section 58C has. in the draft. been broken u' so as to separate the conditions from the provisions for relExa-

tion of the conditions. The conditions are incorporate in this clause. while provisions relating to relaxation are plac- _

-ed in a separate clause Notes to clause 29i General.----A1l provisions in the nature of relaxation of conditions for recognition of Provident Funds have been collected together in this clause.

Sub--clause (1).--Existing section 58C(1)(a), proviso.has been incorporated here. The, concluding words "notwith- standing that a proportion not exceeding 10% of the 'm- _ployees is employed outside India", in the existing secfon, g 2 e , i 473 really mean that the proportion of employees employed out-

.side India should not exceed 10%. The wording has, there-

fore, been altered to bring out the intended meaning.

Other changes are consequential on the breaking up of .section 58C into conditions and provisions for relaxation.

Sub-clause (2).--Existing section 58C(1), (b), proviso, refers to the National Service (European British Subjects) Act, 1940 and the National Service (Technical Personnel) Ordinance, 1940. These references have been replaced in the draft by the words "any law for the time being in force", which are more comprehensive. ~ Other changes are consequential.

S.ub-clause (3).----The changes made are consequential on the breaking up of section 58C and combining of section 58C (d), Proviso and latter part of section 58C (1) (g).

Sub-clauses (4) and (5).--No comments are needed.

Notes to clause 292 I No comments are needed.

Notes to clause 293 This is new. Sums paid by the employer as contribu- tions towards a recognised provident fund should be allow- ed to be deducted in computing the employer's income'. Hence this clause. ~ Notes to clause 294 No comments are needed.

Notes to clause 295 No comments are needed.

Notes to clause 296 General.--Existing section 58G, sub-section (2), has been embodied in this clause. The proviso has been express- ed as an item of the main sub-section.

Section 58G(2) talks of exemption from the payment of income--tax and says that the accumulated balance shall be "excluded" from the computation of the employee's total income. It is thus a case of total exclusion and has been treated so in the draft. ' So far as super-tax is concerned, the exemption in sec- tion 58G (2) was originally applicable to super-tax also, but the words "and super-tax" were omitted by the Indian Income-tax (Second Amendment) Act, 1933 (18 of 1933). The reason for removing these Words from this sub-section apparently was that the exemption for super-tax was dealt 1 Cf. existing section 58R, main para, middle .

474

with separately in a separate sub--section----section 58G (1) which was introduced by the same amendment Act. This ' "exemption" from payment of super-tax has, under the scheme adopted in. the draft, to be treated as a case of excluse from total income'. and, therefore, the draft clause under discussion regards the exclusion as effective both for income-tax and for super-tax. ' In other words, existing section 58G (2) has, in the draft, been expressed as applicable both for income-tax and for super-tax and existing section 58G (1) earlier part, has not, therefore, been reproduced. in the draft'. It is, of course, true that section 58G (1), earlier half, (that is, ex- emption for super-tax) does not require continuous service while section 58G (2 (exemgtion for income-tax) d s re-' quire such service. ut it oes not appear necess y to make any such distinction. The draft, therefore, does not make any such distinction. ' The draft clause requires ﬁve years' continuous service, before exclusion can be claimed. This will now be applic- able in both cases, but it does not put a fresh bur en on the assessee; because, even now under section 5 G (3) if the employee leaves before ﬁve years he has to pity not only income-tax but also super-tax on the basis thiat the exemption was not available. .

Existing section 58G (1), latter part, has been .infcorpo- rated in a separate clause'. . f -

Notes to clause 297 Sub-clause (1).--.-Slight verbal changes have been made for the sake ()f clarity. V Sub-clause (2).--S1ight verbal changes have beeni inade for precision. E Existing section , 58G (1). consists of two parts. The earlier portion, exempting the accumulated balanc from super-tax, has alreaw been accounted for in the t, as the exemption has been treated as an exclusion fro total income, common to income-fax and super-tax'.

