Conversion of capital asset into stock-in-trade treated as transfer, triggering capital gains tax when subsequently sold.
Conversion or treatment of a capital asset as stock-in-trade is to be regarded as a transfer for capital gains; the fair market value on the date of conversion is deemed the full value of consideration and capital gain is charged in the year the stock-in-trade is sold. A new section 47A withdraws exemption on transfers between a company and its wholly-owned subsidiary where within eight years the asset is converted to stock-in-trade or whole ownership of share capital ceases, and section 49 fixes the transferee's cost where deemed gains are taxed.

Scope of 'attributable to' broader than 'derived from', apply that interpretation to similar tax assessment issues.
The textual phrase 'attributable to' has a broader scope than the phrase 'derived from', and that interpretive conclusion renders the earlier Instruction No.596 inoperative; questions of a similar character should be decided in light of the broader meaning of 'attributable to'.

Estate duty clearance requirement relaxed for gratuity and pension payments; indemnity and affidavit required from heirs.
Employers may make concessionary payments of provident fund balances, gratuity and pension to legal heirs without an estate duty clearance certificate, provided the claimant files an affidavit that the property does not attract estate duty and furnishes an indemnity bond indemnifying the employer against any subsequent estate duty liability; the employer's statutory liability remains unaffected but may be recovered from payees under the indemnity bond if estate duty is later claimed.

Promotion of sports as a charitable purpose enables tax exemption claims under the Act even without specific approval.
Promotion of sports and games falls within the definition of charitable purpose in section 2(15) as advancement of an object of general public utility; therefore, an association engaged in promoting sports may claim exemption under section 11 of the Income-tax Act even if not approved under section 10(23) for sports associations.

Notice to legal heirs: require diligent enquiry to identify all heirs before issuing gift-tax notices.
The Board directs that, in proceedings concerning a deceased assessee in gift-tax matters, diligent enquiries must be made to ascertain all legal heirs so that notices are issued to all such heirs; this follows concern over a case where notice was served on only one heir and a Supreme Court remand emphasising whether a bona fide enquiry was made before issuing notices.

Tax procedural and substantive reforms: clarified exemptions, tightened allowances, extended timelines and new settlement procedures.
The Act amends income tax and wealth tax law to clarify substantive exemptions and deductions (notably for non resident film shooting income, earned leave payments as salary, house rent allowance and aggregate standard deduction), to adjust computation rules for new residential lettings and reinvestment of compulsory acquisition compensation, and to reform procedural regimes by extending limitation periods, revising summary assessment and appeal routes, creating a special procedure to avoid repetitive appeals, and strengthening Settlement Commission procedures including disclosure, payment, and interest consequences; many amendments take effect from specified retrospective dates or 1 October 1984.

Coordination between tax recovery and assessing officers ensures prompt communication of demand changes and prevents recovery delays.
Coordination between assessment and recovery functions is required to prevent obstruction of revenue collection by ensuring timely communication of changes in demand, cancellation of certificates where no action is required, and prompt notice of modified demands. Certificates must not be bulk issued, must include prescribed asset particulars, and must not be issued where demands are stayed or instalments granted; TROs should keep disputed demands in abeyance pending verification and avoid coercive steps. High value certificates are to be routed through inspecting authorities with notes on ITO recovery action, and regular meetings and monthly reviews are mandated to monitor recovery work.

Tax deduction at source on government securities interest: prescribed rates and surcharge remain effective; treasury officers must apply them.
Deduction of tax at source on interest payable on government securities is to be made at the prescribed rates and surcharge for the financial year 1984-85, with no change except for one specified sub paragraph; a draft circular setting out the rates for withholding after 31 March 1984 is to be issued to Treasury and Sub Treasury Officers to ensure strict compliance.

Coordination among tax assessing officers: audit-led reporting and commissioner circulars to prevent revenue loss through information sharing.
Audit teams must address coordination aspects during audits, promptly notify assessing officers of all related mistakes or omissions, and escalate important or recurring coordination defects to the concerned Commissioner of Income tax. Commissioners should issue general circulars pointing out coordination lapses and, where issues have all India ramifications, refer them to the Director (I Audit) for department wide circulation. The Board has accepted these recommendations and directed that all officers, especially Audit Teams, be informed to ensure improved coordination and information sharing among units involved in direct tax assessments.

Authentication of Cost Audit Report must be signed by a responsible partner in own hand on behalf of approved firm.
Where a firm of cost auditors is approved for appointment, the cost audit report must be signed in the partner's own hand by the partner responsible for the audit, for and on behalf of the approved firm; mere affixation of the firm's name is not acceptable.

