Capitalisation of Pre Commencement Interest affirmed as part of asset cost, prompting withdrawal of contrary appeals and guidance.
The cost of fixed assets includes all expenditure necessary to bring assets into existence and into working condition; therefore, interest on money borrowed to defray pre production construction or provision of plant and machinery can be capitalised and added to asset cost for computing depreciation and related allowances. The Supreme Court applied established accountancy rules and statutory recognition of capitalisation, and the Board directs withdrawal of pending appeals and circulation of the judgment as guidance to Income Tax Officers.

Interest-tax on bank interest imposes a levy on scheduled banks and sets return, assessment, advance-payment and penalty rules.
A special tax applies to the gross amount of interest received by scheduled banks on loans and advances made in India, measured as chargeable interest for relevant previous years, excluding interest on loans to other scheduled banks and interest accruing before 1-8-1974. Administration is by income-tax authorities with prescribed returns, assessments, reassessments and self-assessment and advance-payment obligations. Specific penalties and recovery procedures mirror income-tax provisions; rulemaking, exemption powers and prosecution measures are provided, and a schedule lists the banks covered.

Casual and non recurring receipts: only those qualifying as income, not purely personal gifts, attract tax.
Receipts of a casual and non recurring nature are chargeable to tax only if they properly qualify as income in ordinary or extended statutory meaning; gifts of a purely personal nature remain non taxable, but gifts that are additions to salary or arise from a profession or vocation are taxable.

Option to tax trust income: once the department chooses trustees or beneficiaries, that income may be charged only once.
Where the tax department elects to assess trust income in the hands of either trustees or beneficiaries, that choice governs liability for the assessment year and the same income must not be assessed again in the hands of the other person; inclusion of the trust share in a beneficiary's total income for rate purposes after the trustees have been assessed would amount to a second assessment and is inconsistent with the statutory scheme.

Compulsory deposit compliance: penalty suspended where delayed deposits are accepted within an administrative grace period.
Where deposit offices refused to accept compulsory deposits through no fault of depositors, penal action under section 10 of the Compulsory Deposit Scheme (Income tax Payers) Act, 1974 should not be initiated if the deposit is made by 31 January 1975; Income Tax Officers are to be issued immediate instructions to implement this approach.

Deductibility of foreign exchange entitlement certificate fee under income tax: fee not deductible against interest already earned.
The foreign exchange entitlement certificate fee charged under the Exchange Control Law is a statutory levy deducted after interest has been earned on a non resident blocked account and therefore is not an expense incurred for the purpose of making or earning that interest; consequently the fee is not deductible under section 57(iii).

Tax deduction at source: gross-up net-of-tax payments where payer bears non-resident tax to ensure correct TDS deposit.
When a payer bears a non-resident's tax, the payer must gross up the net-of-tax payment to determine the income chargeable to the non-resident and deduct tax at source on that grossed-up amount. The tax so deducted must be paid to the credit of the Central Government within the prescribed time. Failure to deduct or remit the tax renders the payer liable for the tax, interest on the unpaid amount, penalties, and potential criminal prosecution for willful default.

Accumulated income compliance review required annually to ensure proper investment and reporting by departmental officers.
The Board mandates an annual review of compliance with investment requirements for income of charitable and religious trusts accumulated under the exemption provision. Reviews like the earlier instruction of 27.9.73 must be carried out each year, with the review for financial year 1973-74 reported by the notified date and reviews for subsequent years communicated to the Board by the first July following the financial year, using the prescribed proforma.

Amortisation of patent and copyright expenditure requires amending the year of allowance before disallowing it in later years.
Deduction for capital expenditure on patent and copyright acquisition is allowed as amortisation over fourteen years or the unexpired life. If such amortisation appears to have been erroneously allowed, officers must not disallow it in a later year until proceedings to modify the year of allowance are initiated by appropriate rectification, revision or reopening procedures; if modification of the year of allowance is not possible, adjustments may be made in subsequent years' assessments.

