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Explanatory notes on the provisions of the Direct Tax Laws (Amendment) Act, 1987 [as amended by the Direct Tax Laws (Amendment) Act, 1989]--Part-III
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....anatory notes). The provisions of section 6(f) of the Amending Act, 1987, which have come into effect from 1st April, 1986, are also explained in this circular. 1.3 This circular also explains those provisions of the Amending Act, 1989, which have further amended the provisions of the Amending Act, 1987, which are discussed in this circular. Withdrawal, of certain new provisions introduced by the Amending Act, 1987 2.1 As mentioned in para. 3.1 of Part I of these explanatory notes, the provisions dealing with following matters, introduced by the Amending Act, 1987, have been withdrawn by the Amending Act, 1989 :-- (i) Scheme of taxation of firms and partners. (ii) Scheme of tax treatment in respect of charitable and religious institutions, trusts, etc., as also scientific and sports associations and institutions of national importance. (iii) Charging of additional tax in lieu of penalty for concealment of income/wealth/gift. 2.2 Since the aforesaid new provisions have been withdrawn, the same are not discussed in detail in these explanatory notes. However, the provisions of the Income-tax, Wealth-tax and Gift-tax Acts, which were first amended, omitted or newly....
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....sequential amendments made in the provision regarding carry forward and set off of losses in case of change in the constitution of a firm. 95 (g) *10. 21 New sub-section (3) section 80A. Consequential amendment substituted in made to exclude references to firms and partners. 95(g) *11. 29 New section 86 substituted Provisions for rebate on the share income of a partner in an unregistered firm, which is included in his total income omitted. 95(g) 12. 61(a) 155(1)(Amended) Provisions regarding rectification of a partner's share in the income of the firm made applicable up to assessment year 1988-89 only. 95(i)(1) 13. 62 158(Amended) Provisions regarding intimation of the assessment of the firm and apportionment of its income among partners made applicable up to assessment year 1988-89 only. 95(j) *14. 66 New section 167A Tax is levied at the maximum substituted marginal rate in the case of a firm (after allowing deduction for interest and remuneration, etc., paid to partners, as indicated at Sl. No. 5 above). 95(j) 15. 67 182 and 183 (omitted) Separate provisions regarding assessment of register....
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....Section 43(a)(i) of the Amending Act, 1989, has amended clauses (g) and (h) of sub-section (1) of the new section 246 of the Income-tax Act, as substituted by section 99 of the Amending Act, 1987, to remove the stipulation that the provisions of these clauses would apply up to assessment year 1988-89 only. 2.4 Scheme of tax treatment in respect of charitable and religious institutions, trusts, etc., as also scientific research and sports associations and institutions of national importance.--A number of sections of the Income-tax Act were amended, omitted or newly inserted by the Amending Act, 1987, to introduce a scheme of tax treatment of charitable and religious institutions, trusts, etc., as also scientific research and sports associations and institutions of national importance. The Table below shows sections of the Amending Act, 1987, which introduced the said scheme, sections of the Income-tax Act which were affected and the subject-matter of amendments in brief. The Table also indicates the sections of the Amending Act, 1989, which have withdrawn the said scheme and have restored the old provisions in this respect. Sl. No. Sections of the Amending Act, 1987, which ....
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....omitted. 95(g) 9. 122 New section 296 substituted. Consequential amendments made in section 296 relating to placing of rules, etc. before Parliament, pursuant to the omission of section 10(23C)(iv). 95(j) 10. 126(8) and (13) 43A (1) and 80G(5) (Amended) Consequential amendments made pursuant to the omission of sections 10(23) and 35. 95(o) NOTES : *(1) While restoring back clauses (21), (23), (23C)(iv) and (v) of section 10 of the Income-tax Act, the Amending Act, 1989, has further amended the said clauses of section 10 to introduce certain conditions for safeguarding against the misuse of the exemptions provided under these clauses. These are discussed at the appropriate places in this part of the explanatory notes. **(2) While restoring back sections 11, 12, 12A and 13 of the Income-tax Act, the Amending Act, 1989, has further made certain modifications in the provisions of section 11. These are discussed at the appropriate places in this part of the explanatory notes. +(3) Section 10 of the Amending Act, 1987, omitted not only sections 35, 35CCA and 35CCB, but also sections 35B, 35C and 35CC of the Income-tax Act. The Amending Act, 19....
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....ed, where income assessed on regular assessment exceeds the returned income, @ 30% of such excess amount. 95(j) *2. 99 New section 246A inserted in the Income-tax Act. Application can be moved by the assessee before the Deputy Commissioner (Appeals) or the Commissioner (Appeals) after submission of return for deciding any issue even when the assessment is not completed. 44 **3. 106 New section 271 substituted in the Income-tax Act. Provisions for the levy of penalty for concealment of income omitted. 95(m) 4. 126(23) 253(1)(a) of the Income-tax Act. Consequential amendments made in the (Amended) provisions relating to appeals to the Appellate Tribunal, pursuant to the insertion of new section 246A. 95(o) **5. 142 New section 18 substituted in the Wealth-tax Act. Provisions for levy of penalty for concealment of wealth omitted. 95(p) 6. 143 New section 18D inserted in the Wealth-tax Act. Additional wealth-tax to be levied, where the net wealth determined on regular assessment exceeds the net wealth returned, @ 3 % of such excess amount. 95(p) 7. 147 New section 23A inserted in the Wealth-tax Act. ....
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....A of the Wealth-tax Act and sections 17 and 17A of the Gift-tax Act. These are discussed at the appropriate places in this Part of the Explanatory Notes. Amendments to the Income-tax Act, 1961 INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME (SECTION 10) 3.1 Section 10 of the Income-tax Act deals with incomes which do not form part of total income, i.e., incomes which are totally exempt from income-tax. This section contains a large number of clauses, which provide various types of exemptions to achieve different social and economic objectives. The Amending Act, 1987, has amended, omitted or newly inserted a number of clauses of this section. The Amending Act, 1989, has made further changes in some of the amendments made by the Amending Act, 1987. These are discussed in the following paras. 3.2 Exemption of share of a partner in the income of a firm [insertion of new clause (2A)].--This was withdrawn by the Amending Act, 1989 (refer to item 2 of the Table given in para 2.3 ante.) 3.3. Merger of clauses (4) and (4A) and also rationalisation of the provisions of these clauses.--Under the old provisions of clause (4), the following income was exempt in the case of a non-r....
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....ession and assistance received from employers [clause (5)].--Under the old provisions of clause (5), the value of any travel concession or assistance received by an employee, who was a citizen of India, from his employer was exempt if it was in connection with his proceeding on leave with his family to any place in India, or if it was in connection with their proceeding to any place in India after retirement from service or after termination of service of the employee. The clause consisted of two sub-clauses as follows :-- (i) Sub-clause (i) applied to the assessment year 1970-71 and earlier assessment years. (ii) Sub-clause (ii) applied to the assessment year 1971-72 and subsequent assessment years. The exemption was subject to the safeguards provided in the proviso to sub-clause (ii) of the said clause (5). It was also subject to the conditions prescribed in rule 2B of the Income-tax Rules, 1962. 3.7 The Amending Act, 1987, has substituted a new clause (5) in the section with a view to rationalise its provisions and also to make it more broadbased. The salient features of the new clause are :-- (i) The exemption is now available to all employees, irrespective of th....
