Payment-method requirement: deductible business payments above threshold must be by crossed cheque, subject to specified exclusions and evidence rules.
Section 40A(3) conditions deduction on payment method: deductible payments exceeding the threshold must be by crossed bank cheque or draft, with exclusions under rule 6DD for specified categories (pre-existing cash contracts, book adjustments, payments in areas without banking, payments to producers of agricultural/forest/animal-husbandry/dairy/poultry/horticulture/pisciculture and cottage-industry products, payments to banking/financial institutions, payments via banking instruments, terminal benefits to low-paid employees) and a residuary exception permitting non-cheque payments in exceptional circumstances upon satisfactory proof of genuineness and payee identity.

Perquisite rules: employer deductions for employee benefits are capped relative to salary; bonuses are salary if contractual.
Section 40(c)(iii)/40(a)(v) limits employer deductions for expenditures that provide benefits, amenities or perquisites to employees to a capped portion of the employee's salary as defined in rule 2(h) of Part A of the Fourth Schedule. Reimbursements and provision of utilities, domestic help and similar benefits are perquisites within that cap. Bonuses and commissions are salary when payable under contractual, statutory or binding award obligations; gratuitous or discretionary payments are perquisites. Classification of commission depends on the facts and terms of service.

Artist definition expanded to include photographers and TV cameramen, enabling deduction for foreign sourced professional income when repatriated.
The provision permits a resident individual-examples given include author, playwright, artist, musician and actor-to deduct a fixed portion of professional income derived from foreign sources when that income is received in India and brought into the country in foreign exchange in accordance with foreign exchange law. The revenue administration has decided that photographers and TV cameramen are to be regarded as artistes for the purpose of this deduction, subject to the residency, source, receipt and repatriation conditions.

Amortisation of film production costs: provisional and class-based allowances guide assessments for producers and distributors.
Guidance permits provisional assessments permitting estimated proportionate deductions of film production or distribution-rights costs against actual receipts when final receipts are unknown, with final adjustment after the exploitation period. Entire cost may be allowed if the film is fully exploited in the year of release; otherwise costs are apportioned over years by realised collections and estimated future receipts. High-cost films follow fixed multi-year amortisation percentages, while lower-cost films are generally treated as having one-year effective life; distributors are treated like producers and mixed exploitation requires proportionate outright deduction with balance amortised.

Professional tax not being a profits based levy can be claimed as a revenue expenditure deduction under income tax law.
Professional tax imposed by local authorities is not generally a tax on profits or gains and thus falls outside the disallowance provision for taxes assessed on profits; accordingly, professional tax paid by a person carrying on business or profession can be allowed as a deduction under the general provision for revenue expenditure.

Bad debt determination: tax officer decides on factual evidence when a bank substantiates irrecoverability.
Determination whether a banking receivable is a bad debt and when it became bad is a question of fact for the income-tax officer, not the assessee's unilateral declaration. If a public bank places the facts and evidence showing irrecoverability before the I.T.O., the I.T.O. may take a reasonable view of that material in reaching a finding, subject to appeal. The treatment of audit certificates in this assessment context was considered by the Income-tax Investigation Commission (see paragraph 206).

Accumulation limits for charitable trusts: excess uninvested income becomes taxable unless fully invested in prescribed government securities.
A trust may retain a limited portion of its income tax-exemptly, but if it accumulates beyond that limit it must invest the entire unspent balance, including the otherwise exempt portion, in prescribed Government securities and comply with notice and filing requirements; failure to meet these protective-investment conditions renders the whole accumulated amount taxable when the accumulation ceases to satisfy those conditions. Trust "income" for these rules is the trust's commercial/book income as shown in accounts adjusted for relevant appropriations and capital debits, while capital donations are excluded from the accumulation limit except contributions from other trusts treated as income.

Interest deductibility on replacement loans: interest on a replacement loan is allowable if used solely to repay the original loan.
If a subsequent borrowing is in fact used solely to discharge the original loan that financed the property, and this use is proved to the satisfaction of the assessing officer, the interest paid on the subsequent borrowing is treated as interest on borrowed capital for the property and is allowable as a deduction.

Weighted deduction for export and agricultural development: indirect expenditure qualifies if properly apportioned and evidenced.
Sections 35B and 35C allow a weighted deduction for qualifying export and agricultural development expenditure incurred directly or indirectly. Indirect expenditure by associations or export houses qualifies for members only if the expenditure falls within specified heads, non-qualifying expenditure is isolated, the net qualifying amount (after subsidy credit) is rationally apportioned and recovered from members, and proper accounts are maintained; for section 35C the association must be approved by the prescribed authority.

Development rebate reserve condition: misuse of the reserve triggers withdrawal of the rebate even after sale to government.
Section 34(3)(a) conditions the allowance of development rebate on crediting a portion to a reserve and prohibiting its utilisation for distribution, remittance as profits, or creation of assets abroad for a statutory period; utilisation or transfer of that reserve into capital or profits contrary to those prohibitions results in forfeiture and withdrawal of the rebate, and the proviso shielding certain asset transfers does not excuse breach of the reserve-use requirement.

