TaxTMI 
TaxTMI 
Amendments at a glance, Rate Structure, Amendment to Income-tax Act, Amendments to Wealth-tax Act, Amendments to Gift-tax Act, Amendments to Companies (Profits) Surtax Act
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.... (a), 209(a)(ii), 211(1), Expln. 212(1) 10(10) Tax treatment of gratuities 24 10(25) Exemption from income-tax of income of approved gratuity funds 25 54C Withdrawal of exemption in respect of capital gains arising from transfer of personal jewellery 28 80C(2)(v) Deduction in respect of long-term savings in specified media - Area of tax incentives widened 12-14 80G(5), Donations to charitable trusts or institutions 20-22 Expln. 2 80-1, 80B(7) Withdrawal of relief in respect of specified priority and 6th Sch. industries 8 80Q, 80L(1)(ix) Withdrawal of deduction in respect of dividends from co-operative societies 9 90, 228A Provisions for enabling the Central Government to enter into tax treaties with foreign countries for exchange of information for preventing evasion or avoidance of taxes and recovery thereof 23 132A(4)(a), Increase in the rate of interest chargeable from assessees, 201(1A), 213, and also payable to assessees by Government under the prov., 214(1), provisions of the Act 27 215(1), 216, 217(1)/(1A), 220(2), 243....
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....ucture Finance Act, 1972 Rates of income-tax for the assessment year 1972-73 3. The rates of income-tax for the assessment year 1972-73 in the case of all categories of taxpayers (corporate as well as non-corporate) are specified in Part I of the First Schedule to the Finance Act, 1972. In the case of taxpayers other than companies, the rates are the same as were specified in Part III of the First Schedule to the Finance (No. 2) Act, 1971, for purposes of computation of "advance tax". Deduction of tax at source from "salaries" and retirement annuities payable to partners of registered firms engaged in specified professions and computation of the tax payable in certain special cases, during the financial year 1971-72. In the case of the Life Insurance Corporation of India and other companies, the basic rates of income-tax on incomes assessable for the assessment year 1972-73 are the same as those laid down in Part III of the First Schedule to the Finance (No. 2) Act, 1971, for the purpose of computation of "advance tax" during the financial year 1971-72. The income-tax payable by these entities will, however, be increased by a surcharge on income-tax calculated at the ra....
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.... surcharge of 4.5 per cent (being 15 per cent of the income-tax). In view of a specific provision made in the new section 194B inserted by section 28 of the Finance Act, 1972, income-tax will be deductible only where the payment exceeds Rs. 1,000. It is also provided in that section that no deduction will be made from winnings from lotteries and crossword puzzles where the payment is made before 1-6-1972. The provisions of the new section 194B have been explained in paragraph 10 of this circular. Payments to contractors and sub-contractors resident in India - Under the new section 194C, inserted by section 28 of the Finance Act, 1972, income-tax will be deductible at source from income comprised in payments made by the Central Government or any State Government, local authorities, statutory corporations and companies to contractors engaged for carrying out any work or for supplying labour for carrying out such work. Income-tax will be deductible at 2 per cent of such payments. Similarly, deduction will be made from payments made by contractors other than individuals and Hindu undivided families, to sub-contractors at the rate of 1 per cent of the payment. No deduction would, ....
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.... financial year 1972-73 5. The Finance Act, 1972 follows the principle adopted in the Finance Acts of the preceding years that in prescribing the rates of tax and in making new provisions in the taxation laws which have the effect of bringing about a change in the tax liability or which provide tax incentive or disincentive in any sphere should apply to current incomes falling due for assessment in the next following assessment year, and not retrospectively to incomes earned in the past except where there are special circumstances justifying the retrospective operation of any particular provision. In conformity with this principle, changes in the rates of tax which were considered necessary or desirable have been made operative prospectively in relation to incomes of the financial year 1972-73 or other accounting period which would be relevant for the assessment year 1973-74. The rates for deduction of tax at source from "salaries" in the case of individuals during the financial year 1972-73 and for the computation of "advance tax" payable during that year in the case of all categories of taxpayers during the said financial year are specified in Part III of the First Schedule to....