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....ss. 3.11 With a view to rationalise the provisions of the said sub-clause (iii), the Amending Act, 1987, has made the following amendments therein :-- (i) Calculation of the amount of gratuity to be exempted is now to be made on the basis of the average salary for 10 months immediately preceding the month of retirement, etc., instead of the average of three years, as was the case under the old provisions. (ii) The maximum limits of exemption, namely, Rs. 36,000 or 20 months' salary are not specified in the sub-clause. Instead, it is now provided that the limit may be specified by the Central Government by way of notification in the official gazette, having regard to the limit applicable to the Central Government employees. As a result of this amendment, it would not be necessary to make frequent changes in the Income-tax Act every time the monetary limit is to be changed as and when the maximum amount of allowable gratuity is changed in the case of Central Government employees. 3.12 There were four provisos in the old clause (10), which provided as under :-- (i) The first proviso stipulated that where gratuities were received from two or more employers in the same ye....
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....irement covers two classes of employees as follows :-- (i) Sub-clause (i) deals with employees of the Central Government or a State Government. (ii) Sub-clause (ii) deals with employees other than employees of the Central Government or a State Government. 3.17 Under the old provisions of sub-clause (ii) of the said sub-clause (10AA), any payment received by an employee, other than an employee of the Central Government or a State Government, as cash equivalent of leave salary in respect of the period of earned leave to his credit at the time of his retirement was exempt from tax. Further, the maximum amount of exemption was limited to six months' leave salary, calculated on the basis of average salary drawn during the 10 months immediately preceding his retirement or Rs. 30,000, whichever was less. 3.18 This limit applicable to non-Government employees was required to be raised as a result of the higher amount getting exemption in the case of the Central Government employees as a result of the recommendations of the Fourth Pay Commission. To achieve this objective and also to rationalise the provisions, the Amending Act, 1987, has made the following amendments in the sai....
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....3.22 To avoid frequent amendments of the Act, the Amending Act, 1987, has amended clause (10B) to provide that the amount of compensation exempt under this clause shall not exceed-- (i) the amount calculated in accordance with the provisions of the Industrial Disputes Act, 1947, or (ii) such amount, not being less than Rs. 50,000, as the Central Government may, by notification in the Official Gazette, specify in this behalf, whichever is less. Thus, under the amended clause, whenever the exemption limit of Rs. 50,000 is to be enhanced, it can be done by a notification. 3.23 Amendment of the provisions relating to exemption of allowances, etc., granted to the employees [clause (14) of section 101 and definition of "income" [clause (24) of section 2].--Under the old provisions of clause (14), any allowance or benefit, not being in the nature of entertainment allowance or other perquisite within the meaning of section 17(2), specially granted by an employer to an employee to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of his office or employment of profit, was exempt from tax to the extent such expenses were actually incurred....
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....esides or to compensate him for the increased cost of living, will be exempt only if the Central Government specifies them by notification in the Official Gazette. 3.25 The Amending Act, 1989, has amended clause (24) of section 2. Allowances and benefits, which are mentioned in section 10(14), have been included in the definition of "income" by using the same language as is used in section 10(14). The amendment has been made retrospectively from 1st April, 1962. 3.26 The combined effect of the substitution of the new clause (14) in section 10 of the Income-tax Act by the Amending Act, 1987, and the amendment of the definition of "income" contained in section 2(24) of the Income-tax Act by the Amending Act, 1989, is that all allowances and benefits granted to the employees will first be treated as income in their hands, but those allowances and benefits which are intended to be exempt from tax will be specified in the notification to be issued under section 10(14). 3.27 It may be mentioned that the following notifications have so far been issued under the new clause (14) of section 10 to exempt various allowances and benefits :-- (i) Under sub-clause (i) of clause (14) :....
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....as and when the Government floated certain securities or bonds or savings certificates, etc., to exempt from tax, interest or any other income therefrom. 3.30 The Amending Act, 1987, has omitted all these sub-clauses and replaced them by a single clause (i), which provides exemption in respect of income by way of interest, premium on redemption or other payment on such securities, bonds, annuity certificates, savings certificates, other certificates issued by the Central Government and deposits as the Central Government may, by notification in the Official Gazette, specify in this behalf. The exemption will be subject to such conditions and limits as may be specified in the said notification. As a result of this amendment, whenever the Central Government wants to exempt income from any new security, bond, certificate, deposit, etc., it need not amend the Act. The purpose will be served by the issue of a notification in this behalf. 3.31 Merger of clauses (17A), (17B) and (18) into a single new clause (17A) and also simplification and rationalisation of the provisions of these clauses.--Clauses (17A), (17B) and (18) provided for exemption in respect of the following :-- (i)....
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....) and sub-clauses (iv) and (v) of clause (23C) by the Amending Act, 1987, and their restoration, with adequate safeguards against misuse, by the Amending Act, 1989.--The Amending Act, 1987, omitted the following clauses of section 10 :-- (i) Clause (21), which exempted the income of a scientific research association. (ii) Clause (23), which exempted the income of a sports association or institution. (iii) Sub-clauses (iv) and (v) of clause (23C) which exempted the income of a notified charitable fund or institution or a notified wholly public religious or a wholly public religious and charitable trust or institution. The provisions of these clauses, after incorporating appropriate amendments, along with modified provisions of sections 11 to 13, were contained in a new section 80F inserted by the Amending Act, 1987. However, following representations in this regard, the Amending Act, 1989, has omitted the new section 80F and has restored back the said clauses (21) and (23) and sub-clauses (iv) and (v) of clause (23C) of section 10 (refer to items 1, 2 and 6 of the Table given in para 2.4 ante). 3.34.The Amending Act, 1989, has further substituted new clauses (21) and ....
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....ernment may, by notification in the Official Gazette, specify in this behalf. However, the exemption is subject to the following conditions :-- (i) The conditions regarding application of income, investment of funds in assets specified in section 11(5) and income from business are essentially the same as those in the case of clause (21) relating to scientific research associations, which have been enumerated at serial Nos. (i) to (iii) in the preceding para. It is, however, provided in this clause that if any funds invested or deposited before 1st April, 1989, in any form or mode, other than that specified in section 11(5) are invested or deposited in the form or mode specified in section 11(5) by 30th March, 1990, the exemption under this clause shall not be denied in respect of such funds. (ii) The association or institution should not distribute any part of its income in any manner to its members except as grants to any association or institution affiliated to it. (This condition was also there in the old provisions of the clause). (iii) The association or institution should make an application in the prescribed form and manner to the prescribed authority for the pur....
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....or grant of exemption or continuation thereof under the said sub-clauses (iv) and (v) are essentially the same as those in the case of clause (23) relating to sports associations, which have been enumerated at serial Nos. (i) to (v) in para 3.36 ante, with the following difference :-- (i) The provisions of sub-sections (2) and (3) of section 11 are not made applicable to the accumulation of income by institutions, etc., exempt under sub-clauses (iv) and (v) of clause (23C), while they are applicable in the case of institutions exempt under clause (23) and also clause (21). The effect is that while scientific research and sports institutions and associations exempt under clauses (21) and (23) can accumulate, for application to their purposes, only 25 per cent. of their income without any time-limit and without fulfilling any conditions and the balance 75 per cent. for a period of 10 years after complying with certain requirements mentioned in section 11(2), there is no such embargo in the case of religious or charitable institutions, etc., exempt under sub-clauses (iv) and (v) of clause (23C). The latter can accumulate any amount out of income for application to their objects for....
