TaxTMI 
TaxTMI 
Amendments at a glance , Amendments to Income-tax Act , Amendments to Wealth-tax Act , Amendments to Gift-tax Act , Amendments to Companies (Profits) Surtax Act
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....onstructed residential units let out on rent 63 23(2) Computation of income from house property occupied by the owner for purposes of his residence 64-66 32(1A), 32(2), Amortisation of expenditure on renovation or extension of, 34(1)/(2), or improvement to, leased business premises 56-57 35(2)(iv), 38(2), 41(2A)/(5), 43(1), Explns. 1 & 4, 55(1), 57(ii), 59(3) 35D Amortisation of certain preliminary expenses 42-47 35E Amortisation of expenditure on prospecting for, and development of, certain minerals 48-55 64(2), 10(2), Conversion of separate property of an individual into 295(2)(b) joint Hindu family property 81-85 80B(5) Definition of "gross total income" 101-102 80G(4), prov. Deduction in respect of charitable and other donations 103-104 80K Deduction in respect of dividends attributable to "tax holiday" profits 105-106 80QQ Tax concession to book publishing industry 58-59 80U Tax relief to blind or physically handicapped individuals 99 89(1), (2) Relief in cases where salary, etc., is paid in arrears or in advance 76 112A and Calculation of tax in a case where the total income includes Expln. 1 income by way of interest ....
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....80 11 (1)(cc) of Part B, and rules 4(1), 8A, 9(1)(bb) of Part C of 4th Sch. Wealth-tax Act 5(1)(via) Exemption from wealth-tax of the value of annuities due on annuity deposits 117-118 15B(3) Penalty for failure to pay tax on self-assessment 119 18(2A), prov. Procedure for waiver or reduction of penalty in cases of voluntary disclosure of wealth 121 18(3) Procedure for levy of penalties for concealment of wealth 120 18(5) Time limit for completion of penalty proceedings 122 24(4) 26(2), Enhancement of fees payable by assessees along with 27(1) their appeals and reference applications in wealth-tax cases to the Tribunal 123 44C, 44D Rounding off of net wealth and also wealth-tax payable or refundable 124 46(2)(dd) Rule making power vested in Board for laying down procedure for calculation of interest 125 Gift-tax Act 23(4), 25(2), Enhancement of fees payable by assessees with their 26 (1) appeals and reference applications to the Appellate Tribunal in gift-tax cases 126 44A, 44B Rounding off of taxable gifts and gift-tax, etc. 127 46(2)(ee) Rule making power vested in Board for laying down procedure for calculation of interest 128 Surta....
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....see or the production by him of any evidence in support of the return, and without being satisfied that the return is correct and complete in all respects. In making such a "summary" assessment, the Income-tax Officer will have the authority to make certain adjustments to the income or loss declared in the return. These adjustments will be by way of: a. rectifying any arithmetical errors in the return and the accounts and documents, if any, accompanying it; b. allowing any deduction, allowance or relief which, on the basis of the information available in such return, accounts and documents is, prima facie, admissible though not claimed in the return; and c. disallowing any deduction, allowance or relief claimed in the return but which, on the basis of the information available in such return, accounts and documents, is prima facie, inadmissible. The Income-tax Officer will also be required, in making a summary assessment, to give due effect to the deduction on account of unabsorbed depreciation brought forward from the preceding assessment year under section 32(2); unabsorbed development rebate brought forward under section 33(2)(ii); unabsorbed development allowance under s....
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....sessee requiring the presence of the assessee or the production of account books and other evidence, in support of the return. In such a case, the procedure for completion of regular assessments will be virtually the same as under the existing law. The Taxation Laws (Amendment) Act, 1970 6. A notice under section 143(2) may be issued also in a case where an assessment has been made under section 143(1). The issue of a notice in such cases will, however, be subject to the requirement that the previous approval of the Inspecting Assistant Commissioner is obtained. The basis for issue of such notice will be that the Income-tax Officer considers it necessary or expedient to verify the correctness and completeness of the return by requiring the presence of the assessee or the production of evidence in this behalf. The Taxation Laws (Amendment) Act, 1970 7. A notice under section 143(2) calling upon the assessee to produce the account books and other evidence in support of the return must be issued by the Income-tax Officer in a case where the assessee objects to the "summary" assessment made under section 143(1) and makes an application to the Income-tax Officer in that behalf. Such....
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....on his own volition after obtaining the previous approval of the Inspecting Assistant Commissioner. A fresh assessment in the latter type of case needs to be made only where the Income-tax Officer is of opinion that the assessment made under section 143(1) is incorrect, inadequate or incomplete in any material respect. The Explanation to section 143(3) specifies the circumstances in which an assessment under section 143(1) shall be regarded as being incorrect, inadequate or incomplete in a material respect. These circumstances are the following : 1. The amount of the total income as determined in that assessment is greater or smaller than the amount of total income on which the assessee is properly chargeable to tax. 2. The amount of the tax payable as determined in that assessment is greater or smaller than the amount of tax properly payable by the assessee. 3. The amount of any loss as determined in that assessment is greater or smaller than the amount of the loss, if any, determinable on a proper computation. 4. The amount of depreciation allowance, development rebate or any other allowance or deduction as determined in that assessment is greater or smaller than the amount o....
