Perquisite valuation for furnished employer provided furniture increased, altering rent free accommodation valuation and payroll deduction treatment.
The amendment to Rule 3(a)(i) retains the existing allotment rule valuation for unfurnished rent free residential accommodation for Government officers and officers seconded to Government controlled bodies. Where accommodation is furnished, valuation is computed on the allotment rule basis and then increased by a prescribed proportion of the original cost of employer provided furniture or, if the furniture is hired, by the hire charges payable by the employer; this furniture valuation applies to the specified salaried categories and for payroll tax deduction purposes in the transitional year.

Compulsory deposit: high income individual taxpayers must make prescribed mandatory deposits with fixed rates, interest and penalties.
The circular explains the compulsory deposit regime under the 1974 Act and Scheme: liable persons (Indian individuals, Hindu undivided families, trustees of discretionary trusts and representative assessees) must make deposits when "current income" exceeds the statutory threshold; current and correct income are defined for advance tax payers and others. It prescribes graduated deposit rates with marginal and de minimis limits, timing and instalment options, accepted deposit offices, interest at the bank deposit rate, five year repayment in equal instalments commencing after two years, and fixed statutory penalties and recovery procedures with appeal rights.

Deductibility of urban land tax for business premises upheld as allowable under business expenditure provisions, affecting assessment and appeals.
Urban land tax paid in respect of premises used for business or profession is allowable as a deduction as expenditure incidental to carrying on business under Section 37 and Section 57(iii) of the Income tax Act, 1961; departmental officers should apply this position for guidance and regulate appeals and references accordingly.

Superannuation membership rules: prohibition on admitting persons already receiving prior employer pensions withdrawn, trustees may admit such members.
Prior restriction barring persons already receiving a normal pension from a former employer from Superannuation Fund membership is withdrawn because the Fund's purpose clause does not prohibit admitting such persons; the earlier instruction is rescinded with immediate effect.

Exemption of City Compensatory Allowance: appeal and stay sought; protective appeals and abeyance administratively recommended.
The Board advises pursuing a leave petition to a higher appellate forum and seeking a stay of the High Court judgment; the CIT in the affected charge is to file the petition and apply for interim suspension. All other departmental charges must continue to follow existing Board guidance and file appeals or references against adverse orders irrespective of tax effect; charges within the High Court's territorial jurisdiction should request abeyance of appeals and lodge protective appeals or references where adverse orders exist to keep the issue alive.

Tax deduction at source required on interest payments; deducted tax must be deposited and certificate issued to payees.
ITOs must deduct tax at source on interest payments, deposit the tax to the Central Government account, prepare two refund orders (net refund to the assessee and a refund order in favour of the Income-tax Department to be forwarded to the Reserve Bank or State Bank of India with a covering letter and challan), and issue the prescribed certificate of tax deducted at source; the procedure applies mutatis mutandis to withholding on interest to non-residents.

Irregular tax collections scrutiny: auditors must examine year-end receipts and report suspicious collections for supervisory review.
Direction requires audit parties to examine year-end receipts for irregular collections by assessing officers and report such instances to the Internal Audit Chief, who must notify the Commissioner; range inspection officers must also inspect for and report any such collections, ensuring communication of these obligations to audit and assessing staff.

Computation of company capital clarified: specific reserves included and certain balance-sheet items excluded for surtax capital calculation.
Instruction defines company capital for surtax as the aggregate on the first day of the relevant previous year of specified reserves including development rebate reserve and other reserves reduced by amounts already allowed as deductions; the Explanation excludes certain balance-sheet entries under "Reserves and Surplus" and "Current Liabilities and Provision" in Schedule VI from being treated as reserves for capital computation.

Interest under section 139(8) is computed on tax as if a registered firm were assessed as an unregistered firm.
Levy of interest under section 139(8) is to be computed on the tax that would have been payable if a registered firm (or an unregistered firm assessed under the special provision) had been assessed as an unregistered firm; Explanation 2 to clause (a) of sub section (8) of section 139(2) mandates use of that hypothetical tax base, so interest is chargeable even where the firm's actual assessment shows total income below the taxable minimum.

Taxation of capital gains: market-value basis prevents evasion and permits reassessment when consideration is understated.
The note explains that Section 52(2) treats the full value of the consideration for a transferred capital asset as its market value where declared consideration is understated, to prevent tax evasion on capital gains, while permitting a 15% margin for genuine valuation differences and imposing safeguards such as prior concurrence of a senior inspecting officer, opportunity to be heard, and referral to a Valuation Officer or appellate remedies to avoid arbitrary application.

