building ) (xii)! 108 Clause 11 ' 1l3c:l;Yo?1!1I';;"I:: (19) any daily allowance received by any person by hm ofPar"a_ reason of his membership of Parliament or of any State me," and Legislature or of any Committee thereof;
LCSM3' (20) any payment made, whether in cash or in kind, [M(,',)(x;x)] by the Central Government or any State Government in Gallantry pursuance of gallantry awards instituted or approved by awards- the Central Government;
Ef;;*,';°"'§i§Z§,. (21) any amount received by the Ruler of an Indian E8514 (3) (x) State as privy purse under article 291 of the Constitu- 3 tion;
Local autho- I (22) (i) income of a local authority chargeable under 'iS'i°5- the head "Interest on securities", "Income from house Spro- ga'r;*](3) ('")' perty", "Capital gains" or "Income from other source '; [s. 4 (3) (iii) (ii) income from a trade- or business carried on 4 by a Part] local authority which accrues or arises from the supply of a commodity or service within its own Jurisdictional area;
Scientiﬁc Re. _(23) any income of a scientiﬁc research assbciation for search Asso- the time being approved for the purposes of section 35(1) f§3"'Z")-(Kim (ii) [10 (2)_(xiii)] which is applied solely to the purposes of '4 3 that association; 1 Educational (24) any income of a University or other educafional {1'\'§':i"'°"5- institution, existing solely for educational purpose, and [See item ,2 not for purposes of proﬁt; . oi Notiﬁca-
tion No.878F I -1 éartiggme ax) . "
2,-3-22] (25) any income chargeable under the head Initerest certain mm- on securities", "Income fro house property" and! "In- mes of Trade come from other sources" or a registered trade union U'"°"S- . within the meaning of the Indian Trade Unions Act,§1926, [S'4(3)(""")l formed primarily for the purpose of regulating the? rela- '6 °f'9"'6 tions between workmen and employers or between Work- men and workmen;
I come I, (26) (i) interest on securities which are held by, or pfovidcnt ° are the property of, any provident fund to which ' the and superan- Provident Funds Act, 1925,' applies, and any capital E ains nuation funds of the fund arising from the sale, exchange or trans'er of 5- 4(3)(i'')] such securities;
19 of 192 5 [s. 4(3)(ix)] (ii) any income received by trustees on behalf of a recognised provident fund; ' [New] ' (iii) income_of an approved superannuation fund, to the extent provided in section 309 [s. 58R, main para]; (27) any income. of a member of a Scheduled ribe, .Sl.°r'i',')'(':1s"l°d as deﬁned in clause (25) of article 366 of the Constit, tion, [5, 4(3')(xx;)] residing in any area speciﬁed in Part A or Part B of the table appended to paragraphl20 of the Sixth Sched le to the Constitution, or in,the Uni n Territories of Manip and Tripura, provided .... su member is not in th ser- vice of Government. ' I 109 Clause 12 (1) Subject to the provisions of sections 63 to 66, [16 ?°"i°" f *9- (1) (c)], the following income shall not be included in the '''°""' '°"' total income of the previous year of the person in receipt E;-°p°,:,?i'g};'§:,(: of the income-- or charitable;
~ purposes an
(i) (a) so much of the income derived from property l';'g'if')":'s°0;'fd';: held under trust .......... ., wholly for charitable or mablc insti_ religious purposes as is applied or accumulated tution. for application to such .......... .. purposes in India; [s. _4 (3) (i), and mun para]
(b) in the case of property so held in part only for such purposes, so much of the income derived from the property as is applied or ﬁnally set apart for application to such purposes in India:
Provided that so much of any income referred to in [s.4_(3) (i). sub-clause (a) or (b) of this clause as is applied to purposes '}"'°"'.5° ff'): other than charitable or religious purposes as aforesaid, or :§f1"'"§mv'i';f, ceases to be accumulated or set apart for application there- (")1 to, ............. ..shall be deemed to be the income of such per- I son of the previous year in which it is so applied or ceases to be so accumulated or set apart;
(ii) (a) income from property held under trust....._ ..... .. [:. 4(3) (i), created on or after the 1st day of April, 1952, P'.°'"'° (3) for charitable purposes which tend to promote (.-- international welfare in which India is interest- § ed, applied to such purposes outside India, and for charitable or religious purposes created be- "i5° "(W fore the 1st day of April, 1952, applied to such purposes outside India, '
(b) income from property held under trust ................ .. R04 (3) (1) if the Central Board of Revenue by general or special order directs in either case that it shall not be included in i the total income of the person in receipt of such income. ' Explanation.----In this sub-section, "property" does not ' include business. ' _ (2) Subject to the provisions of sections 63 to 66 [16(1) 54 (3) 53).
(c)], any income derived from businqst»: carried on by or on '°"' ( )' behalf of a'trust_ ﬁor charittﬂﬂe or rblhgious purposes shall 1 not be included in the total income of the previous yearpof ' the trustees, if the conditions speciﬁed in sub-section (4) are satisfied.
(3) Any income derived from business carried. on by 4 (3) (i) or on behalf of a religious or charitable institutionshall not . °" (b): be included in the total inc e of 3 previous year of the "M1 tn:l:1tﬁl.t&On, if the conditionsyslpeciﬁ . elin sub-section (4) are 5 sa is e . .i ' E 4 E 110 Clauses 12-13 [s. 4 (3) (i), (4) The provisions of sub-section (2) or sub-section (3) P'°V- (5): shall a l onl i the ollowin conditions are satisfied- pm] PP 21 y 9
(a) the income is applied Wholly for the purposes of the trust or institution, as the case may be; and
(b) either the business is carried on in the course of the actual carrying out of a primary purpose of the trust or institution, or the Work in connection with the business is mainly carried on by bene- ﬁciaries of the trust or institution.
4(3) (ii)] (5) Any income of a trust ﬁor charitable or religious purposes or a religious or charitable institution, derived from voluntary contributions and applicablesolely to charitable or religious purposes shall not be included in the total income of a previous year of the trustees or the insti- tution, as the case may be. .
[5, 4(3), last (6) Nothing contained in this section shall operate to para. part] exempt from the provisions of this Act that part of the income from property held under a trust ............. ..for pri-
vate religious purposes, which does not enure for the bene- fit of the public.
[s. 4(3). last E:r'planation------In this section,-
Pam pm] (a) "charitaﬁole purpose" includes relief of the poor, education, medical relief and 'advancement of any other object of general public utility;
[New] (b) "trust" includes any other legal obligation.
[Cf. s. 4(3) '
(i), main para.
5- 4 (3) (i), §L'°Y.-) (3) (0 (1) Where any business, profession or vocation _on s_ (;'(3;')' last which income-tax was at any time charged under the pro-
para] visions of the Indian Income-tax Act, 1918, is discontinued, section ,3, then, unless the provisions of sub-section (2) have been Business as- rendered applicable by virtue of there having been a sac- Sesscd under cession, the income, .......... .. of the period from the date AIC':,°':';'I°é of commencement of the previous year in which the busi-
[s, 25(3), ness was discontinued to the date of ................ .. disconti-
part] nuance, shall not be_included in the total income of the 7 Of 1913 person who was carrying on the business, profession or voca- tion. ' gm] 25(4)» (2) Where the person who was on the 1st day of April, 1939, carrying on any business, profession or vocationzon which inoome-tax was at any time charged under the pro- .V1SiOnS of the Indian Income-tax Act, 1918, is succeeded in such capacity by another person, the change not merely being a change in the constitution of a firm, the income ........ ..of such business, profession or vocation of the period from the date of commencement of the previous year in which the su-ccession took place to the date of ......... succession shall not be includedtin the total income of the first mentioned person. a ' 7of 1918 111 Clauses 13-16 (3) The provisions of sub-sections (1) and (2) shall not E} . '-'5%)] apply to a business, profession or vocation on which in- '°'"'° ( )' come-tax was at any time charged in the hands of a com- pany under the Indian Income-tax Act, 1886, or on which 2 "I336 income-tax would have been charged in the hands of a company for the assessment year ending ' n the 31st day of March, 1918, if the company, having een in existence in that year, had also been in existence in the year ending on the 31st day of March, 1917.
CHAPTER IV COMPUTATION OF TOTAL INCOME Heads of income Save as otherwise provided by this Act, all income ﬁfgnof ﬁg; shall, for the purposes of charge of income-tax and co_m- cmm, putation of total income, be 'classiﬁed under the following [s. 6] heads of income-
A--Sa1aries.
B----Interest on securities.
C----Income from house property.
D---Proﬁts and gains of business, profession or voca- tion.
E--Capita1 gains.
F--Income from other sources.
A--Salaries Section I 5 The following income shall be chargeable to income- Salaries. tax under the head "Sa1aries"---- [ ( ) 3- 7 I 2
(a) any salary .......... ..due from an employer or former main para. employer to an assessee in the previous year, whe- Part] ther paid or not;
(b) any salary paid or allowed to him in the previous year by or on behalf of the employer or former employer though not' due or before it became due to him; _
(c) any arrears of sala paid to him in the previous year by or on behgf of the employer or former ~ employer, if not charged to income-tax for any . earlier previous year. Section '16 The income chargeable under the 'head "Salaries" shall be clomputed after making the following deductions, name y---
(i) any amount not exceeding ﬁve hundred rupees, expended by the assessee cm the purchase of books l and other publicatitns necdssary for the purpose ; of his duties; E A -
' . 3 d , 112 Clauses 16-17 [s. 7 (2) (ii)] (ii) in respect of any allowance in the nature of an entertainment allowance speciﬁcally granted to the assessee by his employer-
(a) in the case of an assessee who is in receipt of a salary from the Government, a sum equal to one-ﬁfth of his salary (exclusive of any'spe- cial allowance, beneﬁt or. other perquisites) or ﬁve thousand rupees, whichever is less; and
(b) in the case of any other assessee who is in receipt of such entertainment allowance and was in receipt of such entertainment allowance regularly from his present employer before the 1st day of April, 1955, the amount of such entertainment allowance regularly received by the assessee from his present employer in any previous year ending before the 1st- da of April, 1955, or a sum equal to one-ﬁfth or his salary (exclusive of any special allowance, beneﬁt or other perquisites) or seven thousand ﬁve hundred rupees, whichever is the least;.....
1r::5,Z;(,:) (Ha) (iii) .......... ..where the assessee is not in receipt of a conveyance allowance whether as such or as paift of [s_ 7 (2) (;;a) his salary, and owns a conveyance which is {used main para] for the purposes of his employment, such sum as the Income-tax Oﬂicer may estimate in respect of such use as representing the expenditure incurred by him in its maintenance and as representing its normal wear and tear;
[s. 7(2) (iii)] (iv) any amount actually expended by the assessee,._not being an amount expended on the purchase of books or other publications, or on,entertainmen'1: or on the maintenance of a conveyance, which, by? the conditions of his service, he is required to s nd out of his remuneration wholly ............. ..and e lu- sively in the performance of his duties. _ ;
Section 17- For the purposes of sections 15 and 16 [preceding pec- Im" Pma' tions re: salary] and of this section,------- . E tion. ' "Employer" (1) "employer" means an em loyer, who is the Central [-3- 7(I)aPa"l Government, a State overnment, any forfign Government, a local authority, a company, any;..... .......... ..public body or' association, or any private employer; ' _' "Sa1ary"- (2) "salary" includes- [S- 7(I)»part] (i) any salary or wages;
(ii) any annuity or pension;
(iii) any gratuity;_
(iv) any fees, commissi l perquisites or proﬁt' in , lieu of or in iadditio to any salary or wag ;
i 113 Clause 17
(v) advances by way of loan or otherwiseof the amounts enumerated in sub-clauses (i), (ii), (iii) and (iv) above;
(vi) the annual accretion to the balance at the credit [New] of an employee participating in a recognised pro- vident fund, to the extent to which it is charge- able to tax under section 294' [58E];
(vii) the aggregate of all sums that are comprised in [New] the transferred balance, as referred to in section. 299(2) [58J (2)] of an empio ee participating in a recognised provident fun , to the extent to which it is chargeable to tax under section 299(3) [58-T (3)1;
"Perquisite"
(3) "perquisite" includes---- E'-:pln'l]7(I)
(i) the value of rent free accommodation .......... ..pro- [mam (i) vided to the assessee by his employer; Daft]
(ii) the value of any concessi9n'in the matter of rent 6) respecting any accommodation provided to the assessee by his employer;
(iii) the value of any beneﬁt or amenity granted or provided ............. ..ﬁree of cost or at concessional rate in any of the following cases :-- _ '
(a) by a company to an employee who is a direc- [Wm (ii) tor thereof .......... .. pap]
(b) by a company to an employee who is a share- [Wm (ii)- holder concerned in the management of the 5:" 8 2('§E')! company and is the beneficial owner of shares, (ﬁgi ' not being shares entitled to a fixed rate of ? dividend whether with or without a right to ' participate in proﬁts, carrying twenty per cent or more of the voting power;
(c) by any employer,(including a company) to an [mm » (iﬁn employee to whom th provlsions of para- f graphs (a). and (b) of is sub-clause do not apply and whbse incdme under the head 2 "Salaries" exclusive of the value of all bene- g ﬁts or amenities not 'provided by way of ; ' monetary payment exceeds eighteen thousand 9 rupees; '
(iv)\any_ sum paid by the emplqyer in respect of any (iv)] obligation which but for such payment would ' have been payable by the assessee; and
(v) any sum payable by the employer, whether directly or through 'a fund other than a recognised provident fund or an appnoved superannuation fund to effect an assurance on the life of the assessee or to effec a conti-'got for an annuity on the life of the assa e; * 5 l 114 Clauses 17-20 'l'i1;fl°ﬁ" (4) "proﬁts in lieu of salary" includes-- \ salary" _ [s. 7 (I), (i) the amount of any compensation due to or received Explm 2 by an assessee from his employer or former em-
'"31" Pm] ployer at or in connection with, the termination of his employment, whether solely as compensation for loss of employment, or for any other consideration;
(ii) the amount of any contributions to an approved superannuation, fund (including interest on such contributions) paid to an employee, to the extent to which such amount is deemed to be the income of the employee under section 312 [58-5(1)];
(iii) without prejudice to the provisions of sub-clause (ii) of this clause, any payment due to or received by an assessee from an employer or former employer or from a provident or other fund, (not being an approved superannuation fund), to the extent to which it does not consist of contributions by the assessee or interest on such contributions.