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....to force with effect from 1st April, 1990. (Clauses (a) to (1) of section 6 of the Amending Act, 1987). (Sub-clause (ii) of clause (a) of section 2, clauses (c), (d) and (e) of section 4 and clause (b) of section 95 of the Amending Act, 1989). TAX TREATMENT OF CHARITABLE AND RELIGIOUS TRUSTS, INSTITUTIONS ETC. 4.1 Omission of sections 11, 12, 12A and 13 by the Amending Act, 1987, and their restoration by the Amending Act, 1989 :--The Amending Act, 1987, omitted the following sections of the Income-tax Act :-- (i) Section 11, which exempted the income of charitable and religious trusts, institutions etc., subject to fulfilment of certain conditions. (ii) Section 12, which dealt with voluntary contributions received by religious or charitable trusts and institutions. (iii) Section 12A, which laid down conditions for application of the provisions of sections 11 and 12. (iv) Section 13, which enumerated the cases and circumstances in which the provisions of sections 11 and 12 did not apply. The provisions of these sections, after certain modifications, were incorporated in a new section 80F inserted by the Amending Act, 1987. However, following representation....
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....pulations in clauses (a) and (b) of sub-section (1) of section 11 that 75 per cent. of the income of the trust should be spent during the year and only 25 per cent. can be accumulated for application to its purposes in future could not have been made applicable to corpus donations, the Amending Act, 1989, has further amended section 11 to exclude corpus donations from the total income of the trust, as explained in para 4.2 above. 4.5 The effect of the amendment of the definition of "income" contained in section 2(24) by the Amending Act, 1987 and the amendment of sub-section (1) of section 11 by the Amending Act, 1989, is that although corpus donations would be treated as income in the hands of the recipient, in the case of trusts or institutions, which comply with the requirements for exemption under section 11, these will be excluded from their income. However, in case the trust or institution loses the exemption under section 11, either by not complying with the conditions laid down in section 12A or by falling within the mischief of section 13, corpus donations will be included in its income and taxed. 4.6 Consequential amendments in sections 2(24) and 11(1) by the Amendi....
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....ded by the Amending Act, 1987, read with the provisions of the new section 80F, also inserted by the Amending Act, 1987. (ii) Section 35B relating to weighted deduction in respect of expenditure incurred for promoting exports, as the concessions had already been withdrawn by the Finance Act, 1983, in respect of expenditure incurred after February 28, 1983. (iii) Section 35C relating to deduction for expenditure on agricultural development, as the concessions had already been withdrawn by the Finance Act, 1984, in respect of expenditure incurred after February 28, 1984. (iv) Section 35CC relating to deduction for expenditure on an approved programme of rural development as the concessions had already been withdrawn by the Finance Act, 1985, in respect of expenditure on programmes not approved till March 16, 1985. (v) Sections 35CCA and 35CCB relating to deductions for expenditure by way of payments to associations and institutions for carrying out rural development programmes or programmes of conservation of natural resources, as deductions for such payments were to be allowed under the provisions of section 80G, as amended by the Amending Act, 1987, read with the provis....
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....thority for the purposes of grant of such approval or continuance thereof. (ii) Before granting the approval, the prescribed authority may, for satisfying itself about the genuineness of the activities of the scientific research association university, college or institution, call for such documents (including audited annual accounts) or information from the said association, university, college or institution as it thinks necessary. The prescribed authority may also make such enquiries as it may deem necessary in this behalf. (iii) The notification granting approval shall, at any one time, have effect for not more than three assessment years (including an assessment year or assessment years commencing before the date of issue of such notification), as may be specified in the notification. 5.5. These amendments come into force with effect from 1st April, 1989, and will, accordingly, apply to the assessment year 1989-90 and subsequent assessment years. [Section 10 of the Amending Act, 1987] [Section 8 and clause (e) of section 95 of the Amending Act, 1989] COMPUTATION OF INCOME UNDER THE HEAD "PROFITS AND GAINS OF BUSINESS OR PROFESSION" 6.1. Under the old provi....
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....lise provisions regarding allowability of bonus and commission payments.--The old provisions of clause (ii) of sub-section (1) of section 36 provided for allowance of bonus or commission paid to an employee subject to certain conditions laid down in the two provisos to the said clause (ii). The first proviso laid down the condition that deduction in respect of bonus paid to an employee governed by the Payment of Bonus Act, 1965, shall not exceed the amount of bonus payable under that Act. The second proviso laid down that the amount of bonus in case of employees not governed by the Payment of Bonus Act or the amount of commission should be reasonable with reference to the pay of the employee, the conditions of his service, the profits of the business for the year in question and the general practice in similar business or profession. 6.4 Instances have occurred where payments to employees governed by the Payment of Bonus Act were made in excess of the statutory amounts for reasons of business expediency. A claim for the balance amount in such cases was generally made under the provisions of section 37(1) which allows all expenses incurred wholly or exclusively for the purposes o....
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....ed to have become bad in that year. In order to eliminate the disputes in the matter of determining the year in which a bad debt can be allowed and also to rationalise the provisions, the Amending Act, 1987, has amended clause (vii) of sub-section (1) and clause (i) of sub-section (2) of the section to provide that the claim for bad debt will be allowed in the year in which such a bad debt has been written off as irrecoverable in the accounts of the assessee. 6.7 Clauses (iii) and (iv) of sub-section (2) of the section provided for allowing deduction for a bad debt in an earlier or later previous year, if the Income-tax Officer was satisfied that the debt did not become bad in the year in which it was written off by the assessee. These clauses have become redundant, as the bad debts are now being straightaway allowed in the year of write-off. The Amending Act, 1987, has, therefore, amended these clauses to withdraw them after the assessment year 1988-89. 6.8 Amendments to section 36(1)(viia) to include definition of " scheduled bank " therein.--Under the provisions of clause (viia) of sub-section (1) of the section, deduction is allowed to scheduled as well as non-scheduled b....
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....iture, which exceeded Rs. 2,500 to be made by a crossed cheque or a crossed bank draft. On failure to do so, the payments made were disallowed in the computation of income. In order to remove hardship to smaller assessees, the Amending Act, 1987, has raised this ceiling to Rs. 10,000. 6.11 Omission of sub-sections (5) and (6) of section 40A.--Sub-section (5) of the section laid down ceilings on the remuneration and perquisites paid by any assessee to its employees or former employees. Sub-section (6) laid down the ceiling upto which any expenditure by way of fees for services rendered by a person, who at any time during the period of 24 months immediately preceding the previous year was an employee of the assessee could be allowed. The Amending Act, 1987, has omitted both these sub-sections. Consequently, the artificial ceilings laid down on the remuneration or fees payable to employees or former employees of an assessee are removed. However, if excessive or unreasonable payments are made to relatives or connected persons, the same can still be disallowed under the provisions of section 40A(2). 6.12 These amendments come into force with effect from 1st April, 1989, and will, ....
