INCOME TAX BILL, 2018MODEL - I

(VOLUME - II)

INCOME-TAX BILL, 2018

INDEX

Section Description Page

CHAPTER - IPRELIMINARY

1. Short title, extent and commencement 1CHAPTER – II

BASIS OF CHARGE2. Liability to pay income-tax 23. Central Government to provide old age security 24. Scope of total income 35. Agreement with foreign countries 46. Income deemed to be received in the financial year 57. Total income to include income of any other person 58. Total income to include income of spouse, minor child, etc. 59. Income not included in the total income 610. Persons not liable to income-tax 7

CHAPTER - IIICOMPUTATION OF TOTAL INCOME

A. General11. Interpretation 712. Classification of income 713. Computation of income from ordinary sources 714. Computation of income from special sources 715. Apportionment of income between spouses governed by

Portuguese Civil Code 716. Avoidance of double taxation 817. Expenditure not to be allowed as deduction 818. Amount not deductible where tax is not withheld 8

B. Income from various sources19. Income of a person 820. Treatment of receipt outside India 921. Gross receipts 922. Receipts not to be included in Gross receipts 1123. Gross payments 1124. Payments not to be allowed as deduction 12

ii25. Treatment of cash-in-bank 1326. Treatment of self-occupied property 1327. Deductions from gross rent 1328. Transitional provision for assets and liabilities of earlier year 1429. Transitional provision for non-profit organisation 1430. Special provisions relating to business reorganisation 1431. Treatment of unincorporated body 1532. Depreciation in respect of unabsorbed losses (Table - 1) 1533. Treatment of unabsorbed losses before commencement of this Act 1634. Interpretations 16

C. Capital Gains35. Gains from Investment Assets 1936. Income from certain transfers not to be treated as capital gains 2037. Financial year of taxability (Table - 2) 2138. Computation of income from the transfer of any investment asset 2239. Full value of the consideration 2340. Deduction for cost of acquisition, inflation-adjustment etc. 2441. Indexed cost of acquisition 2442. Cost of acquisition of an investment asset 2543. Cost of improvement 2644. Relief for rollover of investment asset (Table - 3) 2645. Relief for rollover of capital gains 28

D. Aggregation of income46. Aggregation of income under the class ‘Income from Ordinary Sources’ 2847. Aggregation of income under the class ‘Income from Special Sources’ 2848. Determination of total income 2949. Aggregation of losses in case of change in constitution of

unincorporated body 2950. Aggregation of loss not to be allowed in the case of

filing of return after due date 29E. Tax incentives

51. Deductions to be made in computing total income 2952. Deduction for contribution to National Pension System Trust 3053. Deduction in respect of donations to certain funds,

non-profit organisations etc. 3054. Deduction in respect of political contributions 31

iii55. Deduction in respect of income of Investor Protection Fund 3156. Deduction in respect of income of co-operative

society from banking activities 3157. Deduction in respect of income of primary co-operative societies 31

F. Maintenance of accounts and other related matters58. Maintenance of accounts 3259. Tax audit 3360. Method of accounting 33

CHAPTER - IVSPECIAL PROVISIONS RELATING TO COMPUTATION OF TOTAL INCOME

OF NON-PROFIT ORGANISATIONS61. Applicability of this Chapter 3462. Total income of a non-profit organisation 3463. Computation of total income of a non-profit organisation 3464. Gross receipts in the case of a non-profit organisation 3465. Outgoings in the case of a non-profit organisation 3566. Modes of investment 3567. Deemed use or application of funds or assets for the

benefit of interested person 3668. Total income to be increased by anonymous donations etc. 3669. Maintenance of accounts and tax audit 3770. Consequences of conversion of a non-profit organisation 3771. Provisions of this chapter not to apply in certain cases 3872. Interpretations 38

CHAPTER - VSPECIAL PROVISIONS RELATING TO COMPUTATION OF TOTAL INCOME

OF POLITICAL PARTIES AND TRADE UNIONS73. Applicability of this Chapter 4074. Total income of a specified person being a political party or trade union 4075. Computation of total income of a specified person 4076. Gross receipts in the case of a specified person 4077. Outgoings in the case of a specified person 4178. Modes of investment 4279. Deemed use or application of funds or assets for the benefit

of interested person 42

iv

80. Total income to be increased by anonymous donations etc. 4381. Maintenance of accounts and tax audit 4382. Consequences of conversion of a specified person 4383. Provisions of this chapter not to apply in certain cases 4484. Interpretations 44

CHAPTER - VISPECIAL PROVISIONS TO PREVENT EVASION

85. Disallowance of expenditure having regard to fair market value 4686. Avoidance of income-tax by transactions resulting in

transfer of income to non-residents 4687. Avoidance of tax by sale and buy-back transaction in security 4788. Avoidance of tax by buy and sale-back transaction in security 4789. General anti-avoidance rule 4790. Presumption of purpose 4891. Interpretation 48

CHAPTER - VIITAX ADMINISTRATION AND PROCEDURE

A. Central Board of Direct Taxes92. Establishment of institutions 5593. Establishment of the Central Board of Direct Taxes 5594. Management of the Board 5595. Delegation of powers by the Board 5596. Term of office and conditions of service of Chairman and

Members of the Board 5597. Meetings of the Board 5598. Secretariat of the Board 5699. Attached offices of the Board 56100. Subordinate offices of the Board 56101. Functions of the Board 56102. Public Rulings 57103. Instructions by the Board 57104. Grants by the Central Government 58105. Accounts and audit 58106. Power of Central Government to issue directions 58107. Returns and reports 59

vB. Income Tax Department

108. Establishment of the Income Tax Department 59109. Function of the Income Tax Department 59110. Income-tax authorities 59111. Recruitment, appointment and control of income-tax authorities 60112. Establishment of functional units 60113. Powers and Functions of Communication Unit 61114. Powers and Functions of Filers Compliance Monitoring Unit 61115. Powers and Functions of Examination Unit 62116. Powers and Functions of Verification Unit 62117. Powers and Functions of Technical Assistance Unit 62118. Powers and Functions of Collection Unit 63119. Powers and Functions of Judicial Management Unit 63120. Power of higher authorities 63121. Proceedings before tax authorities to be judicial proceedings 64

C. Jurisdiction122. Power to assign jurisdiction 64123. Dispute relating to jurisdiction 65124. Power to transfer cases 65125. Change of incumbent 65

D. Enforcement: Search and seizure126. Authorization to conduct Search and seizure 66127. Consequential authorisation 67128. Assistance of police officer etc. 67129. Prohibitory order 67130. Statement during search 67131. Provisional attachment during search 68132. Reference for valuation 68133. Reasons not to be disclosed 68134. Powers to requisition material taken into custody 68135. Retention and release of books of account or documents

seized or requisitioned 69136. Delivery of material belonging to other persons 69137. Retention and application of seized or requisitioned assets 69138. Presumption of ownership etc. 70139. Code of Criminal Procedure to apply 71

vi140. Power to make rules relating to search and seizure 71141. Interpretation 71

E. Enforcement: Survey and other enquiries142. Powers regarding discovery, production of evidence etc. 71143. Power of survey 72144. Power to call for information 73145. Selection of information for verification 74

F. Allotment of Identification Number146. Permanent Account Number 74147. Power of the Board in respect of the Permanent Account Number 75148. Allotment of Withholding Account Number 75149. Document Identification Number 75

G. Communication and Notice150. Mode of communication 75151. Service of notice in certain cases 76152. Authentication of notices and other documents 76153. Personal hearing and deposition exclusively through video conferencing 77154. Electronic record as evidence 77155. Communication deemed to be valid in certain circumstances 77156. Publication of Forms, notices etc. 77157. Defect or mistake in form not to affect validity of communication or order 78158. Extension of due dates 78159. Deemed date of receipt 78

H. Taxpayer Assistance160. Tax Return Preparer 78

I. Assessment Procedure161. Self-reporting of income 79162. Certificate of income 80163. Belated return 81164. Modification statement for revising return 81165. Defective return 82166. Acknowledgment of return 82167. Reporting of international transaction 82168. Furnishing of tax audit report 82169. Issue of notice to stop-filer 82170. Issue of notice to non-filer 83

vii

171. Processing of return 83172. Selection of cases for examination 84173. Communication about selection 84174. Notice for examination 85175. Enquiry for examination 85176. Technical Assistance 86177. Special Audit 86178. Determination of value of assets 86179. Determining the consequences of an impermissible avoidance arrangement 87180. Assessment 88181. Assessment in large cases 89182. Best judgement assessment 89183. Assessment of search and seizure cases 90184. Dispute Resolution Panel 92185. Modification of assessments 93186. Procedure for modification 94187. Review of order 95188. Procedure for amendment upon review 96189. Rectification of mistake 97190. Procedure for rectification 98191. Notice of demand 98192. Time limits for completion of assessment or reassessments (Table - 4) 98

J. Procedure for assessment of unincorporated body193. Assessment of unincorporated body 102194. Assessment of unincorporated body in case of change in its constitution 103195. Assessment on the retirement or death of the participant 103196. Assessment upon business reorganisation 103

K. Procedure for assessment in special cases197. Representative assessee 104198. Rights and obligations of a representative assessee 105199. Direct assessment or recovery not barred 105200. Remedy against property in cases of representative assessee 106201. Assessment after partition of a Hindu undivided family 106202. Assessment of non-resident in respect of occasional shipping business 107203. Assessment of persons leaving India 107

viii204. Assessment of an unincorporated body formed for a

particular event or purpose 108205. Assessment of persons likely to transfer property to avoid tax 109

L. Appeals and revision206. Appeal to Commissioner (Appeals) 109207. Form of appeal and limitation 110208. Procedure in appeal 111209. Powers of the Commissioner (Appeals) 111210. Appellate Tribunal 112211. Qualifications, terms and conditions of service of

President, Vice-President andMember 112212. Appeals to the Appellate Tribunal 112213. Orders of the Appellate Tribunal 113214. Procedure of the Appellate Tribunal 114215. Appeals to High Court 114216. Case before High Court to be heard by not less than two Judges 115217. Appeals to the Supreme Court 115218. Filing of appeal by the Department 116

CHAPTER – VIIICOLLECTION AND RECOVERY

A. General219. Modes of collection and recovery 116220. Bar against direct demand on person 116221. Bar against certain pleas 117

B. Withholding tax222. Liability to withhold tax (Table - 5 & 6) 117223. Payment and withholding of tax 119224. Certificate for deduction at lower rate 119225. Payment of withholding tax, certificate of withholding, etc. 120226. Reporting of transactions without withholding of tax 120227. No withholding of tax in certain cases 120228. Credit for withholding tax 122229. Interpretation 122

C. Withholding statements230. Furnishing of withholding statements 124231. Certificate of no withholding of tax 124

ix232. Processing of withholding statements 125

D. Advance Tax233. Liability to pay advance income-tax 125234. Computation of advance tax 125235. Instalment of advance income-tax (Table - 7 & 8) 126236. Estimate by the person 128237. Order for payment of advance income-tax 128

E. Tax relief in respect of arrears or advance receipts238. Tax relief for arrears or advance receipts 128

F. Foreign tax credit239. Foreign tax credit 129

G. Minimum Alternate Tax Credit240. Credit for minimum alternate tax paid by a company 129241. Credit of minimum alternate tax not to be allowed in certain cases 129

H. Self-Assessment Tax242. Self-assessment tax 130

I. Indemnity243. Indemnity 130

J. Interest244. Interest payable to the Central Government (Table - 9 & 10) 130245. Interest payable by the Central Government (Table - 11) 131246. Manner of computation of interest and waiver thereof to be prescribed 132

K. Fee payable in certain cases247. Fee for filing defaults (Table - 12 & 13) 132

L. Payment of cost by Department248. Payment for delayed appeal effect, rectification etc. (Table - 14) 133

M. Refund249. Refunds 133

N. Provisional recovery measures250. Provisional attachment of property in certain cases 134251. Revocation of provisional attachment against bank guarantee 134252. Invocation and release of bank guarantee 134253. Interpretation 135

O. Recovery254. Compliance by a person with the notice of demand 135255. Jurisdiction for collection and recovery 135

x256. Grant of time, instalments, stay etc. 136257. Certificate of tax arrears 137258. Modes of recovery 137259. Recovery of tax arrears in respect of non-resident from his assets 138260. Recovery in the case of a company in liquidation 138261. Liability of manager of a company 139262. Joint and several liability of participants 140263. Recovery of tax in pursuance of agreements with foreign countries 140264. Tax clearance certificate in certain cases 140265. Recovery by suit or under other law not effected 141

CHAPTER - IXADDITIONAL INCOME-TAX

266. Charge of additional income-tax on under reported tax liability 141CHAPTER – X

PENALTIES267. Penalty for misreporting of income 142268. Penalty for other defaults 143269. Procedure 143270. Bar of limitation for imposing penalty 144271. Power to reduce penalty 144

CHAPTER - XIPROSECUTION

272. Chapter not in derogation of any other law or any other provisionof this Act 144

273. Contravention of any prohibitory order 145274. Failure to afford facility of inspection to Authorised Officer 145275. Removal, concealment, transfer or delivery of property to thwart

tax recovery 145276. Failure to comply with the provisions of section 260 145277. Failure to pay the withholding tax 145278. Willful attempt to evade tax, etc. 146279. Failure to furnish return of income 146280. Failure to furnish other returns, statements, reports, etc. 147281. Failure to comply with direction under this Act 147282. False statement in verification, etc. 147283. Falsification of books of account or documents, etc. 147

xi284. Abetment of false return, etc. 148285. Offences by entities, etc. 148286. Proof of entries in records or documents 148287. Presumption as to assets, books of account, etc., in certain cases 149288. Presumption as to culpable mental state 149289. Prosecution to be at the instance of Competent Sanctioning Authority 149290. Certain offences to be non-cognizable 150291. Disclosure of information by public servants 150292. Punishment for second and subsequent offences 150293. Punishment not to be imposed in certain cases 150294. Power to tender immunity from prosecution 150295. Offences by Hindu undivided families 151296. Cognizance of offences 151297. Special Courts 151298. Offences to be tried by Special Court 151299. Trial of offences as summons case 152300. Application of Code of Criminal Procedure, 1973 to

proceedings before Special Court 152301. Section 360 of the Code of Criminal Procedure, 1973, and the

Probation of Offenders Act, 1958, not to apply 152CHAPTER - XII

ADVANCE RULING302. Definitions 152303. Scope of Ruling 153304. Authority for Advance Ruling 154305. Decision to be by majority 155306. Filing of application 155307. Admission of application 155308. Further enquiry 156309. Pronouncement of ruling 156310. Inspection of reports 156311. Income-tax authority or Appellate Tribunal not to proceed in certain cases 157312. Applicability of Advance Ruling 157313. Advance Ruling to be void in certain circumstances 157314. Rectification of mistake 157315. Powers of the Authority 157316. Procedure of Authority 158

xiiCHAPTER - XIII

GENERAL317. Prohibited modes of loan transactions 158318. Prohibited modes of other transactions 158319. Person competent to verify return, etc. 159320. Appearance by registered valuer in certain matters 160321. Appearance by authorised representative 160322. Power to rescind 161323. Certain transfers to be void 161324. Bar of suits in civil courts 161325. Rounding off 162326. Power to disclose information in respect of person 162327. Publication of information respecting persons in certain cases 163328. Power to make rules 163329. Rules and certain notifications to be placed before Parliament 164330. Repeals and savings 165331. Power to remove difficulties 166

CHAPTER - XIVDEFINITIONS

332. Definitions 166333. Interpretation 198

ARRANGEMENT OF SCHEDULES

SCHEDULE

The First Schedule RATE OF INCOME-TAX 199

The Second Schedule RATES OF OTHER TAXES 203

A. Tax on branch profits 203

The Third Schedule PROCEDURE FOR RECOVERY

OF TAX 204

PART I

GENERAL PROVISIONS 204

PART II

ATTACHMENT AND SALE OF

MOVABLE PROPERTY 209

xiiiPART III

ATTACHMENT AND SALE OF

IMMOVABLE PROPERTY 214

PART IV

APPOINTMENT OF RECEIVER 219

PART V

ARREST AND DETENTION OF

THE DEFAULTER 220PART VI

MISCELLANEOUS 222

The Fourth Schedule INCOME NOT INCLUDED IN

TOTAL INCOME 224

The Fifth Schedule PERSONS NOT LIABLE TO

INCOME-TAX 230

The Sixth Schedule COMPUTATION OF INCOME

FROM SPECIAL SOURCES 232

The Seventh Schedule PART A

DONATIONS ELIGIBLE FOR

HUNDRED PER CENT DEDUCTION 232

PART B

DONATIONS ELIGIBLE FOR

FIFTY PER CENT DEDUCTION 234

The Eighth Schedule DETERMINATION OF COST OF

ACQUISITION IN CERTAIN CASES 235

The Ninth Schedule COMPUTATION OF PROFITS

OF BUSINESS OF OPERATING

A QUALIFYING SHIP 237

The Tenth Schedule COMPUTATION OF PROFITS

OF THE BUSINESS OF MINERAL

OIL OR NATURAL GAS 241The Eleventh Schedule MINERALS AND GROUP OF

ASSOCIATED MINERALS 242

INCOME-TAX BILL, 2018

A

Bill

to consolidate and amend the law relating to direct taxes.

BE it enacted by Parliament in the Sixty-ninth Year of the Republic of India as follows:-

CHAPTER - IPRELIMINARY

Short title, extent and commencement1. (1) This Act may be called the Income-tax Act, 2019.

(2) It extends to the whole of India.(3) Save as otherwise provided in this Act, it shall come into force on the 1st day of

April, 2019.

2

CHAPTER - IIBASIS OF CHARGE

Liability to pay income-tax2. (1) Every person shall be liable to pay income-tax in respect of his total income for the

financial year in accordance with the provisions of this Act (hereafter referred toas “standard tax liability”).

(2) The standard tax liability shall be the amount of income-tax calculated at the ratespecified in the First Schedule and in the manner provided therein.

