TaxTMI 
TaxTMI 
Explanatory Notes on the provisions relating to direct taxes
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....x Act, 1961 ; amended sections 2, 4 and 46 of the Wealth-tax Act, 1957 ; amended sections 2 and 5 of the Gift-tax Act, 1958 ; amended section 3 of the Interest-tax Act, 1974 ; amended sections 4, 6 and 17 of the Expenditure-tax Act, 1987. Provisions in brief 3. The provisions in the Finance Act, 1994, in the sphere of direct taxes, relate to the following matters : (i) Prescribing the rates of income-tax on incomes liable to tax for the assessment year 1994-95 ; the rates at which tax will be deductible at source during the financial year 1994-95 from interest (including interest on securities), dividends, winnings from lotteries or crossword puzzles, winnings from horse races, commission and other categories of income liable to deduction of ....
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.... rural branches of banks ; _ introducing estimated income method for taxpayers engaged in the business of civil construction and in the business of plying, leasing or hiring trucks ; _ amending the provisions relating to capital gain on transfer of assets where there is no cost of acquisition ; _ excluding income of handicapped minor from the clubbing provisions ; _ amending the provisions regarding set-off and carry forward of losses under the head "Income from house property" ; _ providing deduction in respect of repayment of loan taken as a student for pursuing higher studies ; _ providing 100 per cent. deduction for donations to the Chief Minister's Earthquake Relief Fund, Maharashtra ; _ removing the minimum limit for claiming deduction under section 80G ; _ rationalising the provisions relating to incentive to tourism ; _ extending tax concession in respect of profits from export of computer software for one more year ; _ withdrawing restrictions in respect of new industrial undertakings set up in backward States ; _ extending the five-year tax holiday to new industrial undertakings set up in extremely backward districts ; _ liberalising pr....
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.... of the First Schedule to the Finance Act, 1993, for the purposes of computation of "advance tax", deduction of tax at source from "salaries" and charging of tax payable in certain cases during the financial year 1993-94. II. Rates for deduction of income-tax at source during the financial year 1994-95 from income other than "salaries" 5. The rates for deduction of income-tax at source during the financial year 1994-95 from incomes other than "Salaries" have been specified in Part II of the First Schedule to the Finance Act. These rates apply to income by way of interest on securities, interest other than "interest on securities", dividends, insurance commission, winnings from lotteries or crossword puzzles, winnings from horse races and income of non-residents (including non-resident Indians). These rates are basically the same as those specified in Part II of the First Schedule to the Finance Act, 1993, for the purposes of deduction of income-tax at source during the financial year 1993-94, except that, _ (i) the income by way of dividends, interest payable by the Government or an Indian concern on monies borrowed or debt incurred by the Government or the Indian concern ....
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....ct specifies the rates of income-tax in the case of individuals, non-specified Hindu undivided families (i.e., other than those having at least one member with independent total income exceeding the exemption limit), associations of persons, etc. Raising of exemption limit. _ The exemption limit in the case of individuals, non-specified Hindu undivided families, associations of persons, etc., has been raised from Rs. 30,000 to Rs. 35,000. Modification in the rates of income-tax. _ The rate schedule applicable in the case of individuals, non-specified Hindu undivided families, associations of persons, etc., has been restructured. The Table below gives the rates of income-tax applicable to the aforesaid categories of taxpayers (a) as specified in Part I of the First Schedule to the Finance Act, i.e., for the assessment year 1994-95 ; and (b) as specified in Part III of the First Schedule to the Finance Act, i.e., for the financial year 1994-95. Table Income slab Rates as specified in Part I of the First Schedule to the Act(i.e., for A.Y. 1994-95) Income slab Rates as speci- fied in Part III of the First Schedule to the Act(i.e., for F.Y. 1994-....