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....Amending Act, 1989, has withdrawn the new scheme of assessment of firm and partners and the new proviso to clause (ii) of section 64(1). Consequently, all the amendments to section 64(1), as mentioned in the preceding para, have been reversed (refer to item 6 of the Table given in para 2.3 ante). Thus, the old provisions of clauses (i), (ii) and (iii) of section 64(1) along with Explanations 1A and 2A have been restored. 7.3 Other amendments to section 64(1) by the Amending Act, 1987, which have not been withdrawn by the Amending Act, 1989 :-- (i) Amendments to clauses (v) and (vii).--Clause (v) provides for clubbing of the income from assets transferred to the minor child with the income of the individual transferring the assets. Clause (vii) deals in a similar way with the assets transferred to any person or association of persons for the benefit of the spouse or minor child. Under the old provisions of the said clauses (v) and (vii), the term " minor child " was qualified by the words " not being a married daughter ". Since the use of these words was considered unnecessary, because of the requirement of the relevant law laying down the minimum age for marriage, the Amendin....
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....rm, association or body. The Amending Act, 1987, substituted a new sub-section (3) after making the following amendments :-- (i) Reference to a firm and its partners was omitted from the new sub-section (3), as under the new scheme of assessment of firm and partners introduced by the Amending Act, 1987, such a reference was not necessary in the said sub-section (3). (ii) Since section 80T had already been omitted by the Finance Act, 1987, and sections 80GGA and 80QQ were being omitted by the Amending Act, 1987, references to these sections were omitted from the new sub-section (3). 8.3 The Amending Act, 1989, has withdrawn the new scheme of assessment of firm and partners and has also restored section 80GGA. The Amending Act, 1989, has, therefore, withdrawn the above amendments to sub-section (3) of section 80A made by the Amending Act, 1987, except omission of references to sections 80QQ and 80T (refer to item 10 of the Table given in para 2.3 ante). 8.4 Omission of certain " definitions " from Chapter VIA (Amendment of section 80B).--The Amending Act, 1987, has omitted the following definitions from section 80B :-- (i) Definitions of " domestic company " and " fore....
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...., 1987, made the following amendments in this section :-- (i) Consequent upon the omission of clauses (21), (23) and sub-clauses (iv) and (v) of clause (23C) of section 10 and sections 11 to 13 and their replacement by a new section 80F, amendments were also made in section 80G to bring the provisions of this section in line with those of the new section 80F. Further consequent upon the omission of sections 35, 35CCA, 35CCB and 80GGA, the provisions of those sections, with appropriate amendments, were also incorporated in section 80G. For these purposes, amendments were carried out in sub-sections (1), (2) and (5) and Explanation 2 of the section. (ii) Sub-section (4) lays down the ceiling upto which certain donations mentioned in sub-section (2) of the section can qualify for deduction. Under the old provisions of the sub-section, this ceiling was 10 per cent. of the gross total income or Rs. 5 lakhs, whichever was less. A new sub-section (4) has been substituted, which does not contain the ceiling of Rs. 5 lakhs. The effect is that the aforesaid donations will now be subject to only one upper limit, i.e., 10 per cent. of the gross total income. 8.8 Following representati....
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....zures, and enabled him to exercise the powers even when no proceedings were pending. However, these powers were not available to the Directors and the Deputy Directors, who are generally associated with investigation of cases and intelligence work in connection with searches and seizures under section 132. Another difficulty felt was that an authorised officer could record a statement on oath only during the course of search under the provisions of section 132(4). Sometimes it becomes necessary to record a preliminary statement before the commencement of the search for proper investigation. This was not possible, as the courts had held that such a preliminary statement before the search could not be recorded under the provisions of section 132(4). 9.2 To overcome these difficulties, the Amending Act, 1987, has amended the said sub-section (1A) to extend similar powers to the Director-General or Director. As per the new definition of " Director-General or Director " in section 2(21), the term also includes a Deputy Director and an Assistant Director. Thus, the powers have been extended to the Director-General, Director, Deputy Director the Assistant Director. The Amending Act, 19....
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....-section (3) amounts to seizure or not. While the Punjab and Delhi High Courts held that it did not amount to seizure [O. P. Jindal v. CIT [1976] 104 ITR 389] and Mrs. Kanwal Shamsher Singh v. Union of India [1974] 95 ITR 80], the Bombay High Court held in a case that the effect of the prohibitory order under section 132(3) is in essence to bring out a seizure of articles and things and so it would amount to seizure [N. M. R. Gillani v. CIT (1976) Tax LR 688]. In order to put an end to the controversy arising out of the differences of judicial pronouncements and to make the intention of the Government clear, the Amending Act, 1987, has inserted an Explanation to sub-section (3) to clarify that a prohibitory order under this sub-section does not amount to seizure. 9.6 Further, there is no time limit upto which such a prohibitory order can be in force. This causes inconvenience to the assessee, as the authorised officer can keep the books of account, documents, valuable articles, etc., under prohibitory order for an indefinite period and there is no recourse left to the person, if the prohibitory order continues for an unduly long period. Several courts have held that the absence ....
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....y and the purpose will be served by making a reference to the period referred to in sub-section (5). The Amending Act, 1987, has, therefore, made the necessary amendment to Explanation 1. The effect is that amendment of the Explanation will not be necessary if the period of 120 days mentioned in sub-section (5) is enhanced or reduced subsequently. NOTE :--For further amendments to section 132 by the Finance Act, 1988, refer to paras 34.1 to 34.3 of the Explanatory Notes on the Finance Act, 1988 (Circular No. 528) (See [1988] 176 ITR (St.) 154). 9.9 Consequential amendments to section 132A relating to powers to requisition books of account, etc.--The Amending Act, 1987, has made amendments of consequential nature in this section pursuant to the changes in designations of income-tax authorities. NOTE:--The Finance Act, 1988, has further clarified that these amendments would come into force with effect from 1-4-88 [clause (c) of section 88 of the Finance Act, 1988]. 9.10 Amendments of the provisions relating to powers of income-tax authorities to call for information (section 133).--Under the old provisions of clause (4) of the section, the income-tax authorities....
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....come-tax Officer. This meant that an Inspector of Income-tax could conduct survey only when so authorised by the Income-tax Officer and the Deputy Commissioner or Assistant Director could not authorise an Inspector to conduct a survey. To remove this lacuna, the Amending Act, 1987, has amended clause (a) of the Explanation to provide that instead of only the Income-tax Officer, any income-tax authority mentioned in the section can authorise the Inspector of Income-tax to conduct the survey. 9.13 Amendments of the provisions relating to disclosure of information respecting assessees (section 138).--Under the old provisions of clause (a) of sub-section (1) of the section, dealing with disclosure of information in respect of income-tax assessees, it was provided that information about " any assessee in respect of any assessment made " could be disclosed to other Central Government agencies and to the authorities under the Foreign Exchange Regulation Act, 1947, by the Board or by any income-tax authority specified by the Board. This meant that the information could be passed on only in respect of the person who was an assessee with the Department and that too when the assessment rel....