The latter part enacts the exception in respect of nual accretions up to 1st "April 1 3. That has been repr duced in the draft with two draft ng changes. First, the ords "which is not included in his total income" have been added by way of introduction. Secondly, instead of the e ' ting negative form "except .......... ..", a positive form of angu- age has been used to emphasise the 'liability to p y the amount referred to inthe provision. , .

--'1 Cf. notes to clause 104. _ I ' Sec notes to clause :02 (2).

' Vida clause 297 (2). ' ' See notes to draft cluée 296.

475

The provision in question was enacted only to make an adjustment necessitated by the course of legislation (see note below), and hence the aspect of payment receives a higher emphasis compared with the aspect of liability.

The Provident Funds Chapter was introduced in 1929. Section 58E provided for the inclusion of the annual ac- cretion in the total income. Section 58F exempted the annual accretion from income-tax, subject to certain con- ditions. Though the intention of the legislature was, thus, to assess the annual accretion to super-tax, by the omission of section 58F from the sections not applicable to super-tax mentioned in section 58, the provisions of section 58F be- came applicable to super-tax. The annual accretion, there- fore, remained exempt from super-tax also up to 1933.

The legislature noticed this defect in 1933 and rectiﬁed it by including section 58F in section 58. Simultaneously section 58G (1) was introduced and 58G (2) was made not applicable to super-tax. The resulting position is that though the accumulated balance is exempt from payment of super- tax, the employee receiving the accumulated balance has to make good the super-tax that he would have paid bet- ween 1929 and 1933. ' Notes to clause 298 Existing section 58H has been embodied here. The sec- tion provides that at the time of payment of the accumulat- ed balance. the trustees shall deduct therefrom any income-- tax payable under section 58G (3). So far as this require--- ment is concerned. the words "in cases where section ....... .. [58G (3)] applies," have been added in the draft, to make it clear that deduction is permissible only where the liabi- lity for payment of tax has arisen.

The existing section further provides for the deduc- tion of any income-tax and super-tax payable on an em-- ployee's total income as determined under section 58J (3). This requirement does not appear to be intelligible. Section 58J (3) does not really apply at the time of payment of accumulated balance to the employee and is conﬁned to the taxation, at the time of recognition, of sums transferred to the employee's account in the recognised provident fund. This requirement has, therefore, been omitted in the draft.

Notes to clause 299 Existing section 58J is incorporated in this clause. Sub- section (4) of that section has been incorporated in the clause dealing with relaxation of conditions'.

No other comments are needed.

Notes to clause 300 No comments are needed.

'Compare draft clause 29: (5).

31-] Law Gom.l58.

476

N-btes to clause 301 No comments are needed.

Notes to clause 302 N 0 comments are needed.

Notes to clause 303 No comments are needed. .

Notes to clause 304 No comments are needed.

Notes to clause 305 "Recognised provident fund".--No change' has 9, been made in the existing deﬁnition. Section 9 of the Emp oyees Provident Funds Act 1952 (19 of 1952) provides that pro- vident fund established under a scheme under th Act shall be deemed to be a recognised provident fund f r the Income-tax Act. It does not appear necessary to repe t this provision in the Income-tax Act, since some of the rovi- sions in this Chapter (for example, withdrawal) m not in terms apply to such funds. ' "Employer".--In existing ection 58A, clause (h), the words "maintaining the provident fund for the beneﬁt of his or its employees" are applicable not only to the "indi- vidual" referred to 'm item (ii) but also to the -"Hindu undivided farn-i1y,_co1I'1pany" e_tc., referred to in item [i_). To make this clear, the substance of these words has been placed in the beginning of the deﬁnition.

Other deﬁnit'ions.--Do not need any comments.

CHAPTER XXV APPROVED SUPERANNUATION 'FUNDS Notes to clause 306 No comments are needed.