B. Interest on securities Section 18.. The following amounts received by an assessee. in the 1m°r°,8t 0" previous year shall be chargeable to income-tax under the securities. :4 - - ,- n __ {L8, m Pam] head Interest on securities .......... ..
(i) interest ............. ..on any security of the Central Government;
(ii) interest on any security of a State Government;
(iii) interest on debentures or other securitiespfor mo- ney issued by or on behalf of a local authority or a company.
section ,9_ Subject to the provisions of section 21 [section regarding-
Deductions. amounts not deductible], the income chargeable undelr the is 8 m m_ head "Interest on securities" shall be computed after mak-
,,i',,,,, earfcr ing the following deductions-
Part] (i) any reasonable sum expended by the assessee for the purpose of realising such interest; ............. ..
(ii) any interest payable on moneys borrowed for the purpose of investment in the securities by the as-
sessee.
Banking (1) In the case of a banking company---- , C°mpa"V' (i) the sum to be regarded as a sum reasonabl ex- [s. 8, Expln. pended for the purpose referred to in clause i) of
(a) Part] section 19 [section regarding deductions] shal be an amount bearing to the aggregate of its expen- ses as are admissible under the provisions of sec- tions 30, 31, 36 and 37, other than clauses (3), (5) and (6) of section 36, [sub-section (2) of secti n 10 (other than clauses 4=(iii), (vi), (via), (vib), vii),
(viii), (xi), (xii), (xii): and (xiv) thereof)]§ the 3
(ii) 115 Clauses 20-21 same proportion as the gross recei ts from interest on securities (inclusive of tax de ucted at source) chargeable to income-tax under section 18 [main section re: Interest on Securities] bear to the gross receipts of the company from all sources which are included in the proﬁt and loss account of the company ; ............. ..
....... ..the amount to be regarded as interest paya- [s. 8. Expln.
ble on moneys borrowed for the purpose referred (b) Part] to in clause (ii) of section 19 [section regarding deductions] shall be an amount which bears to the amount of interest payable on all moneys borrow- ed by the company the same proportion as the gross receipts from interest on securities (inclu- sive of tax deducted at source) chargeable to in- come-tax under section 18 [main Section for in- terest] bear to the gross receipts from all sources which are included in the proﬁt and loss account of the company;
(2) The expenses deducted under clauses (i) and (ii) of sub-section (1) shall not again form 3pa'rt of the,deduc-
tions admissible under sections 30 to of section 10] for the purposes of the company under the head 7 [sub-section (2) computing the income of "Proﬁts and gains of business, profession or vocation".
Explanation :----For the purposes of this section, [s. 8, Expln.
(a) and (b) last lines] "rno- [s. 8, Expln.
neys borrowed" includes moneys received by way of de-(b)5m1in=] posits.
Notwithstanding anything contained and 20 pany] , computing the income chargeable under the head on securities"--
(i)
(ii) I (iii) [sections regarding the following amounts shall not be deducted in interest chargeable under this Act which is paya-
in sections 19 S°°"°n 9' Amounts not Part] ble outside India (not. being interest on a loan .
issued for public subscription before the 1st day of April, 1938) on which tax has not been paid or deducted under section 202 or 204 [section 18] and in respect of which there is_ no person in India who may be treated as an agent under section 173 [section 43] ; « su/rns expended by the assessee for the purpose of realising interest on securities on which no income- tax is payable under section 87 (i) or 87 (ii) [s. 8 provisos 2 and 3]; . ' interest payable on money borrowed for the pur-
pose of investment in securities, being securities, on the interest on w ' h no under section 87(1) oi 87(ii) irqome-tax is payable and 3]. \ section 8, provisos 2 deductions and banking com- deductiblm "Interest l',- 3» '3' PN-
viso, lat ler Section 22.
Income from house pro-
perty.
s. 9 (1) open-
mg para] Section 23.
Annual value s. 9 (2), 1st para] [New] [s. 9'(2), Ist proviso] [s. 9. (2), 2nd proviso, ex-
cept last line] 116 Clauses 22-23 C. Income from: house property The .. . . . . . . annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any busi- ness, profession or vocation carried on by him the proﬁts of which are assessable to income-tax, shall be chargeable to income-tax under the head "Income from house property".
(1) For the purposes of section 22 [chargeability of income from house property], the annual value of any pro- perty shall be deemed to be the sum for which'the pro- perty might reasonably be expected to let from year to year.
(2) In determining the sum for which the property might reasonably be expected to let from year to year, due regard may be had, where the property is let to a tenant, to the following factors, besides others, namely-
(i) the annual rent agreed to be paid by the tenant;
(ii) the other obligations, if any, undertaken by the te- ' nant on behalf of the owner, including the y- ment of taxes due to the Government or a? ocal authority ; ~ the annual value of the property, if any, fixed by the local authority for the purposes of any tax on property levied by it; and , the rents of properties in the neighbourhood' simi-
larly situated and with similar advantages.
(3) . . . . . Where the property is in the occupation of the owner for the purposes of his own residence; the annual value of the property . . . . . . shall be the annual value of the property determined in the same manner as if the property had been let, reduced by the lower of the following---- *
(iii)
(iv)
(i) one half of such annual value, or
(ii) oneithcusand eight hundred rupees ;
but shall in no case exceed eleven per cent. of all i V ome of the assessee, other than the annual value of such pro- perty, liable to inclusion in his total income under this Act. i (4) . . . . . Where the property referred to in su sec- tion (3) consists of one residential house only and i can- not actually be occupied by the owner by reason the fact that owing to his employment, business, professibn or vocation carried on at any other place, he has to reside at that other place in a building not belonging to? him, ................ ..the annual value of such house shall-
(a) if the house was not gactually occupied by the owner durin .the wl$>1e of the previous ye , be taken to be l, or '~ ' l 1 17 Clauses 23-24
(b) if the house was actually occupied by the owner for a fraction of the previous year, be taken to be that fraction of the annual value determined un- der sub-section (3);
provided the following conditions are in either case fulﬁl- led:--
(i) the house is not actually let, and
(ii) no other beneﬁt therefrom is derived by the owner.
(1) Income chargeable under the head "Income from _ house property" shall, subject to the provisions of sub- ]S):'c{'°"_ 24 section (2), be computed after making the following deduc- "°"°"" tions, namely-
(i) ................ ..where the property is in the occupation of a tenant, ...................... .. one half of the total [3- 9 (2): 3"! amount of the taxes levied by any local authority "'°" in respect of the property ....... ....... ..
(ii) in respect of repairs,--- [5 gm (0
(a) where the property is in the occupation of the part] ' ' owner, ......................... ..a sum equal to one-sixth of the annual value ;
(b) where the property is let to a tenant and the V . owner has undertaken to bear the cost of re- ["3]3(') 0)' pairs, a sum equal to one-sixth of the reduced . annual value;
(iii) where the property is in the occupation of a te- , ,, nant who has undertaken to bear the cost of re- §l'a]§"(') 0') pairs--- "Paul
(a) the diﬁerence between the reduced annual value and the amount of rent payable for a year by the tenant, or
(b) one-sixth of such value, whichever is less;
/
(iv) the amount of any_- annual premium paid to insure [" 9K')(i")] the property against I'lSk of damage or destruc- tion;
(v) where the 'property is subject to -a mortgage or other $531!') (W) capital charge, the amount of any interest on ; such mortgage or charge; 3 _
(vi) where the property is subject 1: an annual charge, r[,:,',?]:(') W)' not being a capital charge, I e amount of such i charge ; ,. _
(vii) where the property is subject to a ground rent, §,;r?](') (W) the amount of such ground rent ;
(viii) where the property has been acquired, construct- [S- 9(1) (iv)- ed, repaired, renewed r reco_ s ructed with bor- 93"]; rowed capital, the arn;unt_o£3 y interest paya- ' ble on such capital ; ' ' 118 Clauses 24-21 It 9 (1) M] (ix) any sums paid on account of land revenue in res- pect of the property;
9-90) (''01 (x) amounts spent to_ collect the rents from the pro- perty, not exceeding six per cent. of the reduced annual value of the property; I [s. 9 (x)(vii)] (xi) where the property is let and was vacant during a part of the year, that part of the reduced annual value which is proportionate to the period during which the property is wholly unoccupied or, where the property is let out in parts, that portion of the reduced annual value appropriate to any vacant part, which is proportionate to the period during which such part is wholly unoccupied;
t[:'3°";}f*':§;i_ (xii) such amount, in respect of rent from property l'et ﬁcation No. to a tenant which the assessee cannot realise, as 878F dated may be prescribed.
?tlei'?1-13%)?' Escplanation.--In this sub-section, "reduced annual value" means the annual value as reduced by one-half of the total amount of taxes levied by any local authority in respect of the property.
(2) The totaliamount deductible under sub-section (1) [S 9 (2) 2nd in respect of property of the nature referred to in section p,'m,iso'1ast 23(4) [sub_--section in section deﬁning annual value, relat- um] ing to residential house not occupied] shall not exceed the annual value of the property as determined under section 23 [section for annual value]. ' Section 25. Notwithstanding anything contained in section 24 Amourats not ':[section regarding deductions], the following amounts d°d"°"b'°- shall not be deducted in computing the income chargeable Er-ogigg (iv): under the head "Income from house property"-
any annual charge or interest .......... ..chargeable under this Act which is payable outside India (not being interest on a loan issued for public subscription before the 1st day of April, 1938), ...................... ..on which tax has not been paid or ................... ..deducted under section 202 or 204 [18] and in respect of which there is no person in India who may be treated as an agent under' section 173 [43].
Section 26. Where property consisting of buildings or buildings Propcrw and lands appurtenant therwo is owned by two or more gxgfvien Y persons and their respective shares are deﬁnite and ;ascer- ' tainable, such persons shall not in respect of such property I" 9 (3)1 be assessed as an association of persons, but the share of each such person in the income from the property as com- puted in accordance with sections 22 to 25 [section re: com-
putation] shall be included in his total income.
scct.-0,. ,7, For the purposes of sections 22 to 26 [sections regard- I_n:crprc:a- ing income from house property] (4) (3)1 (i) the holder of: an im rtible estate shall be deemed to be the individua ;owner of all the properties comprised in the estate;
5i 119 Clauses 27-28
(ii) a member of a co--operative society to whom a [8-9(4)(b)] building or part thereof built by the society is allotted or leased under --a house building scheme of the society shall be deemed to be the owner of that building or part thereof,' ' (n1) .......... .."annua1 charge" means a charge to secure [s- 9 (I).
an annual liability, but does not include any tax in E"P"!: "°'°W, respect of property or income from property impos- ' ed by a local authority, or a State Government or the Central Government ; l
(iv) "capital charge" means a charge to secure the dis-. [New] charge of a liability of a capital nature;
(v) taxes levied by a local authority in respect of any [S- 9 (4) (0)1 property shall be deemed to include service taxes levied by the local authority in respect of the property.
D--Proﬁts and gains of business, profession or vocation The following income shall be chargeable to income- S°°'t=,li°n 23- taa: under the head "Proﬁts and gains of business, profes--- P'9m" and . . gal of sion or vocat1on"-- busmas'
(i) the proﬁts and gains of any business, profession or ggffgzn 0' vocation which was carried on by the assessee at ' any time during the previous year; 0)'
(ii) any compensation or other payment due to or re-- ls' "° (54)?
. opening line celved by:-' and last para, earlict half]
(a) a managing agent of an Indian company, at or [s.1o(sA)(a)] in connection with the termination or modiﬁca- tion of his managing agency agreement with the company;
(b) a manager of an Indian company at or in con- [s_,o(5A)(1,)1 nection with the termination of his office or modiﬁcation of the terms and conditions relat-
) ing thereto; 11 d (c any person, by whatever name ca e , managing . C K the whole or substantially the Whole affairs of [8 w(5A)( )1 'any other company in India, at or in connection with the termination of his oﬁice or the modi- ﬁcation of the terms' and conditions relating thereto;
(d) any person, by whatever name called, hold- [,_,o(5A)(d)} ' ing an agency in India for any part of the activities relating to the business of any other person, at or in connection with the termination of the agency or the modiﬁcation of the terms and conditions relating thereto ;
(iii) income derived by a trade, professional or similar [s. 10(6)] association from specific; service ferformed for its members for remuneration degipitely related to those services ............. ...... .. : -
120Clauses 28-30 [New] Explanation 1.-----The proﬁts and gains of business shall include the proﬁts and gains of managing agency.
[s. 24(1), Ex-- Explanation 2.---Where .......... ..speculative transactions -
P1n- 1] carried on by an assessee are of such a nature as to con- stitute a business, the business (hereinafter referred to as "speculation business") shall be deemed to be distinct and separate from any other business.
Scctipr} 29- The income of an assessee referred to in section 28 P'°'1'.'5"g}5 [section 10(1), part embodied in main section for income 't'1{'Ig:,3" °' from business] shall be computed in accordance with the provisions of the following sections-
Section 30--Rent, repairs and insurance for buildings. Section 31--Repairs and insurance of machinery, plant and furniture.
Section 32----Depreciation.
Section 33--Development rebate.-
Section 34--Conditions for depreciation allowance and development rebate.
Section 35--Expenditure on scientiﬁc research.
Section 36--Other deductions-
Insurance of stocks or stores.
Bonus or commission to employees. Interest.
Contributions to certain funds for employees' beneﬁt.
Animals.
Bad debts.
Section 37--General. _ Section 38----Bui1din etc. partly used for business etc. or not exc usively so used. .
Section 39--Managing agency.
Section 40--Amounts not deductible.
Section 41--Proﬁts chargeable to tax. . Section 42-Interpretation. » Section 43---Residences of employees.
Section 30 In respect of rent, repairs and insurance for buildings, Rent, repairs the frollowing deductions shabl be allowed- and insu-
rax_1ce.for (a) in respect of any premises used_ for the purposes of b"'1d"'g"' the business, profession or vocation,-
[s._1o(2)(i), (i) where the, premises are occupied by the assessee without the as a tena:,"'_. , ' , p 4 promo] (a) the rent}? paid fa} gsuch premises; and E E , E 121 Clauses 30-32 -
(b) if he has undertaken to bear the cost of.._ ..... .. [s.1o(2)(ii), repairs to the permises, the amount paid on without the account of such repairs; P'°"3°l
(ii) where the premises, being a building, are occu- [s.10(2)(v), pied by the assessee otherwise than as a tenant, part, for the amount paid by him on account of current b""d'"3'5] repairs to the premises;
(b) any sums paid on account of land revenue, local [s.1o(2)(ix), rates or municipal taxes; ............. .. Caflicr Part]
(c) ............. .. the amount of any premium paid in res- [s.x¢(2)(iv), pect of insurance agairst risk of damage or destruc- £"f1'a.f°' tion of the premises, being a building ................ .. " '"91 In respect of machinery, plant or furniture used for Section 3i. the purposes of the business, profession or vocation the fol- .R°P""= and lowing deductions shall be allowed-- plant and.
urrﬁture.