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....ch may be made in a summary assessment under section 143(1). The other modification is to the effect that where the regular assessment is not made within 6 months from the date of receipt of the return, the Income-tax Officer will be bound to make a provisional assessment under section 141A so as to grant refund of the excess tax paid by the assessee. The Taxation Laws (Amendment) Act, 1970 11. Consequential to the omission of section 141, certain amendments have been made in sections 209, 210, 215, 233 and 234 so as to omit the reference in those sections to section 141. The Taxation Laws (Amendment) Act, 1970 12. Scope of operation of the new assessment procedure - The new procedure for making regular assessments, omission of the existing provision for making a provisional assessment to demand tax modifications in the existing provision for the making of a provisional assessment to grant refund of tax paid in excess, and the consequential amendments referred to in the preceding paragraph, will come into force on 1-4-1970 and, accordingly, the new procedure will be operative with effect from the assessment year 1971-72. As these are procedural provisions, the new procedure wi....
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....ocedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties. Such orders may be even in relaxation of any of the provisions of section 143 (procedure of regular assessment), section 144 (best judgment assessment made ex parte), sections 147 and 148 (proceeding for assessment or reassessment of escaped income), sections 154 and 155 (rectification or amendment of assessments) and section 210 (orders of Income-tax Officer for demanding advance tax), or of the provisions relating to initiation of penalty proceedings contained in sections 271 and 273 (penalties for defaults in furnishing return of income, production of accounts, etc., concealment of income and default in payment of advance tax on the taxpayer's own estimate). Such orders shall not, however, be prejudicial to assessees. It has also been specifically provided that where the Board is of opinion that it is necessary in the public interest so to do, cause such orders to be published and circulated for general information. The Taxation Laws (Amendment) Act, 1970 15. Another area in which the powers of the....
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.... The Taxation Laws (Amendment) Act, 1970 18. The above-mentioned provisions for charge of interest, which are presently contained in the proviso to section 139(1), have now been incorporated in a modified form in a new sub-section (8) which replaces the existing sub-section (8) of that section. Under the new sub-section (8) of section 139, it has been specifically provided that interest will be chargeable in all cases where the return of income is not furnished by the specified date. Such interest will be chargeable not only in cases where the return is furnished after specified date but also in cases where the return is not furnished at all. As under the existing provision, interest will be reckoned, in the generality of cases, from 1st October of the assessment year. However, in cases where the total income includes any income from business or profession for which the previous year expired after 31st December of the year immediately preceding the assessment year, the interest will be reckoned from 1st January of the assessment year. It has also been made clear that in cases where the return is furnished after the specified date, the interest will be calculated and charged up to ....
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....ble by Government to assessees, including the rounding off of the period for which such interest is to be calculated in cases where such period includes a fraction of a month, and also specify the circumstances in which and the extent to which petty amounts of interest payable by assessees may be ignored. The Taxation Laws (Amendment) Act, 1970 21. Sub-section (3) of section 139 relating to the furnishing of return showing a loss under the head "Profits and gains of business or profession" or under the head "Capital gains", has been amended so as to empower the Income-tax Officer to extend in his discretion, the time for furnishing such a return on an application being made to him for this purpose. At present, there is no provision specifically empowering the Income-tax Officer to extend the time for furnishing such a return. [Sections 26 and 55(b) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Time limit for completion of assessments set aside in appeal or reopened under section 146 22. Section 153, relating to time limits for completion of assessments and reassessments, has been amended so as to provide a time limit for completion of fresh assessments, to be ....
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....e exercised only once. Under the provision as amended, it will be possible to regulate the quantum of penalty according to the gravity of the default. As under the existing provision, before levying any such penalty, the assessee will be given a reasonable opportunity of being heard. As the power to levy penalty on more than one occasion in such cases will become effective from 1-4-1971, in cases where the default in payment of tax on self-assessment for any past year, having occurred before 1-4-1971, continues on or after that date (without a provisional assessment or regular assessment having been made), it will be open to the Income-tax Officer to levy a penalty or penalties under the section as substituted, subject to the ceiling of 50 per cent of the tax, provided the power to levy penalty has not already been exercised before 1-4-1971. [Section 27 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 24. Penalty for non-payment of tax demanded - Section 221 has been amended with effect from 1-4-1971, by way of substituting a new sub-section (1) for the existing sub-section (1) of that section. The sub-section as substituted makes it clear that penalty in cases of de....
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...., a uniform period of three months has now been specified in sections 243 and 244, beyond which any delay in grant of refund will entitle the assessee to payment of interest to him by the Central Government. However, with a view to facilitating the adherence to this reduced time limit, it has been secured that the three-month period will expire at the end of a calendar month. Thus : 1. In cases where the total income of the assessee consists solely of interest on securities or dividends or both, the three-month period will be reckoned from the end of the month in which the claim for refund is made. 2. In the case of refunds arising on assessment, the three-month period will be reckoned from the end of the month in which the total income is determined. 3. In the case of refund arising as a result of any order in appeal, revision or any other proceeding, the three-month period will be reckoned from the end of the month in which the order in appeal, revision or other proceedings is passed. 4. In cases where the refund arising out of any order is withheld, on the ground that the order giving rise to the refund is the subject matter of appeal, etc., the three-month period will be re....
