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.
54Judges 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.
57Second 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 .
58LIST 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.
64though 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. .
4It 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-
5tion 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
(c) (penalty for concealment of income etc.).
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).
66share-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-
67(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).
68The 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.
72LIST 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);
73(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. § =-
76Existing 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.  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. . .
1Interpretation . . .
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-
80Subject 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.  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.  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.  Sec. 23A(1) part.
119.  New
120.  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.  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).
82Clause Subject matter Existing section C H A P T E R XIII INCOME-TAX AUTHORP1 IES.
A ppoinlmcnt and Ctmtrol
127.  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..  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.  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.  » . . Sec. 23(1), (2) and (3) '
148. Best judgment assessment . . . . . . Sec. 23(4) part
149.  _ 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.  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.
1'¢........-..;.. .., . ..._._ . .. , 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.  Sec. r8A(2) &_ (3)
221.  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.  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.  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 .
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 . . . . .  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. . . . . .

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 . . .
5Exclusions 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:.(;).
"-
88Clause Subject matter Existing section Other Provision:
300. Account of Recognised Provident Funds - - '. Sec. 58 I V
301.  - . 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.  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.  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';
89Clause 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 91Clause' 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]; .
 [Sect1on 5 er.._
(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 .
93Clauez 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 99Clauses 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.
 [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;
102Clauses 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.  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';
6(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.