(3) Every company shall, regardless of anything to the contrary in sub-section (1), beliable to pay minimum alternate tax, if it is higher than the standard tax liability.

(4) The liability to pay income-tax shall be discharged through pre-paid taxes inaccordance with the provisions of this Act.

(5) The Income Tax Department may charge a person in respect of his liability for anyfinancial year under this Act, if the person fails to discharge his liability under theforegoing provisions.

(6) The liability charged under sub-section (5) shall include the liability to payadditional income-tax, interest, fee, fine or penalty, by whatever name called.

(7) The liability charged under sub-section (5) shall be collected after allowing creditfor pre-paid taxes, if any, in accordance with the provisions of this Act.

(8) Subject to the provisions of this Act, every foreign company shall be liable to taxon profits of its branch in India (hereafter referred to as “branch profit tax”) at therate specified in Paragraph A of The Second Schedule.

(9) The profits of the branch referred to in sub-section (8) shall be the total income forthe financial year as reduced by the amount of income tax thereon.

(10) The liability to branch profits tax shall be discharged by payment of pre-paid taxesin accordance with the provisions of this Act as if the branch profits tax wasincome-tax.

(11) Without prejudice to the foregoing and subject to the provisions of this Act, everyforeign company may be charged in respect of its liability to branch profits taxreferred to in sub-section (8).

(12) The branch profits tax charged under the foregoing provisions shall be collectedafter allowing credit for pre-paid taxes, if any, in accordance with the provisions ofthis Act.

(13) The liability under the foregoing provisions, for any financial year, shall bedetermined in accordance with the provisions of this Act as they stand on the firstday of April immediately succeeding the last day of the financial year.

Central Government to provide old age security3. (1) The Central Government shall provide for an annuity towards old age security to

every person being an individual and resident in India.(2) The amount of annuity shall be equal to five per cent. of the annuity deposit.(3) The annuity shall be provided within three months from the beginning of the

eligible year.(4) No annuity shall be provided -

(a) unless the person has paid tax for a minimum of fifteen financial years; and(b) to any person who has been convicted for an offence under section 278 of

this Act.

3(5) The Central Government may make a scheme for providing annuity having regard

to maximizing the return on the annuity and convenience of the person.(6) In this section, -

(a) “annuity deposit” means the aggregate amount of standard tax liability paidby the person for the period of any fifteen financial years, commencing on orafter the first day of April 2005, preceding the eligible year, not exceeding anamount of rupees ten lakhs.

(b) “eligible year” means the later of the following, namely:-(i) the financial year immediately following the financial year in which the

person attains sixty years of age; or(ii) the financial year immediately following the fifteenth financial year in

which the person has paid tax under this Act or under Income-tax Act,1961.

(c) “tax liability paid” shall include the aggregate amount of standard tax liabilitypaid under this Act or under Income-tax Act, 1961 but shall not include anyamount paid by way of additional income-tax, penalty, fee or interest.

Scope of total income4. (1) Subject to the provisions of this Act, the total income for any financial year of a

person shall include all income from whatever source derived which is sourced, ordeemed to be derived from a source, in India by him during the year.

(2) The income referred to in sub-section (1) shall be from a source in India, if it isreceived by the person, or on his behalf, in India during the year.

(3) The income referred to in sub-section (1) shall be deemed to be derived from asource in India, if the payment has been made from India.

(4) The payment referred to in sub-section (3) shall be deemed to be made from India,if it is -(a) for any goods or services consumed in India;(b) towards interest, dividend, bonus or any other form of return on capital (by

whatever name called) which is utilised in India; or(c) for any purpose and the amount is eligible for, or claimed as, a deduction in

computing the total income of the person making the payment in the same, orany other, financial year.

(5) Without prejudice to the provisions of sub-section (4), the following income shallbe deemed to be derived from a source in India, namely:-(a) income in respect of employment, outside India, if the employer is the

Government;(b) income of a non-resident from alienation, outside India, of any share of, or

interest in, a company or an entity, registered or incorporated outside India, tothe extent attributable to assets located in India, if,-(i) such company or entity directly, or indirectly, owns the assets situated in

India; or(ii) the shares or interest derives, directly or indirectly, its value substantially

from the assets located in India.(6) For the purposes of clause (b) of sub-section (5),-

(a) the share or interest shall be deemed to derive its value substantially from theassets (whether tangible or intangible) located in India, if, on the specifieddate, the value of such assets -

4(i) exceeds the amount of ten crore rupees; and(ii) represents at least fifty per cent of the value of all the assets owned by

the company or entity, as the case may be;(b) the value of an asset shall be the fair market value as on the specified date, of

such asset without reduction of liabilities, if any, in respect of the asset,determined in such manner as may be prescribed.

(7) The Board may prescribe de minimis amounts in respect of any payment or incomewhich, regardless of anything to the contrary in this section, shall not be deemedto be derived from a source in India.

Agreement with foreign countries5. (1) The Central Government may enter into an agreement with the Government of any

other country—(a) for the granting of relief in respect of -

(i) income on which income-tax has been paid both under this Act and underthe corresponding law in force in that country; or

(ii) income-tax chargeable under this Act and under the corresponding law inforce in that country to promote mutual economic relations, trade andinvestment;

(b) for the avoidance of double taxation of income under this Act and under thecorresponding law in force in that country;

(c) for exchange of information for the prevention of evasion or avoidance ofincome-tax chargeable under this Act or under the corresponding law in forcein that country, or for investigation of cases of such evasion or avoidance;

(d) for recovery of income-tax under this Act and under the corresponding law inforce in that country; or

(e) for any other purpose under this Act or the corresponding law in force in thatcountry.

(2) The Central Government may enter into an agreement with the Government of anyspecified territory outside India for the purposes specified in sub-section (1).

(3) Any specified association in India may enter into an agreement with any specifiedassociation in the specified territory outside India for the purposes specified insub-section (1).

(4) The Central Government may, by notification in the Official Gazette, make suchprovisions as may be necessary for implementing the agreements.

(5) A person shall not be entitled to claim relief under the provisions of the agreementunless a certificate of his being a resident in the other country or specified territoryis obtained by him from the tax authority of that country or specified territory, inthe prescribed form.

(6) The provisions of this Act shall not be regarded as discriminatory against theforeign company merely on the consideration that the liability of the foreigncompany to pay tax is calculated at a rate higher than the rate at which the liabilityof a domestic company is calculated.

(7) Any term used in the agreement, but not defined in this Act or in the agreement,shall have the meaning assigned to it in the notification issued by the CentralGovernment in the Official Gazette in this behalf, having regard to the fact that themeaning is not inconsistent with the provisions of this Act or the Agreement.

(8) For the purposes of determining the relationship between a provision of anagreement and this Act,-

5(a) neither the agreement nor the Act shall have a preferential status by reason of

it being a agreement or law; and(b) the provision which is later in time shall prevail.

(9) The Central Government may reaffirm the provisions in the agreement through aprotocol, if -(a) the agreement is overriden by a provision in this Act by virtue of it being later

in time; and(b) it considers necessary or expedient to do so having regard to the purpose of

the agreement referred to in sub-section (1).(10) The protocol referred to in sub-section (9) shall, regardless of anything to the

contrary in sub-section (8), prevail over the provisions of the Act as they exist onthe date specified therein.

(11) The protocol referred to in sub-section (9) shall be given effect to regardless of thefact that the other country has not ratified the protocol.

Income deemed to be received in the financial year6. The following income shall be deemed to be received in the financial year,

namely :-(a) any contribution made by an employer, in the financial year, to the account of

an employee in any fund; and(b) any contribution made by the employer, in the financial year, to the account of

an employee in the National Pension System Trust.

Total income to include income of any other person7. (1) The total income of any person, being a transferor, shall include the following,

namely:-(a) any income received by any other person, by virtue of a transfer, whether

revocable or not, without transfer of the asset from which the income isreceived; or

(b) any income received by any other person, by virtue of a revocable transfer ofan asset.

(2) The provisions of clause (b) of sub-section (1) shall not apply in a case where-(a) any income is received from an asset transferred to any trust, if the transfer is

not revocable during the life time of the beneficiary of the trust; or(b) any income is received from an asset transferred to any other person, not

being a trust, if the transfer is not revocable during the lifetime of such otherperson.

(3) In this section,-(a) a transfer shall be deemed to be revocable, if -

(i) it contains any provision for the re-transfer, directly or indirectly, of thewhole or any part of the income or assets to the transferor; or

(ii) it, in any way, gives the transferor a right to re-assume power, directly orindirectly, over the whole or any part of the income or assets; and

(b) a transfer shall include any settlement, trust, covenant, agreement orarrangement.

Total income to include income of spouse, minor child, etc.8. (1) The total income of any individual shall include,-

(a) all income which accrues, directly or indirectly,-

6(i) to the spouse, by way of salary, commission, fees or any other form of

remuneration, from a concern in which the individual has a substantialinterest;

(ii) from assets transferred, directly or indirectly, to the spouse by theindividual, other than any asset transferred -(A) for adequate consideration; or(B) in pursuance to an agreement to live apart;

(b) all income which accrues to a minor child (other than a minor child being aperson with disability or person with severe disability) of the individual, otherthan income which accrues to the child on account of any-(i) manual work done by the child; or(ii) activity involving application of the skill, talent or specialised knowledge

and experience of the child;(c) all income derived from any converted property or part thereof; and(d) all income derived from any converted property which is received by the

spouse or minor child upon partition of the Hindu undivided family of whichthe individual is a member.

(2) The provisions of sub-clause (i) of clause (a) of sub-section (1) shall not apply inrelation to any income accruing to the spouse where the spouse possesses technicalor professional qualifications and the income is solely attributable to the applicationof the technical or professional knowledge and experience of the spouse.

(3) The income referred to in sub-clause (i) of clause (a) of sub-section (1) shall,regardless of anything contained therein, be included in the total income of thespouse whose total income (excluding the income referred to in that sub-clause) ishigher.

(4) The Board may prescribe the method for determining the income referred to in sub-clause (ii) and sub-clause (iii) of clause (a) of sub-section (1).

(5) The income referred to in clause (b) of sub-section (1) shall be included in the totalincome of -(a) the parent who is the guardian of the minor child; or(b) the parent whose total income (excluding the income referred to in that clause)

is higher, if both the parents are guardians of the child.(6) Where any income referred to in clause (b) of sub-section (1) is once included in

the total income of a parent, any such income arising in the succeeding year shallnot be included in the total income of the other parent, unless the Departmentconsiders it necessary to do so after giving an opportunity of being heard to theother parent.

(7) In this section, “property” includes any interest in property whether movable orimmovable, the sale proceeds of such property, in whichever form, and where theproperty is converted into any other form by any method, such other property.

Income not included in the total income9. The total income of any person for any financial year shall not include any of the

income enumerated in the Fourth Schedule, subject to the fullfilment of conditionsspecified therein.

7Persons not liable to income-tax

10. The persons enumerated in the Fifth Schedule shall not be liable to income-taxunder this Act for any financial year, subject to the fullfilment of conditions specifiedtherein.

CHAPTER - IIICOMPUTATION OF TOTAL INCOME

A. General

Interpretation11. (1) The total income of a person for any financial year shall be computed in accordance

with the provisions of this Chapter.(2) Unless otherwise provided in this Act, reference to any receipt, expenditure,

withdrawal, asset or liability shall be construed to be in relation to the financialyear in respect of which, and the person in respect of whom, the income is computed.

Classification of income12. For the purposes of computation of total income of any person for any financial

year, all income shall be classified under the following sources:A. Income from ordinary sources, andB. Income from special sources.

Computation of income from ordinary sources13. (1) The income received from a source, other than the special sources, shall be computed

under the class “income from ordinary sources”.(2) All income falling under the class “income from ordinary sources” shall be further

classified under the following heads of income:-A. Income from various sourcesB. Capital gains.

Computation of income from special sources14. (1) Every item listed in column (3) of the Table in Part V of the First Schedule shall be

the income from a special source of the person specified in column (2) of the saidTable.

(2) The income from any special source shall be computed under the class ‘incomefrom special sources’ in accordance with the provisions of the Sixth Schedule.

Apportionment of income between spouses governed by Portuguese Civil Code15. (1) The income of the husband and wife, governed by the communiao dos bens, from

ordinary sources under each head of income (other than the head “Income fromemployment”) and from special sources shall be apportioned equally.

(2) The income so apportioned shall be included separately in the total income of eachspouse.

(3) The income received from the employer shall be included in the total income of thespouse who has actually earned it.

(4) In this section, communiao dos bens refers to the system of community of propertyunder Protuguese Civil Code of 1860 as in force in the State of Goa and in theUnion territories of Dadra and Nagar Haveli and Daman and Diu.

8Avoidance of double taxation

16. Subject to the provisions of this Act, -(i) any income which is included in the total income of the person for any financial

year shall not be so included in his total income for the same or any other financialyear;

(ii) any income which is includible in the total income of any person shall not beincluded in the total income of any other person.

Expenditure not to be allowed as deduction17. (1) In computing the total income of a person for any financial year, the following shall

not be allowed as a deduction, namely:-(a) any expenditure, which is attributable to income not includible in the total

income under this Act, determined in accordance with such method as may beprescribed;

(b) any expenditure attributable to any income from special sources;(c) any expenditure which has been allowed as a deduction in any other financial

year;(d) any expenditure incurred for any activity which is an offence or prohibited by

law;(e) any provision made for any liability, if it remains unascertained by the end of

the financial year; and(f) any unexplained expenditure.

(2) Any amount allowed as a deduction under any provision of this Act shall not beallowed as a deduction under any other provision of this Act.

(3) The provisions of this section shall apply regardless of anything to the contrarycontained in any other provisions of this Chapter.

Amount not deductible where tax is not withheld18. (1) Any amount on which tax is required to be withheld under Chapter VIII during the

financial year shall not be allowed as a deduction in computing the total income,if -(a) the tax has not been withheld during the financial year; or(b) the tax has been withheld, but has not been paid on or before the due date.

(2) A deduction shall be allowed in respect of the amount referred to in sub-section (1)in any subsequent financial year, if -(a) the tax has been withheld during the financial year, but paid in the subsequent

financial year after the due date; or(b) the tax is paid in the subsequent financial year, regardless of the fact that tax

has not been withheld at the time of payment.

B. Income from various sources

Income of a person19. The income of a person for any financial year shall be the gross receipts as

reduced by the amount of gross payments.

9

Treatment of receipt outside India20. No amount shall be included in the gross receipt under section 21, if the amount is

received from any person, or remitted by any person from, outside India, regardlessof -(a) the nature or character of the amount;(b) the purpose for which the amount has been received; and(c) the fact that the amount has been brought into India by the person.

Gross receipts21. (1) The gross receipts referred to in section 19 shall be aggregate of the following

amount of receipts during the financial year, namely :-(a) amount of receipt from employment (including arrears or advance);(b) amount of receipt of family pension;(c) amount of receipt from the sale of goods and rendering of the services;(d) amount of receipt from royalties, fees, commissions and other revenue;(e) amount of receipt of premium, claims, annuities or other policy benefits;(f) amount of receipt of any tax, duty, cess, surcharge or similar other receipts, by

whatever name called;(g) amount of receipt from contracts;(h) amount of receipt from transfer of property, plant and equipment, intangibles

or any other capital asset, whether business capital asset or investment asset;(i) amount of receipt from sale of equity or debt instruments of the person, or any

other entity, and interest in joint ventures.(j) amount of receipt of loans and advances;(k) amount of receipt of repayment of loans and advances extended;(l) amount of receipt from futures contracts, forward contracts, option contracts

or swap contracts;(m) amount of receipt from issuing shares or other equity instruments;(n) amount of receipt from issuing debentures, loans, notes, bonds, mortgages or

other borrowings;(o) amount of receipt by way of assistance in the form of subsidy, grant, cash

incentive, duty drawback, waiver, concession, reimbursements by whatevername called;

(p) amount of receipt of any compensation or non-compete fee;(q) amount of receipt of gross rent from a house property;(r) amount of receipt of rent from any asset other than a house property;(s) amount of receipt of interest or dividend;(t) amount of receipt of any amount of voluntary contribution by any person,

other than a non-profit organisation;(u) amount of receipt from employees towards contribution to any fund setup for

their welfare;(v) amount of receipt of bonus under a life insurance policy from an insurer, on

maturity or otherwise;(w) amount of receipt of any amount under a Keyman insurance policy including

the sum allocated by way of bonus on such policy;(x) amount of receipt of any sum of money without consideration, in excess of

fifty thousand rupees;(y) amount representing the aggregate value of any specified property received

10without consideration or for inadequate consideration;

(z) amount of receipt, or retention, of any amount on account of settlement orbreach of any contract;

(za) amount of receipt, or withdrawal, of any amount, other than the amountsreferred to in item number 15 or item number 16 of the Fourth Schedule, underany circumstances, from any account maintained with National Pension SystemTrust, representing -(i) the principal amount of the savings; or(ii) interest, dividend, bonus, capital appreciation or any other form of return

on the investment, by whatever name called;(zb) amount of receipt of any consideration in respect of transfer of any business

asset, which is self-generated;(zc) amount of receipt of any amount on account of the cessation, termination or

forfeiture of any agreement entered by the person;(zd) amount of receipt of any amount as reimbursement of any expenditure incurred

by the person;(ze) amount of receipt, or withdrawal, of any amount under any circumstances

from the account maintained under the Capital Gains Savings Schemerepresenting the principal amount or any accretion thereto;

(zf) amount of receipt, or withdrawal, of any amount under any circumstancesfrom the Retirement Benefit Savings Scheme, representing the principal amountor any accretion thereto;

(zg) amount of receipt of any amount as advance, security deposit or otherwise,from leasing or transfer of whole, or part, of any interest in any asset;

(zh) amount of receipt of any compensation or other payment, by whatever namecalled, in connection with the termination of the employment of the person orthe modifications of the terms and conditions relating thereto;

(zi) amount of receipt of any amount of distributed income, by whatever namecalled, from an investment pooling vehicle;

(zj) amount of receipt of any amount of interest, dividend, bonus or any otheramount of similar nature by whatever name called, on contributions made toany fund any time on or after the 1st day of April, 2019;

(zk) amount representing the value of any benefit received in kind; and(zl) amount of any other inflow, or receipt, whether revenue or capital, from any

source.(2) In this section,-

(a) the gross rent in respect of a house property owned by any person shall bethe higher of the following amounts, namely:-(i) contractual rent realised during the financial year; and(ii) presumptive rent for the financial year.