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....as been revised upwards. Under section 274 as amended, the Income-tax Officer will be required to refer to the Inspecting Assistant Commissioner only those cases in which the concealed income as determined by the Income-tax Officer on assessment exceeds Rs. 25,000. In other cases, penalty for concealment of income will be imposable by the Income-tax Officer himself. The Taxation Laws (Amendment) Act, 1970 29. The amendment of section 274 will take effect from 1-4-1971, and, accordingly, the increased limit of Rs. 25,000 in terms of concealed income will apply in cases where the proceedings for imposition of penalty are commenced on or after that date. Where such proceedings are commenced before 1-4-1971, the existing limit of Rs. 1,000 in terms of minimum penalty imposable, will apply. [Section 49 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 30. Revision of the monetary limit for obtaining the previous approval of the Board to reduction or waiver of penalty in cases of voluntary disclosure of income - Under the existing proviso to section 271(4A), the Commissioner of Income-tax is required to obtain the previous approval of the Board to the waiver or reduction....
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....e assessment for further enquiry by the Income-tax Officer or deletes or reduces the addition made on account of concealed income and the Department takes up the matter in further appeal before the Appellate Tribunal. Sometimes, a final decision on the quantum of the concealed income becomes available only after the expiry of the two-year time limit. The Taxation Laws (Amendment) Act, 1970 33. Section 275, as substituted, aims at obviating difficulties in such cases, reducing infructuous work and avoiding hardship to assessees. Under the section as substituted, the time limit for making an order imposing a penalty under the provisions of Chapter XXI will, ordinarily, be two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. However, in a case where the relevant assessment or other order is the subject matter of an appeal to the Appellate Assistant Commissioner or an appeal by the Income-tax Officer to the Appellate Tribunal, the time limit for completing the penalty proceeding will be either the two-year period as stated above or a period of six months from the end of the mo....
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.... penalties for concealment of income by the simple device of withholding the return of income deliberately or by refraining from producing the accounts and documents for examination by the tax authorities. The only consequence of such delinquency is an ex parte assessment, which may fall far short of the true income, besides a penalty up to 50 per cent of the tax determined on the ex parte assessment for failure to furnish the return of income. The Taxation Laws (Amendment) Act, 1970 36. With a view to providing an effective deterrent against defaults in furnishing the return of income voluntarily, as also when called for by notice, or in producing the accounts and documents called for by notice, two new sections 276C and 276D have been inserted in the Income-tax Act. New section 276C provides for the award of punishment of rigorous imprisonment up to one year or a fine ranging from Rs. 4 to Rs. 10 for every day during which the default continues, or both, at the discretion of the court, in cases where a person is convicted of the offence of wilfully failing to furnish in due time the return of income which he is required to furnish under section 139(1) or by notice under section....
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.... new sections 276C and 276D, the existing provisions in section 276 relating to prosecution for defaults in furnishing the return of income called for under section 139(2) or in producing the accounts and documents called for by notice under section 142(1), have been omitted. Section 279 has also been amended so as to secure that the prosecution for an offence under the new section 276C or 276D shall not be launched except at the instance of the Commissioner. It may be noted that the provisions of section 292 will be applicable in relation to offences under the new sections 276C and 276D as they apply in relation to other sections relating to prosecution for tax offences. Accordingly, no court inferior to that of a Presidency Magistrate or a Magistrate of the First Class will be competent to try any such offence. [Sections 51, 52 and 53 of the Amending Act] Modifications in the provisions relating to appeals to the appellate tribunal The Taxation Laws (Amendment) Act, 1970 Fees payable by assessees along with their appeals and reference applications to the Income-tax Appellate Tribunal 40. Section 253(6) presently provides that an appeal by an assessee to the Appellate Tribun....
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.... commences production or operation. Such amortisation will be allowed only in respect of expenditure incurred after 31-3-1970 under specified heads. The heads of qualifying expenditure specified for this purpose are the following : 1. Expenditure in connection with : (i) preparation of feasibility report; (ii) preparation of project report; (iii) conducting market survey or any other survey necessary for the business of the assessee; and (iv) engineering services relating to the business of the assessee. These items of expenditure will qualify for amortisation where the work in connection with the preparation of the feasibility report or the project report or the conducting of the market survey or other survey or the engineering services, is carried out within the organisation of the company or other assessee himself, or, where it is entrusted to an outside concern, such concern is, for the time being, approved for the purpose of this provision by the Central Board of Direct Taxes. 2. Legal charges for drafting any agreement between the assessee and any other person for any purpose relating to the setting up or conduct of the business of the assessee. 3. In the case of a compan....
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....ceiling limit of 2½ per cent of the cost of the project over the amount of the preliminary expenses eligible for amortisation applies to all categories of taxpayers to whom the benefit is available. However, in the case of an Indian company, an alternative ceiling of 2½ per cent of the capital employed in the business of the company may be elected by the company, if it so desires. "Capital employed in the business of the company" has been defined to mean, in a case where the preliminary expenses to be amortised were incurred before the commencement of the business, the aggregate of the issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the business of the company commences. Where the preliminary expenses to be amortised are those incurred in connection with the extension of the industrial undertaking of the company or the setting up of a new industrial unit, "the capital employed in the business of the company" will be the aggregate of issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the extension of the industrial undertaking is completed or, as the case may be, the ....