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....ts approved after 31st March, 1961, but before 1st April, 1976, and (ii) by way of fees for technical services in pursuance of agreements approved after 29th February, 1964, but before 1st April, 1976, the rate of income-tax shall continue to be 50 per cent. The Table below gives the rates of income-tax applicable to the domestic companies and foreign companies (a) as specified in Part I of the First Schedule to the Finance Act, i.e., for the assessment year 1994-95 ; and (b) as specified in Part III of the First Schedule to the Finance Act, i.e., for the financial year 1994-95. Table Rates as specified in Part I of the First Schedule to the the Act (i.e., For f.y. 1994-95) Rates as specified in Part III of the First Schedule to Act (i.e., For a.y. 1994-95) Domestic companies : Domestic companies : (I) in which the public are substantially interested : 45 per cent (I) in which the public are substantially interested : 40 per cent (Ii) in which the public are not substantially interested : 50 per cent (Ii) in which the public are not substantially interested : 40 per cent Foreign companies : 65 per cent Foreig....
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....ities referred to in this class perform different kinds of functions such as, _ (i) supervising the work of Assistant Commissioners/Income-tax Officers, (ii) doing assessment functions, (iii) handling internal audit of the completed assessments, (iv) disposal of appeals, (v) representing Departmental cases in the Appellate Tribunal, (vi) handling search and seizure matters, etc. The above shows that some of the Deputy Commissioners and Deputy Directors have been assigned duties of higher responsibility. Therefore, there is need to recognise the aforesaid distinction in responsibility by making an appropriate change in the designation of such authorities. 15.2 The Finance Act has, therefore, amended the relevant provisions of the Income-tax Act in order to create a new class of income-tax authorities, namely, Additional Directors of Income-tax, Additional Commissioners of Income-tax and Additional Commissioners of Income-tax (Appeals). Similar changes have been made to the Wealth-tax Act, the Gift-tax Act, the Interest-tax Act and the Expenditure-tax Act. 15.3 These amendments take effect from 1st June, 1994. [Sections 3, 35, 51, 54, 56, 58 and 59] P....
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....voiding complicated calculations, the Finance Act has introduced a simple and unambiguous set of provisions for computation of the cost of acquisition of financial assets, including shares, where there is an entitlement to subscribe to additional financial assets on rights basis. It has been provided that the cost of rights entitlement in the hands of the original shareholder is to be deemed as nil. Of course, the cost of the rights share acquired by the original shareholder is the price actually paid by him to the company for acquiring the rights share. But where the rights renouncee acquires the rights share, the cost of the rights share is equal to the cost incurred by him for purchasing the rights entitlement plus the price paid by him to the company for acquiring the rights share. The amount realised by the original shareholder by selling his rights entitlement will be short-term capital gains in his hands (as the cost is taken as nil). The period of holding of the rights entitlement is to be reckoned from the date of offer made by the company to the date of renouncement. 17.3. These amendments will enable the taxpayers to compute the tax liability easily and prevent prolif....
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.... the Income-tax Act the principle which has all along been accepted for the determination of the income of persons residing in the State of Goa and the Union Territories of Dadra and Nagar Haveli and Daman and Diu and governed by the Portuguese Civil Code of 1860. A new section 5A has been inserted in the Income-tax Act so as to set at rest the controversy. Section 5A provides that income from all sources, except from salary, should be apportioned equally between the husband and wife and such income shall not be assessed as income of the community of property (whether treated as an association of persons or as a body of individuals). Even the income from profession will be apportioned equally between the husband and the wife. The income so apportioned will be included separately in the total income of the husband and of the wife and the remaining provisions of the Income-tax Act shall apply accordingly. Salary income will, however, continue to be assessed in the hands of the spouse who has actually earned it. References to the association of persons consisting of the husband and wife governed by the system of community of property in force in Goa and other places in the provisions ....