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....ption from tax of such receipts is not in keeping with the principle of taxing equally persons with equal capacity to pay. The exemption also provides scope for tax evasion and conversion of "black" money into "white" by ascribing income, which would normally be taxable, to winnings from lotteries, races, card games, etc. The Finance Act, 1972 has made the following amendments to the Income-tax Act with a view to withdrawing the exemption currently available in respect of casual and non-recurring receipts : 1. The definition of "income" in section 2(24) has been amended to specifically provide that winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever will be regarded as income for purposes of the Income-tax Act. [Section 3(b)(ii) of the Finance Act] 2. Winnings from state or other lotteries in the case of non-corporate tax-payers will be taxed on a concessional basis in the same manner as long-term capital gains relating to assets other than lands and buildings. Under the new section 80TT, the whole of the income by way of lottery winnings will be allowed as....
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.... income from the same source. Losses relating to these sources incurred in one year will also not be allowed to be carried forward to be set off against income of a subsequent year. For this purpose, each of the following sources will be regarded as a separate and distinct source : a. lotteries ; b. crossword puzzles ; c. races, including horse races ; d. card games ; e. other games of any sort ; f. betting or gambling of any form or nature not falling under any of the foregoing items. Thus, while losses from bridge may be set off against winnings from any other card game, these will not be set off against income from any other source. Consequential amendments have been made to sections 75 and 77. [Sections 11, 12 and 13 of the Finance Act] 6. By virtue of the amendment made to section 207, income by way of winnings from lotteries, crossword puzzles, races including horse races, card games, other games or from gambling or betting will not be included in the "income subject to advance tax" and, accordingly, no "advance tax" will be payable in respect of income from the aforesaid sources. Consequential changes have also been made to sections 208, 209, 211 a....
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....eir activities through the medium of one or more co-operative societies. This special concession in respect of dividends from co-operative societies has, therefore, been withdrawn by omitting section 80Q. Such dividends have, however, been included in the categories of financial assets income wherefrom qualifies for deduction up to Rs. 3,000 in the aggregate in the hands of an individual or a Hindu undivided family by adding a new clause (ix) to sub-section (1) of section 80L. The above changes will take effect from 1-4-1973 and will, accordingly, apply to the assessment year 1973-74 and onwards. [Sections 20 and 21 of the Finance Act] Amendments to Wealth-tax Act Finance Act, 1972 Exemption of co-operative societies from wealth-tax 32. Under section 3, wealth-tax is chargeable in respect of the net wealth of (i) individuals, (ii) Hindu undivided families, and (iii) companies. Wealth-tax is, however, not being charged in respect of the net wealth of companies from the assessment year 1960-61 onwards in view of a special provision made in this behalf in the Finance Act, 1960. Recently, some doubt has been raised that a co-operative society could, in law, be regarde....
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.... the Central Government. 2. Fixed deposits with the Central Government as also in Post Offices on Government account and Recurring and Time Deposits in Post Offices. 3. Shares in Indian companies. 4. Notified debentures. 5. Units in the Unit Trust of India. 6. Deposits with banking companies, including co-operative banks, land mortgage banks and land development banks. 7. Deposits with approved financial institutions engaged in providing long-term finance for industrial development in India. 8. Shares in co-operative society. 9. Deposits made by a member of a co-operative society with the society (other than deposits made with a co-operative housing society by a member of the society to whom a building or part thereof is allotted or leased under a house building scheme of the society, which are separately exempted from wealth-tax without any limit to the extent such deposits have been made under the house building scheme of the society). The Finance Act, 1972 has added two new clauses (xxxi) and (xxxii) to sub-section (1) of section 5 enlarging this list so as to include the value of assets forming part of an industrial undertaking belonging to the assess....
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....t from wealth-tax) and depositing the amount in a bank may forfeit exemption from tax in respect of the amount merely because he has not been able to hold the bank deposit for a period of six months. In order to obviate hardship in such cases, section 5(3) has been amended to provide that in computing the period of six months in relation to any asset, in a case where such asset was acquired by the assessee by conversion of, or in exchange for, or with the proceeds of, or with the money constituting, any other asset exempt from wealth-tax under sub-section (1) or sub-section (2) of section 5, so much of the period for which the assessee held such other asset as falls within the period of twelve months ending with the relevant valuation date, will also be taken into account. This relaxation will be available only if the assessee acquires the relevant asset within thirty days after he ceases to hold the first asset. The concession under this provision will, however, not apply in the case of shares or securities held as stock-in-trade by the assessee for the purposes of his business. These amendments will take effect from 1-4-1973 and will, therefore, apply for the assessment year 1....
