Encashment of leave: department treats amounts as taxable salary and directs income tax officers to follow this position.
The Department's operative position is that amounts received on encashment of leave salary, whether during service or on retirement, are taxable as part of salary income, and Income tax Officers assessing salary cases are instructed to follow this stand pending the reference to the High Court.

Valuation of perquisites: rule 3 governs rent free accommodation and free food, superseding the earlier circular in instruction.
Valuation of employee perquisites for free boarding and lodging must be determined under Rule 3 of the Income-tax Rules, 1962, with the provision for rent free residential accommodation applied to employer provided housing and the provision for free food applied to employer supplied meals; the earlier 1960 circular is superseded.

Finality of adopted annual accounts: adopted accounts cannot be reopened and amendment resolutions are invalid.
Accounts adopted and passed at an annual general meeting become final and cannot be reopened or revised in a subsequent meeting. A special resolution purporting to empower the company to amend or revise accounts already adopted is invalid and cannot override the rule of finality (noted as invalid under the provision cited in the correspondence).

Retrospective tax provision waiver where gratuity provision led to short advance tax, penalty and interest waived.
Waiver of penalty and interest applies where reassessment or rectification arises from the retrospective operation of section 40A(7) and the short payment of advance tax is attributable to deduction of a provision for gratuity; Instruction No.849 para 5(b) is extended to assessment years 1973-74 and 1974-75 and officers are directed to apply this guidance in relevant assessments.

Agricultural income: processed tea may be agricultural produce, but income computation follows income tax rules allocating business and agricultural portions.
The Circular clarifies that the Supreme Court's ruling that processed tea leaves remain agricultural produce for sales tax purposes does not affect the Income tax Act's statutory scheme: the constitutional restriction tying the definition of agricultural income to the income tax enactments limits State competence, and income from tea grown and manufactured by the seller in India must continue to be computed under the Income tax Rules, allocating a portion as business income and the balance as agricultural income.

Employer reservation to discontinue pension scheme does not automatically render trust revocable, approval need not be withheld.
A reservation permitting the employer to discontinue contributions does not automatically render an otherwise irrevocable superannuation trust revocable; the trust corpus remains vested in the trustees and such a reservation does not, by itself, offend the conditions of rule 3 of Part B of the Fourth Schedule, so approval need not be withheld for that reason, although the commissioner may act, including withdrawing approval under rule 2, if specified events occur.

Reopening assessments: request direct Supreme Court reference where High Court conflict exists on adding barred items.
Instruction requires Commissioners to have Departmental Representatives request the Tribunal to make a direct reference to the Supreme Court where High Courts conflict on whether a valid reopening of assessment for one category permits bringing time barred items into charge; CsIT to issue instructions and DRs to seek such references, including when the assessee seeks a reference.

Exemption for employee foreign travel allowances limited to amounts actually spent; unspent savings are taxable.
Section 10(14) exempts allowances only to the extent expenses are actually incurred; central and state government daily foreign-tour allowances are exempt without that actual-spend requirement for Indian citizens. Allowances paid by other employers for foreign tours are exempt only to the extent spent, and any unspent foreign exchange brought back to India is not eligible for exemption. Tax officers should verify actual expenditure for non-government employees claiming such exemptions.

Interim dividend: board may declare if authorised by articles, subject to regularisation by shareholders at the annual general meeting.
The board may pay an interim dividend if authorised by the articles of association, but any interim dividend must be regularised by the company in general meeting; the appropriate meeting for such regularisation is the annual general meeting because the profit for the financial year would not otherwise be known.

Extension of assessment time unavailable when reassignment follows a pending reference; verify references before assigning assessment functions.
Extension of assessment time under the proviso to assessment time-limits is not available where the assessing officer has made a reference to a higher income-tax authority and the assessment functions for that year are subsequently assigned to that higher authority; chief commissioners must verify pending references before reassigning assessment responsibility.

Right of custody of seized documents: owner's objection can bar an employee from copying seized books.
Section 132(9) grants the person from whose custody books or documents are seized the right to make copies or extracts; "custody" entails control or actual/constructive possession tied to legal duty. The decisive consideration is the person to whom the documents relate and against whom they will be used. If the assessee objects to an employee making copies of documents of which the assessee is owner, the assessing officer may refuse permission and the assessee alone is entitled to the benefit of Section 132(9).

