Classification of securities as stock in trade alters deduction of valuation losses and taxation of net interest.
Securities held by banks are to be regarded as stock in trade, so valuation losses debited in the books are treated like other stock in trade losses for tax purposes. Interest payments and receipts on securities, including broken period interest, are revenue in nature; only net interest on securities is taxable as business income.

Surcharge exemption clarified: non-resident taxpayers charged under section 172(4) owe no surcharge on occasional shipping profits.
The circular clarifies that, following amendment by the Taxation Laws (Amendment) Act, 1991 and the Finance Act, 1990, no surcharge is payable by a non-resident taxpayer where income-tax is charged in respect of profits of non-residents from occasional shipping business under the relevant Income-tax Act provision, and that paragraphs 3 and 4 of Circular No. 591 dated 30-1-1991 should be read as modified accordingly.

Tax Deduction Certificate Forms replaced, introducing form-specific issuance rules and revised annual TDS return deadlines.
The circular replaces the unified TDS certificate with Form No.16, 16A and 16B, allocating each form to specific deduction heads and making the new forms effective for certificates issued after 28th February, 1991. It prescribes that Forms 16 and 16A may be printed privately in prescribed proforma, while Form 16B is to be on serially numbered government-printed book forms unless computerised issuers are permitted by the Commissioner. Certificates must be furnished within time-limits under rule 31 and failure to comply attracts penalty under section 272A.

Applicability of section 13(1)(d) clarified: effective from assessment year 1984-85; prior appeals will not be contested.
The substituted clause of section 13(1)(d) takes effect from assessment year 1984-85, not 1983-84; trusts that changed investment patterns between April and November 1983 should not be denied exemption for AY 1983-84. Appellate decisions favouring assessees on this issue are not to be contested, and Chief Commissioners may withdraw pending appeals and references under delegated powers.

Approved superannuation fund winding up restricted unless employer's trade is wound up or discontinued under Income-tax Rules.
An approved superannuation fund established under an irrevocable trust cannot be wound up except when necessitated by the winding up or discontinuance of the employer's trade or undertaking; Rules 93 and 94 of the Income-tax Rules are analogous to the rules for gratuity funds and rule 3(a) of Part B of the Fourth Schedule requires establishment in connection with a trade or undertaking.

Ad hoc deduction for commission extended to authorised agents of specified savings and post office schemes.
The Board permits an ad hoc deduction at the rate of 50% of gross commission receipts to authorised agents of the Unit Trust of India and agents for specified national savings and post office schemes where detailed accounts are not maintained and gross commission is below the notified threshold. The deduction applies to National Savings Certificates VIII Issue; Social Security Certificates; Post Office Time Deposit and Recurring Deposit Accounts; National Savings Scheme 1987; Post Office Monthly Income Account Scheme; Kisan Vikas Patra; Public Provident Fund Accounts; and the Deposit Scheme for Retiring Government Employees 1989.

Prosecution initiation guidelines emphasise prioritising serious tax frauds and require a show-cause notice before proceedings.
Departmental guidance requires thorough factual examination and, where prosecution parameters are met, service of a show-cause notice to the assessee before initiating prosecution, except for offences under section 276C(1) and 277; prosecutions are to focus on significant frauds and major defaults, with avoidance normally for persons aged seventy or above and with specified thresholds for various sections determining non-initiation.

Surcharge on withholding tax increased, changing TDS/TCS rates and advance tax instalment payment timing.
The Amending Act increases the surcharge on income-tax applicable to tax deducted or collected at source for domestic companies and non-corporate resident assessees and requires payers to adjust any deficiency in prior withholdings, including salary withholding adjustments. It prescribes which advance tax instalments must include the enhanced surcharge and when additional surcharge liabilities arising after earlier instalment dates must be paid. The Act also restricts company depreciation deductions to seventy-five per cent of the computed amount for the relevant block, making the resulting extra advance tax payable with the final advance instalment.

Exemption of interest on Non-Resident External Accounts: joint account holders qualify if each individual meets statutory conditions.
The Circular clarifies that mere joint operation of a Non-Resident (External) Account does not convert joint holders into an association of persons; therefore the exemption for interest under the Income-tax Act is available to joint account holders provided each individual joint holder fulfils the other statutory conditions for claiming the exemption.

Search authorisation under the Income tax Act: deputy officers empowered to authorise searches per Board instruction.
Deputy Directors (Investigation) and Deputy Commissioners of Income-tax are authorised to grant search authorisations under the Income-tax Act, with the scope of their delegated powers governed by prior notifications and the covering letter to the 1979 notification, which applies mutatis mutandis to the 1990 notification.