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....ay wealth-tax on the value of its entire property at the rate of 1.5 per cent or the rate applicable in the case of an individual, whichever is beneficial to the Revenue. For the purposes of this provision, it has been specifically provided that any part of the property or income of a trust shall be deemed to have been used or applied for the benefit of any of the specified categories of persons if it can be deemed to have been so used or applied within the meaning of clause (c) of sub-section (1) of section 13 of the Income-tax Act at any time during the period of twelve months ending with the relevant valuation date. Where the trust funds are invested in any concern in which any of the specified persons has a substantial interest, and the quantum of the investment does not exceed 5 per cent of the capital of the concern, the trust or institution forfeits exemption from income-tax only in respect of the income arising from such investment and not its entire income. Similarly, exemption from wealth-tax, in such cases, will be denied only in relation to such investment and other assets will continue to qualify for exemption. The new section 21A takes effect from 1-4-1973 and will, t....
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....ections 48 and 49 of the Finance Act] Finance Act, 1972 Power to make rules for admission of additional evidence 41. The Finance Act, 1972 has amended the Income-tax Act with a view to regulating the admission of evidence which is not produced by the assessees before the Income-tax Officer but is produced for the first time in the course of proceedings before the Appellate Assistant Commissioner. Corresponding amendments have also been made to the Wealth-tax Act by inserting a new clause (cc) in sub-section (2) of section 46 and the Central Board of Direct Taxes has been empowered to prescribe in the Wealth-tax Rules, the circumstances in which, the conditions subject to which and the manner in which the Appellate Assistant Commissioner of Wealth-tax may permit the appellant to produce evidence which he did not produce or which he was not allowed to produce before the Wealth-tax Officer. Under the Wealth-tax (Amendment) Rules, 1973, a new rule 5A has been inserted in the Wealth-tax Rules, 1957. This rule is broadly on the lines of rule 46A of the Income-tax Rules, 1962, the scope of which has been explained in paragraph 29 of this circular. [Section 51 of the Finance....
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....in the Income-tax Act has also been applied to the Gift-tax Act by amending section 44 of the Gift-tax Act. [Sections 53 and 54 of the Finance Act] Finance Act, 1972 Exemption of gifts made by charitable or religious institutions or funds 45. Section 45(e) excludes from the purview of that Act any gifts made, inter alia, by an institution or fund, the income whereof is exempt from income-tax under section 11 of the Income-tax Act. Under an amendment made to the Gift-tax Act through the Finance (No. 2) Act, 1971, it has been provided that a charitable institution or fund will not forfeit the exemption from gift-tax in respect of gifts made by it merely because (a) subsequent to the gift, any income of the institution or fund becomes chargeable to income-tax due to non-compliance with any of provisions of section 11 of the Income-tax Act relating to application of income during the accounting year itself ; or (b) the institution or fund forfeits exemption in respect of a part of its income which arises from investments made in a concern in which the founder of the institution or fund or his relatives have a substantial interest, where the aggregate of the funds invested b....
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.... of the accounts of the institution or fund by a chartered accountant, etc., or the institution or fund forfeits exemption in respect of its income by way of voluntary contributions on the ground that the funds of the institution or fund have been invested in a prohibited concern provided, however, the investment in such concern does not exceed 5 per cent of its capital. Finance Act, 1972 48. The changes set forth in the preceding paragraphs will be effective from 1-4-1973 and will, accordingly, apply in relation to the assessment year 1973-74 and subsequent years. [Section 55 of the Finance Act] Finance Act, 1972 Powers to make rules for admission of additional evidence 49. At present, an Appellate Assistant Commissioner of Gift-tax has a wide and unrestricted discretion in regard to admission of evidence which is not produced by the assessee before the Gift-tax Officer but is produced for the first time in the course of the appellate proceedings. With a view to regulating the admission of such additional evidence, section 46 has been amended in order to empower the Central Board of Direct Taxes to prescribe in the Gift-tax Rules, the circumstances in which, the ....