Statutory notices under section 139(2): mandatory issuance to newly registered companies to secure tax assessment compliance.
The Board mandates that notices under section 139(2) be issued in the financial year following registration to bring newly registered companies onto Income-tax Department records and secure assessments; names of companies not undertaking business or incurring losses may be struck off. Commissioners must tally unassessed companies for 1969-70 to 1973-74, direct initiation of assessment proceedings in liable cases before the compliance date, and submit a report detailing initiated proceedings and reasons for non-initiation by the reporting deadline.

Safekeeping of taxpayer documents: ITOs must retain dividend warrants and accompanying papers personally to prevent loss and harassment.
The Board reiterates that returns filed with dividend warrants and other accompanying documents must be retained in the personal custody of the Income Tax Officer to prevent loss and taxpayer harassment; loss or misplacement of such papers at assessment is unacceptable and will be viewed seriously.

Allowance taxation: guidance treats certain pilot allowances as taxable remuneration while preserving limited tax-exempt allowances and evidence-based exceptions.
Special travelling allowance is treated as taxable remuneration in full; stay-over, meal and light refreshment allowances remain tax-exempt. Kit maintenance allowance is exempt only to the extent it reasonably represents expenditure incurred for duties, with the excess taxable. Reimbursement of insurance premia for loss of licence is a taxable perquisite. Other allowances and benefits meeting statutory exemption conditions remain non-taxable. Assessing Officers may accept evidence to allow greater exemption where justified. The guidelines apply to commanders and other pilots and to Air India pilots, and affect pending and future assessments but do not require reopening completed assessments.

Provisional assessment failures led to uncredited pre-paid taxes; ensure proper recording and liaison to protect tax credits.
Revenue Audit found that payments against provisional assessment were not credited in final assessments because ITNS-150 and demand notices omitted such payments, Demand & Collection registers lacked corresponding entries, and assessing officers did not verify credits with ITO (Collection), resulting in inflated demands; the instruction directs proper recording of payments, retention of payment evidence, and closer liaison between assessing officers and collection offices to ensure pre-paid taxes are adjusted.

Valuation of shares under Rule 10(2) follows the E.D. Act valuation method, not the 1968 circular.
Valuation of shares under Rule 10(2) of the Gift Tax Rules, 1958 is excluded from Circular No.1D/GT of 1968 and must instead follow the Board's earlier letters prescribing the valuation method corresponding to the E.D. Act provision, which govern the valuation methodology for shares covered by Rule 10(2).

Valuation of shares under section 37 excluded from Circular No.1 D/ED and governed by Board letters of 1965.
The Board directs that Circular No.1 D/ED of 1968 shall not apply to valuation of shares covered by section 37 of the Estate Duty Act beyond the circumstances in paragraph 5 of that circular, and that valuation of such shares shall be governed by the Board's letters of 3 May 1965 and 5 July 1965 issued from F.No.25A/3/65 ED.

Priority industry tax relief: doubts on eligibility must be referred upward and prior grants reviewed and reported.
The Board requires that any doubt about an industry's eligibility for the statutory priority industry tax relief be referred up the chain-assessing officers to Commissioner and onward to the Board if necessary-prohibiting subordinate officers from treating non listed items as eligible; it also directs review of completed cases where relief may have been wrongly granted and submission of a report detailing reviews, mistakes, tax effect and actions taken.

Refund advice timing: limit delay between voucher dispatch and bank advice to minimise taxpayer hardship and complaints.
Instruction requiring tighter administrative controls so that advice notes to banks are transmitted contemporaneously with dispatch of refund vouchers; test checks showed many cases with time lags caused by batching, postal delays and staff carelessness. The Board directs operational measures-more frequent notice server visits, avoidance of batching, mitigation of postal delay, disciplinary scrutiny of careless staff-and prescribes that the time lag should not normally exceed three days unless compelling reasons exist.

Tax withholding on salaries: employers must obtain an authorised employee certificate before applying no or lower deduction.
Employers must deduct income-tax at source on salary payments; if an employee claims non-taxability or seeks lower withholding, the employer must require an authorised certificate from the income-tax officer permitting no or lower deduction. Without such a certificate the employer must deduct tax at normal rates.

Provisional certificate review requires reassessment to withdraw excess dividend relief and notify commissioners promptly and report to the Board.
Review provisional certificates issued under section 197(3) during the last four financial years to ascertain whether excess dividend relief under section 80K was allowed due to non revision after regular assessments; ITOs assessing companies must intimate Commissioners so excess relief can be withdrawn from shareholders, and a report identifying counts of certificates, completed assessments, required withdrawals, and sent intimations must be submitted to the Board by 11th November 1974.