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....r of companies under the terms of section 226(2) of the Companies Act, 1956. In such a case, the assessee is further required to furnish along with his return of income for the first year in which the deduction under the section is claimed, the report of such audit in a form to be prescribed for this purpose, duly signed and verified by such Chartered Accountant or other person and setting forth such particulars, as may be prescribed. The Taxation Laws (Amendment) Act, 1970 47. The benefit of amortisation of preliminary expenses under section 35D will ordinarily be available only to the Indian company or other assessee who incurred the expenditure. However, the benefit will not be lost in a case where the undertaking of an Indian company which is entitled to the amortisation is transferred to another Indian company in a scheme of amalgamation within the 10-year period of amortisation. In that event, the deduction in respect of the previous year in which the amalgamation takes place and the following previous years within the 10-year period, will be allowed to the amalgamated company and not to the amalgamating company. [Section 8 of the Amending Act] The Taxation Laws (Amendme....
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....nce, if any, will be eligible for amortisation. The Taxation Laws (Amendment) Act, 1970 51. The following categories of expenditure are specifically excluded from the expenditure eligible for amortisation under section 35E : 1. Expenditure on the acquisition of the site of the source of any of the specified minerals or groups of associated minerals or of any rights in or over such site. 2. Expenditure on the acquisition of the deposits of any of the specified minerals or groups of associated minerals or of any rights in or over such deposits. 3. Expenditure of a capital nature in respect of any building, machinery, plant or furniture for which allowance by way of depreciation is admissible under section 32. The Taxation Laws (Amendment) Act, 1970 52. The amortisation of the qualifying expenditure will be allowed in equal instalments over a 10-year period against the profits arising from the commercial exploitation of any mine or other natural deposit of any of the specified minerals or associated minerals in respect of which the expenditure was incurred, not only where such commercial exploitation resulted from the operations of prospecting or development in question but als....
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....5E is claimed and allowed for any assessment year in respect of any expenditure qualifying for amortisation, the expenditure in respect of which the deduction is so allowed shall not qualify for deduction under any other provision of the Act for the same or any other assessment year. [Sections 8 and 58 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Amortisation of expenditure on renovation or extension of, or improvement to, leased business premises 56. Under the existing provisions of the Income-tax Act, an assessee is not entitled to depreciation or any other deduction in respect of capital expenditure incurred by him on renovation or extension of, or improvements to, a building not belonging to him which is used for the purposes of his business or profession. Under a new sub-section (1A), inserted in section 32 by section 5 of the Amending Act, with effect from 1-4-1971, provision has been made for the grant of depreciation on capital expenditure incurred by the assessee for the purpose of his business or profession on the construction of any structure or doing of any work, in or in relation to, and by way of renovation or extension of, or improvement to, any ....
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....section 32(1A) in respect of any previous year in which the structure or work is sold, discarded, demolished or destroyed, or is surrendered on the determination of the lease or other right of occupancy in respect of the building. 3. Section 35(2)(iv) has been amended to secure that in a case where any deduction is allowed under section 35 in respect of scientific research expenditure represented wholly or partly by any asset, no depreciation in respect of that asset is allowed under section 32(1A). 4. Section 38(2) has been amended so as to secure that in a case where the building is only partly used for the purposes of the business or profession, depreciation under section 32(1A) will be restricted to a proportionate amount. 5. Section 41 has been amended by insertion of a new sub-section (2A). Under the new sub-section, where any structure or work referred to in section 32(1A) is sold, discarded, demolished, destroyed or surrendered as a result of the determination of the lease or other right of occupancy in respect of the building, and the "moneys payable" taken together with the "scrap value", if any, exceeds the written down value of the structure or work, a "balancing cha....
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....acquisition" of a capital asset, the terminal allowance admissible under section 32(1A)(ii) in respect of the structure or work as referred to in that section or, as the case may be, the "balancing charge" under section 41(2A) in respect of such structure or work, receives the same treatment as is being presently accorded to the terminal allowance or, as the case may be, the "balancing charge" in the case of other depreciable assets. 8. Section 57(ii) has been amended to secure that depreciation under section 32(1A) is allowed in respect of a structure or work referred to in that section in or in relation to a building, even where such building is used for the purpose of earning any income chargeable to tax under the head "Income from other sources". 9. Section 59 has been amended by the insertion of a new sub-section (3) so as to secure that the "balancing charge" under section 41(2A) will be made in respect of a structure or work referred to in section 32(1A) even where the building is used for the purpose of earning any income chargeable to tax under the head "Income from other sources". [Sections 5, 6, 7, 9, 11, 12, 13, 14 and 15 of the Amending Act] The Taxation Laws (Ame....
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....ea estates in India, the Government of India has been granting a subsidy to cover a part of the expenses on such replantation. This subsidy is being granted since October 1968 and it is routed through the Tea Board. The subsidy is being granted not only for planting of tea bushes in replacement of those which have become old and non-productive in areas already planted, but also for planting of tea bushes in new areas to replace those which were destroyed or washed away during the floods in Darjeeling district. Under rule 8 of the Income-tax Rules, expenditure incurred in replantation of tea estate, i.e., planting tea bushes in replacement of bushes that have died or become permanently useless in an area already planted which had not previously been abandoned, is deductible as revenue expenditure in computing the income derived from the sale of tea grown and manufactured by the seller in India. [This provision in rule 8 is not, however, applicable to expenditure incurred in planting the bushes in a new area, even if such planting is undertaken with a view to replacing tea bushes which had been planted in another area and destroyed or washed away due to any reason.] The subsidy recei....