(i) the amount paid on account of current repairs [3-"°(2)(")» thereto ' P""f9' ' macliuncry ' etc.
(ii) .......... .. _the amount 0 any_premium paid in res- [5, no (Q)(iv), pect of Insurance agamst ms]! of damage or des- part; for ma- truction thereof. °h"*=FY etc-] (1) In respect of depreciation of buildings, machinery, Section 32. plant or furniture owned by the assessee and used for the Depfreciation. purposes of the business, profession or" vacation, the fol- lowing deductions shall, subject to the provisions of sec-
tion 34 [section re: conditions' for depreciation], be allow- ed-- ' '(i) in the case of ships other than ships ordinarily s.1Q(2)(vi), plying on inland waters, such percentage (for tstipam, each completed month of user) on the original Pm" cost thereof to the assessee as may in any case or class of cases be prescribed;
(ii) in the case of building', machinery, plant or ;furni- §.1?(2)(vi), ture, other than shipsé covered by clause (i), such rst~Pa?a'. percentage (for each. completed month of user) P' on the written down value therieof as may in any 1 case or class of cases be prescribed;
I ,
(iii) in the case of buildirfs newgl erected or machi- [s.1 (2)(via), nery or plant being n w whi has been installed, P t after the 31st day of March, 1948, a further sum... ' equal to the amount deductible under clause (i) or
(ii), allowable for five consecutive previous years, including the previous year of erection or installa- tion.
Explanation.--F-or the purposes of clause (iii), any [s.xp(2)(via), extra deduction for double 0 multi :3 shift working of the machinery or plant adm' 'ble ,' er clause (ii) shall .1 be ignored.
122Clauses 32-33 s.io(2)(vii), (iv) in the case of any ............. ..building, machinery or 'Patel plant which is sold or discarded or demolished or destroyed in the previous year, the amount by which the moneys received in respect of such [s.1o(2) building, machinery, or plant, together with the (Vii). Ist amount of scrap value, if any, fall short of the writ- P'°"'-] ten down value thereof, provided such deﬁciency is actually written of in the books of the assessee.
Explanation.--For the purposes of this clause, the "moneys received" in respect of any building, machinery or plant shall include----
[s.1o(2)(vii), (a) any insurance, salvage or compensation moneys 3rd P'°"i'°» received in respect thereof;
modiﬁed] [New] (b) where the building, machinery or plant is sold, the price for which it is sold, whether such price has been actually realised or not.
[s.10(2)(vi), (2) Where, in the assessment of the assessee, (or, if the Pm"-2 (b): assessee is a registered ﬁrm or an unregistered ﬁrm assess- pm] ed as a registered ﬁrm, in the assessment of its partners) full effect cannot be given to any ....... .. allowance under clause (i) or (ii) of sub-section (1) [10(2)(vi), main para] in any previous year owing to there being no proﬁts or gains chargeable for that previous year, or owing to the proﬁts or gains chargeable being less than the allowance, then, sub- ject to the provisions of sections 73(3) and 74(3) [Sub-sec-
tion' (3) of main Section rezset off in business], the allow-
ance or part of the allowance to which eﬁect has not been given as the case may he, shall be added to the amount of the allowance for de reciation for the following previous year and deemed to e part of that allowance, or if 'athere is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for suc- ceeding previous years ................ ..
Section 33- In respect of a new ship acquired or new machinery D°V°1°Pm°"' or plant installed after the 31st day of March 1954 ' hich '°ba'°' - is wholl used for th ' ur oses of the business on [s.r_o(2)(v1b) , Y , 9 P P mam para] by the assessee, a sum by way of development rebate.
....... ..equivalent to,-
(i) in the case of a ship acquired after the 31st y of December, 1957, forty per cent. of the-actua cost, of the ship to the assessee, and -- at
(ii) in the case of a ship acquired before the 1st y of January, 1958, and in the case of any mac ery or plant, twenty-ﬁve per cent. of the actual cost of the ship or machinery or plant to the assessee shall, subject to the revisions of section 34 [sec- tion re 2 conditions or depreciation], be allow- ed as a deduction in respect of the previouszyear in which the ship was" acquired' or the mach ery on plant was iristalledgor, if the ship, machin or E 123 Clause 33 plant is first put to use in the immediately suc- ceeding previous year, then. in respect of that pre- vious year.
Explanation 1.--In the case of a ship acquired or ma- _chinery or plant installed after the 31st day of December, 1557, where the total income of the assessee assessable for the assessment year relevant to the previous year in which the ship was acquired or the machinery or plant installed (the total income for this purpose being computed without making any allowance under this section) is nil or is less than the full amount of the development rebate calculated at the rate applicable thereto under this section,---
(i) the sum to be allowed by way of, development re- bate for that assessment year under this section shall be only such amount as sufficient to reduce the said total income to nil ; and
(ii) the amount of the development rebate, to the ex- tent to which it has not been allowed as aforesaid, shall be carried forward to the following assess- ment year, and the development rebate to be al- lowed for the following assessment year shall,be such amount as is sufﬁcient to reduce the total income of the assessee assessable for that assess- ment year, computed in the manner aforesaid, to nil, and the balance of the development rebate, if any, still outstanding shall be carried forward to the following assessment year and so on, so however that no portion of the development re- bate shall be carried forward for more than eight assessment years immediately succeeding the as- sessment year for which the development rebate was first allowable.
Explanation 2.--Where for' any assessment year deve- lopment rebate is to be allowed in accordance with the pro- visions of Explanation 1, in respect of ships acquired or machinery or plant installed in more than one previous year, and the total income of the assessee assessable or the assessment year relevant to that previous year (t e total income for this purpose being computed without mak- ing any allowance under this section) is less than the aggre- gate of the amounts due to be allowed in respect of the assets aforesaid for that assessment year, the following pro- cedure shall be followed, namely :-- "
(i) the allowance under paragraph (ii) of Explanation 1 shall be made before any allowance under para-
graph (1) of that Explanation is made; and
(ii) where an allowance has to be made under para- graph (ii) of Explanation 1 in respect of amounts carried forward from more than one assessment year, the amount carried forw d from an earlier assessment year shall bd allow before any amount carried forward from later fsessrnent year.
9-1 Law Com. 58 § 2 3 V latter half] 124 scctiém 34 Clause 34 C " .
fa':-ndl(§,(:-zzia. (1) The deductions referred to in sub-section (1) of tion all0wan- section 32 .......... ..[s. 10(2)(v1) 10(2) (via), and (vii)] shall 03 and d°V¢' be allowed only if the prescribed particulars have been fur- ]r';1§')';'t:"' nished; and the deduction referred to in section 33 .......... .. I ' .. [s. 10(2)(vib)] shall be allowed only if the particulars pres- lesiovo (:3; cribed for the purpose of clauses (i) and (ii) of sub-section ,_ I022) (vib), (1) of section 32' [S. 10(2)(vi)]- have been furnished by the Prov.para(a)] assessee in respect of the ship or machinery or plant.
[New] H (2) For the purposes of section 32 [10(2)(vi), (via) and [see rule 8] (V")]-- =
(i) if the buildings, machinery,- plant or furniture have been used by the assessee for the purposes of his business, profession or vocation for more than a month, the deduction under section 32(1), clhuses
(i)_ (ii) and (iii), [10(2) (vi), (via)] shall be deter- mined proportionately with reference to the5com- plete months of user thereof by the assessee 2 Provided, however, that if the total period of user is less than one month, it shall be deemed to be one-com- plete month for computing the deduction propor- tionately.
Explanat'i0n.----In the case of a seasonal factory worked by the assessee during all the working seasons of the pre- vious year, the buildings, machinery, plant or furniture shall be deemed to have been used by the assessee throughout the period he was the owner thereof during the previous year.
[s. Io(2)(via), (ii) the deduction provided for by section 32(1), clause part] (iii) .......... ..[10(2)(via)] shall be allowed 'only in respect of a previous year relevant for the assess- ment year 1958-1959; ' [s. 10(2) (vi) (iii) the aggregate of all deductions in respect of depre-
proviso(c)] ciation made under section 32(1), [10(2) (vi), (via) H of 1922 and (vii)] or under the Indian Income-taxi Act. 1922, or under any Act repealed by that Act or , under the Indian Income-tax Act. 1886, shall, in 2 of 1886 no case, exceed the original cost to the asse$ee of the buildings, machinery, plant or furniture, as the case may be;
_[s.xo(4B). (iv) nothing in section 32(1)(i) or (ii) [1o(2)(vi)] or mscrtedbv 32(1)(111) [section 10(2)(v1a)] shall be deemed to the Finance Am X958] authorise the allowance for any previous y' at of any sum in respect of any building, mac pinery, plant or furniture sold, discarded, demolished or destroyed, in that year;
(3 )' (a) The deduction referred to in section 33 [S. 10(2) [§- I0(2)(Vib) (vib), main para.] shall not be allowed unless- l-rov. (b), an amount eqagi'{e.'ﬁg;;¢;;itg;;tiy;;';s;;£'.;;s;;t.";;i'the d ve1op- ment rebate to be a ually a lowed is debited to th proﬁt and loss account of t e rele previous year and c dited I 125 Clauses 34-35 to a reserve account to be utilised by the assessee during a period of ten years next following for the purposes of the business of the undertaking, except-
(i) for distribution by way of dividends or proﬁts; or
(ii) for remittance outside India as proﬁts or for the creation of any asset outside India.
E:cception.--The provisions of clause (a) shall not ap- [s- I0(2)(Vib) ply where the assessee is a company, being a licensee with-5:31;-ullglzilfl in the meaning of the Electricity (Supply) Act, 1948, 54 "I943 where the ship has been acquired or the machinery or 8plant .. has been installed before the 1st day of January, 195 .
(b) ....... .. If any ....... .. ship, machinery or plant is sold [an xo(2)(vib) or otherwise transferred by the assessee to any person other lP"°"--
than the Government" at any time before the expiry of ten as' mm] years from the end of the previous year in which it was ac-
quired or installed, any allowance made under section 33...
.... ..[s. 10(2) (vib), main para] in respect of that shi , machinery or plant shall be deemed to have been wrong y made for the purposes of this Act.
(1) In respect of expenditure on scientiﬁc research, the Se°ti°n 35 following deductions shall be allowed-- §§§3;§;;;-;_.°
(i) any expenditure (not being in the nature of capital ""°"°h __ expenditure) laid out or expended on scientiﬁc re- [5- '°('~')("")] search related to the business;
(ii) any sum paid to a scientiﬁc rtsearch association [s. 1o(2)(xiii) which has as its objects'the undertaking of scienti- Pm] ﬁc research related to the class of business carried on, and which is approved for the purposes of this clause by the prescribed authority;
(iii) any sum paid to a university, college or other in- [s. 1o(2)(xiii) stitution to be used for scientiﬁc research, research Part] ' in social science or statistical research related to the class of business carried on, bein a ............. .. university, college or institution which is for the time being approved for the purposes of this clause by the prescribed authority;
(iv) in respect of any expenditure of 'a capital nature on Er.s1o(}2)(xiv) ' scientiﬁc research related to the' business carried on t,p a. by the assessee, such deduction as may be admis- ea"'° Pm] sible under the provisions of subsection (2).
(2) For the purposes of clause (iv) of sub-section (1),-
(i) one--fifth of the capital expenditure incurred in any 3. 1o(2)(xiv) previous year shall be deducted for that previous' '5tP"a: year; and the balance 0 the e iture shall be m" {'""] deducted in equal insta nts 1' each of the fou immediately succeeding, revio ' ears. ' 126 Clause 35 '[15. xo(2)(xiv) _ E9cplanation.--Where any capital expenditure has been rst PY0V1S°] incurred before the commencement of the business, the ag-
gregate of the expenditure so incurred within three years immediately preceding the commencement of the business shall be deemed to have been incurred in the previous year in which the business is commenced;
[S- !0(2)(_xiv) (ii) notwithstanding anything contained in clause (i), ?':)d :;:;i':° where an asset representing .......... ..expenditure of hugs] g a capital nature ceases to be used in a previous year for scientiﬁc research related to the business and the value of the asset at the time of the cessation. together with the aggregate of deductions already allowed under clause (i), falls short of»the said 'expenditure, then-- A d'°(r"'ol'§"'("al)' (a) ................ .. there shall ............. .. be allowed (1 ~- P ' deduction for that previous year of an amount equal to such deﬁciency, and [s.1o(2)(;<iv), (b) no deductionshall be allowed under that clause g1)d(Sr°$:3,i_ for that previous year or for any subsequent pre-
ﬁcd] vious year; ...................... .. ,
(iii) if the asset mentioned in clause (ii) is sold, Without [S- I0(2)(§<iV), having been used for other purposes, in the ear of (1%? P'°""° cessation, the sale price shall be taken to _ e the value of the asset at the tirne of the cessation; and if the asset is sold, without having been used for other purposes, in a previous year subsequent to the year of cessation. and the sale price falls short of the value of the asset taken into account at the time of cessation, an amount equal to the deﬁciency shall be allowed as a deduction for the previous year in which the sale took place;
[8- I0(2)(XiV), (iv) where a deduction is allowed for any previous year '*'"d P"°"'(d)] under this section in respect of expenditure repre- sented wholly or partly by an asset, no deduction shall be allowed under section 32(1) clauses (i) (ii) and (iv) [10(2)(Vi) or (vii) i.e., section authorising depreciation allowance] for the same previous year in respect of that asset;
[s- I0(2)(3=iv), (V) where the asset is used in the business after it 2nd P'°'."5° ceases to be used for scientiﬁc research related to _ I(,:)r't]"a'1'°' that business, depreciation shall be admissible under section 32(1), clauses (i) (ii) and (iv), j;10(2)
(vi) and (vii) i.e., section authorising depreqiation allowance]. l ~ [s. xo(2)(3:iv), (3) If any question arises under this section as to '-'"d P'°""'° whether, and if so, to what extent, any activity constitutes
(g)] or constituted or any asset is or was being used for scientiﬁc research, the Central Board of Revenue shall refer the question to the prescribed authority, whose decision shall be ﬁnal. i ' [s.1o(2)(g:iv), (4) Theiprovisions of sub-section (2) of secti 32 end Pr0V1s° [Section re : depreci lion] s _'l1 apply in relation to edu"- U) 93"] ' tions allowable under? clause iv) of sub-section (1) as; they 127 Clauses 35-36 apply in relation to deductions allowable in respect of dep- reciation. ' The deductions provided for in the following clauses section 36 shall also be allowed in respect of the matters dealt with other deduo therein, in computing the income referred to in section 28 tions. [mam section for income from business]----- Insurance of (1) the amount of any premium paid in respect of in-- stocks or surance against risk of damage or destruction of ............. .. st0r¢s- _ stocks or stores used for the purposes of the business, pro- [5' '°(')("')' ;.