(b) the contractual rent referred to in clause (a) shall be the rent and taxes thereon,if any, receivable by the person under a contract for letting the property,whether in writing or otherwise.

(c) the presumptive rent referred to in clause (a) shall be four per cent. of -(i) the fair market value of the property as on the first day of April, 2001, if the

property is acquired before that date; or(ii) the cost of acquisition of the property, in any other case.

11

Receipts not to be included in Gross receipts22. Regardless of anything to the contrary in section 21, the gross receipts shall not

include the following amounts, namely: -(a) amount of receipt by an individual, from transfer of any capital asset, being an

investment asset;(b) amount of receipt derived from cultivation of agricultural land ;(c) amount of receipt of rent derived from any agricultural land;(d) amount of receipt of rent derived from any farm house; and(e) amount of receipt derived from saplings or seedlings grown in a nursery(f) amount received by an account payee cheque, if the amount has not been

credited to the account of the person in the bank.

Gross payments23. (1) The gross payments referred to in section 19 shall be the aggregate of the following

amounts paid during the financial year, namely:-(a) amount of employment related payments;(b) amount of payment to suppliers for goods and services;(c) amount of payment to employees;(d) amount of payment of royalties, fees, commissions and similar other amounts;(e) amount of payment of premium, claims, annuities or other policy benefits;(f) amount of payment of any tax, duty, cess, surcharge or similar other receipts,

by whatever name called;(g) amount of payment for contracts;(h) amount of payment to acquire property, plant and equipment, intangibles or

any other capital asset;(i) amount of payment to acquire equity or debt instruments of the person, or

any other entity, and interest in joint ventures;(j) amount of loans and advances extended;(k) amount of repayment of borrowings;(l) amount of payment for futures contracts, forward contracts, option contracts

or swap contracts;(m) amount of payment to owners to acquire, redeem or reduce the shares or other

equity instruments, of the person;(n) amount of payment for redemption of debentures, loans, notes, bonds,

mortgages or other borrowings;(o) amount of payment for any compensation or non-compete fee;(p) amount of payment of rent;(q) amount of payment for current repairs to buildings;(r) amount of payment of interest or dividend;(s) amount of payment of the contribution received from employees, to any fund

setup for their welfare;(t) amount of any sum received under a life insurance policy, including the sum

allocated by way of bonus on such policy, if -(i) the premium payable for any of the years during the term of the policy

does not exceed five per cent of the actual capital sum assured; and(ii) the sum is received only upon completion of the original period of contract

of the insurance or upon the death of the insured;(u) amount included in income in respect of an insurance policy where -

12(i) the premium paid or payable for any of the years during the term of the

policy does not exceed five per cent. of the capital sum assured; and(ii) the amount is received only upon completion of original period of contract

of the insurance;(v) amount equal to thirty-three and one-third per cent of income or fifteen

thousand rupees, whichever is less, in respect of family pension;(w) amount of payment of consideration, if any, made in respect of specified

property referred to in clause (y) of sub-section (1) of section 21;(x) amount of any refund, or otherwise, of any advance or security deposit from

leasing or transfer of whole, or part, of any interest in any asset;(y) amount of payment for -

(i) creating and maintaining an in-house facility for scientific research anddevelopment; and

(ii) carrying out scientific research and development in the in-house facility;(z) amount deposited by a banking company with the Reserve Bank of India; and(za) amount of any other outflow, or payment, whether revenue or capital.

(2) The amount referred to in sub-section (1) shall be included in the gross payments,if the amount is paid for the purposes of -(a) the business carried on by the person; or(b) earning the receipts referred to in section 21.

Payments not to be allowed as deduction24.(1) Regardless of anything to the contrary in section 23, the gross payments shall not

include the following amounts, namely: -(a) amount of payment for -

(i) personal expenses;(ii) acquiring any personal asset; or(iii) discharge of any personal liability;

(b) amount of payment on behalf of the owner of a non-natural person, for -(i) personal expenses;(ii) acquiring any personal asset; or(iii) discharging any personal liability.

(c) amount of payment for advertisement in any souvenir, brochure, tract, pamphletor the like published by a political party;

(d) amount of payment of tax, interest or penalty payable under this Act or theIncome-tax Act, 1961 or the Wealth-tax Act, 1957.

(e) amount of payment to a person who is not liable to tax under this Act;(f) amount of payment by an individual, in relation to a capital asset, being an

investment asset;(g) amount of payment for the purposes of earning any agriculture-related receipt

referred to in clause (b), clause (c), clause (d) or clause (e) of section 22;(h) amount of payment of any loan or advance to any employee, director, or

member, as the case may be, if the benefit of availing loan or advance is notavailable to all full time employees on equal terms;

(i) amount of capital contribution by an individual (other than a proprietorshipconcern) to an unincorporated body;

(j) amount of payment or aggregate of payments made to a person in a day,otherwise than by an account payee cheque drawn on a bank or account

13payee bank draft, or use of electronic clearing system through a bank account,if it-(i) is allowable as a deduction under section 23 in any financial year;(ii) exceeds a sum of-

(A) fifteen thousand rupees where the payment is made for carriage ofgoods by road; and

(B) five thousand rupees in any other case; and(iii) has not been made in such cases and under such circumstances, as may

be prescribed; and(k) amount of payment made by an account payee cheque, if the amount has not

been debited to the account of the person in the bank.(2) The provisions of clause (e) of sub-section (1) shall not apply, if the payment is for

the purposes of acquiring any security issued by the Central or State Government.

Treatment of cash-in-bank25. Regardless of anything to the contrary in this Chapter the amount standing to the

credit of a person in a current account, or any other similar account by whatevername called, maintained with any banking company, on the first day and the lastday of any financial year shall, -(a) in the case of the person, be deemed to be cash-in-hand and the provisions of

this Act shall apply accordingly; and(b) in the case of the bank, not be included in the amount of receipts referred to in

section 21 and the provisions of this Act shall apply accordingly.

Treatment of self-occupied property26. (1) The gross rent referred to in clause(q) of sub-section (1) of section 21 shall be

taken to be nil in respect of a house property, or part thereof, which is owned bythe person and self-occupied.

(2) However, in the case of an individual, who owns more than one self-occupiedproperty - (a) the gross rent shall be taken at nil in respect of any one self-occupied property,

at the option of the individual; and(b) the other property shall be deemed to have been let out and the gross rent

shall be determined in the manner provided in section 21.(3) The provisions of sub-section (1) shall not apply, if-

(a) the house property or part thereof is actually let out during any part of thefinancial year; or

(b) any other benefit is derived from it by the owner.(4) For the purposes of this section, “self-occupied property” means any property, or

part thereof, which is not let out any time during the financial year.

Deductions from gross rent27. (1) The deductions in respect of a house property shall, regardless of anything to the

contrary contained in section 23, be limited to the following, namely:-(a) the amount of taxes levied by a local authority in respect of the property, or

part thereof, paid during the financial year;(b) the amount of tax on goods and services paid to the Central Government or

State Government, in respect of rent, to the extent the amount is actually paidduring the financial year;

14(c) a sum equal to twenty five per cent. of the gross rent determined under section

21, towards repairs and maintenance of the property;(d) a sum equal to fifty per cent. of any interest paid during the financial year, -

(i) on loan taken for the purposes of acquisition, construction, repair orrenovation of the property; or

(ii) on loan taken for the purpose of repayment of the loan referred to in sub-clause (i).

(2) The interest referred to in clause (c) of sub-section (1) which pertains to the periodprior to the financial year in which the house property has been acquired orconstructed shall be allowed as a deduction in five equal instalments beginningfrom such financial year.

(3) The interest deductible under sub-section (2) shall be reduced by any part thereofwhich has been allowed as deduction under any other provision of this Act.

(4) The aggregate of the amount of interest referred to in clause (c) of sub-section (1)and sub-section (2) shall, in the case of a self-occupeid property to which theprovisions of sub-secion (1) of section 26 applies, not exceed two lakh rupeesduring the financial year.

Transitional provision for assets and liabilities of earlier year28. (1) Regardless of anyting to the contrary in this Chapter, a person shall, on the 1st day

of the commencement of this Act, be deemed to have -(a) received an amount equivalent to the adjusted value of liabilities on the 31st

day of March, immediately preceding the commencement of this Act; and(b) paid an amount equivalent to the adjusted value of assets on the 31st day of

March, immediately preceding the commencement of this Act.(2) The amount deemed to have been received under clause (a) of sub-section (1)

shall be included in the gross receipts under section 21.(3) The amount deemed to have been paid under clause (b) of sub-section (1) shall be

included in the gross payments under section 23.

Transitional provision for non-profit organisation29. (1) A non-profit organisation which ceases to be so any time during the financial year

shall be deemed to be an association of person for the financial year and theprovisions of this Act shall apply accordingly.

(2) Regardless of anything to the contrary in this Chapter, the assocation of personreferred to in sub-section (1) shall be deemed to have received an amount equivalentto the value of the net assets of the non-profit organisation in which the non-profitorganisation ceases to be so.

(3) The association of person shall be deemed to have received the amount referred toin sub-section (2) on the 1st day immediately following the day on which the non-profit organisation ceases to be so.

(4) The value of the net assets of the non-profit organisation referred to in sub-section (2) shall be the value as on the 1st day of the financial year in which thenon-profit organisation ceases to be so and determined in the prescribed manner.

Special provisions relating to business reorganisation30. (1) Regardless of anyting to the contrary in this Chapter, in a case where business

reorganisation has taken place during the financial year, the successor shall, onthe date of the business reorganisation, be deemed to have -

15(a) received an amount equivalent to the adjusted value of liabilities on the day

immediately preceding the date of the business reorganisation; and(b) paid an amount equivalent to the adjusted value of assets on the day

immediately preceding the date of the business reorganisation.(2) The amount deemed to have been received under clause (a) of sub-section (1)

shall be included in the gross receipts under section 21, in the case of the successor.(3) The amount deemed to have been paid under clause (b) of sub-section (1) shall be

included in the gross payments under section 23, in the case of the successor.(4) For the purposes of determining the total income of the predecessor for the period

beginning with the 1st day of the financial year and ending on the day immediatelypreceding the date of the business reorganisation, the predecessor shall be deemedto have -(a) paid an amount equivalent to the adjusted value of liabilities on the day

immediately preceding the date of the business reorganisation; and(b) received an amount equivalent to the adjusted value of assets on the day

immediately preceding the date of the business reorganisation.(5) The amount deemed to have been received under clause (a) of sub-section (1)

shall be included in the gross receipts under section 21, in the case of thepredecessor.

(6) The amount deemed to have been paid under clause (b) of sub-section (1) shall beincluded in the gross payments under section 23, in the case of the predecessor.

(7) The successor shall not be entitled to set off any loss of the predecessor againsthis income in the financial year in which the business reorganisation has takenplace or in any subsequent financial year.

Treatment of unincorporated body31. (1) Any amount credited to the account of its member by an unincorporated body in

its books of account shall, regardless of anything to the contrary contained in thisChapter, be deemed to have been paid by the unincorporated body to its memberand included in determining its gross payments under section 23.

(2) The amount credited under sub-section (1) shall be deemed to have been receivedby the unincorporated body from its member and included in determining its grossreceipts under section 21.

(3) The gross receipts under section 21 shall, in the case of a member of anunincorporated body, include -(a) the amount credited under sub-section (1); and(b) any amount of withdrawal in excess of the balance standing to the credit of

the member in the books of account of the unincorporated body.(4) For the purposes of this section, the amount credited under sub-section (1) shall

not include any amount of capital contribution, loans or advances by the memberof the unincorporated body.

Depreciation in respect of unabsorbed losses32. (1) The unabsorbed current loss from ordinary sources shall be deemed to be a

business capital asset and depreciation shall be allowed in respect thereof inaccordance with the provisions of this section.

16(2) The amount of depreciation of the business capital asset referred to in sub-section

(1) shall be such percentage of the adjusted value of the block of asset as specifiedin the Table below.

(3) The adjusted value of the block of asset for any financial year shall be computedin accordance with the formula -A + B

Where A = the written down value of the block of asset at the begining ofthe financial year; and

B = the unabsorbed current loss from ordinary sources of theimmediately preceding financial year.

(4) The written down value of the block of asset at the begining of the financial yearshall be the written down value of the block of asset at the close of the immediatelypreceding financial year.

(5) The written down value of the block of asset at the close of the immediatelypreceding financial year shall be the adjusted value of the block of asset in theimmediately preceding financial year as reduced by the amount of depreciation, ifany allowed under this section during that year.

TABLE 1RATES AT WHICH DEPRECIATION IS ADMISSIBLE

S. Class of assets Block of assets Depreciation allowance asNo. percentage of adjusted

value or of written down value of block of assets

(1) (2) (3) (4)I. Unabsorbed Unabsorbed current 33.33 per cent.

current loss loss from ordinaryfrom ordinary sourcessources

Treatment of unabsorbed losses before commencement of this Act33. The unabsorbed losses, depreciation, or any other allowance relating to any

financial year prior to the commencement to this Act shall not be allowed to be setoff against the income of any financial year after the commencement of this Act.

Interpretations34. For the purposes of this sub-chapter, -

(a) “receipts from employment” includes -(i) wages, remuneration, overtime pay, fees, commissions, bonuses, and

other similar payments;(ii) any allowance or benefit granted by the employer;(iii) any allowance, other than the allowances referred to in sub-clause (ii),

concession or assistance;(iv) any amount received from the employer towards discharge or

reimbursement of any expense incurred by the person, or his associate,on behalf of the employer;

17(v) any amount paid or transferred to another person for the benefit of the

person or his associate;(vi) any amount received in terms of agreement or conditions of employment;(vii) any amount for redundancy or loss or termination of employment;(viii)any amount of leave pay;(ix) any amount of gratuity, leave encashment, annuity, pension or any

commutation thereof;(x) any amount in connection with voluntary retirement, termination of

employment or voluntary seperation, received directly or indirectly;(xi) any contribution made by the employer, in the financial year, to the account

of the employee in the National Pension System Trust;(xii) any contribution made by an employer, in the financial year, to the account

of an employee in any fund;(xiii) the annual accretion, by way of interest, dividend or any other amount of

similar nature, in the financial year, to the balance at the credit of theemployee in the fund referred to in sub-clause (xi) and sub-clause (xii);

(xiv) the fair market value of any perquisite or benefit received or derived bythe person or his associate, by virtue of the employment;

(xv) any other amount, including gifts, received by virtue of the employment;(xvi) the fair market value of shares allotted under any employee stock option

plan, as on the date of exercise of option; and(xvii) any amount in lieu of, or in addition to, the payments referred to in sub-

clauses (i) to (xvi).(b) “any allowance or benefit granted by the employer” means any allowance or

benefit granted -(i) to meet his personal expenses at the place where the duties of his office

or employment of profit are ordinarily performed by him or at a placewhere he ordinarily resides; or

(ii) to compensate him for the increased cost of living;(iii) to meet expenses wholly, necessarily and exclusively for the performance

of the duties of an office or employment of profit;(iv) to remunerate or compensate him for performing duties of a special nature

relating to his office or employment of profit; or(v) which is in the nature of house rent allowance;

(c) “receipt of rent” in relation to any house property owned by a person meansthe higher of the amount of contractual rent and presumptive rent, for thefinancial year;

(d) “contractual rent” means the rent and taxes thereon, if any, received by theperson under a contract for letting, whether in writing or otherwise;

(e) “presumptive rent” means an amount equal to four per cent. of the indexedcost of acquisition of the property;

(f) “adjusted value of liabilities” means the value of all liabilities recorded in thestatement of affairs or books of accounts, as reduced by the amount of accumulatedlosses, if any, recorded therein as asset;(g) “adjusted value of assets” means the value of all assets recorded in thestatement of affairs or books of accounts, as reduced by -

(i) the amount of accumulated losses, if any, recorded therein as asset;(ii) the amount of cash in hand; and(iii) the amount of cash in bank;

18(h) “paid” means actually paid ;(i) “unincorporated body” shall include a proprietorship concern and the

proprietor shall be deemed to be the member;(j) “employment related payments” means -

(i) any sum paid on account of a tax on employment within the meaning ofclause (2) of Article 276 of the Constitution;

(ii) any amount received from the employer towards discharge orreimbursement of any expense incurred by the person or his associate,on behalf of the employer;

(iii) any sum towards discharge or reimbursement of the person’s dental,medical or health insurance expenses, if the benefit is available to all full-time employees on equal terms;

(iv) the value of any medical treatment provided to an employee or any memberof his family in a hospital maintained by the employer, if the benefit isavailable to all full-time employees on equal terms;

(v) any sum paid by an employer in respect of any expenditure actuallyincurred by an employee on his medical treatment or of any member of hisfamily, if -(A) the treatment is in any hospital maintained by the Government or any

local authority or any other hospital approved by the Governmentfor this purpose;

(B) the benefit is available to all full-time employees on equal terms; and(C) the benefit is available consequent to periodical, or lump sum

payment, by the employee;(vi) any amount received by, or benefit accruing to, the person, if -

(A) it, is received, or accrues on a non-discriminatory basis to all full timeemployees; and

(B) it is unreasonable or administratively impracticable for the employerto account for, or to allocate, the amount or the benefit, to the personby reason of the size, type and frequency of transactions;

(vii) the exercise price or grant price of shares allotted under an employeestock option plan referred to sub-clause (xvi) of clause (a) of section 34;

(viii)any allowance or benefit granted by the employer to the person to meetexpenses wholly, necessarily and exclusively in the performance of theduties of an office or employment of profit, as may be prescribed, to theextent such expenses are actually incurred for that purpose; or

(ix) any amount of contribution made by the employer, in the financial year, tothe account of the person with the National Pension System Trust, to theextent it does not exceed ten per cent. of the salary of the person;

(x) the amount due or received, directly or indirectly, by the person from hisemployer, in connection with his voluntary retirement or termination ofservice or voluntary separation under any scheme framed for this purposein accordance with such guidelines as may be prescribed;

(xi) the amount of any gratuity received by the person, from one or moreemployers, on retirement or on termination of employment, to the extentthe aggregate of the amounts does not exceed the least of -(A) one-half month’s salary for each year of completed service computed

on the basis of average salary for ten months immediately preceedingthe month of retirement or termination; and

19(B) a sum of ten lakh rupees;

(xii) the amount of any gratuity received by -(A) the person on his becoming incapacitated prior to his retirement; or(B) the spouse, children or dependants of the person, on the death of

the person;(xiii) the amount received in commutation of pension under a scheme of the

employer, framed in accordance with the prescribed rules, to the extentthe aggregate of the amounts does not exceed the least of -(A) forty per cent. of the pension; and(B) a sum of twenty lakh rupees;

(xiv) the amount of any pension received by the person, who has been-(A) in the service of the Central Government or State Government; and(B) awarded a gallantry award, prescribed for this purpose;

(xv) the amount received by the person, from one or more employers, as thecash equivalent of the leave salary in respect of the period of earnedleave to his credit at the time of his retirement to the extent the aggregateof the amounts does not exceed ten lakh rupees;

(xvi) the amount of gratuity referred to in sub-clause (ix) of clause (a) ofsection 34, as is in excess of the amount referred to in sub-clause (xi), ifthe excess is deposited in the Retirement Benefit Savings Scheme;

(xvii) the amount of commuted pension referred to in sub-clause (ix) of clause(a) of section 34, as is in excess of the amount referred to in sub-clause(xiii), if the excess is deposited in the Retirement Benefit Savings Scheme;

(xviii) the amount received towards leave encashment on retirement orcommuted pension referred to in sub-clause (ix) of clause (a) of section34, as is in excess of the amount referred to in sub-clause (xv), if theexcess is deposited in the Retirement Benefit Savings Scheme;

(k) ‘specified property’ means-(i) immovable property being land or building or both;(ii) shares and securities;(iii) jewellery;(iv) bullion;(iv) archaeological collections;(v) drawings;(vi) paintings;(vii) sculptures; or(viii) any work of art; and

(l) “value of any specified property” means,-(i) in case of an immovable property, the stamp duty value of such property;

and(ii) in case of any other property, the fair market value of such property.