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....1st April, 1995, and will, accordingly, apply in relation to the assessment year 1995-96 and subsequent years, i.e., each previous year commencing on or after 1st April, 1994. [Section 5] Extending the tax exemption on payments under voluntary retirement schemes to employees of co-operative societies, universities, etc. 20. Under the existing provisions of section 10(10C) of the Income-tax Act, any amount received by an employee of a company or a statutory authority or a local authority at the time of his voluntary retirement, in accordance with the scheme of voluntary retirement, is exempt from income-tax up to five lakh rupees. Such a scheme has to be in accordance with the guidelines prescribed by the Central Board of Direct Taxes in this behalf. In the case of the schemes of companies other than public sector companies, it is also necessary that these are approved by the concerned Chief Commissioner or Director-General in this behalf. 20.2. Representations had been received to the effect that the benefit of income-tax exemption under section 10(10C) should be extended to employees of co-operative societies also. Suggestions had also been received that the employees ....
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.... has been established for promoting the interests of the members of Scheduled Castes and/or Scheduled Tribes. Similar bodies, established for promoting the interests of the members of backward classes, have been functioning for some time now. The National Backward Classes Finance and Development Corporation, a wholly owned Government company set up for the benefit of backward classes, has been functioning at the national level and there are State level corporations performing similar functions. There is a need to exempt the income of such bodies also from income-tax. 22.2 The Finance Act, therefore, has amended clause (26B) of section 10 in order to extend the benefit of exemption to income of a corporation established by a Central, State or Provincial Act or of any other body, institution or association (being a body, institution or association wholly financed by Government) where such corporation or other body or institution or association has been established or formed for promoting the interests of the members of the backward classes. The expression "backward classes" has been defined so as to mean such classes of citizens, other than Scheduled Castes and Scheduled Tribes, a....
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....rs. [Section 7] Tax holiday for 100% EOUs producing computer software 24. Section 10A of the Income-tax Act provides for a five-year tax holiday to an industrial undertaking which manufactures or produces any article or thing and is set up in notified Free Trade Zones (FTZs). Through the Finance Act, 1993, the tax holiday under section 10A was extended to industrial units set up in approved Electronic Hardware Technology Parks (EHTP) or the Software Technology Parks (STP). Simultaneously, the scope of the term "produce" was enlarged to include production of computer programmes. 24.2. Under the provisions of section 10B of the Income-tax Act, a five-year tax holiday is allowed to approved 100 per cent. export oriented undertakings (EOUs) which manufacture or produce any article or thing. 24.3. With a view to enlarging the scope of the tax holiday to approved 100 per cent. EOUs established under the EHTP/STP Schemes for export of computer hardware and software and approved by the prescribed Board, an Explanation for the term "produce" has been inserted in section 10B to include production of computer programmes. 24.4. This amendment takes effect from 1-4-1994 and wi....
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....onditions. Exemption from tax is available, inter alia, in respect of reimbursement, by the employer, of expenditure incurred by the employee in hospitals, dispensaries, etc., maintained by the Government or by a local authority or in a hospital approved by the Government for the purposes of medical treatment of its employees. However, in respect of treatment of prescribed diseases in private hospitals approved by the Chief Commissioner, this concession is allowed only where the payment is made directly by the employer to the hospital. 26.2. In order to further liberalise the provision and reduce hardship, it has been provided that expenditure incurred for treatment in any hospital approved by the Chief Commissioner will be exempt even where the payment is in the form of reimbursement of expenditure. This will, however, be subject to the condition that the employee attaches with the return of income a certificate from the approved hospital specifying the prescribed disease or ailment for which hospitalisation was required as well as receipt for the amount paid. 26.3. This amendment takes effect from 1-4-1993, i.e., the date from which expenditure on treatment in hospitals app....