. . r k fession or vocation ............. .., . pa" °"t°° -
etc.] (2) any sum paid to an employee as bonus or commis- Bonus or co.- sion for services rendered, where such sum would not have mmission to been payable to him as proﬁts or dividend if it had not been ¢mP1°Y°°5- paid as bonus or commission, in either of the following [S- _I°(2)(x), cases, namely-- mam P"'"']
(i) ................ ..where the amount of the bonus or com- [s. 1o(2)(x), mission is .......... .. reasonable .......... .. with refer- Proviso] ence to-
(a) the pay of the employee and the conditions of his service;
(b) the proﬁts of the business, profession or vocation for the previous year in question, and
(c) the general practice in .... .., similar businesses, professions or vocations; or
(ii) where such payment is in pursuance of the award [Now] of an industrial or other tribunal constituted under any law for the settlement of industrial disputes;
(3) ...... ....... .. the amount of the interest paid in res- '"'°'°" pect of capital borrowed for the purposes of the business, [5-'.°('*')('")» profession or vocation. "Hm Pm] Explanation.----Recurring subscriptions paid periodically [s. 1o(2)(iii), by shareholders or subscribers in such Mutual Beneﬁt So-- E"Pl"-1 cieties which fulfil such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause.
(4) (a) any sum paid by the assessee as an employer by Contributions .way of contribution towards a recognised provident fund '° °°'"*i" f"' or an approved superannuation fund, to the extent provided f:)dy'c§"{,:,',':§; in section 293 [New Section in chapter on Recognised Pro-- [New] vident Funds re : allowing deduction for employer's contri-
bution] or section 310 [58R, main para, part re 2 deduction for employer's contribution] as the case may be:
(b) any sum. paid by the assessee as employer by way of contribution towards any other fund created by him for the exclusive beneﬁt of his employees under an irrevocable trust;
(5) in respect of animals which have been used for the 'a"Ii;'E:;'(vm)] purposes of the business, profession a' -'vocation otherwise ' r than as stock-in-trade and havj died or ?come permanently 128 Clauses 36-38 useless for such purposes, the difference between the origi- nal cost to the assessee of the animals and the amount, if any, realised in respect of the carcasses or animals; Bad deb'-S-i) (6) ....... .. debts, or parts thereof, that are established to ' have become bad debts in the previous year, provided-
(i) such debts or parts of debts-
(a) have been taken into account in computing the income of the assessee of that previous year or of an earlier previous year, or
(b) represent money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee; and [Last W0I;ds of (ii) such debts or partsof debts have been written 011' as 5~"?(2)("2' irrecoverable in the accounts of the assessee for "W" P" 1 that previous year :
["r'O:,'i'g(o2)1(a"tit)e'r Provided that if the amount ultimately recovered on any Ea"-]' ' such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deﬁciency shall be deductible for the previous year in which the ulti- mate recovery is made :
Provided further that an such debt or part of debt as is referred to in sub--clause i) may be deducted if it has already been written 01)' as irrecoverable in the accounts of an earlier previous year but the Income-tax Officer had not allowed it to be deducted on the ground that it had noit been established to have become a bad debt in that year.
Section 37 Any expenditure (not being expenditure of the nature General described in sections 30 to 36 [all other sections re : deduc- [s. 1o(2)(xv)] tions] and not being in the nature of capital expenditbre or personal expenses of the assessee), laid out or ex nded wholly and exclusively for the purpose of the busine , pro- fession or vocation shall be allowed in computing incmne chargeable under the head "Proﬁts and gains of business, profession or vocation". ' 5°?'-i9" 38 (1) Where any substantial part of- any premises is used B§;';""5s§g°- as a dwelling house by the assessee, the deduction lunder garbzsincss secticm 30(a)(i) [10(2)(i) and (ii)] shall be such sum hs the etc. or not Income-tax Oﬁicer may determine, having regard----' exclusively so "'°d- (a) in a case under section 30(a)(i)(a) [10(2)(i)] to the [s- r§>(2)(i), proportionate annual value of the part used for the P'°'"'°] purposes of the business, profession or vocation, or [s. 1o(2)(ii) (b) in a case under section 30(a)(i)(b) [10(2)(ii ], to proviso] the part of e pre es used for the purpo s of the business. rofes " or vacation.
129Clauses 38-40 (2) Where only a part of any premises is used for the [s- I0(2')(i,x): purposes of the business, profession or vocation, the deduc- 1m""'°'"°"] tion under section 30, clause (b) [10(2)(ix), earlier portion] shall be such sum as the Income-tax Oﬂicer may determine having regard to the part so used.
(3) Where any building, machinery, plant or furniture [s. 10(3)] ...................... .. is not exclusively used for the purposes of the business, profession or vocation, the deductions under section 30(a)(ii), 30(c), 31(i) and 31(ii),-32(1), clauses (i) (ii) and (iv) and 36 clause (1) [S. 10(2) (iv), (v), (vi) or (vii)] shall be restricted to a fair proportional part thereof which the Income-tax Oyfﬁcer may determine having regard to the user of such building, machinery, plant or furniture for the purposes of the business, profession or vocation. ' Where a managing agent of a company is liable under 5°°Fi°". 39, an agreement made for adequate consideration to share Gym' managing agency commission with a third party or parties, commission the said agent and the said party or partiesshall ﬁle a [s.'x2A] declaration showing the proportion in which such commis-
. sion is shared between them, and on proof to the satisfac-
tion of the Income-tax Officer of the facts contained in such declaration such agent and each such party shall be charge- able only on the share to which such agent or party is en- titled unde-r the agreement.
Notwithstanding anything to the contrary in sections Sccttion 4° 30 to 39, [10(2)], the following amounts shall not be de- g3°":¥§l"°' ducted in computing the income chargeable under the ,"°' °' head "Proﬁts and gains of business, profession or vocation"
(a) in the case of any assessee-- 5. 10(2) (iii) proviso, part
(i) ....... ..any interest chargeable under this Act which is payable outside India (not being interest on a { loan issued for public subscliption before the 1st ' day of April, 1938), ....... .. on which tax has not been paid or deducted under section 202 or 204 [18]and in respect of which there is no person in India who may be treated as an agent under sec- tion 173 [43];
(ii) .......... ..any sum paid on account of any cess, rate or 5- 210(4) 5'8 tax levied on the proﬁts or gains of any business, P"?"' profession or vocation or assessed at a proportion of or otherwise on the basis of, any such proﬁts or gains;
(iii) any .......... .. payment which is chargeable under [5, 10(4) (a)] the head "Salaries", if it is payable without India and if the tax has n , been 'd thereon on assess- ment nor deducted erefro der section 201. [s.18] nor recovered, nder ( on 209 [s.8(7)];
130Clause: 40-41 [s- 10(4) (CH (iv) any; ......... .. payment to a provident or other fund established for the beneﬁt of employees of the assessee, unless the assessee has made effective ar- rangements to secure that tax shall be deducted at source from any payments made from the fund which are chargeable to tax under the head "Sala- ries";
[S-1°(4)(b)-] (b) in the case of any ﬁrm, any ............. ..payment of interest, salary, commission or remuneration, made by the ﬁrm to any partner of the ﬁrm;
.j..,o(,,A)(a),; (c) in the case of any company-
(i) any .......... .. expenditure which results directly or indirectly in the provision of any remuneration or beneﬁt or amenity to a director or a person who has a substantial interest in the company within the meaning of section 2 clause (20), Explanation [s. 2(6C) (iii)];
(ii) any expenditure or allowance in respect of any [5"°(4A)(b)] assets of the company used by any person refer- red to in sub-clause (i) either wholly or partly for his own_ purposes or beneﬁt, if in the opinion of the Income-tax Officer any such expenditure or allowance as is mentioned in sub- clauses (i) and (ii) is excessive or unreasonable having regard to the legitimate business needs of the company and the beneﬁt derived by or accru- ing to it therefrom. a E,§;"f'] (M) Explanation: The provisions of this clause .......... .. P' [Section 10(4A)] shall apply notwithstanding that any amount disallowed under this clause is included in the total income of any person referred to in sub-clause (i).
1[i'I'le':F3"fP'c'l1;':f (d) in the case of a banking company, the amounts ,6, (3) & (b)] which have been allowed as a deduction in com- puting its income chargeable to income-taac under the head "Interest on securities" under the provi- sions of section 20(1) [8 Expln(1) (b)] 5°C?" 41 --(1) Where for the purposes of computing income un- gcrgbfz der the head "Proﬁts and gains business, profession or Amount, M- vocation an allowance or deduction has been made in the civcd in res- assessment for any year in res ect of any loss, expenditure Pcct of 1053 or trading liability incurred y 'the assessee and, subse- °'°' quently during any previous. year, the assessee has re- 3- '°('*'A)]- ceived, whether in cash or in any other manner whatso- ever, any amount in respect of such loss or expenditure or has obtained some beneﬁt in respect of such trading liability by way of remission or cessation thereof, the amount received by him or the value of the. beneﬁt ac- cruing to him shall be chargeable to income-tar asg the» income of the business.' profession or vacation of that ;pre-- ziious year. = * 131 Clause 41 (2) ....... .. Where any building, machinery or plant Proﬁts on sale which is owned by the assessee and which was or has °fd$7P'°¢i3b1¢ been used for the purposes of business, profession or voca- 353°" _, ticm, is sold, discarded, demolished or destroyed in the [5-d1°(*)(".")= previous year, and the moneys received in respect of suc :2", ggﬂvﬁi' building, machinery or plant, as the case may be, together p,o,,,so_ pm with the amount of scrap value, if any, exceed the written simpliﬁed] down value, so much of the excess as does not exceed the diﬁerence between the original cost and the written down value .......... ..shall be chargeable to income-tax as income of the business, profession or vocation of the previous year in which the moneys are received.
Explanation 1--For the purposes of this sub-section, [5' '°(')(".") . , . . . 4th proviso the expression 'moneys received" in respect of any build- Pam] ing, machinery or plant has the same meaning as in sec- tioln]32(1) (iv) [sec. re : depreciation-clause for loss on sa e Explanation 2.--The provisions of this sub-section shall [s- I0(2)(Vi_i)» apply notwithstanding that the business, profession, or 120- §v':ﬁds"."§,':f,:'_' cation for the purposes of which the building, machinery or the, ____ __ plant was being used is no longer in existence at the time thc1eof"] when the building, machinery or plant is sold, discarded, demolished or destroyed.
Explanation 3.--For the purposes of this sub-section, [s. x0(2)(vii) the original cost of a building, the written down value of sthiproviw-l 'which is determined in accordance with section 42 clause (7) (b), proviso [Section 10(5) (b), 1st proviso] shall be deemed to be the written down value so determined as at the date of its being brought into use for the purposes of the business, profession or vocation i (3) Where an asset representing expenditure of a capi- Proﬁts onsalc tal nature on scientific research within the meaning of sec- 0' Scicntiﬁc tion 35(1) (iv) read with section 42 clause.(5) [Section 10 3*' (2) _(xiv)] is sold whether during the continuance of the ' X.) business or after the cessation thereof without having been £",'u'1°(";2,,Evi',','° used for other purposes and the proceeds of the sale toge- (c)_]' ther with the total amount of: the deductions made under ' Section 35(2) (i) [s. 10(2) (xiv) ﬁrst para, latter part] ex-
-ceed the amount of the capital expenditure, the excess or the amount of the deductions so made, whichever is the less. shall be chargeable to income-ta,7c as income of the business, profession or vocation of the previous year in which the sale took place.
(4) Where a deduction has been allowed in respect of [s.xo_(2) (xi). «a bad debt or part of debt under the provisions of section F?'°""'°f °"' '36 clause (6) [s. 10(2) (xi) ﬁrst para] then if the amount"°"'=*' -1 ultimately recovered on any such debt or part is greater than the difference between the debt or part of debt and the amount so allowed, the excess shhlal be chargeable to income-tax as income of the business'; rvofession or voca- tion of the previous year in which it'; i? recovered.
132Clause 42 S°°"°" t$'~'- In sections 28 to 41 [all sections incorporating any part ""°"p'°m'°" of section 10]and in this section, unless the context'other- wise requires,-
Asctual cost (1) ....... .."actual cost" means the actual cost of the as- gipln sets to the assessee reduced by that portion of the cost end, "Came, thereof, if any, as has been met directly or indirectly by dart.] Government or by any public or local authority ....... ..