C. Capital Gains

Gains from Investment Assets35. (1) The income from the transfer of any investment asset shall be computed under the

head “Gains from Investment Assets ”.(2) The income under the head “Capital gains” shall, without prejudice to the generality

of the foregoing provisions, include the following, namely:-

20(a) the amount of withdrawal referred to in sub-section (4) of section 44 to the

extent deduction has been allowed under sub-section (2) thereof, if thecondition laid down in the said sub-section (4) is not complied with;

(b) the amount of deposit referred to in sub-section (5) of section 44 to the extentdeduction has been allowed under sub-section (2) thereof, if the conditionlaid down in the said sub-section (5) is not complied with; and

(c) the amount of deduction allowed under sub-section (1) of section 44, if any ofthe conditions specified in sub-section (6) of the said section is not compliedwith.

Income from certain transfers not to be treated as capital gains36. (1) The income from the following transactions shall not be included in the computation

of income under the head “Capital gains”, namely:-(a) distribution of any investment asset on the total or partial partition of a Hindu

undivided family;(b) gift, or transfer under an irrevocable trust, of any investment asset, other than

sweat equity share;(c) transfer of a investment asset under a will;(d) transfer of any investment asset by a predecessor to a successor in a scheme

under a business reorganisation if the successor is (an Indian company).neither a non-resident nor a foreign company;

(e) transfer of a share held in the company referred to in clause (j), by a shareholderas a result of conversion of the company into a limited liability partnershipreferred therein;

(f) transfer of shares of an amalgamating company by a shareholder under ascheme of business re-organisatin, if -(i) the transfer is made in consideration of the allotment to the shareholder

of shares in the successor amalgamated company; and(ii) the successor is neither a non-resident nor a foregin company;

(g) transfer of Sovereign Gold Bond by way of redumption, by an individual;(h) trasfer by way of conversion of preference shares of a company into equity

shares of that company;(i) transfer of a unit under a consolidating scheme of a mutual fund, by a unit

holder, if -(i) the unit are alloted to him in the consolidated scheme of the mutual fund;

and(ii) the consolidation is of two or more schemes of the mutual funds;

(j) transfer of any specified work of art to -(i) the Government;(ii) a University;(iii) National Museum;(iv) National Art Gallery;(v) National Archives; or(vi) any other public museum or institution of national importance or of renown

throughout any State or States, and notified by the Central Governmentin the Official Gazette for this purpose;

(k) transfer by way of conversion of any bonds or debentures, debenture-stockor deposit certificates in any form, of a company into shares or debentures ofthat company;

21(l) transfer by way of convernsion of foreign exchange convertible bond of a

company into shares or debenture of any company; and(m) transfer of any investment asset in a transaction of reverse mortgage under a

scheme notified by the Central Government.

Financial year of taxability37. (1) The income from the transfer of an investment asset specified in column 2 of Table

2 shall be the income of the transferor in the financial year specified in column 3 ofthe said Table:

Table-2 Financial year of taxability

S. Nature of transfer Financial yearNo.(1) (2) (3)

1. Transfer - The financial year in which the compensation,(i) by way of company acquisition or consideration, as the case may be, or such under any law for the time being compensation or consideration enhanced or in force, or further enhanced by any court, Tribunal or(ii) the consideratin for which was other authority, is received determined or approved by the Central Government or the Reserve Bank of India

2. Transfer by way of The financial year in which the assetconversion of an investment so converted or treated, is sold or otherwiseasset into, or its treatement as transferred.

business trading asset

3. Transfer by way of - The financial year in which the asset is(i) contribution of the asset, transferred or distributed.

whether by way of capital orotherwise, to anunincorporated body, in whichthe transferor is, or becomes, aparticipant; or

(ii) the distribution of the asset onaccount of dissolution of anunincorporated body.

4. Transfer by way of distribution of The financial year in which the money ormoney or asset to a participant in the asset is distributed.an unincorporated body on accountof his retirement from the body

5. Transfer by way of part performance The financial year in which the possession ofof a contract, referred to in sub-clause the immovable property is allowed to be(i) of clause (308) of section 332 taken or retained.

22

6. Transfer by way of transaction The financial year in which the enjoyment ofenabling the enjoyment of any the property is enabled.immovable property referred to insub-clause (j) of clause (308)of section 332

7. Transfer by way of slump sale, The financial year in which the transferreferred to in sub-clause (l) of took place.clause (308) of section 332

8. Transfer by any mode other than The financial year in which the transfer tookthe modes referred to in serial place.numbers 1 to 7.

(2) Regardless of anything to the contrary in sub-section (1), -(a) any money or asset received under an insurance from an insurer on account

of damage or destruction of an insured asset referred to in sub-clause (m) ofclause (308) of section 332 shall be demed to be an income of the recipient ofthe financial year in which the money or asset is received;

(b) any money or asset received by the participant on account of his retirementfrom an unincorporated body referred to in sub-clause (o) of clause (308) ofsection 332 shall be deemed to be the income of the recipient of the financialyear in which the money or asset is received;

(c) any money or asset received by the shareholder on account of liquidation ordissolution of a company referred to in sub-clause (h) of clause (308) ofsection 332 as reduced by the amount assessed as dividend within the meaningof item (iii) of sub-clause (a) of clause (95) of section 332, shall be deemed tobe income of the recipient of the financial year in which the money or asset isreceived;

(d) any consideration from transfer made by the depository or participant of anybeneficial interest in a security shall be deemed to be the income of the beneficialowner of the financial year in which such transfer took place;

(e) the amount referred to in clause (a) of sub-section (2) of section 35 shall be theincome of the financial year in which such amount is withdrawn;

(f) the amount referred to in clause (b) of sub-section (2) of section 35 shall be theincome of the third financial year immediately following the financial year inwhich the transfer of the original asset is effected;

(g) the amount referred to in clause (c) of sub-section (2) of section 35 shall bethe income of the financial year in which any condition referred to in sub-section (6) of section 44 is not complied with.

(3) In clause (d) of sub-section (2), “beneficial owner”shall have the same meaning asassigned to it in clause (a) of sub-section (1) of section 2 of the Depositories Act,1996.

Computation of income from the transfer of any investment asset38. (1) The income from the transfer of any investment asset during the financial year

shall be the full value of the consideration received as a result of the transfer, asreduced by the aggregate amount of the deductions referred to in section 44.

23(2) However, the income from the transfer of any investment asset determined under

sub-section (1) shall be two-thirds of the amount determined thereunder, if -(a) the investment asset is an equity share in a company; and(b) the asset is held for a period of more than one year.

(3) For the prupose of computation of income from the transfer of an investmentasset, being any beneficial interest in respect of securities referred to in clause (d)of sub-section (2) of section 37, the cost of acquisition and the period of holdingof such securities shall be determined on the basis of first-in-first-out method.

Full value of the consideration39. (1) The full value of the consideration shall be the amount received by, or accruing to,

the transferor, or a person referred to in sub-section (2) of section 37, as the casemay be, directly or indirectly, as a result of the transfer of the investment asset.

(2) The full value of the consideration shall, notwithstanding anything contained insub-section (1), be,-(a) the amount of compensation awarded in the first instance or the consideration

determined or approved in the first instance by the Central Government or theReserve Bank of India or the amount by which the compensation orconsideration is enhanced or further enhanced by any court, tribunal or otherauthority, as the case may be, if the transfer is by the mode specified in sub-clause (c) of clause (308) of section 332;

(b) the fair market value of the asset as on the date of the transfer, if the transferis by the mode specified in sub-clause (d) of clause (308) of section 332;

(c) the amount recorded in the books of account of the company or unincorporatedbody as the value of the investment asset, if the transfer is by the modespecified in sub-clause (f) of clause (308) of section 332;

(d) the fair market value of the asset as on the date of the transfer, if such transferis by the mode specified in sub-clause (g) of clause (308) of section 332;

(e) the amount of money, or the fair market value as on the date of the receipt ofany asset, received under an insurance from an insurer, if the transfer is by themode specified in sub-clause (m) of clause (308) of section 332;

(f) the amount of money, or the fair market value of the asset as on the date of itsdistribution, received by a shareholder from a company under liquidation ordissolution , as reduced by the amount of dividend within the meaning of sub-clause (iii) of clause (95) of section 332, if the transfer is by the mode specifiedin sub clause (h) of clause (308) of section 332;

(g) the amount of money, or the fair market value of the asset as on the date of itsdistribution, received by the participant, if the transfer is by the mode specifiedin sub-clause (o) of clause (308) of section 332;

(h) the fair market value as on the date of transfer of the asset, if the transfer is bythe mode, and the asset is of the nature, specified in clause (b) of sub-section(1) of section 86;

(i) the stamp duty value of the investment asset, being land, building or both, ifthe consideration is less than the stamp duty value;

(j) the fair market value of the investment asset, being an unquoted share of acompany, determined in such manner as may be prescribed; and

(k) the fair market value of the investment asset on the date of transfer, if theconsideration is not ascertainable or cannot be determined.

(3) The full value of consideration shall, in a case where the amount of compensationor consideration referred to in clause (a) of sub-section (2) is subsequently reduced

24by any court, tribunal or other authority, be the compensation or consideration asso reduced.

(4) The enhanced compensation or consideration referred to in clause (a) of sub-section (2) shall, in a case where it is received by any person other than thetransferor, be deemed to be the income of the other person and the provisions ofsections 35 to 45 (both inclusive) shall accordingly apply.

(5) The consideration received or accruing from the transfer of the asset referred to inclause (j) of sub-section (2) shall be the full value of the consideration therefrom,if the stamp duty value does not exceed one hundred and five per cent of the fullvalue of the consideration received or accruing.

(6) The stamp duty value for the purposes of clause (j) of sub-section (2) shall be thestamp duty value on the date of agreement, if the date of agreement and the date ofregistration are not the same.

(7) The provisions of sub-section (6) shall apply only in a case where the amount ofconsideration or a part thereof has been received by any mode other than cash onor before the date of agreement for transfer of the asset.

Deduction for cost of acquisition, inflation-adjustment etc.40. (1) The deductions for the purposes of section 38 shall, in the case of an investment

asset, be the following:-(a) the cost of acquisition, if any, of the asset;(b) the cost of improvement, if any, of the asset; and(c) the amount of expenditure, if any, incurred wholly and exclusively in connection

with the transfer of the asset.(2) However, if the investment asset is transferred at any time after one year from the

end of the financial year in which the asset is acquired by the natural person,the deductions for the purposes of section 38 shall be the following:-(a) the amount of expenditure, if any, incurred wholly and exclusively in connection

with the transfer of the asset;(b) the indexed cost of acquisition, if any, of the asset;(c) the indexed cost of improvement, if any, of the asset; and(d) the amount of relief for rollover of the asset, as determined under section 44.

(3) The provisions of sub-section (2) shall not apply to an investment asset, being abond or debenture, other than -(a) capital indexed bonds issued by the Government; or(b) Soverign Gold Bond.

(4) No deduction under sub-section (1) shall be allowed, if the amount has been paid,or remitted, to any person outside India, for whatever purpose, whether revenue orcapital.

Indexed cost of acquisition41. (1) The indexed cost of acquisition of an investment asset referred to in sub-section

(2) of section 40 shall be the amount determined in accordance with the formula -A X B CWhere A = the cost of acquisition of the asset;

B = the Cost Inflation Index for the financial year in which the assetis transferred;

C = the Cost Inflation Index for the financial year immediatelyfollowing the financial year in which the asset was acquired by

25the person or for the financial year beginning on the first day ofApril 2001, whichever is later.

(2) The indexed cost of improvement of an investment asset referred to in sub-section(2) of section 40 shall be the amount determined in accordance with the formula -A X B CWhere A = the cost of improvement;

B = the Cost Inflation Index for the financial year in which the assetis transferred;

C = the Cost Inflation Index for the financial year immediatelyfollowing the financial year in which the improvement to theasset took place or for the financial year beginning on the firstday of April 2001, whichever is later.

Cost of acquisition of an investment asset42. (1) Unless otherwise provided, the cost of acquisition of an investment asset

shall be -(a) the purchase price of the asset, or(b) at the option of the person, the fair market value of the asset on the 1st day of

April, 2001, if the asset is acquired by the person before such date.(2) The cost of acquisition of an investment asset specified in column 2 of the Eighth

Schedule, acquired by the mode specified in column 3 of the said Schedule, shallbe the cost specified in column 4 thereof.

(3) The cost of acquisition of an investment asset acquired by the person by any ofthe special modes of acquisition, shall be -(a) the cost at which the asset was acquired by the previous owner; or(b) at the option of the person, the fair market value of the asset on the 1st day of

April, 2001, if the asset was acquired by the previous owner or the personbefore such date.

(4) The cost of acquisition of an investment asset referred to in clause (h) or clause (i)of sub-section (2) of section 63 shall be the fair market value or the stamp dutyvalues as the case may be, which has been taken into account for the purposes ofthe said clauses.

(5) The cost of acquisition of an investment asset being an undertaking or division ofa business transferred by way of a slump sale referred to in sub-clause (l) of clause(308) of section 332 shall be the net worth of such undertaking or division.

(6) The cost of acquisition of an investment asset forming part of a bundle ofinvestment assets acquired by any participant, on distribution of the asset to himon account of his retirement from any unincorporated body, shall be the amountdetermined in accordance with the formula -

A - (B + C)where, A= the amount payable to the participant as appearing in the books

of account of the unincorporated body on the date ofdistribution;

B= any amount attributable to the change in the value of the bundleon account of revaluation of the bundle, if any, up to the date ofdistribution; and

C= the cost of acquisition of any other asset, if any, forming part ofthe bundle acquired by the participant, on distribution of theasset to him on account of his retirement from any incorporated

26body if the cost of acquisition has been allowed as a deductionunder section 40 in any earlier financial year.

(7) The cost of acquisition of an investment asset shall, regardless of anything to thecontrary contained in this section, be “nil”, in relation to -(a) an investment asset which is self generated;(b) the asset which is acquired by way of compulsory acquisition and the

compensation or consideration for such acquisition is enhanced or furtherenhanced by any court, tribunal or other authority; or

(c) the asset where the cost of acquisition to the person or the previous owner, ifany, cannot be determined or ascertained, for any reason.

(8) In sub-section (3), “previous owner”in relation to any investment asset owned bya person menas the last previous owner of the investment asset, who acquired itby a mode of acquisition other than those referred to in clause (308) of section 332.

(9) The Board may, for the purposes of sub-section (1), prescribe the cost ofacquisition of any investment asset and the method of determination thereof,having regard to the nature of the investment asset, mode of acquisition and thecircumstances in which the asset became the property of the person.

Cost of improvement43. (1) The cost of improvement of an investment asset shall be any expenditure of a

capital nature incurred in making any additions or alterations to the asset ,-(a) by the person; or(b) by the previous owner, if the asset is acquired by any special modes of

acquisition.(2) The cost of improvement of the investment asset, notwithstanding anything in

sub-section (1), where the asset became the property of the person or the previousowner before the 1st day of April 2001, shall be any capital expenditure incurred forany addition or alteration to such asset on or after the 1st day of April 2001.

(3) The cost of improvement of an investment asset shall, notwithstanding anythingin sub-section (1), be “nil”in relation to -(a) an investment asset which is self generated(b) an investment asset being an undertaking or division transferred by way of a

slump sale referred to in sub-clause (308) of section 332; or(c) any investment asset if the cost of improvement cannot be determined orascertained, for any reason.

(4) Any expenditure deductible in computing the income under any other head ofincome shall not be taken into account while computing the cost of improvement.

Relief for rollover of investment asset44. (1) An individual shall be allowed a deduction, in respect of rollover of any original

investment asset, from the capital gain arising from the transfer of the asset inaccordance with the provisions of this section.