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.... of persons on whose behalf or for whose benefit the income is receivable are indeterminate or unknown, tax shall be charged at the maximum marginal rate on the entire income. The section further lays down certain circumstances under which the tax may not be charged at the maximum marginal rate. The Amending Act, 1987, made the following amendments to this section :-- (i) Sub-sections (2) and (3) of the section, which dealt with taxation of charitable or religious trusts, were omitted, as these provisions were to be covered by the new section 80F inserted by the Amending Act, 1987, which contained a comprehensive scheme of tax treatment of such charitable and religious trusts. (ii) Some consequential amendments were also carried out in sub-section (1). (iii) Explanation 2 to the section, which defined the term " maximum marginal rate ", was omitted. This was consequent upon the shifting of this definition to section 2. The result is that the definition of the term " maximum marginal rate " will now be valid for the purposes of the entire Income-tax Act. The shifting of the definition of " maximum marginal rate " to section 2 becomes necessary as tax is now to be charged at....
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....n or body are determinate, but any one of whose members has income above the maximum amount not chargeable to tax in the case of an individual. It was also provided that if any member of such association or body was taxable at a rate higher than the maximum marginal rate, then the entire income of the association or body would be taxed at such higher rate. NOTE :--It may be clarified that the Amending Act, 1987, substituted the old section 167A relating to taxation of certain association of persons at the maximum marginal rate by a new section 167A, which provided for taxation of firms at the maximum marginal rate. This new section 167A has, however, been omitted by the Amending Act, 1989, which has withdrawn the new scheme of taxation of firm and partners (refer to item 14 of the Table given in para 2.3 ante). 11.2 Insertion of a new section 167B by the Amending Act, 1989.--A number of representations were received against the provisions of section 167B, as inserted by the Amending Act, 1987. It was pointed out that the provision to tax the entire income of an association of persons or body of taxable at such a higher rate would cause hardship in many cases. Some other an....
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....e at a rate higher than the maximum marginal rate. Thus, only small associations of persons or body of individuals formed by persons who, themselves are not taxable will henceforth be taxed at the normal rates. Persons who are taxable in the high income brackets or are taxable at a rate higher than the maximum marginal rate shall no longer be tempted to form an association of persons or body of individuals for being taxed at lower rates. 11.4 Amendments in the provisions of other sections connected with the taxation of association of persons, body of individuals and their members. ---The Amending Act, 1987, also amended the provisions of sections 40, 67 and 86 of the Income-tax Act to bring forward new provisions for taxation of firm and partners as well as new provisions for taxation of association of persons, body of individuals and their members in these sections. However, since the Amending Act, 1989, withdrew the new scheme of taxation of firm and partners, it also further amended these three sections to withdraw from them the new provisions relating to the taxation of firm and partners, but to retain the new provisions relating to taxation of association of persons, body o....
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....'s share in the income of the firm. However, the provisions of sub-section (4) of section 67, which deals with set off or carry forward of share of loss of a partner in a registered firm do not find place in section 67A, because there are no provisions in the Income-tax Act for the set off or carry forward of the share of loss of a member in an association or body in his own assessment. 11.7 The old and the new provisions of clause (v) of section 86, Under the old provisions of clause (v) of section 86 read with section 110, although the share of a member of an association of persons or body of individuals received out of the income of such association or body on which income-tax had already been paid by the association or body, was included in the total income of the member, but a rebate of tax was given on such share at the average rate of tax applicable to the total income of the member including the said share. The share of a member in the income of an association of persons was so included in his total income even where the shares of the members in the association were indeterminate so that the association had been taxed at the maximum marginal rate. For this purpose, all t....
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.... has also been changed to " DD--Association of persons and body of individuals ". 11.10 These amendments come into force with effect from 1st April, 1989, and will, accordingly, apply to the assessment year 1989-90 and subsequent assessment years. [Clause (ii) of section 13, sections 17, 29 and 66 of the Amending Act, 1987] [Sections 9, 12, 17, 26, 27, 28 and clauses (f), (g) and (i) of section 95 of the Amending Act, 1989] COLLECTION AND RECOVERY OF TAX 12.1 Streamlining the procedure for recovery to make it move effective. --The Amending Act, 1987, has made a number of changes in sections 220 to 231 dealing with the procedure for collection and recovery of tax to make the provisions of these sections more effective for quicker recovery of tax. Thus, the Tax Recovery Officer (hereinafter referred to as TRO) will now be authorised by the Chief Commissioner or Commissioner of Income-tax to act as such and will work under the administrative control of the Commissioner of Income-tax. The Tax Recovery Officer shall now have concurrent jurisdiction with the Assessing Officer and the requirement of issue of tax recovery certificate by the Assessing Officer to the Tax Recov....
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....fficulties in this respect. 12.4 To remove the above difficulties and anomalies, the Amending Act, 1987, has substituted the old clause (44) by a new clause, which defines a Tax Recovery Officer to mean any Income-tax Officer authorised by the Chief Commissioner or Commissioner, by general or special order in writing, to exercise the power of the Tax Recovery Officer. Thus, Collector, Additional Collector and other State Government officials have been excluded from the definition of Tax Recovery Officer. Also, it is no longer necessary that the Tax Recovery Officer must be authorised by the Board by notification. An Income-tax Officer can now be authorised by the Chief Commissioner or Commissioner by order in writing to work as a Tax Recovery Officer. 12.5 The Amending Act, 1989, has further provided that the changed definition of Tax Recovery Officer will come into effect from 1st April, 1988. 12.6 Amendments of the provisions relating to time for Payment of tax demand and charge of interest for delayed payments (section 220). Under the old provisions of sub-section (1) of section 220, any amount specified as payable in a notice of demand under section 156 was to be paid ....
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....s required to forward to the Tax Recovery Officer a certificate under his signature specifying the amount of arrears due from the assessee and only then the Tax Recovery Officer assumed jurisdiction for recovering the said arrears of tax in that case. This unnecessarily delayed the commencement of recovery proceedings by the Tax Recovery Officer, as recovery certificates were generally issued by the Income-tax Officer after a lapse of more than three years when the time limit for issue of such certificates, mentioned in section 231, was to expire. To enable the Tax Recovery Officer to function more efficiently, the Amending Act, 1987, has made amendments in section 222 to dispense with the requirement of issue of recovery certificate by the Income-tax Officer. Under the amended provisions, where the assessee is in default, the Tax Recovery Officer shall assume jurisdiction by drawing up under his signature a statement in the prescribed form specifying the amount of arrears due from the assessee. Such "statement" shall continue to be called as a "certificate". 12.9 Substitution of the old sections 223, 224 and 225 by the new sections 223, 224 and 225.--The old sections 223 ....
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....he modification of demand in appeal or other proceedings under the Act. 12.11 Thus, instead of waiting for the Assessing Officer to amend or cancel the recovery certificate as a result of any appeal or other proceedings under the Act, the Tax Recovery Officer shall now take action himself in this respect. This will quicken the recovery work as well as save the assessee the botheration of going to more than one officer, i.e., the Assessing Officer as well as the Tax Recovery Officer for settling his recovery matters. Also, the Tax Recovery Officer can himself grant time for payment of demand covered by the recovery certificate drawn by him. This power of the Tax Recovery Officer to grant time will, however, run concurrent with the power of the Assessing Officer to grant time for payment of demand under the provisions of sub-sections (3) and (6) of section 220. 12.12 Amendments of the provisions relating to other modes of recovery (section 226). --Section 226 provides for various coercive modes that can be adopted for recovery of outstanding demand, like attachment of salary, attachment of monies due from other persons (including banks) or by distraint and sale of immovable pro....