5- 10(2) (xiy)' Explanation 1.--Where an asset is used in the business ad P'l°'t'::° after it ceases to be used for scientiﬁc research related to par" 3 ' that business, and a deduction has to be made under. sec- tion 32(1), clause (1) (11) or (iv) [Section 10(2) (V1) or (v11)] in respect of that asset, the actual cost of the asset to the assessee shall be the actual cost to the assessee as reduced by the amount of any deduction allowed .under section 35(1) (iv) [10(2) (xiv)] or under any corresponding 11 or 1922. provision of the Indian Income-tax Act, 1922. ' [S- 10(5) (<=)-] Explanation 2.--Where an asset is acquired by the as- sessee by way of gift or inheritance, the actual cost of the asset to the assessee shall be the written down value there-' of as in the case of the previous owner for the previous year in which the asset is so acquired or the marketgvalue thereof on the date of such acquisition, whichever is the less. ' E: Explanation 3.-- .......... ..Where, before the date §of ac- P ' quisition by the assessee, the assets were at any time used by any other person for the urposes of his business, pro-
fession or vocation and the ncome-tax Oﬂicer is satisﬁed that the main purpose of the transfer of such assets, direct-
ly or indirectly to the assessee,' was the reduction ofia lia-
bility to income-tax (by claiming depreciation with lrefer-
ence to an enhanced cost), the actual cost to the assessee shall be such an amount as the Income-tax Ofﬁceri may, with the previous approval of the Inspectin 'stant Commissioner, determine having regard to al the c' cum-
stances of the case. r L [S- I0(5),(a), Explanation 4---- .... .. Where .... .. assets which had once ""1 P'°"'5°] belonged to the assessee and had been used by him for the purposes of his business, profession or vocation and thereafter ceased to be his pro rty by reason of transfer' or otherwise, are re-acquired him, the actual c¢st to the assessee shall be the actual cost to him when h first acquired the assets less all depreciation actually ﬂowed 11 of 1922- to him under this Act or under the Indian Income- Act, 1922, or under any Act repealed by that Act or under exe-
2 of 1886- cutive orders issued when the Indian Income-tax Act, 1886, was in force.
[s.m_B(I),2nd Explanation 5.----When any capital asset is transferred P'°'"5° lam?" by a company to its subsidiary company, then, if the condi- hilf' pm] tions of section 47 (iii) [sectio;1,12B(1), 2nd proviso, earlier half] are satisﬁed, t actualicbst . . . . . . . .. of the transfer- red capital asset to ﬁe subsidiary company shall be taken 133 Clause 42 to be the same as it would have been if the parent com- pany had continued to hold the capital. asset for the pur- poses of its business.
' aid' (2) "paid" means actually paid or incurred according [s.p 10(5) to the method of accounting upon' the basis of which the First Para. proﬁts or gains are computed under the head "Profits and P""'] gains of business, profession or vocation";
(3) "plant" includes ships, vehicles, books, scientiﬁc [s_ ]am,o(5) apparatus and surgical equipment purchased for the pur- First para. poses of the business, profession or vocation; part.] ' (4) "received" means received according to the method "Received" of accounting upon the basis of which the proﬁts or gains [Ndw.] are computed under the head "Proﬁts and gains of business, profession or vocation";
(5) (i) "scientiﬁc research" means any activities in the "Scientiﬁc ﬁelds of natural or applied science for the extension of '§5°'"° . knowledge; _ [ "OM ('M Expln. (i).]
(ii) references to expenditure incurred on scientiﬁc re- [S.'xo(2)_(3<iv) search .......... ..include all expenditure incurred for the pro- E"P1"- ("H secution of, or the provision of facilities for the prosecu- tion of, scientiﬁc research, but do not include any expen- diture incurred in the acquisition of rights in, or arising out of, scientific research;
(iii) references to scientiﬁc research related to a busi- E'-"f(*)(.'.'.i") ness or class of business include-- xp"' 0""
(a) any scientiﬁc research which may lead to or faci- litate an extension of that business or, as the case may be, all businesses -of that class;
(b) any scientiﬁc research of a medical nature which has a special relation to the welfare of Workers « employed in that business or, as the case may be, all businesses of that class;
(6) .......... .."speculative transaction" -means a transac- [S. 24(x) tion in which a contract' for purchase and sale of any EXP1n- (2)-1 commodity, including stocks and shares, is periodically or 1 ' ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips:
Provided that for the purposes of this clause-
(a) a contract in respect of raw materials or merchan- dise entered into by a person in the course of his manufacturing or merchanting business to guard & against loss through future price ﬂuctuations in respect of his contr cts for actual delivery of goods manufactured y himgdr merchandise sold by him; or 134 Clause 42
(b) a contract in respect of stocks and shares entered 1nto_ by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or ' (C) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordi- nary course of his business as such member;
shall not be deemed to be a speculative transaction;
"Written " (7) "written down value" means--
'[i:w:'-0'(':)1"(';), (a) in the case of assets acquired in the previous year, main part.] the actual cost to the assessee;
* * C [s-V_r0(5) (b), (b) in the case of assets acquired before the previous mam pan-t.] year, the actual cost to the assessee less all depre- ciation actually allowed to him under this Act, or under the Indian Income-tax Act, 1922, or any Act repealed. by that Act, or under executive orders issued when the Indian Income-tax Act, 1886 was in force: ' [s. 10(5) (b), Provided that in the case of a building previously the Ist proviso-] property of the assessee and brought into use for the pur- poses of the business, profession or vocation after,the' 28th day of February, 1946, "written down value" means the actual cost to the assessee reduced by an amount equal to the depreciation calculated at the rate in force on that date that would have been allowable had the building been used for the aforesaid purposes since the date of its ac- quisition by the assessee and had the provisions of this Act relating to the allowance for depreciation been in force on and from the date of acquisition.
[s. 10(5) (b), Explanation 1.--When in a case of succession in busi- 2nd Proviso] ness, profession or vocation, an assessment is made on the successor under section 180(2) [Section 26(2) proviso], the written down value of any asset shall be the amount which would have been tdken as its written down value if the assessment had been made directly on the person succeed- , ed to.
[s- 123(1), Explanation 2.--When any capital asset is transferred l"';'t'tlerP'°V}'l5a';;_ by_a company_to its subsidiary company, then, if the; con-
pam] ditions of section 47(u1) [section 12B(1), 2nd proviso, ear- lier half] are satisﬁed, the .......... ..written down value ....... .. of the transferred capital asset to the subsidiary company shall be taken to be the same as it would have been if the parent company had continued to hold the capital asset for the purposes of its business.
[=- 10(5) Explanation 3.--Any allowance in respect of any db-
E"P1"~ 'me' preciation carried forward under Chapter VI [chapter on half') Aggregation and set off] shall be deemed to be dep11ecia- tion "actually allowed". 7 , ' n of 1922.
2 of 1886.
135 .
Clauses 43-47 Buildings provided by the assessee for the residential section 43 accommodation of his employees engaged in the business, Residences of profession or vocation, where the occupation by the em-- €mP1°Y¢¢s- ployees of such building is subservient to and necessary for [New] the performance of their duties, shall, for the purposes of computation of income chargeable under the head "Proﬁts and gains of business, profession or vocation", be deemed to be buildings occupied by the assessee for the purposes of his business, profession or vocation.
Insurance business Notwithstanding anything to the contrary contained in S°°ti°n '44.. the provisions of this Act relating to the computation of income chargeable under the head "Interest on securities". ' d_ "Income from house property" or "Income from other-sour- §'c'hfe%1Zl)e 23¢ ces", or in section 207 [18(5), main para, part regarding 9_] ' credit for tax deducted at source] or in sections 28 to 43 [all earlier sections regarding Proﬁts and gains of busi- ness], the proﬁts and gains of any business of insurance, including any such business carried on by a mutual insu- rance association or by a co-operative society, shall be com- puted in accordance with the provisions of the First Sche- dule [Schedule, Rules 1 to 8].
E--Ca.pital gains .... ........Any proﬁts or gains arising from the sale-, ex- section 45 change, relinquishment or transfer of a capital asset effect- Capital gains ed in the previous year shall, save as otherwise provided [5, :2 B (1) in sections 55 and 56 [12B(4)] be chargeable to income-tax maigl para under the head 'Capital gains'. °a"l'" Pa"-1 The income chargeable to income-tax under the head yef. "Capital gains" shall be deemed to be the income of the [3 mm ) previous year in which the sale, exchange, relinquishment m',,-,, P3,; or transfer took place. ' latter part] For the purposes of section 45 [12B'(1) main para], the Section ,47 following shall not be treated as a sale,--e:cchange, relinqui- T"'""°"°"' shment or transfer of capital assets-- :f§a_f§§;:i°di
(i) any distribution of capital assets on the total or [8- 123(1) partial partition of a Hindu undivided family; I',:"!;t'] P"°"'
(ii) any trﬁnsfer of a capital asset under a .... .. gift .... .-l:Ps1:dIV2.Bp(aIl)'E.5st or W'1 ;
» . ~ . - d
(iii) any transfer of a cap1tal asset bv a company to its §?,o'5.B£L)."i§L, subsidiary company if-- A part.]
(a) the parent company or its nominees hold the whole of the share capital of the subsidiary corn- pany, and
(b) the subsidiary company is an Indian company and is a resident. ' Section 48.
Mode of com-
putation and deductions.
[s. _x2B(2), opening lines.] [s. 12B(2) (i)] [s. 12B(2) (ii) pa:-L] Section 49.
Statutory cost with referen-
ce to modes of acquisition [New] Section 50.
Determina-
tion of statuo tory cost.
[s. 12 B(2)
(ii), part.] x2B(2), Prov.
[ .
3si'd part.] 136 Clauses 48-50 The income chargeable under the head "Capital gains" shall be computed by deductin from the full value of the consideration for which the sa e, exchange, relinquishment or transfer of the capital asset is made, the following amounts, namely--
(i) expenditure incurred wholly and exclusively in connection with such sale, exchange, relinquish- ment or transfer;
(ii) the statutory cost of the capital asset, as determin- ed in accordance with the provisions hereinafter contained .......... ..
Where the capital asset became the property of f the assessee by any of the following modes, the statutorycost of the asset shall be determined. in accordance with ; the provisions of sections 50 and 51 [next two sections follow- ing, dealing with determination of statutory cost]-
(i) under a purchase, exchange, relinquishment or other transfer;
(ii) on any 'distribution of capital assets on the total or partial partition of a Hindu undivided family;
(iii) under a gift or will;
(iv) (a) by succession, inheritance or devolution; or
(b) on any distribution of capital asset on the dissolu- tion of a firm or other association of persons; or
(c) on any distribution of capital assets on the liquida- tion of a company; or
(d) under a transfer on revocable or irrevocable trust. The statutory cost of an asset shall be determined as follows-
(1) Where the cavital asset became the property of the assessee by any of the modes specified' in section 49(1) [clause (i) of section for statdtory cost with reference to modes of acquisition], the statutory cost of the asset shall be----
(a) the cost of acquisition of the hsset to the ses- see ....... .., as increased by the cost of any; im- provements made thereto, incurred and bornk by the assessee; or '
(b) where the capital asset became the proper? of the assessee .......... .. before the 1st day of fann- ary, 1954, then, at the option of the assessee, the fair market value of the asset on the 1st day of January, 1954, as increased by the cost of any improvements made thereto on or after the 1st day of January, 1954;", incurred and borne by, the assessee. ' i 137 Clause 50 (2) Where the capital asset became the property of[s-_ 1213(3), the assessee by the mode speciﬁed in section 49 (ii) [clause '"31? Pm!»
(ii) of section re: statutory cost with reference to modes 52:3' half' of acquisition], the statutory cost of the asset shall be de- ' termined as follows-
(i) where the capital asset became the property of the [s. 1213 (3), assessee before the 1st day of April, 1956, the sta- Prov. (i), tutory cost of the asset shall be the highest of the Pa"-3 following--
(a) the cost of acquisition of the asset to the previ- [s. 123(3). ous owner thereof,.as increased by the cost of mail} para, any improvements made thereto after its ' acqui- °""{'°' ha": sition by the previous owner or the assessee, in- at] curred and borne by the previous owner or the assessee, as the case may be; or
(b) .......... ..the fair market value of the .... ..asset on [s. 12B (3), the date on which it became the property of the pr0V- (i), assessee ................ .., as increased by the cost of p""] any improvements made thereto after its acqui- sition by the assessee, incurred and borne by the assessee; or
(c) where the capital asset became the property of[s. In B (2), the previous owner .... ..before the 1st day of 3rd Prov- January, 1954, the fair market value of the as- Pm] set on the 1st day of January, 1954, as increased by the cost of any improvements made thereto on or after the 1st day of January, 1954, by the previous owner or the assessee, incurred and borne by the previous owner or the assessee, as the case may be;
(ii) where the capital asset became the property of[S- 113 __(3) the assessee on or after the 1st day of April, 1956, pmvis-° ("H .......... ..the statutory cost of the asset shall be the fair market value of the asset on the date of the partition. as increased by the cost of any improve- ments made thereto on or after the date of the par- tition, incurred and borne by the assessee.
(3) Where the capital asset became the property of the assessee by any of the modes speciﬁed in section 49
(iii) [clause (iii) of section regarding statutory cost with reference to mode of acquisition], the statutory cost of the asset shall be determined as follows :-- [S m B ( )
- 2
(i) where the capital asset became the propert of sP""2'§ the assessee before the 1st day of April, 19%, its (3),' ;,,a;,, statutory cost shall be determined in accordance para, earlier with the provisions of clause (i) of sub-section (2); B98;
(ii) where the capital ass t beca e: the property of PM/i0 (1'). the assessee on or aft the 1s iay of April 1956, Pm] the statutory cost of the. ets pl be--
138Clauses 50-51 [,_ ,2}; (3), (a) the cost of acquisition of the asset to the previ- main para, ous owner thereof, as increased by the cost of earlier half: any improvements made thereto after its acqui- part] sition by the previous owner or the assessee, in-
curred and borne by the previous owner or the assessee, as the case may be; or [s. 12B (2), (b) where the asset became the property of the 1072- 3rd prov. vious owner before the 1st day of January, 1954, P""-] then, at the option of the assessee, the fair mar-
ket value of the asset on the 1st day of January, 1954, as increased by the cost of any improve- ments made thereto on or after the 1st day of January, 1954, by the previous owner or the as- sessee, incurred and borne by the previous own- er or the assessee, as the case may be.
(4) Where the capital asset became the property of the assessee, whether before or after the 1st day of Janu- ary, 1954, by any of the modes speciﬁed in section 49 (iv) [clause (iv) of section re : statutory cost and mode of ac- quisition], the statutory cost of the capital asset shall be-
[S_ ,2 B (3), (a) the cost of acquisition of theasset to the previous main para. owner thereof, as increased by the cost of any im- ;=;1t1]6r half» provements made thereto after its acquisition by the previous owner or the assessee, incurred and borne by the previous owner or the assessee, as the case may be; or [5, ,2 B (2), (b) where the asset became the property of the previ- " 3rd prov. ous owner before the 1st day of January, 1954, Pm] then, at the option of the assessee, the fair market value of the asset on the 1st day of January, 1954, as increased by the cost of any improvements made thereto on or after the 1st day of January, 1954, by the previous owner or the assessee, incur- red and borne by the previous owner or ﬂie as- sessee, as the case may be.