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.... that the definition of the term "actual cost of planting" in section 33A(7) specifically provides for the reduction of the cost by such portion thereof as has been met directly or indirectly by any other person or authority. The provision in clause (30) of section 10 does not have the effect of overriding the provision in section 33A(7). Accordingly, the development allowance admissible in a case of replantation of tea estate will be 30 per cent of the net cost, i.e., the gross expenses on such replanting as reduced by the amount of the subsidy. It will be kept in view that the development allowance with reference to replantation of tea estates is available only in cases where the work of replanting has been completed before 1-4-1970. [Section 3(e) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Provisions for encouraging construction of low cost residential tenements to be let out on rent and also construction of house property for self-occupation 63. Liberalisation of "tax holiday" for newly constructed residential units let out on rent - Under the existing second proviso to section 23(1), income from house property constructed after 1-4-1961 which is let out o....
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....he provision in section 23(2) and to provide a fillip to construction of house property for self-occupation, sub-section (2) of section 23 has been substituted by a new sub-section. Under sub-section (2) as substituted, the annual value of house property used by the owner for the purposes of his own residence will first be computed in the same manner as if the property had been let, i.e., by deducting from the gross annual value the whole of the taxes levied by any local authority in respect of the property. The balance of the annual value will then be reduced by one-half thereof or Rs. 1,800, whichever is less. Where the assessee has two houses, both of which are used for the purposes of his own residence, the annual value of each such house will be computed in this manner. Where the assessee owns more than two houses and uses them for his own residence, the concessional basis of computation of the annual value as stated above will be allowed only in respect of two houses of the assessee's choice. [The annual value of the remaining houses will be determined as if they were let out.] The resultant annual value of the house or two houses owned and occupied by the taxpayer for the pu....
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....d, and his employer pays the tax due on his salary income to the Government, the perquisite represented by the payment of his tax dues by the employer is exempt from further tax in the hands of the technician for a further period of 60 months. Thus, a foreign technician may be employed in India on a tax-free remuneration for a total period of 8 years. This provision has enabled Indian industry to secure the services of foreign technicians at a reasonable cost. However, in order that our industry may not lean too heavily on the employment of foreign technicians for long periods in preference to Indian technicians having comparable qualifications, expertise and experience, and also to make our industrial enterprises bear a higher share of the cost of employing foreign experts, the provisions relating to the tax exemption of the remuneration of foreign technicians have been modified in certain directions. The modified scheme has been incorporated in a new sub-clause (viia) inserted in clause (6) of section 10 and will be applicable to foreign technicians entering employment in India after 31-3-1971. The salient features of the new provisions are explained in the following paragraphs. ....
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....edge and experience in agriculture, animal husbandry, dairy farming, deep sea fishing or ship-building with a view to enabling the employment of foreign experts in these fields for the development of our food resources and our ship-building industry. At the same time, industrial or business management experts and also persons having specialised knowledge and experience in distribution of electricity or any other form of power (as distinct from generation) have been excluded from the purview of the term "technician". The Taxation Laws (Amendment) Act, 1970 72. Categories of enterprises or agencies which may employ foreign technicians - Presently, the tax exemption is available to foreign technicians employed by Government or any local authority or any corporation set up under any special law or in any business carried on in India. Under the new provisions, the tax exemption will be available also in the case of foreign technicians employed by any institution or body established in India for carrying on scientific research, which is approved in this behalf by the prescribed authority. The authorities already prescribed in the Income-tax Rules for the purpose of approving scientific....
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....n technician, which is eligible for exemption from further taxation as income of the foreign technician under the new sub-clause (viia) of section 10(6), will not be taken into account. [Section 3(c)(ii) and (iii) and section 10 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Relief in cases where salary, etc., is paid in arrears or in advance 76. Section 89, relating to the grant of tax relief by the Commissioner of Income-tax in cases where salary income or "interest on securities" is received in arrears thereby attracting a higher rate of tax than would otherwise have been applicable, has been amended so as to simplify its operation. Under the law, salary income is taxable in the year in which it is due or is paid. Where salary is paid in arrears or in advance or where any sum which is a "profit in lieu of salary" (e.g., retirement benefits) or salary for more than 12 months is received in any one financial year, the income of that year may become liable to tax at a rate higher than what would have applied if the salary had been received in the year to which it pertains. A similar situation may arise in a case where interest on securities is received in arrears....
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....es of a superannuation fund or a gratuity fund will have to furnish, along with their application to the Income-tax Officer for approval of the fund, two copies of the accounts of the fund for each one of the three years prior to the financial year in which the fund was in existence and for which its accounts have been made up. This requirement is applicable only where the fund has been in existence during any year or years prior to the financial year in which the application is made. Accordingly, where the application is made in the first year of the institution of the fund, there will be no requirement of furnishing copies of the accounts of the fund. The Taxation Laws (Amendment) Act, 1970 79. Under another amendment, a new rule 8A has been inserted in Part C of the Fourth Schedule. Under the new rule 8A, which corresponds to rule 10 of Part B of the Fourth Schedule relating to approved superannuation funds, the Income-tax Officer is authorised to call for relevant returns, statements, particulars and information from the trustees of an approved gratuity fund and from any employer, who contributes to such a fund. Such returns, statements, particulars, etc., can be called for b....