Situs of debts: location determined by place of repayment or debtor residence, not by payment stipulation abroad.
Debts, secured or unsecured, are located in India if they are contracted to be repaid in India or if the debtor is residing in India; a stipulation requiring payment in a country other than the debtor's residence does not alter that rule.

Deduction of tax at source from insurance commission: prescribes payer duties, withholding rates and reporting obligations.
Deduction of income-tax at source from insurance commission under section 194D requires withholding at prescribed rates for residents, domestic and non-domestic companies and non-residents; deduction occurs on credit or payment, must be rounded as per section 288B, remitted to the Government within prescribed periods, and accompanied by use of specified challans, separate surcharge disclosure where applicable, issuance of Form 19D to payees, and filing of Forms 26D, 26E and 26F while recipients may seek certificate in Form 13D for reduced or nil deduction.

Deduction of income tax at source on lottery and crossword winnings enforces prescribed withholding rates and compliance procedures.
Deduction of income tax at source under Section 194B applies to winnings from lotteries and crossword puzzles above the prescribed threshold. For 1984-85 the Circular specifies rates in Part II of the First Schedule to the Finance Act, 1984 (33.75% for persons other than companies, 22.575% for domestic companies, 73.5% for non domestic companies). It sets rules on threshold exemption, aggregation of cash and in kind prizes, instalment payments, exclusion of agents' commissions, rounding under section 288B, payment timelines, separate accounting for tax and surcharge, and prescribed Forms 13B, 19B and 26B for procedural compliance.

Deduction of tax at source for horse-race winnings now required at prescribed rates with specified payment procedure and penalties.
Deduction of tax at source on winnings from horse races under Section 194BB for 1984-85 is prescribed at rates set out in the Finance Act, 1984, distinguishing persons other than companies and companies, with a rule that a higher computed tax under alternative schedule provisions shall govern. Tax deducted must be remitted to the Central Government within one week of the month-end using specified challans identified by type and colour, and failures to deduct or remit without reasonable cause attract penalties under Section 276B.

Net worth computation for deposit limits uses latest audited figures; post balance sheet changes are ignored.
Permissible deposit limits under Rule 3(2)(ii) are to be computed from the aggregate of paid up share capital and free reserves in the latest audited balance sheet, reduced by accumulated losses, deferred revenue expenditure and intangible assets disclosed there; any changes after that balance sheet date are to be disregarded for reckoning the limits.

Deduction at source from salaries: employer duty to deduct on estimated annual salary, with perquisite valuation and exemptions.
Employers must deduct income tax at source from salaries during 1984-85 under section 192 on the assessee's estimated annual salary at the average rate in force, with no deduction required unless estimated salary exceeds the statutory threshold. Perquisites and concessions must be valued under the Rules; specified receipts and exemptions (gratuity, leave salary, certain repayments) are treated per law. Standard deduction, limits on investment linked deductions, special allowances, rent related reliefs, foreign remuneration relief conditions, disability deduction certification, rounding rules, challan and deposit procedures, and penalties for failure to deduct or pay are summarized for disbursing authorities.

Speaking assessment orders: ensure assessments contain articulated reasons rather than cryptic draft-based computations.
The Board identifies a practice where ITOs compute total income by merely recording figures from the draft assessment or tagging IAC directions, resulting in cryptic, non-self-contained assessment orders. Commissioners are directed to curb this practice and ensure assessment orders are speaking, containing articulated reasons for income computation and relief to facilitate proper appellate review.

Compulsory audit requirement and restrictions on cash loans tighten tax compliance, with penalties and trust taxation escalated.
The Finance Act, 1984 prescribes income tax and withholding rates for 1984-85 and amends income tax, wealth tax and Unit Trust law to tighten anti avoidance and compliance. It introduces compulsory audits for specified businesses and professions with penalties and appeal rights, bars substantial cash loans or deposits with criminal penalties, restricts or withdraws various expenditure linked deductions and weighted allowances, tightens benami disclosure time limits, broadens wealth tax exemptions for certain assets, and subjects private trusts or charities forfeiting exemption to maximum marginal tax treatment.

Valuation of perquisites: salary includes dearness allowance where paid but excludes other allowances or perquisites.
Corrects a prior circular to state that for valuation of perquisites relating to medical reimbursement or provision, salary shall include dearness allowance where paid but shall not include any other allowance or perquisite; commissioners are to notify officers accordingly.

Valuation referral: wealth-tax officers may refer asset valuations when returned figures appear below fair market value.
Para. III(b) of the 1957 Board Circular has been withdrawn and is superseded by later statutory amendment and administrative guidance. The Wealth-tax Officer may refer valuation of capital assets to the Valuation Officer where the officer considers a returned value, including one provided by a registered valuer, to be below fair market value according to prescribed thresholds or where, given the asset's nature and other considerations, a reference is necessary.