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....ch tea growers and manufacturers also who make deposits in the Tea Deposit Account in accordance with and for the purposes specified in any other scheme framed by the Tea Board, and approved by the Central Government. 28.3. This amendment takes effect from 1st April, 1995, and will, accordingly, apply in relation to the assessment year 1995-96 and subsequent years. [ Section 12 ] Ambit of tax concessions for scientific research widened 29. Under section 35(2AA) of the Income-tax Act, any sum paid by an assessee carrying on business or profession to a "National Laboratory" for carrying out programmes of scientific research, as are approved by the prescribed authority, are eligible for weighted deduction of one and one-fourth times of the sum so paid. 29.2. "National Laboratory" had been defined to mean a scientific laboratory functioning at the national level under the aegis of the Indian Council of Agricultural Research, the Indian Council of Medical Research or the Council of Scientific and Industrial Research and which was approved by the prescribed authority for this purpose. The prescribed authority is the Director-General (Income-tax Exemptions) in concurrence w....
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....ly in relation to the assessment year 1995-96 and subsequent years. [Section 14] Estimated Income Method of taxpayers engaged in the business of civil construction 31. The Estimated Income Method of assessment for certain categories of businesses is prevalent in several countries. The Tax Reforms Committee has also recommended gradual introduction of the Estimated Income Method in certain areas to facilitate better tax compliance. Accordingly, a new section 44AD has been inserted in the Income-tax Act with a view to providing for a method of estimating income from the business of civil construction or supply of labour for civil construction work. The new section is applicable to all assessees whose gross receipts from the above-mentioned business do not exceed Rs. 40 lakhs, gross receipts are the amount received from the clients for the contract and will not include the value of material supplied by the client. The income from the above-mentioned business will be estimated at 8 per cent. of the gross receipts paid or payable to an assessee. A taxpayer can voluntarily declare a higher income in his return. 31.2. The expression "civil construction" will include the constr....
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....sessment under section 143(3). 31.7. This amendment take effect from 1st April, 1994, and will, accordingly, apply in relation to the assessment year 1994-95 and subsequent years. Accordingly, a person can file his return based on the estimated income method for the current assessment year also. [Section 16] Estimated Income Method for taxpayers engaged in the business of plying, leasing or hiring trucks owned by them 32. A new section 44AE has been inserted in the Income-tax Act with a view to providing for a method of estimating income from the business of plying, hiring or leasing trucks owned by a taxpayer. The scheme applies to persons owning not more than ten trucks. It is not applicable to the persons who do not own any truck but operate trucks taken on hire. The income from each truck, being a heavy goods vehicle, will be estimated at Rs. 2,000 for every month or part of a month during which the truck is owned by the assessee. The income from each truck, other than a heavy goods vehicle, will be estimated at Rs. 1,800 for every month or part of a month during which the truck is owned by the assessee. In either case, the taxpayer can declare his income from truck....
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.... a case will be scrutinised for regular assessment under section 143(3). 32.6. This amendment takes effect from 1st April, 1994, and will, accordingly, apply in relation to the assessment year 1994-95 and subsequent years. Accordingly, a person can file his return based on the estimated income method for the current assessment year also. [Section 16] Capital gain on transfer of assets where there is no cost of acquisition 33. By virtue of the provisions of section 45 of the Income-tax Act, capital gains arising on transfer of a capital asset is subjected to income-tax. Section 48 lays down the method of computing capital gains. The cost of acquisition and expenditure relating to the transfer are deducted from the full value of consideration to arrive at the capital gains. Section 2(14) defines "capital asset" to include all kinds of property except a few specified ones. 33.2. In a number of cases, the courts have decided that in the case of self-generated assets like goodwill or where the cost of assets to an assessee (not covered by situations mentioned in section 49) is nil, no tax on capital gains consequent to transfer of such assets could be charged. They ....
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.... they take decisions on the disposal of income arising from their property as also on the ground that exclusion of minor children's income from that of the parent was resulting in tax avoidance. 34.2. It has been felt that a handicapped minor is in a special category. With a view to providing appropriate relief to handicapped minors, the Finance Act has provided that the entire income of a handicapped minor child shall be kept out of the purview of the clubbing provisions contained under section 64(1A). Consequently, section 80V of the Income-tax Act which provides for deduction of a sum to the extent to which the minor child would have been entitled to the deduction under section 80U had the total income of such minor child been computed separately, has been omitted. Hereafter, the handicapped minor child will be entitled to the deduction under section 80U in his own assessment. 34.3. Corresponding amendments have been made to section 4 of the Wealth-tax Act. 34.4. These amendments take effect from 1st April, 1995, and will, accordingly, apply in relation to the assessment year 1995-96 and subsequent years. [Sections 20, 28 and 52] Modifications relating to house pr....