Stay of recovery under section 220(7) withdrawn; administrative concession for non repatriable foreign income removed by board.
The Board revoked its earlier concession that directed treating Indian income as the assessee's total income and staying recovery of the balance tax where income in Pakistan could not be repatriated. Citing inconsistency with statutory provisions and the Madras High Court's interpretation, the Board withdrew para 2(a) of the 1969 circular, instructed modification of that circular, directed review of existing stayed cases, and required authorities to notify and act accordingly.

Production of cinematograph films treated as manufacture or processing for tax classification, based on transformation into an exhibition-ready product.
Production of cinematograph films constitutes manufacture or processing of goods for tax classification because a cinema film prepared for exhibition is materially and functionally distinct from the raw unexposed film loaded into a camera, so the finished product represents a processed good rather than merely a service.

Business connection in India defines taxable income for non-residents; tax limited to profits attributable to Indian operations.
Section 9 deems income accruing or arising through or from any business connection in India to be income accruing in India, bringing non-resident income into the Indian tax net to the extent such profit can reasonably be attributed to operations in India. The existence of a business connection is fact-specific; examples include branches, agents, factories, local subsidiaries and close financial associations. Where transactions are genuinely on a principal-to-principal basis at arm's length and the resident or subsidiary acts on its own account, profits of the non-resident are not attributable to India. If sales are channelled through an Indian agent, assessment is limited to profit attributable to the agent's services after allowable expenses.

Advance tax reform: streamlined instalments, higher exemption thresholds and stricter interest and penalty rules for defaults.
Finance Act, 1969 revises tax rates and withholding/advance tax schedules and amends income tax, wealth tax and surtax laws. It treats listed public companies as widely held for tax purposes, overhauls the advance tax regime (raising exemption limits, allowing gross TDS set offs, consolidating instalments, permitting payers to vary payments on self estimates, imposing obligations to pay higher self estimates, tightening interest calculations and expanding penalties), enlarges savings and deduction provisions (including new sections for technical fees and foreign receipts of creative professionals), extends development rebate priority treatment to cotton and jute textiles and expands wealth tax to agricultural property subject to specified exemptions.

Taxation of technical collaboration payments: distinguish capital transfers from revenue services and allocate consolidated payments accordingly.
Payments creating an enduring asset or permanent advantage for the Indian participant are capital expenditure, while payments allowing use of technical knowledge, patents or trade marks for a limited period or to run the business are generally revenue expenditure; allocation must be made objectively where consolidated or percentage of sales payments bundle services, and non resident receipts are taxable in India if they arise from services rendered in India or represent royalties exploited in India.

Exemption for initial equity shares - company-applied certificate enables shareholders to claim wealth-tax exemption for specified assessment years.
Where initial-issue equity shares meet the statutory conditions, the issuing company may apply to the Income-tax-cum-Wealth-tax Officer for a certificate declaring the value of such shares exempt in the hands of shareholders; the application must provide prescribed particulars and a declaration by the principal officer. The Officer issues a certificate in a prescribed form specifying the assessment years for which the exemption applies, and the company must furnish copies to shareholders for production to their assessing officers to claim the exemption.

Advertisement expenditure in souvenirs admissible if wholly and exclusively for business; disguised donations treated as inadmissible, possible charity relief.
Expenditure on advertisements in souvenirs is allowable in full if laid out wholly and exclusively for business. Rule 6B does not bar such allowance so long as the business-purpose test is met. Payments that are donations in the guise of advertisement expenses are inadmissible as business deductions but may be considered for relief under the statutory provisions governing charitable donations if they satisfy those conditions.

Bad debt deductions for banks are not automatic; tax officers must determine irrecoverability before allowing relief.
Banks' bad-debt deductions are not automatically allowed; the Income-tax Officer must decide if a debt is irrecoverable by considering relevant facts. While banks write off or provide for doubtful debts under company and banking law, tax relief is permitted only to the extent debts are shown irrecoverable. Audit or directors' certificates are not universally conclusive; officers may accept such certificates in appropriate cases but retain discretion to call for further evidence and to select significant items for enquiry rather than examine every entry.

Advertisement in souvenirs deductible where wholly and exclusively for business; disguised donations not allowable but may qualify under charitable relief.
Expenditure on advertisements in souvenirs is admissible as a business deduction if laid out wholly and exclusively for business and the prescribed conditions for advertising allowance are satisfied; souvenirs constitute recognised publicity media and multiple insertions are permissible. Payments that are in substance donations rather than genuine advertisement expenses are not allowable as business deductions but may be eligible for charitable donation relief if they meet the relevant conditions.

Concealment of wealth: penalty not imposed where understatement stems from disallowed disputed tax claimed to enable rectification.
Where understatement of net wealth results from disallowance of disputed tax claims that were included in returns to enable later rectification, taxpayers are regarded as having discharged the onus of proving absence of fraud or gross or wilful neglect, and penalty under section 18(1)(c) should not be levied.