Notes to clause 307 Sub-clause (1).----In the opening lines, it has bee pro- vided that the superannuation fund must satisfy no only the conditions set out in the section but also the con 'tions to be prescribed by rules to; made by the Centra --- Gov- ernment. This additibn has 'bgen made to secure nifor- mity' with the corresponding provision relating to ecog- nised provident funds. [See existing section 58C(1),,open- ing lines]. § _ Sub-clause' (2).--The» proviso to existing section 58P 1S merely clariﬁcatory. It has been embodied in sub-«lclause 4 ' :

(2). .

'Of. note: to clause 3x7,§_"Gcneral"§. « l ' S' 47':

Sub-clause '(3).--~This is new' and has been added to secure uniformity with the correspon 'rig provision relating to recognised provident fund--see e ing section 58C (2).

Notes to clause 308 It has been made clear that the application for ap- proval is to be made to the Income-tax Officer by whom the employer is assessable. ' The word "year" has been replaced by the expression "assessment year" or ''previous year", as considered appro- priate.

Notes to clause 309 .

General.----Existing section 58R and 58S have, for the sake of clarity, been broken up so as to deal separately with the following :--

(1) Income from investment.

(2) Employer's contribution--deduction for.

(3) Emp1oyee's contribution--when exempted. ' (4) Contributions paid to the emp1oyee--when deemed to be income.

(5) Deduction of tax on contributions paid to an em-

ployee. _ ' Existing section 58R, relating to exemption in respect of superannuation funds, combines a number of provisions. These provisions embody exemptions falling under various categories. For example, the opening lines direct that in- come derived from investments of such funds shall be "ex- empt from payment of income-tax"; while the subsequent lines provide that "any sum paid by an employer by way of contribution shall .......... ..be deducted in computing the income .......... ..". It is obvious that the ﬁrst exemption is in the nature of an exclusion from total income, while the second is a deduction for expenses. In order to bring out clearly the nature of the various exemptions contained in existing section 58R, its various portions have. in the draft. been allocated to various clauses according to' the topic dealt with, thus-

(i) the opening lines relating to income from. invest- ment etc., have been embodied in this clause. That provision applies in respect of super-tax also under existing section 58. The /provision is more in the nature of exclusion from total income and should be treated on the same lines as income received by tngtiees on behalf of a recognised provident fund,é_$ee existing section 4, sub-section (3), item (ix) ;,g _i _ .

478

(ii) the middle portion of section 58R, main para, dealing with sums paid by employer, has been placed in a separate clause' ;

(iii) the last portion of section 58R, main para, has been dealt with in another clause' with certain drafting changes which are discussed below ; the ﬁrst Proviso to section 58R has also been incor- porated in that clause';

(iv) the second Proviso relates to employer's contri- butions and has been placed along with the mid- dle portion of the main para'.

Section 58R says 2 "any sum paid by an employer or an employee by way of contribution ............. ..shall in the case of an employer be deducted in computing his income .......... ..and in the case of an employee be treated for all the purposes of this Act as if it were a sum to which the provisions of section 15 apply;

Provided that no such exemption shall be allowable to , an employee in respect of any sum which is not an ordinary annual contribution." _ s The existing language, at ﬁrst reading, would mean that both the sum paid by the employer and the sum 'paid by the employee are to be allowed as a deduction in the case of an employer, and that similarly both the sums are to be allowed exemption in the case of an employee. 'But. obviously, this is not the intention. Only a sum paidby the employer is to be allowed as a deduction in the em- ployer's assessment, and similarly only a sum paid by the employee is to be allowed deduction in the employee's assessment. Since the case of the employer and the case of the employee have, in the draft, been treated at differ- ent places, the need for any clariﬁcation does not arise.

Notes to clause 310 See notes to the proceeding clause'.

Notes to clause 311.

The words "in the previous year" have been added for the sake of precision, and the place of the first Proviso to existing Section 58R, is, in the draft, taken by the words at the end "in so far as such sum is an ordinary annual contribution".

The general scheme of existing section 58R has already been dealt with'.

'See draft clause 310.

'See draft clause 31 1.

'Vida draft clause 3:0, Prov.