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....aken as a student for pursuing higher studies 36. Deserving, yet poor and needy, students often require loans from banks or other financial institutions or from charitable organisations for pursuing higher education. The repayment of such loans becomes a heavy charge on the person's resources. 36.2. With a view to sustaining high quality human resources in the country and to encourage talented young men and women to take up higher studies despite the constraints of resources, a new section 80E has been inserted in the Income-tax Act to provide for relief to students taking loan for such studies. The relief is not allowed to the parent or guardian but to the student himself when he starts repaying the amount. Any repayment of the principal amount of loan taken for higher studies and interest thereon will be allowed as a deduction from the gross total income up to a maximum amount of Rs. 25,000 in a year. The repayment can be in respect of loan taken from a financial institution or a charitable organisation which is approved for the purposes of section 10(23C) or 80G(2)(a). This relief will be available for those who have undertaken graduate or post-graduate courses, in any bra....
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....mendment takes effect from 1-4-1994 and will, accordingly, apply in relation to donations made in the previous year relevant to assessment year 1994-95 and subsequent years. [Section 24] Rationalisation of provisions relating to incentive to tourism 39. Under the existing provisions of section 80HHD, a resident taxpayer engaged in the business of a hotel or of a tour operator or of a travel agent is allowed a deduction, in computing its total income, of an amount equal to _ (i) 50 per cent. of the profits derived from services provided to foreign tourists ; and (ii) so much of the remaining profits as are credited to a reserve fund to be utilised in the manner prescribed. 39.2. Earlier, the tax concession was available only to the first recipient of convertible foreign exchange. It was then pointed out in representations that foreign groups often make payments in foreign exchange, in one lumpsum, to the first recipient for subsequent payment to other hotels, tour operators or travel agents, as the case may be. Accordingly, through the Finance Act, 1991, a provision was made in section 80HHD, with a view to securing that the hotel/tour operator/travel agent receivi....
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....eduction is allowed to Indian companies and resident non-corporate taxpayers on the profits derived for export of computer software. 40.2. The provisions of section 80HHE were introduced by the Finance (No. 2) Act, 1991, for the assessment years 1991-92, 1992-93 and 1993-94. The Finance Act, 1993, extended the period for one more year, i.e., for the assessment year 1994-95. Software export has considerably increased in the last four years and the sector deserves fiscal incentive for another year to maintain the momentum gained. 40.3. Accordingly, the deduction under section 80HHE has been made available for one more year, i.e., assessment year 1995-96. 40.4. This amendment takes effect from 13-5-1994, i.e., the date on which the Finance Act received the assent of the President. [Section 26] Withdrawal of restrictions in respect of new industrial undertakings set up in backward States 41. In the Budget of 1993, a special five-year tax holiday was introduced under section 80-IA, for new industrial undertakings located in backward States. One of the conditions for availing of the tax concession under section 80-IA is that the new industrial undertaking does not manuf....
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....undertakings located in backward districts notified by the Central Government on the basis of guidelines prescribed. A Group has been set up in the Finance Ministry to prescribe the guidelines and identify the backward districts. 42.3. The five-year tax holiday will be available to undertakings set up in notified backward districts and beginning production after 1-10-1994, but before 31-3-1999. The deduction under section 80-IA will be available at the rate of 100 per cent. of profits in respect of the first five assessment years starting from the assessment year relevant to the previous year in which the industrial undertaking starts manufacture or production. After the initial five assessment years, deduction from the profits will be allowed at the normal rate of 30 per cent. in the case of companies and 25 per cent. in the case of non-corporate assessees. The deduction, at the enhanced rate and the normal rate together, will be limited to twelve assessment years in the case of co-operative societies and ten assessment years in the case of other assessees, as in the existing provisions. The incentive already available to industrial units set up in the States or Union Territori....