(2) The deduction referred to in sub-section (1) shall be computed in accordance withthe formula -A X (B+C+D)

EWhere A = the amount of capital gains arising from the transfer of the original

asset;B = the amount invested for purchase or construction of the new

asset referred to in sub-section (6) within a period of one year

27before the beginning of the financial year in which the transferof original investment asset is effected;

C = the amount invested for purchase or construction of the newasset referred to in sub-section (6) during the financial year inwhich the transfer of original investment asset is effected or sixmonths from the end of the month in which the transfer is effected,whichever is later;

D = the amount deposited in an account in any bank by the end ofthe financial year in which the transfer of original investmentasset is effected or six months from the end of the month inwhich the transfer is effected, whicher is later in accordancewith the Capital Gains Deposit Scheme framed by the CentralGovernment in this behalf, ;

E = the net consideration received as a result of the transfer of theoriginal asset.

(3) The deduction computed under sub-section (2) shall not exceed the amount ofcapital gains arising from the transfer of the investment assets.

(4) Any amount withdrawn from an account under the Capital Gains Deposit Schemeshall be utilised within a period of one month from the end of the month in whichthe amount is withdrawn, for the purposes of purchase or construction of the newasset.

(5) The amount deposited in the account under the Capital Gains Deposit Schemeshall be utilised for the purposes of purchase or construction of the new assetwithin a period of three years from the end of the financial year in which thetransfer of the original asset is effected.

(6) The deduction under this section in respect of capital gain arising from aninvestment asset, specified in column (2) of Table-3, shall be allowed with referenceto the corresponding new investment asset referred to in column (3) of the Table,subject to the fulfillment of conditions specified in column (4) thereof.

Table-3Deduction in respect of capital gains

Sl Description of Description of the ConditionsNo. the original new investment

investment assetasset

(1) (2) (3) (4)1. Agricultural land One or more pieces of The original investment asset was-

agricultural land. (i) an agricultural land during twoyears immediately preceedingthe financial year in which theasset is transferred; and

(ii) acquired prior to one year beforethe beginning of the financial yearin which the transfer of the assettook place.

2. Any investment Residential house. (i) The person does not own anyasset residential house, other than the

new investment asset, on the dateof transfer of the original

28investment asset; and

(ii) The original investment assetwas acquired prior to one yearbefore the beginning of thefinancial year in which thetransfer of the asset took place.

Relief for rollover of capital gains45. (1) An individual shall be allowed a deduction, in respect of rollover of capital gains

arising from the transfer of any investment asset in accordance with the provisionsof this section.

(2) The deduction referred to in sub-section (1) shall be computed in accordance withthe formula -A - B

Where A = the amount of capital gains arising from the transfer of theinvestment asset;

B = the amount of capital gains arising from the transfer of theinvestment asset, deposited in the Capital Gains Savings Accountwithin one month from the end of the month in which the transferof the investment asset is effected, in accordance with the schemeframed by the Central Government in this behalf.

D. Aggregation of income

Aggregation of income under the class ‘Income from Ordinary Sources’46. (1) The “gross total income from ordinary sources” for the financial year shall be the

aggregate of -(a) income under the head ‘‘income from various sources’’; and(b) income under the head ‘‘capital gains”.

(2) The ‘gross total income from ordinary sources’ referred to in sub-section (1) shallbe treated as ‘nil’, if the net result of the aggregation under sub-section (1) isnegative; and the absolute value of the net result shall be the amount of‘unabsorbed current loss from ordinary sources’, for the financial year.

Aggregation of income under the class ‘Income from Special Sources’47. (1) The “ total income from special sources’ for the financial year shall be the aggregate

of the income referred to in Part V of the First Schedule,(2) The ‘ total income from the special sources’ referred to in sub-section (1) shall be

treated as ‘nil’, if the net result of the aggregation under sub-section (1) is negative;and the absolute value of the net result shall be the amount of ‘unabsorbed currentloss from the special source’, for the financial year.

(3) The “unabsorbed current loss from special sources” for any financial yeardetermined under sub-section (2) shall not be allowed to be carried forward for set-off against the “total income from special sources” in any subsequent year.

29Determination of total income

48. The total income of a person for any financial year shall be computed in accordancewith the formula-(A - B) + CWhere A = the ‘gross total income from ordinary sources’, for the financial year;

B = the aggregate amount of deductions allowed under sub-chapter E;and

C = the ‘total income from special sources’, for the financial year.

Aggregation of losses in case of change in constitution of unincorporated body49. (1) The amount of ‘unabsorbed current loss from ordinary sources’ calculated under

sub-section (2) of section 46, for the financial year ending on the date of theretirement, or death, of a participant, shall be reduced by the amount in proportionof the share of the retired, or deceased, participant.

(2) The amount so reduced under sub-section (1) shall be the ‘unabsorbed part yearloss from ordinary sources’, for the financial year beginning on the date immediatelyfollowing the date of retirement, or death, of a participant for the purposes of sub-section (2) of section 46.

(3) The amount of ‘unabsorbed current loss from the special source’ calculated undersub-section (2) of section 47, for the financial year ending on the date of theretirement, or death, of a participant, shall be reduced by the amount in proportionof the share of the retired, or deceased, participant.

(4) The amount so reduced under sub-section (3) shall be the ‘unabsorbed part yearloss from the special source’, for the financial year beginning on the date immediatelyfollowing the date of retirement, or death, of a participant for the purposes of sub-section (2) of section 47.

(5) The amount of “unabsorbed part year loss from ordinary sources’ shall beaggregated with the “gross total income from ordinary sources” for the periodbegining on the date immediately following the date of retirement, or death, of aparticipant and endig on the last day of the financial year and the net result of theaggregation shall be deemed to be the “gross total income from ordinary sources”of the unincorporated body under section 46.

(6) The amount of “unabsorbed part year loss from special sources’ shall be aggregatedwith the “gross total income from special sources” for the period begining on thedate immediately following the date of retirement, or death, of a participant andendig on the last day of the financial year and the net result of the aggregationshall be deemed to be the “gross total income from special sources” of theunincorporated body under section 47.

Aggregation of loss not to be allowed in the case of filing of return after due date50. The amount of ‘unabsorbed current loss from ordinary sources’and the

‘unabsorbed current loss from special sources’, for the financial year shall,regardless of anything contained in any provision of this Act, be deemed to be‘nil’, if the return of income for the financial year is not furnished by the due date.

E. Tax incentives

Deductions to be made in computing total income51. (1) A person shall be allowed the deductions specified in this sub-chapter from his

‘gross total income from ordinary sources’, for the financial year.

30(2) The aggregate amount of the deductions under this sub-chapter shall not exceed

the ‘gross total income from ordinary sources’, for the financial year.(3) Any sum, which qualifies for a deduction under this sub-chapter in any financial

year, shall not qualify for deduction -(a) under any other provision of this Act for the same or any other financial year;

or(b) in the case of any other person.

(4) The provisions of sub-section (3) shall apply irrespective of whether full deductionhas been allowed, or not, in respect of the sum referred therein.

Deduction for contribution to National Pension System Trust52. (1) A person, being an individual, shall be allowed a deduction for any amount

deposited by him, or his employer, in his account maintained with the NationalPension System Trust.

(2) The amount of deduction under sub-section (1) shall be the whole of the amountdeposited in the account as does not exceed, -(a) twenty per cent. of the salary in the financial year, in the case of an

employee; and(b) twenty per cent. of the gross total income in the financial year, in any other

case.(3) The payment to, or deposit with, the National Pension System Trust shall be made

in accordance with the scheme framed and prescribed by the Central Governmentin this behalf.

Deduction in respect of donations to certain funds, non-profit organisations, etc.53. (1) A person shall be allowed a deduction of -

(a) one hundred per cent. of the amount of money paid by him in the financialyear as donation to any person specified in Part-A of the Seventh Schedule;

(b) fifty per cent of the aggregate of the amount of money actually paid by him inthe financial year as donation to any person specified in Part-B of the SeventhSchedule.

(2) The aggregate of the amount of money referred to in clause (b) of sub-section (1)shall be limited to ten per cent of the gross total income from ordinary sources, ifthe aggregate exceeds ten per cent of the gross total income from ordinary sources.

(3) The deduction under this section shall not be allowed in respect of any amount ofmoney paid to any person referred to in sub-section (1), if -(a) the amount is laid out or expended during the financial year for any religious

activity; or(b) any activity of the donee is intended for, or actually benefits, any particular

caste, not being the Scheduled Castes or the Scheduled Tribes.(4) The donation to any person referred to in sub-section (1) shall be eligible for

deduction thereunder, if the donee obtains the approval of the prescribed authorityin accordance with the procedure and subject to such conditions, as may beprescribed.

(5) The deduction under sub-section (1) shall not be denied to a donor merely on theconsideration that, subsequent to the donation, the donee, being a non-profitorganisation, has ceased to be so.

31

Deduction in respect of political contributions 54. (1) A person shall be allowed a deduction in respect of any contribution made by him

in the financial year to any political party or electoral trust.(2) The deduction under sub-section (1) shall not exceed five per cent of -

(a) the average of the net profit determined in accordance with the provisions ofsection 349 and section 350 of the Companies Act,1956 during the threeimmediately preceding financial years, in the case of a company; and

(b) the ‘gross total income from ordinary sources’, in any other case.(3) In this section, the word "contribution", with its grammatical variation, shall have

the same meaning assigned to it under section 293A of the Companies Act, 1956.

Deduction in respect of income of Investor Protection Fund55. (1) A person shall be allowed in the financial year a deduction of the amount specified

in sub-section (2), if such amount is included in the gross total income from ordinarysources.

(2) The amount referred to in sub-section (1) shall be the contribution received fromany recognised stock exchange, or recognised commodity exchange, and themembers thereof.

(3) The deduction under sub-section (1) shall be allowed, if -(a) the person is a Investor Protection Fund set up, either jointly or separately, by

recognised stock exchanges or recognised commodity exchanges; and(b) the Investor Protection Fund is notified by the Central Government.

Deduction in respect of income of co-operative society from banking activities56. A person, being a primary credit co-operative society, shall be allowed a deduction

to the extent of profits derived from the business of providing banking, or credit,facility to its members.

Deduction in respect of income of primary co-operative societies57. (1) A person, being a primary co-operative society, shall be allowed a deduction in

respect of the aggregate of the amounts referred to in sub-section (2).(2) The amount referred to in sub-section (1) shall be-

(a) the amount of profits derived from agriculture or agriculture-relatedactivity; and

(b) the amount of income derived from any other activity, to the extent it does notexceed one hundred thousand rupees.

(3) In this section, -(a) "agriculture-related activities" means the following activities, namely:-

(i) purchase of agricultural implements, seeds, livestock or other articlesintended for agriculture for the purpose of supplying them to its members;

(ii) the collective disposal of,-(A) agricultural produce grown by its members; or(B) dairy or poultry produce of its members; and

(iii) fishing or allied activities, that is to say, the catching, curing, processing,preserving, storing or marketing of fish or the purchase of material andequipment in connection therewith for the purpose of supplying them toits members;

32(b) "primary co-operative society" means a co-operative society whose rules

and byelaws restrict the voting rights to individuals engaged in agriculture oragricultural-related activities.

F. Maintenance of accounts and other related matters

Maintenance of accounts58. (1) Every person shall keep and maintain such books of account and other documents

as may enable the Department to compute his total income in accordance with theprovisions of this Act.

(2) Every person who has entered into an international transaction shall keep andmaintain such information and document in respect thereof, as may be prescribed.

(3) The person referred to in sub-section (1) shall be the following:-(a) any person carrying on legal, medical, engineering, architectural profession

or profession of accountancy, technical consultancy, interior decoration orany other profession as is notified by the Board in the Official Gazette;

(b) any other person carrying on business, if,-(i) his income from the business exceeds six lakh rupees;(ii) his total turnover or gross receipts, as the case may be, in the business

exceeds twenty five lakh rupees in any one of the three financial yearsimmediately preceding the relevant financial year; or

(iii) in a case where the business is newly set up in any financial year, hisincome from the business is likely to exceed six lakh rupees or his totalturnover or gross receipts, as the case may be, in the business is likely toexceed twenty five lakh rupees, during such financial year.

(4) Regardless of anything to the contrary contained in the foregoing provisions ofthis section, any person, who is required to maintain books of accounts and otherdocuments under the relevant law under which it is incorporated, constituted orformed, shall be deemed to have maintained the books of accounts for the purposesof this Act.

(5) The books of accounts referred to in sub-section (1) shall be the following, namely,-(a) a cash book;(b) a ledger;(c) register of daily inventory of business trading asset;(d) carbon copies of serially numbered bills issued by the person, if the value of

the bill exceeds fifty rupees;(e) carbon copies or counterfoils of serially numbered receipts issued by the

person, if the value of the bill exceeds fifty rupees;(f) original bills or receipts issued to the person in respect of expenditure incurred

by him, if the amount of the expenditure exceeds fifty rupees;(g) payment vouchers prepared and signed by the person in respect of expenditure

not exceeding fifty rupees, if there are no bills or receipts for such expenditure.(6) The bills or receipts issued to any person shall contain the name, address and

such other particulars as may be prescribed.(7) The Board may, having regard to the nature of the business carried on by any class

of persons, prescribe-(a) any other books of accounts and documents to be kept and maintained;(b) the particulars to be contained in the books of accounts and documents;and

33(c) the form and the manner in, and the place at, which the books of accounts and

other documents shall be kept and maintained.(8) The Board may prescribe the period for which the books of account and other

documents to be kept and maintained under this section shall be retained.

Tax audit59. Every person, who is required to keep and maintain books of accounts under section 94

shall get his accounts for the financial year audited if,-(a) in a case where the person is carrying on any profession, the gross receipts of

the profession exceeds fifty lakh rupees in the financial year; and(b) in a case where the person is carrying on any business, the total turnover or

gross receipts, as the case may be, of the business exceeds one crore rupeesin the financial year.

(2) The audit of the accounts referred to in sub-section (1) shall be performed by anaccountant and the report of audit obtained before the due date.

(3) The report of audit referred to in sub-section (2) shall be obtained in the prescribedform duly signed and verified by such accountant and setting forth such particularsas may be prescribed.

(4) The provisions of sub-section (1) shall not apply to the business where the incometherefrom is determined under Rule 1 of Table of the Eighth Schedule.

(5) A person shall be deemed to have complied with the provisions of sub-section (1),if the person -(a) gets the accounts of his business audited as required by, or under, any other

law before the due date; and(b) obtains by the due date the report of the audit as required under such other

law and a further report by an accountant in the form prescribed under sub-section (3).

(6) The provisions of this section shall not apply to any person who carries onbusiness listed in column (2) of the Table in the Eighth Schedule. whose income isdetermined on presumptive basis.

Method of accounting60. (1) Subject to the provisions of this Act, income under the head "Income from various

sources" shall be computed in accordance with the cash system of accountingregularly employed by the person.

(2) The Central Government may notify in the Official Gazette from time to time incomecomputation and disclosure standard to be followed by any class of person or inrespect of any class of income.

(3) The interest received by a person on compensation, or an enhanced compensation,shall, regardless of anything to the contrary contained in sub-section (1), beincluded in the total income of the financial year in which it is received.

(4) Any claim for escalation of price in a contract or export incentives shall be deemedto be the income of the financial year in which the claim is realised.

(5) The income referred to in clause (o) of section 21 shall be deemed to be the incomeof the financial year in which it is received, if not charged to income-tax in anyearlier financial year.

34

CHAPTER - IV

SPECIAL PROVISIONS RELATING TO COMPUTATION OF TOTAL INCOME OFNON-PROFIT ORGANISATIONS

Applicability of this Chapter61. The provisions of this Chapter shall be applicable to a non-profit organisation.

Total income of a non-profit organisation62. The total income of any non-profit organisation for any financial year shall be

computed in accordance with the provisions of this Chapter.

Computation of total income of a non-profit organisation63. (1) Subject to the provisions of this Chapter, the total income referred to in section 63

shall be the aggregate of the following amounts, namely:-(a) the amount of surplus from philanthropic activities;(b) the amount of anonymous donation;(c) the amount remaining unutilized for specific purposes;(d) the amount which ceases to remain invested or deposited in any of the modes

specified in section 66; and(e) the amount referred to in section 67 to the extent it is in violation of the

conditions specified therein.(2) The amount of surplus from philanthropic activities referred to in clause (a) of

sub-section (1) shall be the gross receipts from philanthropic activities as reducedby the amount of outgoings in relation to the activities, calculated in accordancewith the cash system of accounting.

(3) The amounts referred to in clauses (b), (c) and (d) of sub-section (1) shall be theamounts calculated in accordance with section 67.

Gross receipts in the case of a non-profit organisation64. (1) The gross receipts from philanthropic activities referred to in section 63 shall be

the aggregate of the following amounts received during the financial year, namely:-(a) any amount of voluntary contribution received, including the contribution

towards corpus, or any other special grant, assistance or aid; and(b) any amount, whether capital or revenue, received from whatever source.

(2) The amount referred to in sub-section (1) shall include the following amountsreceived during the financial year, namely: -(a) any amount of consideration received from the transfer of any capital asset;(b) any amount received from sale of equity, debt or similar instruments of other

entities and interests in joint ventures;(c) any amount of loan and advances received from any person;(d) any amount received from the repayment of loans and advances made to any

other person;(e) any amount received by way of dividend or interest from any investment of its

assets or funds;(f) any amount of royalty, fee, commission or other receipt of similar nature;(g) the amount of any inflow, realization or proceed, received from any source in

the course of philanthropic activity; and

35(h) the amount of receipts derived from any business carried on by it, if the

business is incidental to the philanthropic activity so carried on.(3) The amount of receipts derived from the business referred to in clause (h) of sub-

section (2) shall include the amounts of the nature referred to in clauses (a) to (g)thereunder.

(4) The amounts referred to in sub-section (2) shall not include any amount of thecapital sum received on maturiety, encashment, liquidation or conversion of anyfinancial investment referred to in section 66.