'Clause 309. ' , 'See note: to clause 309'.' 479 Notes to clause 312 Existing section 58S (1) provides that where any con- tributions are "repaid", to an employee, the amounts so repaid shall be deemed, for the purpose of income-tax, the income of the employee for that year. The words "repaid" would, at ﬁrst sight, seem to suggest that it is only the em- ployee's contributions that are intended to be covered by these words. But it seems that the employer's contribu- tions should also be covered, because there does not appear to be any reason for excluding employer's contributions; the word "repaid" was probably used in a wider sense.

The sub-section does not make any exception for con- tributions repaid on death or termination of employment. Existing section 58S (2) however shows that payment of contributions to an employee on death or termination of employment does not come within the scope of this section. Tl;le two sub-sections should run in harmony with each ot er.

The language of the provision has, therefore. been altered on these lines. -

The words "of that year" have been replaced by the words "of the previous year in which it is so paid to him". for precision.

Notes to clause 313 As pointed out in the notes to the clause correspond- ing to existing section 58S (1). section 58S is intended to apply to contributions both of the employees and of the employer'. The necessary change has been made in this clause also.

Notes to clause 314 No comments are needed.

Notes to clause 315 No comments are needed.

Notes to clause 316 Existing section 58V has been embodied here with the following changes :-- ' ' (1) It has been made clear that the information is to be supplied by the trustee to the Income-tax Offi-

cer within "-not less than twenty-one days". This will avoid the raising of any question as to what is meant by the words "within twenty-one days".

-(2) Clauses (a), (b) and (c) of this section. which ela- borate the particulars that will be required by the Income-tax Oﬂicer, have been omitted, as the rule-making power now conferred" enables rules to be made on these matters.

. 'See note: to Clause 312.

'Vida draft clause 317.

480

Notes to clause 317 General.----This is a new clause and is intended to efive effect to the following recommendations of the Incom tax Investigation Commission' :----- i "70. If all the requirements of section 58-P are s tis- ﬁed, it is doubtful if the Central Board of Revenue ,can refuse to recognise a superannuation fund. The powe to impose conditions would probably have reference onl to the three eventualities mentioned in the proviso andanot in other circumstances independent of these contingenc es.

The provisions of the Income-tax Law in respect of superannuation funds should, as far as possible, be bro ght into line with those relating torProvident Funds. It is im- cult to see why the power given to the Central Govern ent to make rules as in Section 58L (2) should not be repeated in the case _of Superannuation Funds. This lack of power to make rules is a serious drawback in the scheme of Super- annuation Funds under the Income-tax Act. of which unfair use can be made". i .

"72. Suitable amendments may be made in the In 'an Income-tax Act restricting the maximum limit to w ich the contributions by the employee and employer ma be made to 25 per cent of the employee's salary. ' E Sub-clause (1).--~Cf. existing section 58L (1) relating to « . ' I recognised provident funds. , Sub-clause (2).--Para (a)--C;f. section 58L (2) (a). ;

Para (b)--relates to the returns etc. referred to in§sec- tion 58R as embodied inthe draft. I t Para (c)--se-e para. 72 of the report of the Income-éltax.

Investigation Commission quotdd above. The maximumlhas been left to be prescribed by the rules, in order to Se ure elasticity. .

Para (d)--Cf. section 58L (2) (c).

Para (e)--Cf. section 58L (2) (d).

Para (f)--is intended to enable withdrawal of rec ; ni- tion. This power will be in addition to that enjoyed u der section 58-0 (1) latter part.

Para (g)--Cf. section 58.1.'. (2) (e). Notes to clause 318' Sub-clause (c)--Th¢ word "earnings" has been re;£lac- ed by the words "income chargeable under the head sala- ries", which ane more appropriate".