Tax treatment of posthumous leave pay: exempt when payment is a family benefit, not income from employment.
The cash equivalent of leave salary paid to the legal heirs on the death of a Government servant is a posthumous family benefit and not remuneration from an employer to an employee; the deceased had no right to the amount and it is a financial benefit payable only because of death, and therefore the payment is not liable to income-tax.

Tax Holiday for Free Trade Zone units: complete multi year exemption under new section 10A and anti avoidance rules on trusts.
The Finance Act, 1981 specifies income tax and withholding rates, reduces corporate surcharge, raises personal exemption and revises slab structure; introduces section 10A granting a complete multi year tax exemption for qualifying industrial undertakings in designated free trade zones with conditions on formation, machinery use and carry forward of allowances; increases standard deductions and certain allowances; expands anti avoidance provisions by treating associations with indeterminate shares and undisclosed oral trusts as taxable at the maximum marginal rate unless properly disclosed; and introduces advance surtax payment, interest and penalty mechanisms alongside appellate fee increases and related compliance measures.

Official residence exemption permits retrospective tax relief for judges' rent free accommodation and HRA, enabling rectification and refunds.
Exemption from income tax for the value of rent free official residence and House Rent Allowance granted to High Court and Supreme Court judges is provided by sections 22 D and 23 D (effective 1 April 1975) and operates notwithstanding the Income tax Act; assessing officers must rectify completed assessments and apply the exemption in pending assessments, allowing refunds where due.

Recovery certificate verification: require confirmation of advance tax payments before enforcement and suspend coercive recovery steps.
Require ITO verification of filed returns and challan evidence before issuing recovery certificates for advance tax arrears and ensure payments are posted in the D & C register; if verification is incomplete by the sec.231 deadline, the recovery certificate must note the assessee's claim and the TRO should be asked to withhold coercive steps until the ITO confirms actual arrears. Periodic review from September is required; instructions apply prospectively from 1980-81 and retrospective verification for 1978-79 and 1979-80 must be completed by 30 September 1981.

Supply of return forms reverted to prior distribution: counters, bulk employer supply, and post-by-request available.
Earlier instructions to send return forms automatically to all assessees above the taxable limit are withdrawn and the Department reverts to prior practice: forms to be available across counters and selected post offices, taken in bulk by practitioners, supplied in bulk to heads or public relations officers of organisations for salaried employees, and sent by post promptly on specific request; this circular supersedes the earlier directions and officers must be instructed immediately.

High court decision review and lists of refused special leave petitions require official circulation to concerned officers.
Summarises the Board's administrative handling of High Court decisions considered for the calendar year 1980 and sets out two appended lists: Annexure A of cases where High Courts refused leave to appeal and the Board accepted that refusal, and Annexure B of cases where the Supreme Court did not grant special leave petitions; directs prompt circulation to officers and authorised representatives.

Promoter contributions exclusion from deposit definition: blanket exemption refused, government may grant individual exemptions under statute.
Promoter contributions constituted by unsecured loans to meet promoters' obligations under financial institution stipulations cannot be accorded a blanket exclusion from the deposit definition; the Government may, at its discretion, consider individual case exemptions under section 58A(8).

Place of assessment: direct tax payments should be made where a taxpayer is assessed to secure prompt credit.
Place of assessment should determine where payments of direct taxes (other than tax deducted at source) are made so departmental receipted challans reach the assessing Income-tax Officer promptly and taxpayers receive timely credit. Tax deducted at source payments must be made at the Income-tax Office location where the deductor files prescribed TDS statements. Taxpayers with accounts at authorised bank branches should tender cheques at those branches to obtain immediate receipted challans, avoid Clearing-House delays, reduce administrative overhead and enable immediate correction of misclassified payments.

Investment allowance reserve: reserve requirement and carry forward limits govern allowance utilisation and reserve adequacy under section 32A
Investment allowance is admissible in the year of installation or the immediately succeeding year subject to creation of a statutory reserve equal to seventy-five per cent of the amount actually allowed, to be debited to the profit and loss account. Only so much of the allowance as reduces total income to nil may be utilised each year, with the balance carried forward to subsequent assessment years. Cumulative reserves created in the year of installation or later may be aggregated to satisfy the reserve requirement, and an assessee may create a reserve exceeding current year profits without denial solely for that reason.