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....icate of recovery under section 222 (as discussed in para 12.12 ante) shall take effect from 1st April, 1989 only. 12.16 Amendments of the provisions relating to the issue of tax clearance certificate to persons leaving India (sub-section (1) of section 230). --Under the old provisions of sub-section (1) of section 230, no person, who was not domiciled in India or who, even if domiciled in India, had in the opinion of an income-tax authority, no intention of returning to India, could leave the territory of India without obtaining a tax clearance certificate from the competent authority authorised by the Government in this behalf. In the case of persons domiciled in India, there were no clear guidelines relating to the categories of persons who should be required to obtain the tax clearance certificates before leaving India. The number of persons of Indian domicile going abroad, either as bona fide tourists or on business trips, had increased tremendously and the vague provisions of section 230(1) became an obstacle in the case of such persons. It was felt that the provisions of section 230(1) should be made more specific in this regard. 12.17 The Amending Act, 1987 has, there....
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....the requirement of the issue of a recovery certificate by the Assessing Officer has been dispensed with and the Tax Recovery Officer can now draw the statement of arrears and assume jurisdiction as soon as the assessee is in default, the provisions of section 231 are no longer necessary. The Amending Act, 1987, has, therefore, omitted the same. 12.20 Amendment of the provisions of the Second Schedule relating to procedure far recovery of tax by the Tax Recovery Officer.--The recovery of outstanding tax is done by the Tax Recovery Officer according to the provisions of the Second Schedule to the Income-tax Act. The Amending Act, 1987, has made a number of changes in the Second Schedule, most of which are consequential to the amendments made in the provisions of sections 222 to 231 and also omission of sub-section (43B) of section 2 containing the definition of "Tax Recovery Commissioner" and amendments to sub-section (44) of section 2 containing the definition of "Tax Recovery Officer". Certain other changes in the provisions of the Second Schedule have also been made. 12.21 The amendments made by the Amending Act, 1987, to the Second Schedule are briefly discussed as follows ....
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....o overcome this difficulty, a new sub-rule (3) has been inserted in rule 59 to provide that where the Income-tax Officer is declared a purchaser of a property at any subsequent sale, the provisions of rule 57 shall not apply to the case and the amount of the purchase price shall be adjusted towards the outstanding amount specified in the recovery certificate. (v) Under the provisions of rule 61, the Income-tax Officer can also apply to the Tax Recovery Officer for setting aside, under certain circumstances, the sale of immovable property in execution of a certificate, if his interests are affected by such sale. Amendments have been made to this rule to provide that such action under the rule can be taken by an Income-tax Officer only if he is authorised by the Chief Commissioner or Commissioner in this behalf. (vi) Pursuant to the abolishing of the posts of " Tax Recovery Commissioners " and Tax Recovery Officers now working under the administrative control of the Chief Commissioner or Commissioner, consequential amendments have been made to rules 82, 83, 87 and 92. (vii) Pursuant to the abolishing of the posts of " Tax Recovery Commissioners " and omission of sub-section ....
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.... could be taken only by the Income-tax Officer, the old provisions of the Third Schedule referred to an Income-tax Officer only. However, since under the amended provisions of section 226(5), action envisaged in that section can now be taken by the Assessing Officer as well as by the Tax Recovery Officer, the Amending Act, 1987, has amended the Third Schedule to substitute the reference therein to " Income-tax Officer " by a reference to the " Assessing Officer or Tax Recovery Officer". 12.24 The Amending Act, 1989, has further amended the said Third Schedule and also the provisions of the Amending Act, 1987, to secure that the words " Income-tax Officer " occurring in the Third Schedule, as it stood immediately before its amendment by the Amending Act, 1987, are substituted by the words " Assessing Officer " retrospectively with effect from 1-4-1988. This was to enable the Assessing Officer (including Assistant Commissioners and Deputy Commissioners) to continue to take action envisaged in the old provisions of the Third Schedule during the period 1-4-1988 to 31-3-1989. The Amending Act, 1989, has, however, further secured that with effect from 1-4-1989, the words " Assessing O....
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....nt is set aside or cancelled with the direction to make an order of fresh assessment, any refund shall become due only on the making of a fresh assessment. 13.2 Further, where the assessment had been annulled in appeal, say for want of jurisdiction or for any other technical reason, and such annulment became final, the judicial pronouncement did not permit retention of even the tax due on the basis of the returned income. Several High Courts had held that in such a case even the tax paid by way of tax deducted at source or advance tax and the tax which was due on the basis of the returned income had to be refunded to the assessee. Equity demanded that even where an assessment was annulled for any reason, the liability of the assessee, at least to the extent of tax payable on the basis of the income declared in the return, should remain. To overcome this difficulty and to make the position clear, the proviso to section 240, inserted by the Amending Act, 1987, provides that where the assessment is annulled, the refund shall become due only in respect of the amount, if any, paid in excess of the tax chargeable on the total income returned by the assessee. 1.3.3 These amendments ....
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.... or against orders of penalties passed under sections 272, 272B and 273, are now allowed only in respect of orders passed under these sections for the assessment year 1988-89 or any earlier assessment years consequent upon the omission of these sections or the barring of the applicability of these sections after the assessment year 1988-89. (iii) Appeals are now provided against orders levying penalties under sections 271B and 272A [for which there were earlier no appeals under sub-section (1)] order levying penalty under section 272AA (for which there was no appeal earlier) and orders levying penalties under sections 271C, 271D and 271E (which have been newly inserted by the Amending Act, 1987). 14.3. The old sub-section (2) of the section consisted of clauses (a) to (d) and (f) to (i), which specified various orders against which an assessee could appeal to the Commissioner (Appeals). The new sub-section (2) also provides for appeals to the Commissioner (Appeals) but consists of clauses (a) to (h). The changes effected are : (i) Appeals against orders passed under the following sections/sub-sections of the Income-tax Act, have been omitted consequent upon the omission of....
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....9.--A new section 246A was inserted by the Amending Act, 1987, which provided for filing of applications by the assessees before the Deputy Commissioner (Appeals) or the Commissioner (Appeals), after submission of returns, for advance decision on any issue in certain cases even before the assessment had been completed. This was in consequence of the charge of additional income-tax under a new section 158B, which was also inserted by the Amending Act, 1987. Since, following representations in this regard, the new section 158B has been omitted by the Amending Act, 1989, section 246A has also been omitted by the said Amending Act, 1989. 14.7 These amendments come into force with effect from 1st April, 1989. [Section 99 of the Amending Act, 1987.] [Sections 42 to 44 of the Amending Act, 1989.] MODES OF TAKING OR ACCEPTING CERTAIN LOANS AND DEPOSITS AND REPAYMENT OF CERTAIN DEPOSITS 15.1 Amendments of the provisions which require the taking or accepting of a loan or deposit by an account payee cheque or account payee bank draft (section 269SS). --Under the old provisions of section 269SS, no person could take or accept from any other person any loan or deposit otherwise t....
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....ey-lenders, who maintained running accounts of the nature of current account and claimed non-applicability of the provisions of section 269T on the plea that the amount credited in such accounts of the customers were payable on demand and were not deposits. This problem did not arise in the case of companies, because they were prohibited by the Companies (Acceptance of Deposits) Rules, 1975, from accepting any deposits which are repayable on demand or on notice, except where such deposit is repayable after a minimum period of six months. All other entities like firms, individuals, association of persons, etc., could, however, help circumvent the provisions of this section. Further, the monetary limit of Rs. 10,000, having been fixed long back, was causing hardship in the case of small genuine transactions. 15.4 To remove the hardship pointed out above and also to prevent the circumvention of the provisions of the section, the Amending Act, 1987, has made the following amendments to sub-section (2) of section 269T : (i) The monetary limit for the application of the provisions of the said sub-section (2) has been increased from Rs, 10,000 to Rs. 20,000. (ii) The scope of ....