1I.'I.I.C. Report, 1948, page 219, for detailed discussion, see para- graphs 170-171 of that Report. a '5 'Cf. Report of the Income-' Investi lion Commission, para. 17:, o ; ura- tion beginning with "Secondly . . .''at pp? :74. . ~. ._. ~ 481 CHAPTER XXVI MISCELLANEOUS Notes to clause 319 _ This is new. It seems desirable to make it clear that income once charged to tax shouldnot again be charged to tax in the hands of the same person. This safeguard seems to be necessary, in view of the fact that an item of income may be chargeable either on the basis of its ac- crual or on the basis of its having arisen or on the basis of its actual receipt, within a particular period. In other words, the chargeable periods may vary according to the basis on which the tax is sought to be assessed. ' Notes to clause 320 It has been made clear that even in the case of a local authority or company, service may be made on its princi- pal officer. The deﬁnition of "principal oﬁicer" is applicable to local authorities and companies also.

Notes to clause 321 Sub--clause (1).'--This is new. Since the family will not be in existence after partition, a provision for service of notices in respect of proceedings pertaining to the disrupted family appears to be necessary and has been in- corporated in this sub--clause. The Supreme Court has held' that in such cases the notice need not be iven to all mem- bers. This view has been followed in the draft, treating, however, a notice under section 34 in a different manner'.

This draft sub--clause will apply only where an order re- cording a ﬁnding of total partition is passed. In cases of par- tial partition, the family continues in respect of undivided property; (if the partition is partial as regarding persons, the remaining members will continue' joint); and notices can be served in the usual manner, and, no special provi- sion is necessary to the effect that the notice in such cases must be served on all the members of the family. (In cases where some of the members went out of the family, the members so separated must of course be served. But this need not be provided for).

Sub-clause (2).--This is new and is 'intended to provide for the service of notice in the case of a dissolved ﬁrm or association. I Notes to clause 322 This clause does not need any comments.

. 1 Lax-mi.Nara1'n Bhadam' v. crr, (igsx) 2'0 rrg. 594(sc). b . 1 Cf. I. T, I. C. Report, i94.8,,pagd§ 155, 351, 352. .- . \ _-. Report 482 Notes to clause 323 This is new. It is desirable that documents placed on the ﬁle of an Income-tax authority should bear proper en- dorsement so that their tracing and identiﬁcation may be facilitated whenever a reference to them becomes neces- sary. It is also desirable that where an Income-tax autho- rity bases any order on any document. the document shall expressly be referred to in the order, so that there may be no difficulty in understanding the basis of the order. The draft clause is intended to achieve this object.

Notes to clause 324 Sub-clause (1)--does not need any comments, except that existing section 61(1) and section 61(2) have, in the draft, been broken up so as to separate the details regard- ing various authorised representatives from the main»pro-- vision authorising their appearance.

Sub-clause (2)--The various kinds of persons who can appear as authorised representatives have been listed in this sub-clause.

Items (i) and (ii)?-do not require any comments.

Item (iii)----relating to lawyers has been redrafted so as to simplify the language. This 'category has been restrict- ed to legal practitioners who can appear in a civil court. (Persons already in practice'will not, of course, be affedted).

As to item (iv), see notes below, under "Explanation".

The right of persons entitled to appear under the exist- ing Act' will be preserved b item (12), even though the persons are not qualiﬁed un er the new Act. But it has been made clear that this right is available only where such persons were actually in practice before the new Act came into force'. ' Explanation.--~The deﬁnition of "accountant" has been brought into line with the Chartered Accountants Act. 1949. Persons who are neither Chartered Accountants nor autho- rised to audit the accounts of companies under section 226(2) of the Companies Act, 1956, are proposed to be ex-

cluded from the deﬁnition. Existingsection 61(2) item' (iii)-

enables a member of an association of accountants recog- nised in this behalf by the Central Board of Revenue to appear as an authorised representative. It is proposed to restrict the right, however, to chartered accountants? etc. (Persons already in practice at the time of the commence- ment of the new Act will not of course be affected).