Company in which the public are substantially interested: review required where liberalised definition applied and report outcome to Board.
The instruction directs that the liberalised definition of company in which the public are substantially interested, as introduced in the Finance Act, 1965, is available for assessments prior to 1965-66 and that all pending proceedings up to that assessment year be regulated accordingly; it further requires a review of cases where the liberalised definition was applied and submission of results to the Board in the prescribed proforma.

Investment limit for National Defence Certificates revised; administrative notice directs compliance with higher ceilings.
The Board amends prior Instruction No. 698 to revise investment ceilings for 12-year National Defence Certificates (discontinued from 14-3-1970), increasing the permissible limits to Rs. 35,000 for single accounts and Rs. 70,000 for joint accounts in place of the former Rs. 25,000 and Rs. 50,000, and directs assessing officers to be notified for necessary action.

Temporal point "first day of previous year" clarified as commencement, so capital is computed at opening of that day.
The instruction rules that "the first day of the previous year" means the commencement of that day, so capital under the companies surtax and the cited finance-act provision must be taken from the balance-sheet as at the opening of that day; changes made on that day are not to be included in determining paid-up capital relevant to dividend-related income.

Charitable donation deduction allowed when donee meets trust income tests despite partial taxable income, recognition certificates remain valid.
Deduction under Section 80G is available where the donee satisfies the exemption tests of Sections 11 and 12; Commissioners have issued recognition certificates administratively. Omission of Section 13 from Section 80G(5) means certificates should not be withdrawn or refused solely because part of the trust's income becomes taxable under Section 13, and a donor's deduction is not to be denied where the income taxable by Section 13(2)(h) remains within the permissible small proportion of the investee capital.

Registered shareholding by banks counts toward the threshold requiring a special resolution under section 224A.
Whenever the name of a bank is entered in the register of members as holder of shares, those shares must be taken into account for assessing the statutory holding threshold that triggers the special resolution requirement; the circumstances or purpose for which the bank holds the shares, including holding as security, are immaterial.

Interest under Section 139(8): include the actual return filing or assessment completion date in computation.
The Board, in consultation with the Ministry of Law, advised that the actual date of filing the return or the actual date of completion of assessment must be included in computing the period for which interest is chargeable under the provision requiring simple interest for late returns.

Revision power under section 263: Commissioner may revise ITO order portions not covered and severable from the appellate order.
Commissioners may exercise revision under section 263 only over points in the Income tax Officer's order that were not covered, expressly or impliedly, by the Appellate Assistant Commissioner's order and which are severable from the parts affirmed by the appellate order; if the appellate order wholly affirms the ITO's order, the ITO's order is merged and not subject to revision.

Instalment default makes full tax demand immediately payable and enables penalty and coercive recovery measures.
Failure to honour an agreed instalment accelerates the entire outstanding tax demand to immediate payment and creates penal liability; the Department must invoke penalties appropriate to the gravity of the default and promptly undertake coercive recovery measures to realise the arrears.

Film cost amortisation: provisional receipts based allowances and time based depreciation guide deduction timing and adjustments.
Amortisation of film production and distribution acquisition costs combines time based depreciation for higher cost films and provisional, receipts based allowances where exploitation extends beyond the accounting year. Full deduction is permitted if a film is fully exploited in the year of release (including outright sales or complete collections under minimum guarantee). Distributors follow the same treatment as producers. Mixed exploitation requires proportional immediate deduction for outright sale receipts with the balance amortised on the prescribed time schedule, and provisional assessments are subject to final adjustment after the exploitation period.

Valuation under Rule 3A: small-share property interests must be referred to Valuation Officer rather than Assistant Valuation Officer.
Where an assessee's declared value represents only a share of a larger property and the assessee's interest falls at or below the prescribed monetary threshold, the proviso to Rule 3A permits valuation by the Valuation Officer rather than by Assistant Valuation Officers; officers are directed to refer such valuation questions to the Valuation Officer and not to Assistant Valuation Officers.

Tax exemption for foreign government trainees' salaries maintained for defence training in India irrespective of payment location.
Salaries and allowances paid by foreign Governments to their officers while undergoing training in Indian Defence Training Establishments are exempt from Indian income tax whether paid in India or abroad; the Board extends an earlier policy from a single college to all Defence Training Establishments and directs its uniform application.