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.... where an individual being a member of a Hindu undivided family, converts at any time after 31-12-1969, his separate property into property belonging to the Hindu undivided family, he will be deemed to have transferred the property through the family to the members of the family for being held by them jointly. Further, the income derived from the converted property or any part thereof by the family shall be deemed to arise to the individual himself and not to the family insofar as it is attributable to the interest of the individual in the property of the family. Moreover, the income from such property insofar as it is attributable to the interest of the spouse or any minor son of the individual in the property of the family will be deemed to arise to the spouse or minor son from assets transferred to them indirectly by the individual and accordingly, such income will be includible in the total income of the individual in accordance with the existing provisions of section 64. In the event of a partial or total partition in the family, the income arising to the spouse or minor son from the whole or any part of the converted property allotted to the spouse or minor son in such partit....
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....e person in whose name such asset stands - will be applicable also in relation to the separate property of an individual converted into property belonging to the Hindu undivided family of which he is a member. The Taxation Laws (Amendment) Act, 1970 84. Under a consequential amendment to section 295(2)(b), the Central Board of Direct Taxes has been empowered to provide in the Income-tax Rules for the manner in which and the procedure by which the income shall be arrived at in the case of an individual who is liable to be assessed under the new sub-section (2) of section 64. Accordingly, the Board will be in a position to make rules providing for the determination of the income to be assessed as the income of the individual making the conversion of his separate property into Hindu undivided family property in circumstances, such as, where due to the sale or exchange of the converted property and merging of the funds with the other funds of the joint family the converted property loses its identity and it becomes difficult to ascertain the income yielded by such property in subsequent years. By another consequential amendment to clause (2) of section 10 it has been secured that the....
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....if the firm were so assessed, would be greater than the aggregate amount of the tax payable by the firm as an unregistered firm and the tax payable by the partners individually. The amendment further provides that where this procedure is adopted, the firm will be liable to tax on its total income in the same manner as a registered firm and the partners will be chargeable to tax on their respective shares in the income of the firm along with their other incomes, if any. This amendment will be effective from 1-4-1971 and will, accordingly, apply for the assessment year 1971-72 and subsequent years. [Section 32 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Registered firms having benamidars as partners 88. Section 185 specifies the procedure for the grant of registration to a partnership firm. Under the existing provisions of this section, the Income-tax Officer is required to enquire into the genuineness of the firm and its constitution as specified in the instrument of partnership, and grant registration to the firm only if he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified. The Taxation L....
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....denied registration even where the spouse or minor child happens to be merely a benamidar of the other partner. The Taxation Laws (Amendment) Act, 1970 90. The amendment of section 185(1) will be effective from 1-4-1971. Accordingly, registration may be refused to a partnership firm by virtue of the Explanation only for the assessment year 1971-72 and subsequent years. Similarly, a firm which has been enjoying the benefit of registration for assessment years up to and including the assessment year 1970-71, is liable to lose the benefit if the Explanation applies to it for the previous year relevant to the assessment year 1971-72 or any sub-sequent years. [Section 34(a) of the Amending Act] Measures for providing tax relief in certain directions The Taxation Laws (Amendment) Act, 1970 Definition of "agricultural income" 91. Section 10(1) exempts agricultural income from income-tax and also provides for its exclusion in computing the total income of the assessee. The exemption of agricultural income from Central taxation is based on the provision in the Constitution according to which Parliament has exclusive power to make laws with respect to taxes on income other than agri....
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....ncome derived by agricultural operations remains the same whether or not the land is subject to land revenue or a local rate, it would be anomalous to subject to Central income-tax such income in those cases where there is no land revenue assessment while exempting income of the same nature in other cases. With a view to removing this anomaly and providing tax relief to the agriculturists who cultivate forest lands, lands in terai areas or cantonments or in States which have abolished land revenue on small holdings, the definition of "agricultural income" in clause (1) of section 2 has been amended so as to drop the condition that the land from which the income is derived should be assessed to land revenue or any local rate. This change will bring within the purview of the expression "agricultural income", income derived from cultivation of forest lands, lands in terai areas and cantonments as also lands in respect of which the State Government does not levy any land revenue. The Taxation Laws (Amendment) Act, 1970 94. In regard to income attributable to farm buildings, the amended definition of 'agricultural income" provides that income attributable to such a building will be tr....
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....e has been subjected to Central income-tax, the relevant assessment should now be rectified and the tax charged on such income refunded or remitted, as the case may be. Where assessment proceedings have been initiated for bringing such income to tax, these should be dropped. [Section 2 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Exemption from income-tax of the value of travel concession or assistance received by Indian citizens, and passage moneys or the value of free or concessional passage received by individuals of foreign nationality, employed in India 96. Section 10(5) presently exempts from tax the value of any travel concession or assistance received by an Indian citizen from his employer for himself, his wife and children in connection with his proceeding on leave to his home-district in India. The exemption is presently not available when the journey is performed after retirement or termination of service of the individual. The Taxation Laws (Amendment) Act, 1970 97. Section 10(6)(i) presently exempts from tax passage moneys or the value of any free or concessional passage received by an individual of foreign nationality from his employer for himse....