Sub-clause (3)----does not need any comments. \ 1The abolition of this cat ory was ecormmcnded even by the Income-tax Investigation Commission aid: _ts Report 19418) Para 240 page 107. The 'l'aza-

(ion Emiuixy Commission, lmwever w 4 not in favour ofany change. cc its ( 953-54), Vol. II, &.i;XII, pararﬂ-50. ' 483 Sub-clause (4)----Under existing section 61(3) the power to take disciplinary action against persons "other than law- yers or accountants subject to their respective professional bodies", is vested in the Commissioner. It is proposed to transfer these powers to an authority whose constitution would be laid down in the rules'. The present provision authorising appeals to the Central Board of Revenue will, of course, continue. ' Sub--clause (5)--is merely a transitional provision. Notes to clause 325 No comments are needed.

_ Notes to clause 326 No comments are needed.

Notes to clause 327 No comments are needed.

Notes to clause 328 The word "year" has been replaced by words "assess- ment year" for precision. In addition to income-tax, super-

"tax has also been added for the sake of precision.

Notes to 'clause 329 Sub-clause (1).--It has been made clear that the rules will be published in the Official Gazette.

Sub-clause (2).--Paragraph (c) is new and is intended to empower the Central Board of Revenue to make rules

-(i) for the registration of Income-tax Practitioners who are not lawyers or accountants and (ii) for the constitution

-of an authority to take disciplinary action against them'.

The changes made by the Finance Act, 1958, have been given effect to. Further, a provision for rules regarding income-tax veriﬁcation certiﬁcates has been added, since it :is ffelt that a statutory provision' on the subject would be use u .

Sub-clause (3)--does not need any comments.

Sub-clause (4)---has been brought into line with recent 'legislative practice.

Existing section 60.

Existing section 60(1) authorises the Central Govern- ment to make exemptions, reduction in rates or other modi- ﬁcations regarding income-tax in certain cases. Sub-section (3) of that section, however, provides..that after the com-

mencement of the Indian Income-tax (Amendment) Act,

1. Of. the Amendment Bill that was introduced in 1951 (which was allowed to lapse), printed in (1951) 28 I.T.R. 46; 47, Vida notes to draft clause 324 (4)

-4' 484 1939, this power will not be exercisable except for the pur- pose _of rescinding exemption, etc. already made. T 'e re- sult is, that no new exemption etc. can now be gr, nted under section 60, sub-section .(1). In view of this, this pro-

vision has been omitted in' the draft.

So far as exemptions already granted are concerned, the question of their retention for assessments under the new Act will have to be considered by the Govern'ment,. when the transitional provisions are drafted (Cf. note re- garding repeal etc. below). i So far as assessments for any period prior to the, com- mencement of the new Act are concerned, exemptions al- ready granted under section 60(1) should, of course, con- tinue to have effect, and thepower to cancel them under Section 60(3) should also continue (Cf. Note re:~repea1 etc. elow). . A Note on Repeal and transitional provisions (At ﬁrst, draft clauses on repeal and transitional pro- vision were prepared in the Commission, but later it was felt that it need not be done in the Commission and might be left to the Ministry of Law.) .

When the new Act comes into force, the existing Act. i.e., 1922 Act will, of course, cease to apply. While d ' fting the repeal clause, it would be desirable to consider hicl1_ of the following courses should be adopted.-

(1) Absolute repeal of the existing Act----This my not be feasible, since it .would necessitate innu rable saving provisions and' may cause inconve ience also. ' (2) Formal repeal of the existing Act with a pr ision that so far as the assessments etc. for asse ment years prior to the commencement of the ne Act are concerned, the existing Act will contin e to- apply. This seems to'be .the method adop ed in section 13 of the Finance Act, 1950 (25 of 19 ) and section 6 of the Taxation Laws (Extens on to J ammu and Kashmir) Act 1954 (41 of 1954.) hich, while repealing the old laws, preserve the ol laws for the purpose of "ldvy, assessment and coll ction"