Outgoings in the case of a non-profit organisation65. (1) The amount of outgoings during the financial year referred to in section 63 shall be

the aggregate of -(a) the voluntary contributions received by the non-profit organisation made

with a specific direction that they shall form part of the corpus of the non-profit organisation;

(b) the amount paid for any expenditure, whether capital or revenue, incurredwholly and exclusively for the purpose of carrying out any philanthropicactivity or any business incidental thereto;

(c) any amount of loans and advances extended for the purpose of carrying outany philanthropic activity or any business incidental thereto;

(d) any amount of repayment of loan and advances obtained for the purpose ofcarrying out any philanthropic activity or any business incidental thereto;

(e) any amount paid during the financial year to any other non-profit organisationengaged in similar philanthropic activity, other than the amount of contribution,if any, to the corpus of the non-profit organisation;

(f) any amount applied outside India, if -(i) the amount is applied for an activity which tends to promote international

welfare in which India is interested; and(ii) the activity is prescribed by the Central Government in this behalf;

(g) any amount accumulated or set apart for carrying on any philanthropicactivity -(i) to the extent of ten percent of the gross receipts; and(ii) deposited in accordance with a scheme prescribed by the Board in this

behalf.(2) The amount of outgoings referred to in sub-section (1) shall not include -

(a) any amount in respect of which tax has not been withheld in accordance withthe provisions of Chapter-VIII; or

(b) payment of any amount exceeding ten thousand rupees which has been madeby any mode other than by an account payee cheque or draft, or throughelectronic transfer.

Modes of investment66. (1) The funds or the assets of the non-profit organisation shall not be invested or

held, at any time during the financial year in any of the forms or modes other thanthe following, namely -(i) deposit in any account with the Post Office Savings Bank;(ii) deposit in any account with a scheduled bank;(iii) investment in any security issued by the Central Government or a State

Government;

36(iv) investment in debentures issued by any company or corporation, guranteed

by the Central Government or by a State Government;(v) investment or deposit in any public sector company;(vi) investment in immoveable property; or(vii) any other mode of investment or deposit as may be prescribed.

(2) The provisions of sub-section (1) shall not apply in respect of any assets formingpart of the corpus of the non-profit organisation as on the 1st day of June 1973.

Deemed use or application of funds or assets for the benefit of interested person67. (1) The funds or the assets of the non-profit organisation shall not be used or applied,

directly or indirectly, for the benefit of an interested person.(2) Without prejudice to sub-section (1), the funds or the assets of the non-profit

organisation shall be deemed to have been used or applied for the benefit of aninterested person, if -(a) the funds or the assets of the non-profit organisation are, or continue to be,

lent to any interested person, for any period during the financial year withouteither adequate security or adequate interest or both;

(b) the land, building or other asset of the non-profit organisation is, or continuesto be, made available for the use of any interested person, for any periodduring the financial year without charging adequate rent or othercompensation;

(c) any amount is paid by way of salary, allowance or otherwise during the financialyear to any interested person, out of the resources of the non-profitorganisation for services rendered by that person to such organisation andthe amount so paid is in excess of what may be reasonably paid for suchservices;

(d) the services of the non-profit organisation are made available to any interestedperson, during the financial year without adequate remuneration or othercompensation;

(e) any share, security or other property is purchased by or on behalf of the non-profit organisation from any interested person, during the financial year forconsideration which is more than adequate;

(f) any share, security or other property is sold by or on behalf of the non-profitorganisation to any interested person, during the financial year forconsideration which is less than adequate;

(g) any funds or property of the non-profit organisation, is diverted during thefinancial year in favour of any interested person where the income or thevalue of property or, as the case may be, the aggregate of the income and thevalue of the property exceeds one thousand rupees; or

(h) any funds of the non-profit organisation are, or continue to remain, investedfor any period during the financial year (not being a period before the 1st dayof January, 1971), in any concern in which any interested person has asubstantial interest and such investment exceeds five per cent. of the capitalof that concern.

Total income to be increased by anonymous donations etc.68. (1) The amount of any anonymous donation received during the financial year referred

to in section 63 shall be the amount received in excess of the higher of the following,namely:-

37(a) five per cent. of the total donations received; and(b) one lakh rupees.

(2) The amount remaining unutilized for specific purposes shall be the amount whichis not utilized for the purpose for which it was accumulated or set apart during theperiod specified therein, in terms of clause (g) of sub-section (2) of section 67.

(3) The amount which ceases to remain invested or deposited in any of the modesspecified in section 66.

(4) The amounts referred to in sub-sections (1), (2) and (3) shall be deemed to bethe income of the financial year -(a) in which the amount is received in a case falling under sub-section (1);(b) immediately following the expiry of the specified period in a case falling under

sub-section (2); and(c) in which the amount ceases to remain so invested or deposited in a case

falling under sub-section (3).(5) The provisions of sub-section (1) shall apply notwithstanding that the anonymous

donation has been made with a specific direction that it shall form part of thecorpus of the non-profit organisation.

(6) No outgoings shall be allowed in respect of any amount referred to in sub-section (1), (2) or (3).

Maintenance of accounts and tax audit69. (1) The non-profit organisation shall keep and maintain such books of accounts, in

the manner as may be prescribed(2) The non-profit organisation shall maintain separate books of account in respect of

business incidental to philanthropic activity(3) The non-profit organisation shall obtain a report of audit in such form as may be

prescribed, from an accountant before the due date of filing of the return of income,if the gross receipts referred to in section 64 in any financial year exceed five lakhsrupees.

Consequences of conversion of a non-profit organisation70. (1) A non-profit organisation shall be liable to income tax at the rate of thirty per cent.

in respect of its net worth if,-(a) it converts into any form of organisation which does not qualify as a non-

profit organisation;(b) it merges with any form of organisation which does not qualify as a non-profit

organisation;(c) it merges with any other non-profit organisation which does not have objects

similar to it; or(d) it fails to transfer upon its dissolution all its assets to any other non-profit

organisation, within a period of twelve months from the end of the month inwhich the dissolution takes place.

(2) The tax on the net worth under sub-section (1) shall be payable by the non-profitorganization regardless of the fact that no income-tax is payable by it on its totalincome computed in accordance with the provisions of this Act.

(3) The principal officer of the non-profit organization on the date of conversion,merger or dissolution, as the case may be, shall be liable to pay the tax on net worthto the credit of the Central Government within fourteen days from -(a) the end of the month in which the period of twelve months referred to in

clause (d) of sub-section (1) expires; and

38(b) the end of the month in which the conversion or merger, as the case may be

takes place, in any other case.(4) The tax on net worth of the non-profit organisation shall be treated as the final

payment of tax in respect of the income and no further credit shall be allowed to thenon-profit organisation or by any other person in respect of the amount of tax sopaid.

(5) No deduction under any other provision of the Act shall be allowd to the non-profit organisation or any other person in respect of the income which has beencharged to tax under sub-section (1) or the tax thereon.

(6) For the purposes of this section,-(a) net worth shall be computed as on the date of conversion, merger or

dissolution, as the case may be, of the non-profit organisation;(b) net worth means the aggregate value of the total assets of the non-profit

organisation as reduced by the value of liabilities of the organisation;(c) the value of the total assets and liabilities shall be computed in accordance

with the rules of valuation prescribed in this behalf.

Provisions of this chapter not to apply in certain cases71. (1) The provisions of this Chapter shall not apply to any person who-

(a) holds any business under trust, regardless of any specific direction that-(i) the business shall form part of the corpus of such person; or(ii) the income from the business shall be applied only for philanthropic

activity;(b) fails to comply with the conditions specified in section 67;(c) ceases to be a non-profit organisation at any time during the financial year; or(d) carries on any business which is not incidental to the philanthropic activity

carried on by it.(2) Without prejudice to sub-section (1), the non-profit organisation which ceases to

be so due to conversion, merger or dissolution as referred to in sub-section (1) ofsection 70 shall be liable to income-tax in respect of its net worth in accordancewith that section.

(3) The total income of any person falling under sub-section (1) shall be computed inaccordance with the other provisions of this Act.

Interpretations72. In this Chapter, unless the context otherwise requires,

(a) a business shall be incidental to the philanthropic activity, if -(i) the activity is in the nature of -

(I) trade, commerce or business; or(II) rendering any service in relation to any trade, commerce or business;

(ii) the activity is in the nature of forward or backward integration with thephilanthropic activity;

(iii) the activity is for the provision of goods or services exclusively for thebeneficiaries; and

(iv) the aggregate receipts by way of cess, fee, or any other considerationfrom the incidental activities during the financial year does not exceedtwenty per cent of the gross receipts of the non-profit organisation duringthe financial year, irrespective of nature of use, application or retention,of the income from such activity;

(b) “anonymous donation” means any voluntary contribution, where a person

39receiving such contribution does not maintain a record of the identity indicatingthe name and address of the person making such contribution and such otherparticulars as may be prescribed;

(c) “associated concern” shall have the meaning assigned to ‘associatedenterprises’ in section 91, with the modification that for the word ‘enterprise’with all its grammatical variation, the word ‘concern’ with its conrrespondinggrammatical variation shall be substituted;

(d) “date of conversion” means the date of adoption or modification of any objectof the non-profit organisation;

(e) "non-profit organisation" means an organisation, by whatever name called,including a trust, if -(i) it is established for the benefit of the general public;(ii) it is established for carrying on philanthropic activities;(iii) it is not established for the benefit of any particular caste;(iv) it is not established for the benefit of any of its members;(v) it actually carries on the philanthropic activities during the financial year;(vi) the actual beneficiaries of its activities are the general public;(vii) it does not intend to apply its surplus or other income or use its assets or

incur expenditure, directly or indirectly, for the benefit of any interestedperson;

(viii)any expenditure by the organisation does not enure, directly or indirectly,for the benefit of any interested person;

(ix) the funds or assets of the organisation are not used or applied or deemedto have been used or applied, directly or indirectly, for the benefit ofinterested person;

(x) the surplus, if any, accruing from its permitted activities does not enure,directly or indirectly, for the benefit of any interested person;

(f) "general public" means the body of unascertained persons sufficiently definedby some common quality of public or impersonal nature;

(g) "interested person" in relation to a non-profit organisation means,-(i) the founder of the organisation or the author of the trust;(ii) any person whose total contribution to the organisation up to the end of

the relevant financial year exceeds fifty thousand rupees;(iii) a member of the Hindu undivided family if the author or founder or person

is the family;(iv) any manager, by whatever name called, of the organisation or trustee of

the trust;(v) any relative of the author, founder, member, trustee or manager;(vi) any concern in which any of the persons referred to in clauses (i) to (v)

has a substantial interest;(h) "philanthropic activity" means any activity,-

(i) for providing relief to the poor;(ii) for the advancement of education;(iii) for providing medical relief;(iv) for the advancement of scientific, social or statistical research;(v) for the preservation of environment (including watersheds, forests and

wildlife;

40(vi) for the preservation of monuments or places or objects of artistic or historic

interest;(vii) for the promotion of yoga; or(viii) for the advancement of any other object of general public utility;

(i) ”specified date” means, -(i) the date of conversion in a case falling under clause (a) of sub-section (1)

of section 70;(ii) the date of merger in a case falling under clause (b) or clause (c) of sub-

section (1) of section 70; and(iii) the date of dissolution in a case falling under clause (d) of sub-section

(1) of section 70;(j) "trust" includes any legal obligation.

CHAPTER - V

SPECIAL PROVISIONS RELATING TO COMPUTATION OF TOTAL INCOME OFPOLITICAL PARTIES AND TRADE UNIONS

Applicability of this Chapter73. The provisions of this Chapter shall be applicable to a specified person being a

political party or a trade union.

Total income of a specified person being a political party or trade union74. The total income of any specified person for any financial year shall be computed

in accordance with the provisions of this Chapter.

Computation of total income of a specified person75. (1) Subject to the provisions of this Chapter, the total income referred to in section 74

shall be the aggregate of the following amounts, namely:-(a) the amount of surplus from its activities;(b) the amount of anonymous donation;(c) the amount remaining un-utilised for specific purposes;(d) the amount which ceases to remain invested or deposited in any of the modes

specified in section 78; and(e) the amount referred to in section 79 to the extent it is in violation of the

conditions specified therein.(2) The amount of surplus from its activities referred to in clause (a) of sub-section (1)

shall be the gross receipts from its activities as reduced by the amount of outgoingsin relation to the activities, calculated in accordance with the cash system ofaccounting.

(3) The amounts referred to in clauses (b), (c) and (d) of sub-section (1) shall be theamounts calculated in accordance with section 80.

Gross receipts in the case of a specified person76. (1) The gross receipts from its activities referred to in section 74 shall be the aggregate

of the following amounts received during the financial year, namely:-(a) any amount of voluntary contribution received, including the contribution

towards corpus, or any other special grant, assistance or aid; and(b) any amount, whether capital or revenue, received from whatever source.

41(2) The amount referred to in sub-section (1) shall include the following amounts

received during the financial year, namely: -(a) any amount of consideration received from the transfer of any capital asset;(b) any amount received from sale of equity, debt or similar instruments of other

entities and interests in joint ventures;(c) any amount of loan and advances received from any person;(d) any amount received from the repayment of loans and advances made to any

other person;(e) any amount received by way of dividend or interest from any investment of its

assets or funds;(f) any amount of royalty, fee, commission or other receipt of similar nature;(g) the amount of any inflow, realization or proceed, received from any source in

the course of its activity; and(h) the amount of receipts derived from any business carried on by it, if the

business is incidental to its activity so carried on.(3) The amount of receipts derived from the business referred to in clause (h) of sub-

section (2) shall include the amounts of the nature referred to in clauses (a) to (g)thereunder.

(4) The amounts referred to in sub-section (2) shall not include any amount of thecapital sum received on maturiety, encashment, liquidation or conversion of anyfinancial investment referred to in section 78.

Outgoings in the case of a specified person77. (1) The amount of outgoings during the financial year referred to in section 75 shall be

the aggregate of -(a) the voluntary contributions received by the specified person made with a

specific direction that they shall form part of the corpus of the specifiedperson;

(b) the amount paid for any expenditure, whether capital or revenue, incurredwholly and exclusively for the purpose of carrying out any activity or anybusiness incidental thereto;

(c) any amount of loans and advances extended for the purpose of carrying outany activity or any business incidental thereto;

(d) any amount of repayment of loan and advances obtained for the purpose ofcarrying out any activity or any business incidental thereto;

(e) any amount paid during the financial year to any other specified personengaged in similar activity, other than the amount of contribution, if any, tothe corpus of the specified person;

(f) any amount applied outside India, if -(i) the amount is applied for an activity which tends to promote international

welfare in which India is interested; and(ii) the activity is prescribed by the Central Government in this behalf;

(g) any amount accumulated or set apart for carrying on any activity -(i) to the extent of ten percent of the gross receipts; and(ii) deposited in accordance with a scheme prescribed by the Board in this

behalf.(2) The amount of outgoings referred to in sub-section (1) shall not include -

(a) any amount in respect of which tax has not been withheld in accordance withthe provisions of Chapter-VIII; or

42(b) payment of any amount exceeding ten thousand rupees which has been made

by any mode other than by an account payee cheque or draft, or throughelectronic transfer.

Modes of investment78. (1) The funds or the assets of the specified person shall not be invested or held, at

any time during the financial year in any of the forms or modes other than thefollowing, namely -(i) deposit in any account with the Post Office Savings Bank;(ii) deposit in any account with a scheduled bank;(iii) investment in any security issued by the Central Government or a State

Government;(iv) investment in debentures issued by any company or corporation, guranteed

by the Central Government or by a State Government;(v) investment or deposit in any public sector company;(vi) investment in immoveable property; or(vii) any other mode of investment or deposit as may be prescribed.

(2) The provisions of sub-section (1) shall not apply in respect of any assets formingpart of the corpus of the specified person as on the 1st day of April, 2019.

Deemed use or application of funds or assets for the benefit of interested person79. (1) The funds or the assets of the specified person shall not be used or applied,

directly or indirectly, for the benefit of an interested person.(2) Without prejudice to sub-section (1), the funds or the assets of the specified

person shall be deemed to have been used or applied for the benefit of an interestedperson, if -(a) the funds or the assets of the specified person are, or continue to be, lent to

any interested person, for any period during the financial year without eitheradequate security or adequate interest or both;

(b) the land, building or other asset of the specified person is, or continues to be,made available for the use of any interested person, for any period during thefinancial year without charging adequate rent or other compensation;

(c) any amount is paid by way of salary, allowance or otherwise during the financialyear to any interested person, out of the resources of the specified person forservices rendered by that person to such organisation and the amount sopaid is in excess of what may be reasonably paid for such services;

(d) the services of the specified person are made available to any interestedperson, during the financial year without adequate remuneration or othercompensation;

(e) any share, security or other property is purchased by or on behalf of thespecified person from any interested person, during the financial year forconsideration which is more than adequate;

(f) any share, security or other property is sold by or on behalf of the specifiedperson to any interested person, during the financial year for considerationwhich is less than adequate;

(g) any funds or property of the specified person, is diverted during the financialyear in favour of any interested person where the income or the value of

43property or, as the case may be, the aggregate of the income and the value ofthe property exceeds one thousand rupees; or

(h) any funds of the specified person are, or continue to remain, invested for anyperiod during the financial year, in any concern in which any interested personhas a substantial interest and such investment exceeds five per cent. of thecapital of that concern.

Total income to be increased by anonymous donations etc.80. (1) The amount of any anonymous donation received during the financial year referred

to in section 75 shall be the amount received in excess of the higher of the following,namely:-(a) five per cent. of the total donations received; and(b) one lakh rupees.

(2) The amount remaining un-utilised for specific purposes shall be the amount whichis not utilised for the purpose for which it was accumulated or set apart during theperiod specified therein, in terms of clause (g) of sub-section (2) of section 79.

(3) The amount which ceases to remain invested or deposited in any of the modesspecified in section 78.