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....dividual who suffers from a permanent physical disability (other than blindness) which has the effect of reducing substantially his capacity for engaging in a gainful employment or occupation. In order to avail of the deduction, the taxpayer is required to furnish, in respect of the first assessment year for which the deduction is claimed, in a case of total blindness, a certificate from a registered oculist, and in a case of other physical disability, a certificate from a registered medical practitioner. Section 80U as substituted will take effect on 1-4-1971 and its provisions will, accordingly, be applicable for the assessment year 1971-72 and subsequent years. [Section 22 of the Amending Act] Amendments for removing certain anomalies, drafting lacunae, etc. The Taxation Laws (Amendment) Act, 1970 Exemption from tax of the income of members of Scheduled Tribes 100. Under the existing provision in clause (26) of section 10, a member of a Scheduled Tribe as defined in article 366(25) of the Constitution, who is not in the service of Government, and who resides in any area specified in Part A or Part B of the Table appended to Paragraph 20 of the Sixth Schedule to the Const....
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....include in the "gross total income", in the case of an individual, also the income arising to the spouse or minor child of the individual in respect of which the individual is chargeable to tax under section 64. The effect of the amendment is that the deductions under the provisions of Chapter VIA, e.g., in respect of long-term savings in approved media (life insurance, provident fund, etc.), charitable donations and long-term capital gains, will be available to an individual also in relation to, or up to appropriate percentage of, the income of the spouse or minor child which is assessable as the income of the individual. The Taxation Laws (Amendment) Act, 1970 102. The amendment of section 80B(5) applies for and from the assessment year 1968-69. Accordingly, assessments where the deduction in respect of long-term savings in approved media or charitable donations has been allowed to an individual only in respect of such savings or donations up to the specified percentage calculated with reference to the gross total income excluding income assessable under section 64, or the deduction under section 80T in respect of long-term capital gains arising to the spouse or minor child den....
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....-section (4) of section 80G has been substituted by a new proviso so as to bring out explicitly the intention underlying the existing provision. Under the proviso as substituted, it has been made clear that where the aggregate of the sums qualifying for the deduction includes any donations for the repair or renovation of any notified temple, mosque, gurdwara, church or other place of worship the monetary limit over the amount qualifying for the deduction under section 80G(1) will be increased, from the general limit of Rs. 2,00,000 to the special limit of Rs. 5,00,000, only to the extent that such aggregate exceeds the general limit of Rs. 2,00,000 by reason of the inclusion of donations to the notified temples, etc. In other words, charitable donations, other than for repair or renovation of the notified temples, etc., in excess of Rs. 2,00,000 will not qualify for the deduction under section 80G, but donations for repair or renovation of temples, etc., taken together with other charitable donations, if any, will so qualify up to Rs. 5,00,000. The amount qualifying for the deduction will, as at present, be subject to the alternative limit of 10 per cent of the "gross total income"....
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....e income of any other person, the whole of such dividend will be allowed as a deduction in computing the total income of the second mentioned person. The Taxation Laws (Amendment) Act, 1970 106. This amendment applies for and from the assessment year 1968-69. Accordingly, where the claim for the deduction under section 80K has been disallowed in respect of dividends attributable to "tax holiday" profits on the ground that the assessee was not the owner of the relevant shares, the necessary relief should be allowed by rectifying the assessment in the light of the section as substituted. [Section 20 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Calculation of tax in a case where the total income includes income by way of interest on National Savings Certificates (First Issue) 107. Section 112A lays down a concessional basis for charging of tax in a case where the total income of a non-corporate taxpayer includes income by way of interest on National Savings Certificates (First Issue) or the Bank series of such Certificates. Prior to 1-4-1968, the section provided for the determination of the tax payable in such a case as the aggregate of: (i) the tax calculate....
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....ates (First Issue) or the Bank series of such Certificates, such ordinary income shall be deemed to consist wholly of "earned income" as defined in the Finance Act of the relevant year, has been omitted with effect from 1-4-1969, as it has become redundant after the discontinuance of the distinction between "earned income" and "unearned income" for the purpose of levy of tax with effect from the same date. [Section 24 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Procedure for grant of registration to partnership firms 110. Under the existing provisions of section 184(7), where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year subject to certain requirements. One of these requirements is that the firm should furnish along with its return of income for the relevant assessment year, a declaration to the effect that there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted. This requirement has, in practice, led to hardship where due to any reason the firm was not able to furnish....
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....should be made by him rejecting the application for registration on account of its being defective, even after the grant of opportunity to the firm to rectify the defect, or declaring that the registration granted to the firm for an earlier assessment year or years shall not have effect for the relevant assessment year. The amendment removes the inconvenience and hardship caused to partnership firms by reason of the absence of any such provision. The Taxation Laws (Amendment) Act, 1970 Appeal against Income-tax Officer's orders refusing registration to a firm because of certain defect in the application or in the declaration for continuation of registration for a subsequent year 112. Under the existing law, no appeal lies against the order of the Income-tax Officer rejecting the application for registration of a partnership firm because of certain defects in the application which are not rectified by the firm even after an opportunity has been allowed to it as required by section 185(2). Similarly, there is no appeal against the Income-tax Officer's refusal to allow the registration granted to a firm for any year to have effect for the subsequent year because of certain defects....