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....reof in a new section 272A. --The Amending Act, 1987, has omitted the following sections of Chapter XXI of the Income-tax Act, consequent upon the incorporation of the provisions of these sections in the new section 272A :--- (i) Section 270 relating to penalty for failure to furnish information regarding securities, etc. (ii) Section 272 relating to penalty for failure to give notice of discontinuance of business or profession. (iii) Section 272B relating to penalty for failure to comply with the provisions of section 139A. 16.3 Amendments to section 271 by the Amending Act, 1987, and the Amending Act, 1989. --Under the old provisions of section 271 of the Income-tax Act, penalties were leviable for defaults in furnishing return of income, failure to comply with notices issued under section 142(1) or 143(2) or a direction issued under section 142(2A) and for concealment of income. The Amending Act, 1987, however, substituted a new section 271 in the Income-tax Act, which levied penalties only for failure to comply with notices or direction issued under sections 142(1), 142(2A) or 143(2). Levy of penalty for default in furnishing the return of income was omitted, becaus....
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....as been inserted in the section to provide for a transitory provision, namely, that penalties for the assessment year 1988-89 and earlier assessment years shall be levied in accordance with the provisions of section 271, as they stood immediately before their amendment by the Amending Act, 1989 (i.e., as they stood prior to 1-4-1989). 16.4. Amendments to section 271A relating to penalty for failure to keep, maintain or retain books of account, documents, etc. Section 271A levies penalty for failure to keep, maintain or retain books of account or documents as required by section 44AA of the Income-tax Act or the rules made thereunder. Under the old provisions of the section, the penalty was computed with reference to the tax which would have been avoided if the returned income had been accepted as the correct income. The Amending Act, 1987, has amended the said section 271A to provide for a minimum penalty of Rs. 2,000 and a maximum penalty of Rs. 1,00,000, thus delinking the levy of penalty with the completion of assessment. 16.5. Insertion of a new section 271C to provide for levy of Penalty for failure to deduct tax at source.--Under the old provisions of Chapter XXI of the....
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....A, which contains provisions for levy of penalties for defaults of miscellaneous nature, which were earlier mentioned in the old section 272A as well as various other sections of the Act, and which have now been consolidated in the said new section 272A. 16.8 Various penalties leviable under the new section 272A fall under two categories. The first category is dealt with in various clauses of sub-section (1) of the section, where minimum and maximum penalties are provided for each default, while the second category, where the default is of continuing nature is dealt with in various clauses of sub-section (2) of the section where minimum and maximum penalties are provided for every day during which the default continues. A chart showing the nature of defaults and sub-sections and clauses of the new section 272A under which these defaults are covered is given below. The chart also shows the sub-sections and clauses of the old section 272A or other sections of the Act, under which the same defaults were covered earlier. Sl. No. Nature of default Sub-section and clause of new section 272A Sub-section and clause of old section 272A or other old sections of the Act which c....
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.... sub-section (1) of section 272A (mentioned at serial Nos. 1 to 4 in the above chart) is a minimum of Rs. 500 extending up to the maximum of Rs. 10,000 for each default. The penalty leviable in respect of failures covered by sub-section (2) of section 272A (mentioned at serial Nos. 5 to 12 in the above chart) is a minimum of Rs. 100 extending up to the maximum of Rs. 200 for every day during which the failure continues. 16.10 Sub-section (3) of the new section 272A specifies the authorities by whom the penalties under the section can be imposed. Penalty for failure covered by clause (f) of sub-section (2) [mentioned at serial No. 10 in the above chart] can be levied only by the Chief Commissioner or by the Commissioner. All other penalties under these sections are to be imposed by income-tax authorities not lower in rank than a Deputy Director or a Deputy Commissioner. 16.11. Sub-section (4) of the new section 272A incorporates the old provisions requiring that, before imposing penalty under the section, the person concerned should be given an opportunity of being heard in the matter. 16.12 Amendment to section 273 to bar its applicability after the assessment year 1988-89....
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....ble under the new provisions. (ii) A new sub-section (6) has been inserted in the section to provide that the provisions of the section, as they stood immediately before their amendment by the Amending Act, 1989 (i.e., as they stood prior to 1-4-1989), shall apply up to the assessment year 1988-89. This means that the amended provisions of section 273A would be applicable from the assessment year 1989-90 onwards. 16.15 Amendments to section 273B by the Amending Act, 1987, and the Amending Act, 1989.--Section 273B provides that penalties imposable under certain sections of the Income-tax Act, mentioned therein shall not be imposed if the person or the assessee concerned proves that there was reasonable cause for the default in question. Amendments have been made to this section by the Amending Act, 1987, as well as the Amending Act, 1989, which are consequential to the omission, substitution or insertion of certain sections in Chapter XXI dealing with penalties, discussed in the preceding paras. 16.16 Amendments to the provisions of section 274 relating to procedure for levy of penalties.--Under the old provisions of section 274 of the Income-tax Act, which lays down the pr....
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.... was extended where the assessment order, etc., were the subject-matter of appeals, it was not extended where the assessment order was the subject-matter of revision by the Chief Commissioner or Commissioner under section 263. This was a lacuna in the Act. 16.19 In order to achieve quicker disposal of penalty proceedings and also to remove the lacuna pointed out above, the Amending Act, 1987, has amended section 275 to provide for substantially reduced limitation period for disposal of penalty proceedings. Under the amended provisions of section 275, no order imposing a penalty can be passed-- (i) in a case where the relevant assessment order or other order is the subject-matter of appeal by the assessee to the Deputy Commissioner (Appeals) or the Commissioner (Appeals) or by the Department to the Appellate Tribunal, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or six months from the end of the month in which the order of the appellate authority is received by the Chief Commissioner or Commissioner, whichever period expires later ; (ii) in a case where the rele....
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.... certificate under the provisions of the Second Schedule relating to procedure for recovery of tax. The punishment provided is rigorous imprisonment for a term which may exceed to two years and also fine. The provisions of this section are in substitution for the provisions of rule 89 of the Second Schedule, which has been omitted by the Amending Act, 1987 (refer to para 12.21 ante.) 17.2 Substitution of a new section for section 276B to exclude failure to deduct tax at source from prosecution provisions and to provide prosecution only for failure to pay tax deducted at source to the Government.--Under the old provisions of section 276B, the following defaults were liable to prosecution :-- (i) failure to deduct tax at source under the provisions of Chapter XVIIB. (ii) failure to pay to the Government the tax so deducted at source. The punishment provided was :-- (i) where the amount involved exceeded Rs. 1 lakh, rigorous imprisonment ranging from a minimum period of six months to the maximum period of seven years and fine. (ii) where the amount involved did not exceed Rs. 1 lakh, rigorous imprisonment ranging from a minimum period of three months to the maximum p....