[s- _!'-'B (3), E:cplanation.--Where the cost of acquisition of a capi- halﬁljraa tal asset to the previous owner cannot be ascertained, the fair market value on the date on which the capital asset became the property of the previous owner shall be=deem- ed to be the cost of acquisition thereof to the L 'ous owner for the purposes of this section. J Section 5: Where the capital asset is an asset in respect of which Special pr0- a deduction on account of depreciation has been obtained :::'"uﬁn ' by the assessee in any previous year either under this Act smuptoryﬁost or under the Indian Income-tax Act, 1922, or any Act re- inthe case of pealecl by that Act, or under executive orders issued when deprcciable the Indian Income-tam Act, 1886, was in force, the ' i-
3"°'5- sions of section 50 Eprecedixtg section regarding d 'ermi-
? § ' _ l 139 Clauses 51-55 nation of statutory cost] shall be subject to the following ;'o::;gg2 modifications:----
(1) The written down value, as deﬁned in section 42 clause (7) [s. 10(5)], of the asset, as adjusted, shall dmgovgfg' be taken as the statutory cost of the asset. pm]p ' (2) Where under any provision of section 50 .... ..[pre- ceding section regarding com utation of statutory 5- ":'1B (:1! cost] the fair market value 0 the asset on the 1st P"""'°' pa 1 day of January, 1954, is to be taken into account at the option of the assessee, then, the statutory cost of the asset shall, at the option of the assessee, be the fair market value of the asset on the said date, as reduced by the amount of depreciation, if any, allowed to the assessee after the said date, and as adjusted.
.......... ..Where any capital asset was on any previous Section 52 occasion the subject of negotiations for its sale, exchange, 0P"°" relinquishment or transfer, any option or other money re- ;':c'c",,,cd_ ceived and retained by the assessee in respect of such nego- B (2) tiations shall be deducted from the cost of acquisition or,[;h'£§',,,,,;,°]' the written down value or the fair market value, as the case may be, in computing the statutory cost.
The full value of the consideration for the exchange section 53_ of a capital asset referred to in section 48 [section re: Considera- computation of income] shall be taken to be the fair mar- tion for ex- ket value, on the date of the exchange, of the asset obtain- °h'"3°' ed by the assessee in exchange,-* [New]
(a) as increased by the value of any other considera- tion obtained by the assessee, and
(b) as diminished by the value of any consideration, in addition to the capital asset, given by the asses- see. ' Where the Income-tax Oﬁicer is satisﬁed that the con-- Section 54. sideration recited in any deed of sale, exchange, relin- C_1°ns=d°7a' quishment or transfer of a capital asset is low and that it "°" f°' 531°' was so recited with the object of avoidance or reduction §'c°{ﬂmine§°; of the liability of the assessee under section 45 [section 's of re: chargeability], the full value of the consideration I'e-un.erstate- ferred to in section 48 [section re: computation of capital m°3"- - gains] shall, with the prior approval of the Inspecting As- [s-12 B (2)- sistant Commissioner ................. .., be taken to be the fair "'P'°"-1 market value of the capital asset on the date on which the sale, exchange, relinquishment or transfer took place.
Notwithstanding anything contained in section 45 [S. %°°'!:"'l gig? 12B(1) main para], where a capital gain arises from the ,,,:,*:,;[ gymm sale, exchange or transfer of one or more capital assets," being buildings or lands appurtenant thereto the income [gm 3 (4) of which is chargeable under the head i'Income from house (a)';| 10-] Law Com./58. ' ' Section 56.
Proﬁt on sale of property used for resi-
dences.
((2)? B (4), Section Interpreta-
tion.
[NW] [&_'f. s. 12B (2), 2nd prov .
latter half] 57
iii)'§a?t] (2)' 140 Clauses 55-57 property", and the full aggregate value of the considera- tion for which the sale, exchange, or transfer is made does not exceed the sum of twenty-ﬁve thousand rupees, the capital gain shall not .......... .. be included in the total in- come of the assessee:
Provided that this section shall not apply in any case where the aggregate of the fair market values of all capi- tal assets, being buildings or lands appurtenant thereto the income of which is chargeable under the head "Income from house property", owned by the assessee immediately before the sale, exchange or transfer aforesaid is made, exceeds the sum of rupees ﬁfty thousand.
Where a capital gain arises from the sale, exchange, relinquishment or transfer of a capital asset to which the provisions of section 55 [12B(4) (a)] are not applicable, be- ing buildings or lands appurtenant thereto the income of which is chargeable under the head 'Income from house property', which in the two years immediately preceding the date on which the sale, exchange, relinquishment or transfer took place, was being used by the assesseeor a parent of his mainly for the purposes of his own or the parent's own residence, and the assessee has within a period of one year before or after that date purchased a new property for thepurposes of his own residence, then instead of the capital gain being charged to inconqe-ta.x: as income of the previous year in which the sale, exch nge, relinquishment or transfer took place, it shall, if the sses- see so elects in writing before the assessment is mase, be dealt with in accordance with the following provisions of this section, that is to say,---- I f
(i) if the amount of the capital gain is greater than the cost of the new asset, the difference between the amount of the capital gain and the cost f the new asset shall be charged under section 45 [ 12B) (1), main para] as income of the previous year; or
(ii) if the amount of the capital gain is equal to 1 less , than the cost of the new asset, the capital gain shall not be charged under section 45 [secti 12B (1) main para].
In sections 50 and 51 [sections re : statutory cost]--
(a) "adjusted", in relation to written down valite or fair market value, means diminished by an loss deducted or increasediby any proﬁt assessed, nder the provisions of section 32(1) clause (iv) s. 10 (2) (vii)----part for losses] or section 41(2) [s.g10(2)
(vii)--part for proﬁts], as the case may be; ,
(b) "cost of any improvements" means all expenditure of a capital nature incurred in making any§addi- tions or alterations it) the capital asset, but does I determination of 3 141 Clauses 57----59 not include any_ expenditure which is deductible in computing the income chargeable under the head "Interest on securities", "Income from house property", "Profits and gains of business, profes- sion or vocation" or "Income from other sources" ,* and "improvements" shall be construed according- ly.
F--Income from other sources Section 58 (1) .......... .. Income .... .. of every kind .......... ..shall1"¢°m€ "Om be chargeable to income-tax under the head "Income from °'h"','°"'°°" other sources" if it is not chargeable to income-tax under [S°°"°""(')] any of the heads speciﬁed in section 14, items A to E [Sec- tion 6, clauses (i) to (iv) and (vi)].
(2) In particular, and without prejudice to the genera- lity of the pnovisions of sub-section (1), the following in- come shall be chargeable to income-tax under the head "In- come from other sources", namely :--
(i) dividends ................ ..; '- 'ﬁe,i,"','?,.°'('§','{,,]
(ii) income from machinery, plant or furniture belong- H"c°h'i'fc!_ mg to the assessee and let on hire, if the income gig", I)', Y' is not chargeable to income-tax under the head furniture, "Proﬁts and gains of business, profession or voca- [New] tion"; '
(iii) where an assessee lets on hire -machinery, plant or Lease of furniture belonging to him and also buildings, and .""'1'['"3:l the letting of the buildings is inseparable from the }:';°":;';c °°f letting of the said machinery, plant or furniture, mac 'ncfy the income from such letting of the buildings, if it etc. is not chargeable to income-tax under the head [New] '€I>roﬁts and gains of business, profession or voca-
tion."
(1) For the purposes -of inclusion in the total income 5" °" 59 of an assessee ....... ..any dividend paid by a company whose.G _ ins "P total income is chargeable to ' income-ital: under this Act °fd' 'd°"d" shall be the gross amount of the dividend as determined [5-. 5 (2)' under sub-section (2). - 3:', Pan' (2) Subject to the provisions of sub ection (3), the gross [s.1 (2), amount of the dividend shall be the a 'nt of"the net divi~ mai Pm:
dend as increased in accordance with the following for-- P3" mula--
DxR 100 minus R.
In the above formula,-
(i) "Increase" stands for_ t increaqe to be made in the amount of the net divi 'end;
Increase = 142 Clauses 59-60
(ii) 'D' stands for the amount of the net dividend; and
(iii) 'R' stands for the average rate of income-tax ap- plicable to the company for the ﬁnancial year in which the dividend is paid, credited or distributed or deemed to have been paid, credited or distri- buted. The rate is to be expressed as a percentage; for example, where the rate is 25 naya paise 'per rupee, 'R' stands for the ﬁgure 25.
(3) .......... ..When the fund out of which the dividend [S-16(2) has been paid, credited or distributed or deemed to have P'°""°-3 been paid, credited or distributed includes-
(i) any proﬁts and gains of the company not included in its total income, or
(ii) any income of the company on which income-tax was not payable, or
(iii) any amount attributable to any allowance made in computing the proﬁts and gains of the company, the increase to be made under sub-section (2) shall be calculated only upon such proportion of the net dividend as the said fund after deduction of the inclusions enumerated above bears to the whole of that fund.
Section 60 The income chargeable under the head "Income from Dcductions, other sources" shall be computed after making the follow- ing deductions, namely:------ _
(i) .......... ..in the case of..,' ....... ..dividends, any reason-
[5-. 12 (2): able sum paid by way of commission or remunera-
":'t"] 93"' tion to a banker or any other person realising such p ' dividend on behalf of the assessee;
(ii) in the case of income of the nature referred to in [s. 12(3) & section 58(2), clauses (ii) and (iii), [new sub-sec-
4)j part for tions regarding income from hire of machine; etc. "°"°""] and lease of buildings, inseparable from mach nery, in the Section regarding chargeability], dedudtions, so far as may be, in accordance with the provisions of sections 30(a)(ii), 30(c), 31, clauses (i) and (ii), 32(1). clauses (i) (ii) and (iv), and 36, clause (1) [section 10(2)(iv), (v), (vi) and (vii) portions in- corporated in draft section for deductions in income from business]. and subject to the provisions of sections 34 and 38 [section 10, provisions incorpo- rated in draft section regarding conditions for de- preciation and development rebate and partial [s._ 12 (2), user];
$313] Pam (iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earn-
ing such income ...... ....... ..
143Clauses 61-62 Notwithstanding anything to the contrary contained in Section 61 section 60 [Section regarding deductions for income from Amounts not other sources], the following amounts shall not be deduc- deductible. tible in computing the income chargeable under the head "Income from other sources", name1y:----
(a) in the case of any assessee-- [S- 1,2 (2), prov1s0.]
(i) any personal expenses of the assessee;
(ii) any interest chargeable under this Act which is payable outside India (not being interest on a loan issued for public subscription before the 1st day of April, 1938), ................ ..on which tax has not been paid or deducted under section 202 or 204 [Sections regarding deductions of tax at source]. and in respect of which there is no per- 'son in India who may be treated as an agent under section 173[section 43];
(iii) any payment which is chargeable under the head "Salaries", if it is payable without India, unless tax has been paid thereon on assessment or de- ducted therefrom under section 201 [18(2)] or recovered under section 209 [18(7)];
(b) in the case of a company, any expenditure or allow-- [S- I2 (5) ance of the nature referred to in section 40, clause Pi'; S '°"*"
(c) [section 10(4A)(a) and"(b)], notwithstanding [Ix] ' '° that the amount thereof is included in the total in- ' come of any person referred to in section 40(c)(i) [10(4A) (a)]-
(1) The provisions of section 41(1) [Section 10(2A)] S'=°,*i°n 52 shall apply, so far as may be, in computing the income of Prqﬁts an assessee under section 58 [main section regarding charge-- Clmgeabk ability of Income from other sources], as they apply in '° 'a''' computing the income of an assessee under the head [5, 1, (5) "Proﬁts and gains of business, profession or vocation". pan.) (2) When_any buildings, machinery, plant or furniture [s. 12 (3) & to which section 58(2). clauses (ii) and (iii) [sub-sections (4) part for regarding income from hire of machinery etc. and lease P'°'ﬁ"-1 of building, inseparable from machinery, in the section re- garding chargeability] apply are sold, discarded, demolished or destroyed, the provisiqns of section 41(2) [Section 10(2)
(vii), 2nd and 4th provisos, so far as they deal with proﬁts] shall apply, so far as may be, in computing the income of an assessee under section 58 [Section regarding chargeability of income from other sources] as they apply in computing the income of an assessee under the head "Profits and gains ~ of business, profession or vocation".
144Clauses 63-67 CHAPTER V INCOME OF OTHER PERSONS. INCLUDED IN ASSESSEE'S TOTAL INCOME Section 63 All income arising to any person by virtue of a transfer Transfer of ............. ..whether revocable or not and whether eﬁected '['§°°"l'g- (1) before or after the commencement of this Act, shall, where wmain para, there is no transfer of the assets from which the income came, ham] arises, be chargeable to income-tax as the income of the S 6 transferor .......... ..and shall be included in his total income. 'ection Revocable 4 All income arising to any person by virtue of a revo- transfer or cable transfer of assets shall be chargeable to income-tax assets. as the income of the transferor and shall be included in his [S- F5 (U (C): total income.
mam para, latter half.] S¢°'i°" 55 (1) The provisions of section 64 [S. 16(1)(c), main para, Trrevocable latter half] shall not apply to any income- transfers.
[3- I5 (I)_ (C), (a) arising to any person by virtue of a transfer which is not revocable for a period exceeding six years or during the lifetime of the transferee, or, in the case of a transfer by way of trust, during the life- t'ime of the beneﬁciary, and
(b) from which income the transferor derives no direct or indirect beneﬁt.
,lS- 16(1) (C) (2) Notwithstanding anything contained in sub-section 13a'ftler]1:;',',1']'S° (1), all income arising to any person by virtue of a transfer ' shall be chargeable to income-tax as the income 09' the transferor as and when the power to revoke the transfer arises, and shall then be included in histotal income.
s°°"'?'f 66 For the purposes of sections 63, 64 and (55 [section 16 D°ﬁ"'"°"3- (1)(c), main para and 3rd proviso] and of this sect1on,--~ E1' (a) ......... ..a transfer shall be deemed to be revocable
(i) it contains any provision for the retransfer direct- ly or indirectly of the income or assets to the .......... ..transferrn:, or 1
(ii) it, in any way, gives the transferor a right to reassume power directly or indirectly ovet the S 6 income or assets; § Eta' (12) "transfer" includes any settlement, trust, covenant, parI.] agreement or arrangement. ' Section 67 In computing the total income of any individual, being Husband, a male, there shall be included all such income as arises Wifc and directly or indirectly-
mmor chi -
ten. (i) to his wife from the membership of the wife in a [S- *5 (3)-1 ﬁrm in which such individual is a partner;
(ii) to a minor child of such individual from the a is- sion of the minor to.' the beneﬁts of partne hip in a ﬁrm in which sucll individual is a partner, 9 145 Clauses 67-69
(iii) to his wife from assets transﬁerred directly or in- directly to the wife by such individual otherwise than for adequate consideration or in connection with an agreement to live apart .......... ..