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....ion to the assessment year 1991-92 and subsequent years. Thus, persons who were getting deduction under section 80C in respect of amounts paid to any notified provident fund, in their spouse's name, will, with effect from the assessment year 1991-92, get rebate under section 88 in respect of that amount. [Section 29 ] Extending the rebate under the provisions of section 88 to pension funds of UTI 44. Under clause (xiiic) of section 88, rebate is allowed in respect of any amount paid by an individual to any pension fund set up by any Mutual Fund notified under clause (23D) of section 10, as the Central Government may, by notification in the Official Gazette, specify in this behalf. 44.2. This benefit has been extended to a pension fund to be set up by the Unit Trust of India. The rebate in respect of contributions to this fund will be allowed from the assessment year 1995-96 and onwards. [Section 29] Relief for senior citizens 45. Under the provisions of section 88B, any person aged 65 years or above, having gross total income not exceeding Rs. 75,000, is allowed a special rebate of 20 per cent. of the tax chargeable on his total income. 45.2. The Finance Act....
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....mpanies, on gross basis, i.e., without deduction of any expenditure or allowance while computing the income. In the case of non-resident non-corporate persons, such items of income were taxed at the rates prescribed in the annual Finance Acts applicable to different categories of persons. In their case, the taxation of these items of income was on net basis, i.e., after allowing expenditure or allowances, as per the Income-tax Act, while computing the income. The taxation of these items of income in the case of non-resident non-corporate assessees is also needed to be done on gross basis in order to remove the complexity involved in determining the net income. Further, the tax rate provided on the aforesaid items of income in most of India's tax treaties with other countries is below twenty per cent. India has tax treaties with as many as forty countries. 47.2. Therefore, as a measure of rationalisation, the Finance Act has amended section 115A of the Income-tax Act, in order to provide that the income of a non-resident non-corporate assessee or a foreign company, by way of _ (i) dividends, (ii) interest received from Government or an Indian concern on monies borrowed or d....
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....nded the scheme to transport operators also. Under the scheme as it stood prior to the amendment made by the Finance Act, the income of a person was deemed to be Rs. 37,000. No deduction under Chapter VI-A (except section 80L) and rebate under Chapter VIII is allowed. The scheme was originally applicable for two assessment years, viz., assessment years 1993-94 and 1994-95. 48.2. A person was eligible to opt for the scheme if _ _his income from such business or vocation did not exceed Rs. 37,000 ; and _ taxable income from any source other than the business or vocation did not exceed Rs. 5,000. 48.3. The tax in respect of the deemed income of Rs. 37,000 amounted to Rs. 1,400 and for income up to Rs. 5,000 from any other source (as reduced by deduction under section 80L) is required to be paid at the appropriate rate, i.e., 20 per cent. 48.4. The simplified procedure is an important measure to widen the tax base. It mobilises resources from small assessees without much compliance cost to them and administrative cost to the Government. 48.5. With a view to continuing the simplified procedure beyond the two assessment years (1993-94 and 1994-95) for which it is applic....
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....t audited is linked to the "due date" for furnishing returns, a consequential amendment has been made in the definition of "specified date" as contained in clause (ii) of the Explanation to section 44AB. 49.4. These amendments take effect from 1st April, 1994, and will, accordingly, apply in relation to the assessment year 1994-95 and subsequent years. [Sections 36 and 50] Direct appeal against prima facie adjustments 50. Under the provisions of sections 143(1) or 143(1B), the Assessing Officer can make certain prima facie adjustments to the income or loss declared in a return of income. The assessee is required to pay tax on the enhanced income and is also liable to pay additional tax under section 143(1A) where there is such an enhancement of income or reduction of loss. There was, however, no right of appeal against the prima facie adjustments and consequential levy of tax and additional tax. The taxpayer was entitled to claim that the adjustments made to vary the income or loss were not correct and needed to be rectified as a mistake apparent from the record. The assessee had been given a right to file an appeal against the order on the rectification petition. In ca....