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..... [Sections 33, 34(b) and 44 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Tax relief on dividends attributable to the agricultural income of the company paying the dividends 114. Section 235 provides for the grant of tax relief to shareholders of companies on that part of the dividend on their shares which is attributable to the paying company's agricultural income which has been subjected to agricultural income-tax under a State law. In the case of shareholders who are themselves companies, the tax relief is presently limited to 27.5 per cent of the agricultural element of the dividend. However, under the other provisions of the income-tax law, the effective incidence of tax on inter-corporate dividends ranges from 14 per cent to 26 per cent only. With a view to removing this anomaly, which enables a company to obtain tax relief on its inter-corporate dividends at a rate higher than the effective rate of tax otherwise chargeable on such dividends, section 235 has been amended so as to secure that the tax relief in such cases is limited to the Central income-tax actually payable by the receiving company on the agricultural element of the dividend. This amendmen....
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....r or other person is required to deposit the amount of the tax in arrear for the recovery of which the sale was ordered, together with interest calculated at the rate of 6 per cent per annum from the date of proclamation of the sale to the date when the deposit is made. The rate of interest chargeable under the other provisions of the Income-tax Act for defaults in payment of taxes, delays in furnishing returns of income, etc., and also that payable by the Central Government to assessees for delays in grant of refunds, has been specified to be 9 per cent per annum since 1-10-1967. Rule 60 of the Second Schedule has, therefore, been amended so as to bring the rate of interest for the purpose of that rule in line with the rate of interest applicable for other purposes, namely 9 per cent per annum. This amendment will take effect on 1-4-1971 and, accordingly, the higher rate will be operative in cases where the proclamation of sale is made on or after 1-4-1971. [Section 56 of the Amending Act] Amendments to Wealth-tax Act The Taxation Laws (Amendment) Act, 1970 Exemption from wealth-tax of the value of annuities due on annuity deposits made under the provisions of the Income-tax A....
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..... Sub-section (3) of section 15B provides for the levy of a penalty up to 50 per cent of the tax payable on self-assessment if such tax is not paid. The power to impose the penalty, under the existing provision, can, however, be exercised only once. Sub-section (3) of section 15B has been amended so as to make the provision for levy of penalty more flexible by enabling the Wealth-tax Officer, in a case of continuing default in payment of tax on self-assessment, to levy the penalty from time to time in stages, according to the gravity of the default. The aggregate amount of the penalty will, however, be limited, as at present, to 50 per cent of the tax which was due to be paid but has not been paid. The amendment of section 15B will come into force on 1-4-1971. In cases where default in payment of wealth-tax on self-assessment for any past year, having occurred before 1-4-1971, continues on or after that date, it will be open to the Wealth-tax Officer to levy a penalty or penalties under section 15B(3) as amended, subject to the ceiling of 50 per cent of the tax, provided the power to levy penalty has not already been exercised before 1-4-1971. [Section 60 of the Amending Act] The....
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....uction or waiver is to be ordered by the Commissioner if he is satisfied that the disclosure is full and complete and has been made voluntarily and in good faith; that the assessee has co-operated in any enquiry relating to the assessment in pursuance of the disclosure; and that the assessee has either paid or made satisfactory arrangements for the payment of the tax and interest determined to be payable in consequence of such assessment. In the corresponding provision in section 271(4A) relating to voluntary disclosure of concealed income, there is a requirement that the Commissioner should obtain the previous approval of the Board to the reduction or waiver of the penalty in cases where the minimum penalty imposable or the amount of concealed income exceeds specified amounts, vide para 30 of this circular. With a view to bringing the provision relating to voluntary disclosure of concealed wealth in line with the corresponding provision in the Income-tax Act, section 18(2A) has been amended by the addition of a proviso under which the Commissioner will be required to obtain the previous approval of the Board to the waiver or reduction of the penalty imposable for concealment of we....
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.... the time taken in rehearing the assessee due to change of incumbent of the office of Wealth-tax Officer, Inspecting Assistant Commissioner or Appellate Assistant Commissioner having jurisdiction and any period during which the penalty proceedings have been stayed by an order of the court will be excluded in computing the period of limitation] is being retained. The amendment of section 18(5) will take effect on 1-4-1971. As stated in para 35, in relation to the similar amendment to section 275 of the Income-tax Act, the revised time limit for completion of penalty proceedings will apply to penalty proceedings commenced on or after 1-4-1971, as also to penalty proceedings commenced before that date provided the period of limitation specified under the existing provisions of section 18(5) has not already expired. [Section 61(c) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Enhancement of fees payable by assessees along with their appeals and reference applications in wealth-tax cases to the Income-tax Appellate Tribunal 123. In conformity with the amendments made to the relevant provisions of the Income-tax Act, the fee payable by assessee along with their appeals....
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....e-tax Appellate Tribunal in gift-tax matters, have been amended with a view to increasing the fees payable by assessees from Rs. 100 to Rs. 125. These amendments will take effect on 1-4-1971. [Sections 67, 68 and 69 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Provisions for rounding off of taxable gifts and gift-tax, etc. 127. With a view to simplifying calculations, two new sections 44A and 44B have been inserted with effect from 1-4-1971. New section 44A provides that the amount assessed under the other provisions of the Gift-tax Act as being the value of all taxable gifts will be rounded off to the nearest multiple of ten rupees, by ignoring amounts less than five rupees comprised in such value and increasing amounts ranging from five rupees to nine rupees, to ten rupees. The new section 44B provides that the amount of gift-tax, interest, penalty or any other sum payable, and the amount of refund due, under the provisions of the Gift-tax Act, will be rounded off to the nearest rupee. These provisions will be applicable also to assessments for the assessment year 1970-71 or any earlier year, which are completed on or after 1-4-1971. [Section 70 of the Amendi....