(iv) to a minor child, not being a married daughter, of , such individual from assets transferred directly or indirectly to the minor child by such individual otherwise than for adequate consideration; or
(v) .......... ..to any person or association of persons .... .. .... ..from assets transferred-otherwise than for ade- quate consideration to the person or association by such individual for the beneﬁt of his wife, or a minor child (not being a married daughter), or both.
CHAPTER VI AGGREGATION OF INCOME AND $ET--OFF OR CARRY FORWARD OF LOSS Aggregation of income In computing the total income of an assessee, there Section 68 shall be included all income on which no income-tax isTo;a1ineome payable under the provisions of sections 81 to 87 [Sections [3 16 (I) (3) relating to income on which no income-tax is payable]. °3'?'°' P3"-1 (1) In computing the total income of an assessee who Sécttionﬁs ' is a partner of a ﬁrm, .......... ..whether* the net result of the Method or computation of total income of the ﬁrm is a proﬁt or a loss, °°IPP"tins _ his share (whether a net proﬁt or a net loss) shall be :hm,P"i'x'1"':{1:
computed as follows-- incbme ofthc
(a) any interest, salary, commission or other remunera- [5 (,) (1,) tion paid to any partner in respect of the previous main para.] year shall be deducted from the total income of ' - the firm, and the balance ascertained and appor- tioned among the paiftners; '
(b) where the amount apportioned_ to the partner under clause (a) is a proﬁt, any salaryl, interest, commission or other remuneration paid to the partner by the ﬁrm in respect of thegprevious year shall be added to that' amount, and the result shall be treated as the partner's share in the income of the ﬁrm;
(c) where the amount apportioned to the partner under clause (a) is a loss, any salary, interest, commission or other remuneration paid tb the partner by the ﬁrm in respect of the previous year shall be ad-- justed against that amount, and the result shall be tireated as the partnefs sharein the income of the rm. 2 3 146 Clauses 69-_73 [New] (2) A partner's share in the income of the ﬁrm, as . computed under sub-section (1), shall, for the purposes of assessment, be apportioned under the various heads of in- come in the proportion which the income of the ﬁrm under each head bears to the total income of the ﬁrm.
[New] (3) Any interest paid by a partner on capital borrowed for the purposes of investment as his capital in the ﬁrm shall, in computing his income chargeable under the head "Proﬁts and gains of business, profession or vocation" in respect of his share in the income of the ﬁrm, be deducted from the share, but no other deduction shall be allowed in respect of the said share.
[S- 16(1) (b) (4) If a part'ner's share in the income of the ﬁrm, as P'°'"5°-1 computed under this section, is a loss, such loss may be set off, or carried forward and set oﬁ, in accordance with the provisions of this Chapter.
[NEW] Explanation.--In this section, "paid" has the same mean- ing as is assigned to it in section 42, clause (2) [s. 10(5)]. Se°"°" 7°. Where any sum is found credited in the books of an Cash °'°d"3- assessee maintained for any previous year, and the assessee [New] offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory, the sum so credited shall be deemed to be the income of the assessee and shall be chargeable to income-tax as the in- come of that previous year.
S°°'i°" 7} Where in the ﬁnancial year immediately preceding the U'1€"P'a'"°d assessment year the assessee has made investments which I""°5'"'°"'s' are not recorded in the books of account maintained by him [NW] for any source of income, and the assessee offers no expla- nation about the nature and ;ource of the investments or the explanation offered by him is not accepted by the In- come-tax Oﬁicer, the value of the investments shall be deem- ed to be income of the assessee of such ﬁnancial year. Section 72 Set oﬂ', or carry forward and set off Set-off ofloss Save as otherwise provided in this Act, where the net from one bu- result for any assessment year in respect of any business, ;'"°53 '° 111°" profession or vocation carri d on by the assessee, computed mm a"°' Cr' under the head "Proﬁts and gains of business, profession or [NW] vocation", is a loss, the assessee shall be entitled to have the amount of such loss set of against the proﬁts and gains assessable for that assessment year from any other business, profession or vocation under .the said head of in- come. ' . Section 73 Scmqonoss (1) Where in respect of any assessment year the net from one head' result of the computation under any of the heads of income to another. mentioned in section 14 [6] other than "Capital gains" is [3, ,4 M, a loss to the assessee, the assessee shall, subject to the other main para.] provisions of this Chapter, be entitled to have the amount 147 Clauses 73-74 of such loss set off against his income assessable for that assessment year under any other head ................ .. except "Capital gains".
(2) Where for any assessment year the net result of Carry for- the computation under the head "Profits and gains of busi- ;"§"}§"d. 5°' ness, profession or vocation" is a loss 110 the assessee, not 105;; "me" being a loss sustained in a speculation business, and such loss has not been wholly set off in accordance with the pro- visions of sub-section (1), so .much of the loss as is not so pm] set off or the whole loss where the assessee had no income ' under any other head, shall, subject to the other provisions of this Chapter, be carried forward to the following assess- ment year, and .......................... ..
(i) .......... ..it shall be set off against the proﬁts and gains, if any, of any business, profession or voca- tion carried on by him and assessable for that assess- ment year, provided that the business, profession or vocation for which the loss was originally computed continued to be carried on by him in the previous year relevant for that assessment year; and
(ii) if the loss ........ .._..cannot be wholly so set off, the amount of loss not so set oﬁ shall be carried forward to the following assessment year and so on.
(3) Where any allowance or part thereof is under sub- 24b (9)» section (2) of section 32 [section regarding depreciation] or ,n3";f Bop sub-section (4) of section 35 [Section regarding scientiﬁc (xiv) 2nd research expenditure] to be carried forward, effect shall Pl'0V.(f)part.] ﬁrst be given to the provisions of sub-section (2).
(4) ....... ..No loss shall be ....... ..carried forward under [s-,'-'4 (2) this section for more than eight assessment years i:mme- mam Pa" diately succeeding the assessment year for which the loss part') was first computed.
_ Section 74.
(1) Any loss computed in respect of a speculation busi- Lomsin sPe_ ness carried on by the assessee, shall not be set 033' except culmion bug- against proﬁts and gains, if any, of another speculation busi- ness. ness. [s. 2 (1), 1st . prov.
(2) Where for any assessment year any loss computed [5, 34 (2), in respect of a speculation business has not been wholly set may Para off under sub-section (1), so much of the loss as is not so P"*"'-1 set off or the whole loss where the assessee had no income from any other speculation business, shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and------
(i) ............. ..it shall be set off against the proﬁts and gains, if any, of any speculation business carried on by him assessable for that assessment year; and
(ii) if the loss cannot be wholly so set off, the amount of loss not so set 01)' shall be carried forward to the following assessment year and iso on.
148Clauses 74-77 §','°.f b)(;,?,',., (3_') In respect of allowance on account of depreciation or and s. 10 (2) capital expenditure on scientiﬁc research, the provisions of (XIV), 2nd sub-section (3) of section 73 [preceding section regarding set I})';':;'-]' (9 off etc. in non-speculation business] shall apply in relation to ' speculation business as they apply in relation to any other business. .
5- 24 (2), (4) No loss shall be carried forward under this section mi" Pam' for more than eight assessment years immediately succeed-
pam] ing the assessment year ﬁor -which the loss was first com- puted.
Scction 75 (1) Where in the previous year relevant for any assess-
Losses under ment year the assessee sustains a loss under the head "Capi- ﬁg .t [had tal gains", the assessee shall, subject to the other provisions gai:f,',_a of this Chapter, be entitled to have the amount 0 such loss set off against his other income assessable for t at as- [5- '*'4('*'A)] sessment year under the head "Capital gains".
[S- 24 (2B), (2) Where in respect of any assessment year the net Pa"-1 result of the computation under the head "Capital . gains" . is a loss to the assessee, suchloss shall, subject to the other provisions of this Chapter, be carried forward to the ﬁol1ow- ing assessment year and set off against capital gains assess- able for that assessment year, and if it cannot be so set off, the amount thereof not so set off shall be carried forward to the following assessment year and so on .... ..: ' Provided that where the loss computed in respect of any assessee, not being a company, for any assessme year does not exceed ﬁve thousand rupees, it shall not car- ried forward under this sub--section.
[5, 24 (23) (3) .......... ..No .......... ..loss shall be carried fdrward Parr.) under sub-section (2) for more than eight assessmen years immediately succeeding the assessment year for wh' h the loss was first computed. i Section 6. _ _ 5 Losses of:C_ (1) _. ......... ..Where the assessee IS a registered ﬁrm, any g;,t¢,cd ﬁrms. loss which cannot be set off against other mcome..., ....... .. of the firm shall be apportioned between the partners of [$034 ('Hfd the ﬁrm and they alone shall be entitled to have the ount lﬁaiﬁso' a er of the loss set off under sections 73(1), 74(1) and 75i1) [24 (1)1. , [s. 24(2) (2) Nothing .......... ..conta.ined in section 73(2), 74(2) or Pr0Yis° (0), 75(2) [s. 24(2) main para and 24(2B)] shall entitle any as-
e3'1'°' Pa" sessee, being a registered ﬁrm, to have carried forward and _ set off its loss .......... ..under the provisions of section 73(2) :'=°"°" :7 or 74(2) [24(2) main para] or section 75(2) [24(2B)]£ OSSCS 0 xﬁgnregistercd In the case. of an unregistered ﬁrm .......... ..assessed as'? under the provisions of section 190(b) [23(5)(b)] in res-
ﬁ,mf[,_24(,) pect of any assessment yeai-,2 its losses for that assessirient Proviso (d).] year shall be dealt with as if git: were a registered ﬁrm:
149Clauses 78--82 (1) ....... ..Where the assessee is an unregistered ﬁrm S°°"°" 78 which has not been assessed as a registered ﬁrm under L°"°'.°f d the provisions of section 190(b) [23(5)(b)] any .......... ..1ossg,',;',3:§;'}:§ of the ﬁrm shall be set off only against the income ....... .. partners. of the ﬁrm. [3, ,4") ma . V 0, (2) .......... ..Where the assesse is a partner of an unregis- 331;: ham tered ﬁrm which has not been assessed as a registered ﬁrm under the provisions of section 190(b) [s. 23(5)(b)] and his share in the income of the ﬁrm is a loss,-
(a) such loss shall not be set off under the provisions [New] of section 73(1), 74(1), or 75(1) [Sec. 24(1)];
(b) nothing contained in sectio_n 73(2) or 74(2) [Sec. 24 [§-o94(:)Ec) (2) main para] or section. 75(2) [s. 24(2B)] shall ;;"§',',,an'.'1 entitle the assessee to have carried forward and set not)' against his crwn income such loss.
( 1) Where a change has occurred in the constitution of S°°"°" 79 a ﬁrm, nothing in this Chapter shall be deemed to entitle 5¢'°'T°f the ﬁrm to have set off so much of the loss pro-, c°f';:° portionate to the share of a retired or deceased partner com-- conititﬁion puted in accordance with the provisions of section 69 [clause of firms or on
(b) of sub-section (1) of section 16] as exceeds his share of SU°°=5Si°n- proﬁts, if any, of the previous year in the ﬁrm, or to entitle [s_.24(2), Pro- any partner to the beneﬁt of any portion of the said loss '"50 ('N which is not apportionable to him under section 69 [sec- tion 16(1)(b)].
( 2) Where any person carrying _on any business, profes- sion or vocation has been succeeded in such capacity by another person otherwise than by inheritance, nothing in this Chapter shall be deemed to entitle any person other E than the person incurring the loss to have it set off against , his income ................ ..
Notwithstanding anything contained in this Chapter, no Scc|§on80 loss which has not been determined in pursuance of a re- su ' 'on turn ﬁled under the provisions of section 143 [22] shall be of Eturn for carried forward and set of under section 73(2) or 74(2)1°'-"t- [24(2)] or section 75(2) [24(2B)]. -- [s- ap<2A).
part-I CHAPTER VII INCOMES ON WHICH NO INCOME--'.=['AX IS PAYABLE ;
Income-tax shall not be pxtyable by an assessee in res- section 31 pect _of such portion, if any, the med income inc1u- Earicd in- ded in his total income as 1S directed by the annual Cen- conic.
-tral Act ﬁxing the rate or rates of income-tax for any as- [8- I5A»°=1'1i-
sessment year to be deducted in making an assessment for °' """'] that year .................................. ..
(1) Income-tax shall not be payable by a co-operative %°0°_':g';mi§: society, including a co-operative society carrying on the soc;_~,,._ business of banking,-- ' e '[s._ (3)..
' , I . mm para.) IS- 14 (3) EX' pln.] ta. :4 <3).
provxso.] Section 83.
Dividends from Co-ope-
rative socie-
ty~ [S-14(4):] Section 84.
Marketing Society.
[M4 (5).) Section 85.
Newly estab-
lished indu-
strial under-
takings.
[8-I5 C (1)1 [s. x_5 C (2), mam para.] 150 Clauses 82-85
(i) in respect of proﬁts and gains of business carried on by it;
(ii) in respect of interest and dividends derived from its investments with any other co-operative socie-
ty;
in respect of any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities;
(iii)
(iv) in respect of any interest on securities chargeable under section 18 [8] or any income from property chargeable under section 22 [9], Where the total income of such society does not exceed twenty thousand rupees and the society is not a housing society or an urban consumer's society or a society carrying on transport business.
(2) For the purposes of this section an "urban consu- mers' co-operative society" means a society for the beneﬁt of consumers within the limits of a municipal corporation, municipality, municipal committee, notiﬁed area committee, town area 01 cantonment.
(3) The provisions of sub-section (1) shall not apply, to------
(i) the Sanikatta Saltowners' Society;
(ii) a co-operative society carrying on insurance busi- ness in respect of the proﬁts and gains of that business computed in accordance with section 44 [Rule 9 of the Schedule].