(4) The amounts referred to in sub-sections (1), (2) and (3) shall be deemed to bethe income of the financial year -(a) in which the amount is received in a case falling under sub-section (1);(b) immediately following the expiry of the specified period in a case falling under

sub-section (2); and(c) in which the amount ceases to remain so invested or deposited in a case

falling under sub-section (3).(5) The provisions of sub-section (1) shall apply notwithstanding that the anonymous

donation has been made with a specific direction that it shall form part of thecorpus of the specified person.

(6) No outgoings shall be allowed in respect of any amount referred to in sub-section (1), sub-section (2) or sub-section (3).

Maintenance of accounts and tax audit81. (1) The specified person shall keep and maintain such books of accounts, in the

manner as may be prescribed.(2) The specified person shall maintain separate books of account in respect of business

incidental to its activity.(3) The specified person shall obtain a report of audit in such form as may be prescribed,

from an accountant before the due date of filing of the return of income, if thegross receipts referred to in section 76 in any financial year exceed five lakhsrupees.

Consequences of conversion of a specified person82. (1) A specified person shall be liable to income tax at the rate of thirty per cent. in

respect of its net worth, if-(a) it converts into any form of organisation which does not qualify as a specified

person;(b) it merges with any form of organisation which does not qualify as a specified

person;(c) it merges with any other specified person which does not have objects similar

to it; or

44(d) it fails to transfer upon its dissolution all its assets to any other specified

person, within a period of twelve months from the end of the month in whichthe dissolution takes place.

(2) The tax on the net worth under sub-section (1) shall be payable by the specifiedperson regardless of the fact that no income-tax is payable by it on its total incomecomputed in accordance with the provisions of this Act.

(3) The principal officer of the specified person on the date of conversion, merger ordissolution, as the case may be, shall be liable to pay the tax on net worth to thecredit of the Central Government within fourteen days from -(a) the end of the month in which the period of twelve months referred to in

clause (d) of sub-section (1) expires; and(b) the end of the month in which the conversion or merger, as the case may be

takes place, in any other case.(4) The tax on net worth of the specified person shall be treated as the final payment

of tax in respect of the income and no further credit shall be allowed to the specifiedperson or by any other person in respect of the amount of tax so paid.

(5) No deduction under any other provision of the Act shall be allowd to the specifiedperson or any other person in respect of the income which has been charged to taxunder sub-section (1) or the tax thereon.

(6) For the purposes of this section,-(a) net worth shall be computed as on the date of conversion, merger or dissolution,

as the case may be, of the specified person;(b) net worth means the aggregate value of the total assets of the specified person

as reduced by the value of liabilities of the organisation;(c) the value of the total assets and liabilities shall be computed in accordance

with the rules of valuation prescribed in this behalf.

Provisions of this chapter not to apply in certain cases83. (1) The provisions of this Chapter shall not apply to any person who-

(a) holds any business under trust, regardless of any specific direction that-(i) the business shall form part of the corpus of such person; or(ii) the income from the business shall be applied only for its activity;

(b) fails to comply with the conditions specified in section 79;(c) ceases to be a specified person at any time during the financial year; or(d) carries on any business which is not incidental to the activity carried on by it.

(2) Without prejudice to sub-section (1), the specified person which ceases to be sodue to conversion, merger or dissolution as referred to in sub-section (1) of section83 shall be liable to income-tax in respect of its net worth in accordance with thatsection.

(3) The total income of any person falling under sub-section (1) shall be computed inaccordance with the other provisions of this Act.

Interpretations84. In this Chapter, unless the context otherwise requires,

(a) “a business shall be incidental to the activity”, if -(i) the activity is in the nature of -

(I) trade, commerce or business; or(II) rendering any service in relation to any trade, commerce or business;

(ii) the activity is in the nature of forward or backward integration with theactivity;

45(iii) the activity is for the provision of goods or services exclusively for the

beneficiaries; and(iv) the aggregate receipts by way of cess, fee, or any other consideration

from the incidental activities during the financial year does not exceedtwenty per cent of the gross receipts of the specified person during thefinancial year, irrespective of nature of use, application or retention, ofthe income from such activity;

(b) "activity" means,-(i) in the case of a trade union, any activity for the purpose of regulating the

relations between the workmen and employers or between workmen andworkmen; and

(ii) in the case of a political party, any activity incidental to the objectives onthe basis of which it has been granted registration under section 29A ofthe Representation of the People Act, 1951.

(c) “anonymous donation” means any voluntary contribution,-(i) exceeding two thousand rupees which is received otherwise than by an

acccount payee cheque drawn on a bank, or on an account payee bankdraft, or use of electronic clearning system through a bank account, orthrough electoral bond; and

(ii) in any other case, the person receiving such contribution does not maintaina record of the identity indicating the name and complete address andsuch other particulars as may be prescribed, of the person making suchcontribution so as to establish the correct identity of the said person;

(d) “associated concern” shall have the meaning assigned to ‘associatedenterprises’ in section 91, with the modification that for the word ‘enterprise’with all its grammatical variation, the word ‘concern’ with its conrrespondinggrammatical variation shall be substituted;

(e) “date of conversion” means the date of adoption or modification of any objectof the specified person;

(f) "electoral bond" means a bond referred to in the Explanation to sub-section(3) of section 31 of the Reserve Bank of India Act, 1934;

(g) "specified person" means a political party or a trade union, by whatever namecalled, including a trust, if -(i) it is established for carrying on activities incidental to its objectives; and(ii) it actually carries on the activities during the financial year;

(h) "interested person" in relation to a specified person means,-(i) the founder of the organisation or the author of the trust;(ii) any person whose total contribution to the organisation up to the end of

the relevant financial year exceeds fifty thousand rupees;(iii) a member of the Hindu undivided family if the author or founder or person

is the family;(iv) any manager, by whatever name called, of the organisation or trustee of

the trust;(v) any relative of the author, founder, member, trustee or manager;(vi) any concern in which any of the persons referred to in clauses (i) to (v)

has a substantial interest; and(i) "political party" means a political party registered under section 29A of the

Representation of the People Act, 1951.

46CHAPTER - VI

SPECIAL PROVISIONS TO PREVENT EVASION

Disallowance of expenditure having regard to fair market value85. A person shall not be allowed a deduction under this Act in respect of so much of

the expenditure, whether capital or revenue in nature, as is considered by theDepartment to be excessive or unreasonable, if -(a) the payment in respect of the expenditure has been, or is to be, made to any

associated person; and(b) the expenditure is excessive, or unreasonable, having regard to,-

(i) the fair market value of the goods, services or facilities for which thepayment is made;

(ii) the legitimate needs of the business of the person; or(iii) the benefit derived by, or accruing to, the person therefrom.

Avoidance of income-tax by transactions resulting in transfer of income to non-residents

86. (1) The total income of a person shall include all income received by him or any otherperson outside India, if -(a) the income is received outside India by virtue of a transfer of any asset by the

person, either alone or in conjunction with associated operations, directly orindirectly, to himself, or to any other person, outside India;

(b) the person -(i) acquires any rights by virtue of which he has power to enjoy, whether

forthwith or in the future, such income; or(ii) is entitled to receive, or has received, any capital sum, the payment whereof

is in any way connected with the transfer or any associated operations;and

(c) the income would have been included in the total income of the person, hadthe transfer not taken place.

(2) A person shall be deemed to have the power to enjoy the income received outsideIndia, if -(a) the income is in fact so dealt with by the person so as to be calculated at some

point of time and, whether in the form of income or not, to enure for the benefitof the person;

(b) the accrual or receipt of the income operates to increase the value to theperson of any assets held by him or for his benefit;

(c) the person receives, or is entitled to receive, at any time any benefit provided,or to be provided, out of that income, or out of moneys, which are or shall beavailable for the purpose by reason of the effect, or successive effects, of theassociated operations on that income and assets which represent that income;

(d) such person has power by means of the exercise of any power of appointmentor power of revocation or otherwise to obtain for himself, whether with orwithout the consent of any other person, the beneficial enjoyment of theincome; or

(e) the person is able, in any manner whatsoever and whether directly or indirectly,to control the application of the income.

(3) For determining whether a person has power to enjoy the income, regard shall behad to -

47(a) the substantial result and effect of the transfer and any associated operations;

and(b) all benefits which may at any time accrue to such person as a result of the

transfer and any associated operations, irrespective of the nature or form ofthe benefits.

(4) The provisions of this section shall not apply if the person referred to in sub-section (1) shows to the satisfaction of the Department that the transfer and allassociated operations were bonafide commercial transactions and were notdesigned for the purpose of avoiding liability to taxation.

Avoidance of tax by sale and buy-back transaction in security87. The total income of any person shall include any interest received from any security

owned by any other person, if -(a) the person undertakes a transaction relating to sale and buy back of the

security;(b) the interest is received by the other person as a result of such transaction;

and(c) the income would have been included in the total income of the person, had

the transfer not taken place.

Avoidance of tax by buy and sale-back transaction in security88. (1) The transaction relating to buy and sale back of the security under section 87

shall, in the case of the other person referred to therein, be ignored and no accountshall be taken of the transaction in computing the income, if the interest receivedby the other person is not included in his total income by vitue of the provisionsof that section.

(2) The loss, if any, to a person on account of any buy and sale back transaction inany security undertaken by him, shall be ignored for the purposes of computinghis total income, if any other income received by the person on such security is notincluded in his total income.

(3) The loss, referred to in sub-section (2), shall be ignored to the extent such lossdoes not exceed the amount of any other income referred to therein.

General anti-avoidance rule89. (1) Any arrangement entered into by a person may be declared as an impermissible

avoidance arrangement and the consequences, under this Act, of the arrangementmay be determined by,-(a) disregarding, combining or re-characterising any step in, or a part or whole of,

the impermissible avoidance arrangement;(b) treating the impermissible avoidance arrangement-

(i) as if it had not been entered into or carried out; or(ii) in such other manner as in the circumstances of the case, the Principal

Commissioner deems appropriate for the prevention or diminution of therelevant tax benefit;

(c) disregarding any accommodating party or treating any accommodating partyand any other party as one and the same person;

(d) deeming persons who are connected persons in relation to each other to beone and the same person;

(e) re-allocating, amongst the parties to the arrangement,-(i) any receipt, of a capital or revenue nature;

48(ii) any expenditure of a capital or revenue nature, deduction, relief or rebate;

(f) re-characterising-(i) any equity into debt or vice-versa;(ii) any accrual, or receipt, of a capital or revenue nature; or(iii) any expenditure of a capital or revenue nature, deduction, relief or rebate.

` (2) The provisions of sub-section (1) may be applied in the alternative for, or inaddition to, any other basis for determination of tax liability in accordance withsuch guidelines as may be prescribed.

(3) The provisions of this section shall apply subject to such conditions and in themanner as may be prescribed.

Presumption of purpose90. (1) An arrangement shall be presumed to have been entered into, or carried out, for

one of the principal purposes of obtaining a tax benefit unless the person obtainingthe tax benefit proves that obtaining the tax benefit was not one of the principalpurposes of the arrangement.

(2) An arrangement shall be presumed to have been entered into, or carried out, forone of the principal purposes of obtaining a tax benefit, if one of the principalpurposes of a step in, or part of, the arrangement is to obtain a tax benefit,notwithstanding the fact that one of the principal purposes of the wholearrangement is not to obtain a tax benefit.

Interpretation91. In this Chapter, -

(1) “accommodating party” means a party to an arrangement who, as a direct orindirect result of his participation, derives any amount in connection with thearrangement, which shall-(a) be included in his total income which would have otherwise been included in

the total income of another party;(b) not be included in his total income which would have otherwise been included

in the total income of another party;(c) be treated as a deductible expenditure, or allowable loss, by the party which

would have otherwise constituted a non-deductible expenditure, or non-allowable loss, in the hands of another party; or

(d) result in prepayment by any other party;(2) “arm’s length price” means a price which is applied, or proposed to be applied, in

a transaction between persons, enterprises or undertakings, other than associatedenterprises, in uncontrolled, unrelated or independent conditions;

(3) “arrangement” means any step in, or a part or whole of, any transaction, operation,scheme, agreement or understanding, whether enforceable or not, and includesany of the above involving the alienation of property;

(4) “asset” includes property, or right, of any kind;(5) “associated enterprises” means two enterprises which are associated with each

other at any time during the financial year, by virtue of -(a) one enterprise holding, directly or indirectly, shares carrying ten per cent., or

more, of the voting power in the other enterprise;(b) any person or enterprise holding, directly or indirectly, shares carrying ten per

cent., or more, of the voting power in each of such enterprises;

49(c) a loan advanced by one enterprise to the other enterprise and the loan

constitutes twenty-six per cent, or more, of the book value of the total assetsof the other enterprise;

(d) one enterprise guaranting ten per cent, or more, of the total borrowings of theother enterprise;

(e) more than one-third of the board of directors, or members, of the governingboard, or one or more executive directors, or executive members, of thegoverning board of one enterprise, being appointed by the other enterprise;

(f) more than one-third of the directors, or members, of the governing board, orone or more of the executive directors, or executive members, of the governingboard, of each of the two enterprises, being appointed by the same person orpersons;

(g) the manufacture, or processing, of any goods or articles of, or carrying on thebusiness by, one enterprise being wholly dependent on the use of know-how,patents, copyrights, trade-marks, brands, licences, franchises, or any otherbusiness or commercial rights of similar nature, or any data, documentation,drawing or specification relating to any patent, invention, model, design, secretformula or process, of which the other enterprise is the owner or in respect ofwhich the other enterprise has exclusive rights;

(h) two-third, or more, of the raw materials and consumables required for themanufacture, or processing, of goods or articles carried out by one enterprise,being supplied by the other enterprise, or by persons specified by the otherenterprise, and the prices and other conditions relating to the supply areinfluenced by such other enterprise;

(i) the goods or articles manufactured, or processed, by one enterprise, beingsold to the other enterprise or to persons specified by the other enterprise,and the prices and other conditions relating thereto are influenced by suchother enterprise;

(j) the services provided, directly or indirectly, by one enterprise to anotherenterprise or to persons specified by the other enterprise, and the amountpayable and the other conditions relating thereto are influenced by suchother enterprise;

(k) one enterprise being controlled by an individual, and the other enterprisebeing also controlled by such individual or his relative, or jointly by suchindividual and his relative;

(l) one enterprise being controlled by a Hindu undivided family, and the otherenterprise being also controlled by a member of such Hindu undivided familyor by a relative of a member of such Hindu undivided family or jointly by suchmember and his relative;

(m) one enterprise holding ten per cent., or more, interest in another enterprisebeing an unincorporated body;

(n) any specific or distinct location of either of the enterprises as may beprescribed; or

(o) there existing between the two enterprises, any relationship of mutual interest,as may be prescribed;

(6) “associated operation” in relation to any transfer means an operation of any kindeffected by the transferor in relation to-

50(a) any asset transferred;(b) any asset representing, directly or indirectly, any asset so transferred;(c) the income accruing from any asset so transferred; or(d) any asset representing, directly or indirectly, the accumulations of income

accruing from any asset so transferred;(7) “associated person”, in relation to a person, means -

(a) any relative of the person, if the person is an individual;(b) any director of the company or any relative of such director, if the person

is a company;(c) any participant in an unincorporated body or any relative of such

participant, if the person is an unincorporated body;(d) any member of the Hindu undivided family or any relative of such member,

if the person is a Hindu undivided family;(e) any individual who has a ‘substantial interest in the business’ of the

person or any relative of such individual;(f) a company, unincorporated body or Hindu undivided family having a

substantial interest in the business of the person or any director,participant, or member of the company, body or family, or any relative ofsuch director, participant or member;

(g) a company, unincorporated body or Hindu undivided family, whosedirector, participant, or member have a substantial interest in the businessof the person; or family or any relative of such director, participant ormember;

(h) any other person who carries on a business, if-(i) the person being an individual, or any relative of such person, has a

substantial interest in the business of that other person; or(ii) the person being a company, unincorporated body or Hindu

undivided family, or any director, participant or member of suchcompany, body or family, or any relative of such director, participantor member, has a substantial interest in the business of that otherperson;

(8) “benefit” includes a payment of any kind;(9) “broken period income” shall be calculated as if the income from such securities

had accrued from day to day and been apportioned accordingly for the brokenperiod;

(10) “bonafide purpose” shall not include any purpose which -(a) has created rights or obligations that would not normally be created between

persons dealing at arm's length; or(b) would result, directly or indirectly, in the misuse, or abuse, of the provisions

of this Act;(11) “capital sum” means-

(a) any sum paid by way of a loan or repayment of a loan; or(b) any other sum paid otherwise than as income, being a sum which is not paid

for full consideration in money or money's worth;(12) “connected persons” includes associated persons;

51(13) “debt” means any loan, financial instrument, finance lease, financial derivative, or

any arrangement that gives rise to interest, discounts or other finance charges thatare deductible in the computation of income chargeable under the head "Profitsand gains of business or profession";

(14) “enterprise” in relation to an international transaction includes-(a) a person who is, or has been, or is likely to be, engaged in any business,

industrial, commercial, financial, construction, mining, research, investmentor any other similar activity, whether such activity is carried on directly orthrough one, or more, of its units, divisions or subsidiaries, whereverlocated; and

(b) the permanent establishment of the person referred to in sub-clause (a);(15) “excess interest” shall mean the least of -

(a) an amount of total interest paid or payable in excess of thirty per cent ofprofits before interest, taxes, depreciation and amortisation of the borrower inthe financial year previous year; and

(b) interest paid or payable to associated enterprises for that previous year.(16) “excess money” means the difference between the arm's length price determined

in primary adjustment and the price at which the international transaction hasactually been undertaken;

(17) “funds” includes,-(a) any cash;(b) cash equivalents; and(c) any right, or obligation, to receive, or pay, the cash or cash equivalent;

(18) “impermissible avoidance arrangement” means a step in, or a part or whole of, anarrangement, whose one of the principal purposes is to obtain a tax benefit andit -(a) creats rights, or obligations, which would not normally be created between

persons dealing at arm's length;(b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this

Act;(c) lacks commercial substance, in whole or in part; or(d) is entered into, or carried out, by means, or in a manner, which would not

normally be employed for bonafide purposes;(19) “intangible property” shall include -

(a) marketing related intangible assets, such as, trademarks, trade names, brandnames, logos;

(b) technology related intangible assets, such as, process patents, patentapplications, technical documentation such as laboratory notebooks, technicalknow-how;

(c) artistic related intangible assets, such as, literary works and copyrights, musicalcompositions, copyrights, maps, engravings;

(d) data processing related intangible assets, such as, proprietary computersoftware, software copyrights, automated databases, and integrated circuitmasks and masters;

(e) engineering related intangible assets, such as, industrial design, productpatents, trade secrets, engineering drawing and schema-tics, blueprints,proprietary documentation;

52(f) customer related intangible assets, such as, customer lists, customer contracts,

customer relationship, open purchase orders;(g) contract related intangible assets, such as, favourable supplier, contracts,

licence agreements, franchise agreements, non-compete agreements;(h) human capital related intangible assets, such as, trained and organised work

force, employment agreements, union contracts;(i) location related intangible assets, such as, leasehold interest, mineral

exploitation rights, easements, air rights, water rights;(j) goodwill related intangible assets, such as, institutional goodwill, professional

practice goodwill, personal goodwill of professional, celebrity goodwill, generalbusiness going concern value;

(k) methods, programmes, systems, procedures, campaigns, surveys, studies,forecasts, estimates, customer lists, or technical data;

(l) any other similar item that derives its value from its intellectual content ratherthan its physical attributes.