Surcharge increase on income tax alters advance tax, TDS/TCS and transitional payment obligations for companies and residents.
The Amending Act, 1991 increases the surcharge on income tax for domestic companies and non corporate resident assessees, prescribes effective dates for applying the enhanced surcharge to tax charged, deducted or collected at source, and sets transitional provisions for adjustment of advance tax instalments. It restricts depreciation deductions for companies to seventy five per cent of the otherwise calculated amount for a block of assets, clarifies exceptions for low cost assets and written down value computation, and exempts specified shortfalls arising from these changes from interest under section 234C where paid within prescribed subsequent instalments.

Interest exemption on NRE/FCNR accounts allowed for temporarily repatriated non-resident Indians maintaining accounts abroad; continuity permitted.
Interest on amounts deposited in NRE and FCNR accounts is exempt for persons retaining non-resident status; individuals normally resident in Kuwait who returned as a direct consequence of the invasion and who continue to maintain NRE/FCNR and foreign currency accounts under the Reserve Bank's temporary permission are eligible for the interest exemption in respect of such accounts maintained during the permitted period.

Prosecution counsel fee schedule instituted, setting departmental rates and excluding specified metropolitan jurisdictions.
Sanction of a departmental fee schedule for Prosecution Counsels effective 1 January 1991, authorising implementation of prescribed rates, subject to obtaining consent of incumbent counsels; the schedule excludes specified metropolitan jurisdictions where Ministry of Law Branch Secretariat rates apply, and the instruction records concurrence of the Ministry of Law and Justice.

Exchange of information under DTAA: regular transmission of taxpayer transaction data to treaty partners via consolidated half yearly reports.
Information relevant to recipients in treaty partner countries must be collected from returns of income or assessment proceedings using the prescribed proforma and compiled into consolidated half yearly reports to the Board's Foreign Tax Division for transmission under the exchange of information article of the Double Taxation Avoidance Agreements.

Forfeiture auction procedures assigned to Income Tax Chief Commissioners to conduct sales and report promptly to the Board.
The Board directs that auctions and disposal of properties forfeited under Section 7 be handled by Chief Commissioners of Income Tax who manage custody and sale under the Chapter XXC pre-emptive purchase provisions; those Chief Commissioners must conduct sales using their existing infrastructure and report each sale to the Board within one month, and the instruction is to be circulated to all regional officers for implementation.

Assessment of Chapter VI-A deductions: require verification of eligibility and documentary proof before allowing small-scale industry benefits.
Audit review found Assessing Officers routinely failed to verify statutory conditions for Chapter VI-A deductions: they did not obtain authenticated worker records, did not verify actual plant and machinery cost, allowed rural or backward-area claims without confirmation, permitted ineligible large-scale or processing units to claim benefits, failed to insist on prescribed audit certificates, and treated collected taxes as assessable receipts. The Board directs issuance of instructions requiring AOs to verify documentary and audit evidence, confirm location and classification criteria, and apply correct income measures before allowing deductions.

Discretion under section 220(6) permits AOs to consider all relevant factors before treating an assessee not in default.
Assessing Officer discretion is to be exercised by considering all relevant factors bearing on a tax demand and by communicating the decision to the assessee in the form of a speaking order; this applies to deciding whether to treat an assessee as not in default for amounts disputed in first appeal.

Utilisation of survey reports under section 133B requires monthly feedback and consolidated reporting through prescribed proforma.
The instruction mandates feedback on utilisation of survey reports under section 133B and CIB verification reports via revised Proforma I and II; Part C of Proforma I must use the prescribed register of 'Survey and CIB verification' while Part A continues to record new assessees. Assessing Officers send monthly Proforma I to Commissioners for consolidation to Chief Commissioners and the Board; Directors of Income-tax (Inv.) consolidate Proforma II via Directors General (Inv.) with DIT-wise breakups. Revised proformae apply from January 1991 with consolidated regional reports due to the Board by the 7th of the succeeding month.

CIB verification procedures mandate uniform verification, specific recommendations, and standardized monthly reporting for tax information transmission.
The instruction mandates uniform verification by Central Information Branches of transactions reported from various sources for both existing assessees and non assessees, using statutory inquiry powers where necessary, and categorises verification outcomes into forwarding for assessment records, marking for Assessing Officer action, filing where no taxable capacity exists, and appending verified information to standardized monthly lists. Specific, vetted recommendations must accompany cases proposed for Assessing Officer action, and a prescribed register and monthly reporting format must be maintained for monitoring and oversight by range and commissioner level officers.

Large refund controls require prior approval, substantive review, and consideration of adjustment before issuing tax refunds to claimants.
Controls require prior executive approval for issuance of large tax refunds. Reviewing officers must verify justifiable grounds for large refund claims, consider statutory withholding measures, and examine adjustment against existing or foreseeable demands. For assessment-related refunds reviewers must ensure prima facie adjustments or disallowances are made and consider referring cases to scrutiny under applicable assessment procedures before sanctioning payment.