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....rk (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the Government of a foreign State or a foreign enterprise or any association or body established outside India. 51.3. This amendment takes effect from 1st June, 1994. [Section 39] Provision for deduction of income-tax at source from income by way of rent 52. An effective method of widening the tax base is to enlarge the scope of deduction of income-tax at source. Apart from bringing in more persons in the tax net, it also helps in the reporting of correct incomes. An item of income which needs to be covered within the scope of deduction of income-tax at source is the income by way of rent. In a number of countries, such income is subject to deduction of income-tax at source. 52.2. The Finance Act has, therefore, inserted a new section 194-I in the Income-tax Act relating to deduction of income-tax at source from rent. The new section provides that income-tax has to be deducted at source at the rate of twenty per cent. on payments of rent beyond one hundred and twenty thousand rupees in a financial year made by any person other than an individual or a Hindu ....
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....nt. On or before 15th March The whole amount of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments. Thus, the first instalment of advance tax is payable only in the sixth month of the financial year and that instalment constitutes only thirty per cent. of the total advance tax. The entire amount of advance tax is payable during the last seven months of the financial year. About two-thirds of the collection of advance tax comes from the companies. The spread of the payment of advance tax during the financial year, therefore, needs to be made more even in the case of companies. 53.2. The Finance Act has, therefore, amended section 211 of the Income-tax Act to provide that all the companies, who are liable to pay advance tax, will, hereafter, pay advance tax in four instalments. The advance tax so payable in a financial year, _ (a) on or before 15th June, shall not be less than fifteen per cent. ; (b) on or before 15th September, shall not be less than forty-five per cent. ; (c) on or before 15th December, shall not be less than seventy-five per cent. ; (d) on or before 15th March, shall be the who....
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....d not cease to be payment of advance tax. There is no penal provision in the law to enforce payment of the last instalment of advance tax by 15th March. The aforesaid proviso and the absence of a penal provision, have generated a tendency among the assessees to make payment of advance tax only towards the last day of the financial year. 54.2. The Finance Act has, therefore, amended section 234C(1) of the Income-tax Act to provide that where the whole amount of advance tax paid by an assessee on or before the 15th day of March in the financial year is less than the tax due on the returned income, the assessee shall be liable to pay simple interest at the rate of one and one-half per cent. on the amount of the shortfall from the tax due on the returned income. 54.3. The calculation of interest as a result of the aforesaid amendment, may be illustrated by means of the following examples : Example I : Where an assessee has paid sums of Rs. 300 on 15th September, Rs. 300 on 15th December and Rs. 400, on 20th March by way of advance tax and the tax due on his returned income is Rs. 1,000, he will be liable to pay interest of Rs. 6, i.e., at the rate of one and one-half per cent.....
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.... 56.2. For the purpose of facilitating quicker disposal of cases (relating to the aforesaid assessment years) covered under section 273A, the Finance Act provides that when the Commissioner passes the order of reduction or waiver of penalties wherever the previous approval is necessary in terms of sub-section (2) or sub-section (4), such approval is to be given by the Chief Commissioner or, as the case may be, the Director-General and not by the Board. Only the Commissioner is to pass the order. Similar provisions already exist for the cases covered under section 273A pertaining to the assessment year 1989-90 and subsequent years. The Board will, therefore, not be required to give any approval for passing an order under this section for any assessment year. As a result of this amendment, the cases pending with the Board for approval stand transferred to the Chief Commissioners and Directors General. 56.3. This amendment takes effect from 1st June, 1994. [Section 48] Laying of rules of procedure framed by Income-tax Appellate Tribunal, etc. 57. Section 255(5) of the Income-tax Act gives power to the Appellate Tribunal to regulate its own procedure and the procedure of i....