of income-tax, etc. for past years. ' Section 527 of the U.K. Act. 1952 follows the same method; sub-section (1), main para, repeals the piievious laws as listed in the twenty-ﬁfth Schedule, but the proviso enacts that the provisions of the new Act "shall not-apply to income-tax for the year 1951-52 or any previous year of assessment and the provisions of the enactments me tioned' in the twenty-ﬁfth S hedule "shall continue to apply r tax in any such year to he sam xtent that they woul have ,not been passed". :

applied thereto if t s Act 485 Section 2 of the Australian Income-tax and Social Ser- vice Contribution Assessment Act, 1936-v1953, while repeal- ing the enactment concerned (vide the main paragraph), provides (vide first proviso) that the Act repealed by this section, shall continue in force for all purposes in connec--- tion with income-tax payable for any ﬁnancial year prior to ,.the ﬁnancial year commencing on the_1st January, 1936.

.[It may be noted that the saving embodied in the various Acts referred to above varies in each Act. Thus the Indian Acts i.e.. Finance Act, 1950 and the _Act relating"

to Jammu and Kashmir, save the old law for levy, assess-- ment and collection of tax etc. The UK. Act saves the old. law for tax. The Australian Act saves the old law "for all.

purp,-,5es"'.] (3) Another alternative would be, not to "repeal" the existing Act, but to provide that it "shall cease to apply"., (A clause framed on these lines would not of course, attract the provisions relating to repeal in the General Clauses Act and they will have to be speciﬁcally incorporated in the- repeal clause).

A precedent for this will be found in section 130 of the Canadian Income-tax Act which, instead of effecting a speciﬁc repeal, merely provides that provisions of. the In- come-tax War Act (1'..e.' the earlier Income-tax Act of Canada) "are not applicable to taxation years after the 1948.

)3] Taxation Year . --

Title 1, sub title A, section 1, U.S.A.»Internal Revenue- Code, (U.S.A. Statutes 1934 Part I p. 683) provides that the provisions of the new Act shall not apply to assessment years commencing prior to 1st January, 1934, and income- tax for assessment years prior to that date shall remain unaffected by the new Act and shall continue to be govern- ed by the applicable provisions of the old Act.

If this third alternative is adopted, notiﬁcations and orders etc. can be issued under the old Act on all matters in respect of assessment years prior to the commencement of the new Act.

(It may be stated here that the repeal clauses in section 53 of the Indian ,Income-tax Act, 1918 (7 of' 1918), section 8 of the Indian Income-tax Act, 1920 (19 of 1920) and section 68 of the Indian Income-tax Act, 1922 (11 of 1922) might not be very helpful in drafting the repeal clause. These Acts straight-away repeal the old Act and. add that such repeal shall not affect the liability of any person to pay any sum due under the old Act.)

1. Hence, assessments in Canada still I tinue to be made and disputes-. A litigated andunder the old Act in respect of 1948 l;'l00!nC. Vida Plaxton, Income-tax Law, 1949, Second Supplement. : é 486 Transitional provisions A number of orders, notiﬁcations etc. issued under the existing Act, will have to be continued for the purposes of the new Act, until the appropriate action is taken under the new Act. The actual form of the clause on the subject would, of course, depend on how the repeal clause is'fram- ed. If the usual repeal clause is adopted, section 24 of the General Clauses Act would have the effect of continuing appointments, notiﬁcations, orders, schemes, rules, forms. 'bye-laws etc. But still a number of other things which do not fall under section 24 of the General Clauses Act would have to be dealt with. If straight-away repeal is not effect- ed, the continuation clause will, of course, have to men- tion orders, notiﬁcations and, rules etc. also. -

It may be necessary to make some provisions as to how far the Act is retrospective. Section 129(6) of the Canadian Income-tax Act, may be compared.

. Provision for ensuring that income taxed under the existing Act is not taxed again under the new Act might also be necessary.