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....elays in obtaining approval.--Under the provisions of section 119(2)(b) of the Income-tax Act, the Board is empowered to authorise any income-tax authority [except a Deputy Commissioner (Appeals) or a Commissioner (Appeals)] to admit belated applications or claims for any exemption, deduction, refund or any other relief under the Act and deal with them on merits in accordance with law. However, the Board had no such power to waive the time-limit where the application had to be made to itself within a specified time. There are several provisions in the Act under which the Central Government or the Board is required to give its approval to agreements, contracts of service, etc., for the purposes of certain tax benefits, if the applications for such approvals are made within the specified time. It was felt that the Central Government and the Board should also have powers, on the analogy of the provisions of section 119(2)(b) to condone the delay in making an application to them for approval under various provisions of the Act. The Amending Act, 1987, has, therefore, inserted a new section 293B in the Income-tax Act, which empowers the Central Government or the Board to condone, for su....
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....ealth-tax Act relating to powers of income-tax authorities, assessment of association of persons, collection and recovery of tax, refunds, appeals, penalties and offences and prosecutions, in order to bring these provisions in line with the corresponding provisions of the Income-tax Act, as they have emerged after their amendment by the said Amending Act, 1987, and which have been discussed in the preceding paras in this part of the explanatory notes. Any gaps or shortcomings in this respect have been removed through certain amendments made by the Amending Act, 1989. The Table below shows the provisions of the Wealth-tax Act that have been so amended and the corresponding provisions, if any, in the Income-tax Act. The Table also indicates the sections of the Amending Act, 1987, and the Amending Act, 1989, which have carried out the necessary amendments and the subject-matter of the amendments in brief. Sl. No. Section of the Amending Act, 1987/Amending Act, 1989 Section of the Wealth-tax Act that has been amended Corresponding section of the Income-tax Act Subject-matter of the amendment in brief 1 2 3 4 5 1. 128(iv) of the Amending Act, 1987. ....
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....ted) 132B A new section 37C relating to application of retained assets inserted in the Wealth-tax Act containing provisions similar to those of section 132B of the Income-tax Act. Earlier, there was no such provision in the Wealth-tax Act. 14. 157 of the Amending Act, 1987. 38 Amendments to section 38 relating to power of wealth-tax authorities to call for information, returns and statements. Amendments to section 38 relating to power of Wealth-tax authorities to call for information, returns and statements. *NOTES : (i) Sections 143 and 147 of the Amending Act, 1987, had introduced now sections 18D and 23A in the Wealth-tax Act, to provide for charging of additional wealth-tax at 3% of wealth and for moving an application by the assessee before the Deputy Commissioner (Appeals) or the Commissioner (Appeals) for deciding an issue before completion of assessment. These new sections have, however, been omitted by the Amending Act, 1989. This has also been discussed in Para 2.6 ante. and items at serial Nos. 6 and 7 in the Table given in that para. (ii) Section 144 of the Amending Act, 1987, had made amendments to section 21A of the Wealth-tax Act,....
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....section, prior approval of the Deputy Commissioner would be necessary, if-- (i) the penalty is to be imposed by the Income-tax Officer and it exceeds Rs. 10,000 ; (ii) the penalty is to be imposed by the Assistant Commissioner and it exceeds Rs. 20,000. Under the old provisions, approval of the Deputy Commissioner was necessary for imposing penalty for concealment of wealth if the amount of concealed wealth exceeded Rs. 25,000. (6) Under the old provisions of sub-section (5) of the section, time-limit for imposition of penalties under the section was provided, which was on the same lines as under the old provisions of section 275 of the Income-tax Act, i.e., it was generally more than two years (refer to para 16.18 ante.). A new sub-section (5) has been substituted in the section to provide for reduced time-limits for imposition of penalties under this section, which are exactly on the same lines as the amended provisions of section 275 of the Income-tax Act (refer to para 16.19 ante). (7) A new sub-section (6) has been inserted in the section to provide for a transitory provision, namely, that the penalties for the assessment year 1988-89 and earlier assessment year....
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....e are no limitation provisions in section 18A. Therefore, penalties leviable under section 18A do not get time-barred. [Section 142 of Amending Act, 1987] [Sections 68, 69 and 95(p) of the Amending Act, 1989] 22. Amendments to section 37, relating to power to take evidence on oath, etc., by the Amending Act, 1987, and by the Finance Act, 1988.--Section 37 of the Wealth-tax Act contains provisions corresponding to the provisions of section 131 of the Income-tax Act. Amendments made to section 131 of the Income-tax Act by the Amending Act, 1987, and by the Finance Act, 1988, have already been discussed in paras 9.1 to 9.3 ante. The Amending Act, 1987, and the Finance Act, 1988, have also amended section 37 of the Wealth-tax Act to bring its provisions on the same lines as the provisions of the amended section 131 of the Income-tax Act. [Section 153 of the Amending Act, 1987] [Sections 64 and 88 (f) of the Finance Act, 1988] 23. Amendments to section 37A, relating to power of search and seizure, by the Amending Act, 1987, and by the Finance Act, 1988.--Section 37A of the Wealth-tax Act contains provisions corresponding to the provisions of section 132 of the Income-t....
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....87 2 (xvii) (omitted) Definition of 'partner' omitted consequent upon its inclusion in a new clause (xi) substituted in the section (refer Sl. No. 3 below). 2. 162 (d) of the amending Act, 1987 2(vii) new clause substituted) Substitution of the definition of 'company', by the definitions of 'company' 'Indian company' and company in which the public are 'substantially interested', which have the same meaning as in section 2 of the income-tax Act. 3. 162 (e) of the Amending Act, 1987 2(xi) new clause substituted) Substitution of the definition of 'partner' by the definitions of 'firm', 'partner' and 'partnership' which have the same meaning as in section 2 of the Income-tax Act. 4. (i) 174 of the Amending Act, 1987, (ii) 86, 87 and 95 (p) of the Amending Act, 1989 17 & 17(A) 271, 272A(1) (a) to (c) 272A(2) (c), 274 & 275 Amendments of penalty provisions in the G.T.Act to bring them in line with the corresponding provisions in the Income-tax Act. 5. (i) 176 of the Amending Act, 1987 (ii) 88 of the Amending Act, 1989 22 246 Amendments to section 22 relating to appeals to the Deputy Commis....
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.... (refer to para 21 ante). The effect is that the penalty provisions contained in sections 17 and 17A of the Gift-tax Act and in sections 18 and 18A of the Wealth-tax Act are on similar lines, including the reduced time-limit for imposition of penalties under section 17 of the Gift-tax Act and under section 18 of the Wealth-tax Act. It may be mentioned that, under the old provisions of section 17 of the Gift-tax Act, there were no limitation provisions, so that the penalties leviable under this section did not get time barred. However, limitation provisions have now been introduced in section 17 of the Gift-tax Act. on the same lines as in section 18 of the Wealth-tax Act. There are, however, no limitation provisions in section 17A of the Gift-tax Act, as well as in section 18A of the Wealth-tax Act. [Section 174 of the Amending Act, 1987] [Sections 86, 87 and 95 (p) of the Amending Act, 1989] 26. Amendments to section 36 relating to power to take evidence on oath, etc., by the Amending Act, 1987, and by the Finance Act, 1988. Section 36 of the Gift-tax Act contains provisions corresponding to the provisions of section 131 of the Income-tax Act and section 37 of the Weal....