Income-tax shall not be payable by an assessee, who is a member of a co-operative society, in respect of any dividends received by him from the society.
Income-tax shall not be payable by an assessee, which is an authority constituted under any law for the time be- ing in force for the marketing of commodities, in respect of any income derived from the letting of godowns or ware- houses for storage, processing or facilitating the marketing of commodities.
(1) Save as otherwise hereinafter provided, income- tax shall not be payable by an assessee on so much of the proﬁts or gains derived from any industrial undertaking to which this section applies as do not exceed six per cent.
per annum on the capital employed in the undertaking,.
computed in accordance with such rules as may be made in this behalf by the Central Board of Revenue.
(2) This section applies to any industrial undertaking which fulﬁls all the following conditions, namely:.--
(i) it is not formed by the splitting up or the recons-
truction of business already in existence . . . . . . ..
151' Clauses 8537
(ii) it is not formed by the transfer to'a new business of building, machinery or plant used in a business which was being carried on before the 1st day of April, 1948;
(iii) it has begun or begins to manufacture or produce articles in any part of India at any time within a period of thirteen years from the 1st day of April, 1948, or such further period as the Central Gov- ernment may, by notiﬁcation in the Ofﬁcial Gazette, specify with reference to any particular industrial undertaking;
(iv) it hmploys ten or more workers in a manufactur- ing process carried on with the aid of power, or employs twenty or more workers in a manufac- turing process carried on without the aid of power.
(3) .......... ..The Central Government may, by notiﬁ- [M5 c (2), cation in the Oﬂicial Gazette, direct that the exemption proviso.) conferred by this section shall not apply to any particular industrial undertaking.
(4) The proﬁts or gains of an industrial undertaking [S-I5 C-'(3)l - to which this section applies shall be computed in accor- dgiace with the provisions of sections 28 to 43 [Section 1 .
(5) Nothing in this section shall aﬁect the application [:45 c(_=,)1 of sections 113 to 120 ....... .. [23A] in relation t6 the pro- ﬁts or gains of an industrial undertaking to which this sec- tion applies.
(6) The provisions of this section shall apply to the [Ma 0(5)] assessment----
(i) for the assessment year if in the previous year for that assessment year the assessee begins to manu- facture or produce articles, and
(ii) for the four assessment years immediately suc- ceeding.
Income-tax shall not be payable by a shareholder in seceiones respect of so much of any dividend id or deemed to be 1); dud paid to him by an industrial underta ng as is attributable from new; in- to that part of the_ proﬁts or gains on which inc'ome-taa: 5" ial . is not payable under section 85 [preceding section re: new '["',= '3??? industrial undertakings]. 5' 5 4' Income-tax shall not be payable by an assessee in res~ Section 37 pact of the following amounts which are included in his Other in. total 'income---- comes.
(i) ....... ..the interest received on any security of the [5.-8- 2"'! P'°' Central Government_issued on declared to be in- ""°' come-tax free; ' ' ' ' 152 Clauses 87-88 [New] (ii) the interest received on any security of a State Government issued income-tax free, the income- [Cf.s.8, 3rd tax whereon shall be payable by the State Gov-
proviso.] ernment ;
[5-'4") (3)1 (iii) if the assessee is a partner of an unregistered ﬁrm, ............. .. any portion of the assessee's share in the proﬁts and gains of the ﬁrm computed in the manner laid down in section 69 [16 (1) (b)] on « Valhlch income-tax has already been paid by the rrn ;
[,_,4 (._,)(aa)] (iv) if the assesse is a partner of a registered firm, the amount which represents the difference bet- , ween--
(a) the assessee's share in the total income of the ﬁrm,'and '
(b) hisshare in such total income as reduced by the income-tax, if any, payable by the ﬁrm.
the shares in either case being computed in the manner laid down in section 69 [16(1) (b)]; and (V) if the assessee is a member of an associatibn of persons, other than a Hindu undivided family. a company or a ﬁrm, .... .; any portion of the amount which he is entitled to- receive from the associa- tion on which income-tax has already been. paid by the association. 8 CHAPTER VIII _ REBATES AND RELIEFS X A---Rebate of income-tax.
I!-14(9) (W '''''on (1) Subject to the provisions of this section, the as- life insumnce sessee shall be entitled to a deduction, from the amount of prcmia, income-tax on his total income with which he is c arge- annuities and able for any assessment year '0 an amount equal to t e in- fg"";g;'i'é::; come-tax calculated at the dverage rate of income-1; on fund'; cm the following sums, namely:--- f [s- :7 (2). ft ;'::5'1m] (a) .......... ..where the assessee is an individua any sums paid in the previous year by the asse ee-
(i) to effect or to keep in force an insurance the life of the assessee or on the life of a Wife or husband of the assessee ; or
(ii) to eﬁect or to keep in force a contract foria de- ferred annuity on the lig of the assessee gar on the life of a wife or husband of the assessee ; or
(iii) as a contribution to any provident fund to which 1909' 1925- the Provident Funds Act. 1925, applies;
)1 153 Clauses 88-89
(b) where the assessee is a Hindu undivided family,... [s_ ,5 (2)] any sums paid in the previous year by the assessee to effect or to keep in force an insurance %n the life of any male member of the family or of the wife of any such member; '
(c) ....... ..any sum deducted in the previous year from [s_-, (1), 1,. the salary payable by or on behalf of the Govern- proviIo.] ment to any individual, being a sum deducted in accordance with the conditions of his service, for the purpose of securing to him a deferred annuity or making provision for his Wife or children, in so far as the sum so deducted does not exceed one- ﬁfth of the salary; '
(d) if the assessee is an employee participating in a [New] recognised provident fund, his own contributions to his individual account in the Jund in /the previ- ous year, to the extent provi ed in section 295 [58F] ;
(e) if the assessee is an employee participating in an [New] approved superannuation fund, any sum paid in the previous year by him by way of contribution towards the superannuation fund, to the extent provided in section 311 [58R].
(2) The provisions of clauses (a) and (b) of sub-section [s-I5§(2A)] (1) shall apply only to so much of any premium or other ' payment made on a policy (other than 'a contract for a deferred annuity) as is not in excess of? ten per cent. of the actual capital sum assured. = * Eacplanation:-- ....... ..In calculating any such capital sum, no account shall be taken-- f
(i) of the value of any premiums agreed to be return- ed, or
(ii) of any beneﬁt by wayof bonusor otherwise over and above the sum aqtually assured, which is to be or may be received under' the policy by any person.
(3)_ The aggregate of the sums in respect of which a[,_,5 (3)1 deduction of income-tax is allowed under sub-section (1), shall not .......... .. exceed, in the case of an individual, one--fourth of his total income ......... or eight thousand ' rupees, whichever is less, and in the case of a Hindu undi-
vided family, one-fourth of iits total income or sixtee thousand rupees, whichever is less. ' (1) Subject to the provisions of this. section, the asses- S°Ctl°P- 39~ see shall be entitled to a deduction from the amount of Dongtiom for income-tax on his total income with which he is charge- °b"l""b'° able for any assessment 'year,;_of an _ 1 nt equal to the p"mv_°m' l [s. 1513 (1) main para and 17 (2), part.] [s.15B (I)2nd 154 _ Clause 89 income-tax calculated at the average rate of income-tax on any sums paid by him in the previous year as donations to any institution or fund to which this section applies.
(2) No deduction shall be made under sub-section (1) p'°"is°' (3): if the aggregate of the sums paid as aforesaid by the asses-
[s.15B (1)2nd proviso, (b).] [S-1 53 (3)1 [s.15B (2), main para.] 21 of 1860 1 of 1956 see is less than two hundred and ﬁfty rupees.
(3) No deduction shall be made under sub-section (1) in respect of any sums paid in excess of one-twentieth of the assessee's total income as reduced by any portion there- of on which income-tax is not payable under any provi- sion of this Act and by any amount in respect of which a deduction of income-tax has been granted under the pro- visions of this Chapter, or one hundred thousand rupees, whichever is less.
(4) The amount of income-tax deductible under this section, together with the amount of super-tax deductible under section 109 [section 15-B--for super-tax] shall not in any case exceed half the aggregate of the donations in respect of which the deduction is allowed under this sec- tion.
(5) This section applies to any institution or fund established in India for a charitable purpose which fulﬁls the following conditions, namely:--'
(i) if the institution or fund derives any income-, such income would not be liable to inclusion in its total income under the provisions of section 12 (1) to 12 (4) [section 4(3)(i)] or section 12(5) [4(3) (ii)] or section 11(24) [new provision added in the draft clause for exclusion from total income, Wh' h re- lates to universities or' other educational i stitu- tions not existing for proﬁt] ;
(ii) the institution or fund is not expressed to be for the beneﬁt of any particular religious community;
(iii) the institution or fund maintains regular accounts of its receipts and expenditure; and
(iv) the institution or fund is either constitutedas a public charitable trust or is registered under the Societies Registration Act, 1860, or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956, or is a university established by law, or is any other educational institution recognised by Government or by a university established by law, or afﬁliated to any university established by law or ....... .. is an institution ﬁnanced wholly or in part by the'Government or, a local authority.
155Clauses 89-92 x (6) An institution or fund established for the beneﬁt [s.l (2), of scheduled castes, backward classes, scheduled tribes or Exp n-] of women and children shall not be deemed to be an insti- tution or fund expressed to be for the beneﬁt of a religious <(:ommunity within the meaning of clause (ii) of sub-section
5). .
B.--Relief for income-tax Where, by reason of any portion of an assessee's sala- Sgctiongo ry being paid in arrears or in advance, or by reason of his 531,", paid having received in any one ﬁnancial year salary for more for more than than twelve months or a payment which is under the pro- 0116 V68'- visions of section 17 [sub-section (1) ofsection 7] a perqui- [5-5° (")1 site or a proﬁt in lieu of salary, his income is'assessed at a rate higher than that at which it would otherwise have been assessed, the Central Government may grant the ap- propriate relief.
(1) Where by virtue of the provisions of section l3 5°°'_3°" 9'- [section 25(3) part and section 25(4) part as incorporated in Business 359- the Chapter an exclusion from total income] the income fffe°dIn;':;: of any business, profession or vacation of any period has tax 'Act,',9,3 not been included in the total income of the assessee, the [s.25 (3),par assessee may further claim that the income .... .; .... .. from and*25 (4). that business, profession or vocation of the said period P'"'] shall be taken as the amount of income from that business, profession or vacation of the previous year immediately preceding the said period. Where anysuch claim is made, the income-tax payable in respect of the total income of the previous year immediately preceding the said period shall be determined in accordance with that claim. and if an amount of incomes-tax has already been paid in respect of that previous year in excess of the amount payable on the basis of such determination, a refund shall be given of the excess.
(2) No claim to the relief afforded under sub-section [ms (5)3 (1) shall be entertained unless it is made before the ex- ' piry of one calendar year from the date on which the busi- ness, profession or vocation Was discontinued or the suc- cession took place, as the case may be.' CHAPTER IX DOUBLE TAXATION RELIEF The Central Government may enter into an agree- Section 92 ment" Agreement with coun-
(a) with the Government of any 'country outside India tries-
for the granting of relief in respect of income on ["495] which have been paid; both came-tax (including super-tax) under this ;Act rncome-tax in that ' country, or ' ' ll--l Law Com.I58
-
'1 Section 93 Countries 156 Clauses 92-93
(h) with the Government of any country outside India for the avoidance of double taxation of in- come ....... .. under this Act and under the corres- ponding law in force in that country; and may, by notiﬁcation in the Official Gazette, make such provi- sions as may be necessary for implementing the agreement.
(1) If any person who is resident in India in any pre- vious year proves that, in respect of his income which ac-
with which crues or arises during that previous year without_ India noagreemcnt-(and which is not deemed to accrue or arise in India), he exists.
[349 13(1)] [M9 D(3)] l5- 4-9 D:
Expl.] has paid in any country, with which there is no agreement under section 92 [49A] for the relief or avoidance oi dou- ble taxation, income-tax, by deduction or otherwise, nder the law in force in that country, he shall be entity d to the deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income at the Indian rate of tax or the rate of tax of the said country, whichever is the lower, or at the Indian rate of tax if both the rates are equal. ' ;
(2) If any person who is resident in India in an pre- vious year proves that -in respect of his income whi h ac- crues or arises to him during' that previous year in akis- tan he has paid in th tlcountry, by deduction or othe ise, tax payable to the overnment under any law f the time being in force in that country relating to taxat on of agricultural income, he shall be entitled to a deduction from the Indian income-tax payable by him-- 3
(a) of the amount of the tax paid in Pakistan llnder any law aforesaid on, such income which is gliable to tax under this Act also; or i
(b) of a sum calculated on that income at the llndian rate of tax; 1 whichever is less.
Explanation.--In this section,-
(i) the expression "Indian income-tax" means in ome-
tax and super-tax charged in accordance wi the provisions of this Act ; 3 _
(ii) the expression "I 'an rate of tax" me 5 the rate determined by 'viding the amount of dian income-tax. after deduction' of any relief du un-
der the provisions of this Act but before ded ction of any relief due under this section, by the total V income; '
(iii) the expression "rate of tax of the said country" means income-tax and super-tax actually paid in the said country in accordance with the rres- ponding lawsof the id country after deducgbn of all' relief du but ﬁfpre deduction of any ;relief I - I i 157 Clauses 93-96 due in the said country in respect of double taxa- tio_n, divided by the whole amount of the income asessed in the said country;
(iv) the expression "income-tax" in relation to any coun- try", includes any excess proﬁts tax or business proﬁts tax charged on the proﬁts by the Govern- ment of any part of that country or a local autho- rity in that country.
(1) Where any dividend has been paid, credited or dis- S°"f'°" 94 tributed or is deemed to have been paid, credited or dis- R611" to tributed to a shareholder of a company which has obtain- gzmligzrdgg ed the relief .......... ..granted under section 92 [49A] or un- as "relief to der the India and Burma (Income-tax Relief) Order, 1936, share holder. the shareholder shall be deemed in respect of such divi- [L450] dend himself to have obtained such relief at the rate at 3 which such relief has been granted in respect of income- tax only to the company for the ﬁnancial year preceding the year in which the dividend was paid, credited or dis- triguteg or is deemed to have been paid, credited or dis- tri ute .