Since the Tribunal is proposed to be abolished, it may be necessary to make elaborate provisions in respect of 'proceedings pending under the existing Act before the Tribunal. These proceedings may include not only appeals, but also applications for making a reference under section 66 of the existing Act. It will also be necessary to provide how references pending in the High Court under section 66 or applications pending in the High Court under Section

-66(2) or section 66(3) should be dealt with, and also as to the authority which should carry out the decisions passed by the High Court on these references. Where an applica- tion under section 66(1) has been rejected before the com- mencement of the new Act, it would also be necessary to 'provide that the assessee or the Commissioner maylapply 'to the High Court as regards the merits or as regards the issue of limitation. Provision will also have to be! made as regards decisions given by the Commissioner or _A.A.C. (before the new Act) in respect of which an appeal: could have been ﬁled to the Tribunal if it had not been abcﬁished.

The usual clause relating to power to remove d_ilﬁcul-- ties in achieving thetransition or giving effect to the pro- visions of the Act will also have to be embodied.

Notes to First Schedule Rule 1 The existing Schedule uses the expression "yea1"" and 'deﬁnes it in rule 5(1). In the draft, however, the expres- sion "previous year" has been used. The deﬁnition of "previous year" as-adopted in the draft' deals speciﬁcally with insurance business, so that the expression "pr eding year" need not be used in the substantive provisi ns.

' ' " ' . l 'Draft clause 5.

487

Instead of the expression "income proﬁts and gains", the shorter expression "profits and gains" has been used, on the lines of the existing section 10.

Rule 2 Slight changes have been made to simplify the lan- guage. For example, the existing Schedule, rule 2 proviso, clauses (a), (b) and (c), repeat the word "plus". This has been replaced by the words "aggregate of the following".

Rule 3 The following drafting changes have been made:----

1. The ﬁrst proviso to the existing Schedule, rule 3(a), has been omitted, as it was applicable only to the "first such computation" made under the rule.

2. The second proviso to the existing Schedule, rule 3(a) says that if any amount reserved for policy holders is not paid to or expended on behalf of the policy holders, then the proportion previously allowed as a deduction is to be treated as a part of the surplus. The proportion has been described as "one--half or four-ﬁfths as the case may be". The reference to "one-half" in the Act is not intelli- gible on first reading, because the deduction allowed is four- ﬁfths under the main para of existing Schedule, rule 3(a). The text of the rule. as it stood before the amendment made by Act 25 of 1953, contained the words "one~half" and the intention apparently was to cover also cases where a deduc- tion was allowed before the amendment of 1953.

Ordinarily speaking, by the time the new Act comes in force cases of deductions under the existing Act as it stood before 1953 will have been exhausted. However, as a. matter of caution, the reference to."one-half" has been retained in the draft.

The words "under this Act or under the Indian Income- tax Act, 1922" have, however. been added in the draft, in- order to deal with cases where a deduction under the exist- ing Act is to be adjusted in the surplus under the new Act.

3. Existingrule 3, clause (b), uses the Words "securi- ties or other assets". But the appropriate word seems to be "investments"; that is the word used in the existing Schedule, rule 6, last sentence. The draft, thenefore, uses the word "investments".

4. Existing Schedule, rule 3, clause (c), has been incor- porated in the draft sub-clause (c), with minor drafting changes made for the sake of precision.

Rule 4 This does not need any detailed comments.

4.88 Rate 5 The changes made are all of a drafting nature, and do not affect the substance of the existing law and practice.

Para a ).--The existing Schedule, Rule 6, says that the balance disclosed in the accounts is to be adjusted so as to exclude from it any expenditure "other than expendi- ture that may ............. .. under section 10 .... .. be allowed for in computing the proﬁts etc. of a business". It is only expenditure that is excluded; deduction for depreciation is not, it seems, to be questioned, and must be allowed as entered in the accounts'. Para (a) is intended to make this clear.

I .

(It does not appear to be necessary to make any simi- lar speciﬁc provision for deductions in the nature oﬁ loss on resale of assets etc., since disputes regarding the quantum of such deductions are not likely to arise frequently).

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Income Tax Act 1922