(20) “international transaction” means -(a) a transaction between two or more associated enterprises, either or all of

whom is a non-resident, in the nature of -(i) the purchase, sale, transfer, lease or use of tangible property including

building transportation vehicle, machinery, equipment, tools, plant,furniture, commodity or any other article, product or thing;

(ii) the purchase, sale, transfer, lease or use of intangible property, includingthe transfer of ownership or the provision of use of rights regarding landuse, copyrights, patents, trademarks, licences, franchises, customer list,marketing channel, brand, commercial secret, know-how, industrialproperty right, exterior design or practical and new design or any otherbusiness or commercial rights of similar nature;

(iii) capital financing, including any type of long-term or short-term borrowing,lending or guarantee, purchsae or sale of marketable securities or anytype of advance, payments or deferred payment or receivable or anyother debt arising during the course of business;

(iv) provision of services, including provision of market research, marketdevelopment, marketing management, administration, technical service,repairs, design, consultation, agency, scientifice research, legal oraccounting service;

(v) a transaction of business restructuring or reorganisation, entered into byan enterprise with an associated enterprise, irrespective of the fact that ithas bearing on the profit, income, losses or assets of such enterprises atthe time of the transaction or at any future date; or

(vi) a mutual agreement or arrangement between two or more associatedenterprises for the allocation or apportionment of, or any contribution to,any cost or expense incurred, or to be incurred, in connection with abenefit, service or facility provided, or to be provided, to any one or moreof the enterprises;

(b) a transaction entered into by two or more persons, not being associatedenterprises, if -

53(i) either, or both, of the associated enterprises is a non-resident;(ii) the transaction is of the nature referred to in sub-clause (a); and(iii) there exists a prior agreement in relation to the relevant transaction between

such other person and the associated enterprise; or the terms of therelevant transaction are determined in substance between such otherperson and the associated enterprise;

(21) “interest” includes dividend;(22) “lacks commercial substance”- A step in, or a part or whole of, an arrangement

shall be deemed to be lacking commercial substance, if-(a) it does not have a significant effect upon the business risks, or net cash

flows, of any party to the arrangement apart from any effect attributable to thetax benefit that would be obtained but for the provisions of section 89;

(b) the legal substance, or effect, of the arrangement as a whole is inconsistentwith, or differs significantly from, the legal form of its individual steps; or

(c) it includes, or involves -(i) round trip financing without regard to,-

(A) whether or not the round tripped amounts can be traced to fundstransferred to, or received by, any party in connection with thearrangement;

(B) the time, or sequence, in which round tripped amounts are transferredor received; or

(C) the means by, or manner in, which round tripped amounts aretransferred or received;

(ii) an accommodating or tax in different party;(iii) any element that have the effect of offsetting or cancelling each other;or(iv) a transaction which is conducted through one or more persons and

disguises the nature, location, source, ownership, or contrrol, of the fund;(23) “mutual agreement procedure” means an agreement entered into under section 5

for avoidance of double taxation;(24) “party” means party to the arrangement;(25) “primary adjustment” to a transfer price, means the determination of transfer

price in accordance with the arm's length principle resulting in an increase in thetotal income or reduction in the loss, as the case may be, of the person;

(26) “permanent establishment” includes a fixed place of business through which thebusiness of the enterprise is wholly or partly carried on.

(27) “round trip financing” includes financing in which, -(a) funds are transferred among the parties to the arrangement; and(b) the transfer of the funds would,-

(i) result, directly or indirectly, in a tax benefit but for the provisions ofsection 89; or

(ii) significantly reduce, offset or eliminate any business risk incurred by anyparty to the arrangement;

(28) “safe harbour”, in relation to computation of arm’s length price, meanscircumstances in which the Department shall accept the transfer price declared bythe person;

54(29) “secondary adjustment” means an adjustment in the books of account of the

person and its associated enterprise to reflect that the actual allocation of profitsbetween the person and its associated enterprise are consistent with the transferprice determined as a result of primary adjustment, thereby removing the imbalancebetween cash account and actual profit of the person;

(30) “similar security” means security which entitles its holder to the same rightsagainst the same person as to capital and interest and the same remedies for theenforcement of those rights, regardless of any difference in the-(a) total nominal amounts of the respective security;(b) form in which it is held; or(c) manner in which it can be transferred;

(31) “step” includes a measure or an action, in a series of measures or actions, as thecase may be, taken in order to deal with or achieve a particular thing or object in thearrangement.

(32) “substantial interest in the business” - A person shall be deemed to have asubstantial interest in the business, if -(a) in a case where the business is carried on by a company, such person is, at

any time during the financial year, the beneficial owner of equity shares carryingtwenty per cent., or more, of the voting power; or

(b) in any other case, such person is, at any time during the financial year,beneficially entitled to twenty per cent., or more, of the profits of such business.

(33) “tax benefit” means,-(a) a reduction, avoidance or deferral of tax or other amount payable under this

Act in the relevant financial year or any other financial year;(b) an increase in a refund of tax or other amount under this Act in the relevant

financial year or any other financial year;(c) a reduction, avoidance or dererral of tax or other amount that would be payable

under this Act but for a tax treaty, in the relevant financial year or any otherfinancial year;

(d) an increase in a refund of tax or other amount under this Act as a result of a taxtreaty, in the relevant financial year or any other financial year; or

(e) a reduction in the total income or increase in loss in the relevant financial yearor any other financial year;

(34)“transaction” in relation to an international transaction shall include an arrangement,understanding or action in concert,-(a) whether or not such arrangement, understanding or action is formal or in

writing; or(b) whether or not such arrangement, understanding or action is intended to be

enforceable by legal proceeding;(35) “transaction relating to buy and sale-back of the security” means a transaction

where a person buys a security, and sales or transfers the same, or similar, security;(36) "transaction relating to sale and buy-back of the security" means a transaction

where a person, being the owner of any security, sells or transfers the security, andbuys-back or reacquires the same, or similar, security; and

(37) "transfer" in relation to any right includes the creation of the right.

55CHAPTER - VII

TAX ADMINISTRATION AND PROCEDURE

A. Central Board of Direct Taxes

Establishment of institutions92. The Central Government shall, for the purposes of this Act, establish the following:-

(a) Central Board of Direct Taxes;(b) Income Tax Department;(c) Authority for Advance Ruling; and(d) Income Tax Appellate Tribunal.

Establishment of the Central Board of Direct Taxes93. (1) The Central Government shall, for the purposes of this Act, establish by

notification, a Board by the name of the Central Board of Direct Taxes.(2) The Board referred to in sub-section (1) shall be established with effect from the

commencement of this Act.(3) The head office of the Board shall be at New Delhi.

Management of the Board94. (1) The Board shall consist of a Chairman and not less than six members, as may be

appointed by the Central Government in accordance with the rules made in thisbehalf.

(2) The general superintendence, direction and management of the affairs of the Boardshall vest in a Board of members, who may exercise all powers and do all acts andthings which may be exercised or done by the Board.

(3) Save as otherwise provided by rules, the Chairman shall have the powers of generalsuperintendence and direction of all the affairs of the Board.

Delegation of powers by the Board95. (1) The Board may, by general or special order in writing, delegate to any member

subject to such conditions, if any, as may be specified in the order, such of itspowers and functions under this Act as it may deem necessary.

(2) Save as otherwise provided by rules, a member shall have the powers of generalsuperintendence and direction of such affairs of the Board as may be assigned tohim by the Central Government.

(3) The member shall exercise all the powers and do all acts and things which may beexercised or done by the Board, as the case may be, in respect of the workassigned to him under sub-section (2).

Term of office and conditions of service of Chairman and Members of the Board96. The term of office and other conditions of service of the Chairman and the Members

referred to in section 94 shall be such as may be prescribed.

Meetings of the Board97. (1) The Board shall hold meetings regularly at such frequency, times and places as

may be prescribed.(2) The Board shall observe such rules of procedure in regard to the transaction of

business at its meetings as may be prescribed.

56(3) The Chairman shall preside over the meetings of the Board and, if for any reason,

he is unable to attend any such meeting, any other member chosen by the memberspresent at the meeting from amongst themselves, shall preside.

(4) All questions which come up before any meeting of the Board shall be decided bya majority votes of the Members present and voting, and, in the event of anequality of votes, the Chairman, or in his absence, the person presiding, shall havea second or casting vote.

Secretariat of the Board98. (1) The Board may, subject to the prescribed rules, appoint Secretaries, Joint

Secretaries, Deputy Secretaries, Under Secretaries and such other officers andofficialsas it considers necessary for the efficient discharge of its functions underthis Act.

(2) The term and other conditions of service of officers and officials of the Boardappointed under sub-section (1) shall be such as may be prescribed under therules.

Attached offices of the Board99. The Board may, with the approval of the Central Government, establish Directorates

by notification in the Official Gazette to assist the Board in the discharge of itsfunctions.

Subordinate offices of the Board100.(1) The Board may, with the approval of the Central Government, establish by

notification in the Official Gazette, subordinate offices at such places as isconsidered necessary for the purposes of this Act.

(2) The subordinate offices established under sub-section (1) shall be functional unitsor any other organizational units consisting of income-tax authorities and executiveand ministerial staff, employed in the execution of this Act.

Functions of the Board101. (1) Subject to the provisions of this Act, it shall be the duty of the Board to collect

revenues in a fair and transparent manner.(2) For the purposes of sub-section (1), the Board shall,-

(a) formulate strategies for -(i) effectively and efficiently detecting and penalizing non-compliance with

the provisions of this Act;(ii) providing quality taxpayers' service to promote voluntary compliance;(iii) educating taxpayers;(iv) redressal of taxpayers' grievances; and(v) optimal use of available resources;

(b) aid and advice the Central Government on matters relating to tax policy,administration and legislation thereof and such other matter as it may becalled upon to do so;

(c) provide public rulings on all matters relating to this Act which are of publicimportance;

(d) supervise and regulate the functions of the Income-tax Department;(e) undertake evaluation of its strategies, tax gap, compliance cost and taxpayers’

satisfication, at periodic intervals as may be prescribed;

57(f) call for information from any person, as may be considered necessary by the

Board for the efficient discharge of its functions; and(g) perform such other functions, as may be assigned by the Central Government

from time to time in the prescribed manner.

Public Rulings102. (1) The Board shall provide public rulings on all matters relating to this Act which are

of public importance after considering the proposal by the Directorate of Income-tax (Public Rulings).

(2) The Directorate may identify any matter of public importance, on its own motionor on an application made by any person, and examine for the purposes of makinga proposal to the Board for providing public ruling.

(3) The Board shall ordinarily provide a public ruling on an application made by anyperson, within a period of six months from the end of the month in which theapplication is received by it, which can be extended further by six months with theapproval of the Central Government.

(4) The public ruling shall be provided after obtaining comments from the public byplacing the draft public ruling in public domain, for a minimum period of thirtydays.

(5) The public ruling shall be binding on the Department and every person required tocomply with any provision of this Act.

(6) Any person aggrieved by the public ruling may prefer an appeal against it to theHigh Court of Delhi.

(7) No public ruling which is provided at the instance of any person under sub-section (2), shall disclose, in any manner, the name of the person .

(8) For the purposes of this section, -(a) “matter of public importance” with all its grammatical variations, includes any

matter relating to interpretation of a treaty, arrangement, agreement or anyprovisions under this Act, or applicability thereof;

(b) “public ruling” includes an advance ruling.

Instructions by the Board103. (1) The Board may issue orders, instructions, directions or circulars for the proper and

efficient management of this Act, if it considers it necessary or expedient so to do.(2) The Board shall not issue any order or instruction or direction or circular under

sub-section (1) so as to-(a) require any income-tax authority to make a particular assessment or to dispose

of a particular case in a particular manner;(b) interfere with the discretion of the Commissioner (Appeals) in the exercise of

his appellate functions;(c) extend the date specified under this Act for completion of any proceedings or

issuing any notice or taking any action by any income-tax authority;(d) relax any requirement or condition contained in any of the provisions of the

Act in relation to grant of any deduction or any other relief under this Act;(e) admit any application or claim for any exemption, deduction, refund or any

other relief under this Act after the expiry of the period specified by or underthis Act for making the application or claim; and

58(f) exempt any income, partly or fully, liable to tax under the Act, unless specifically

empowered to do so under the relevant provisions.(3) The income-tax authorities and all other persons employed in the execution of this

Act shall observe and follow the orders, instructions, directions and circularsissued by the Board under this section.

(4) All public orders and circulars issued by the Board under this section shall benotified in the Official Gazette.

(5) All internal orders, instructions, directions and circulars issued by the Board underthis section shall be published in a tax bulletin or on the intranet of the Income-taxDepartment.

Grants by the Central Government104. (1) The Board shall prepare an estimate of the sums of money (hereinafter referred to

as demand-in-grant) which may be required in any financial year for meeting thefollowing expenditure:-(a) the salaries, allowances and other remuneration of the Members, officers, and

other employees of the Board, its Secretariat, attached offices and the Income-tax Department; and

(b) the expenses of the Board, its Secretariat, attached offices and the Income-taxDepartment in the discharge of functions under this Act.

(2) The demand-in-grant prepared under sub-section (1) shall, on approval by theCentral Government with such modifications as may be considered necessary onthe basis of discussion with the Board, be presented to the Parliament for dueappropriation by law.

(3) The Central Government shall, after due appropriation under sub-section (2), maketo the Board grants of the amount so appropriated for being utilised for the purposesreferred to in sub-section (1).

(4) The administration of the grant referred to in sub-section (3) shall, regardless ofanything contained in any other law or rules, vest in the Board.

Accounts and audit105. (1) The Board shall maintain proper accounts and other relevant records in respect of

the grants referred to in section 104 and prepare an annual statement of the accountsin such form as may be prescribed by the Central Government in consultation withthe Controller General of Accounts.

(2) The accounts of the grant shall be audited by the Comptroller and Auditor-Generalof India at such intervals as may be prescribed by the Central Government.

(3) The Comptroller and Auditor-General of India and any other person appointed byhim in connection with the audit of the accounts of the grant shall have the samerights and privileges and authority in connection with such audit as the Comptrollerand Auditor-General generally has in connection with the audit of the Governmentaccounts.

(4) The accounts of the grant as certified by the Comptroller and Auditor-General ofIndia or any other person appointed by him in this behalf together with the auditreport thereon shall be laid before each House of Parliament.

Power of Central Government to issue directions106. (1) The Board shall, in exercise of its powers or the performance of its functions under

this Act, be bound by such directions on questions of policy as the Central

59Government may give in writing to it from time to time.

(2) The Board shall, as far as practicable, be given an opportunity to express its viewsbefore any direction is given under sub-section (1).

(3) The decision of the Central Government whether a question is one of policy or notshall be final.

Returns and reports107. (1) The Board shall furnish to the Central Government at such time and in such form

and manner as may be prescribed or as the Central Government may direct, suchreturns and statements and such particulars in regard to its functions and duties,as the Central Government may, from time to time, require.

(2) Without prejudice to the provisions of sub-section (1), the Board shall, withinninety days after the end of each financial year, submit to the Central Governmenta report in such form, as may be prescribed, giving a true and full account of itsactivities, policy and programmes during the immediately preceding financial year.

(3) A copy of the report received under sub-section (2) shall be laid, as soon as may beafter it is received, before each House of Parliament.

B - Income Tax Department

Establishment of the Income Tax Department108. (1) The Central Government shall, for the purposes of this Act, establish by notification

the Income Tax Department.(2) The Income Tax Department referred to in sub-section (1) shall be established with

effect from the commencement of this Act.(3) The Income Tax Department shall be an organization of sub-ordinate offices

comprising all income-tax authorities and executive and ministerial staff employedin the execution of this Act.

(4) The Income Tax Department shall have offices at such places within India as maybe approved by the Board.

Function of the Income Tax Department109. The Income Tax Department shall be responsible for -

(a) implementing, with integrity, fairness and transparency, -(i) the strategies and the work plan formulated by the Board; and(ii) this Act and the allied Acts; and

(b) performing such other functions as may be assigned by the Board from timeto time.

Income-tax authorities110. (1) There shall be the following classes of income-tax authorities for the purpose of

this Act, namely:-(a) Principal Chief Commissioners of Income-tax or Principal Directors-General of

Income-tax,(b) Chief Commissioners of Income-tax or Directors-General of Income-tax,(c) Principal Commissioners of Income-tax or Principal Directors of Income-tax,(d) Commissioners of Income-tax or Directors of Income-tax or Commissioners of

Income-tax (Appeals),

60(e) Additional Commissioners of Income-tax or Additional Directors of Income-

tax,(f) Joint Commissioners of Income-tax or Joint Directors of Income-tax,(g) Deputy Commissioners of Income-tax or Deputy Directors of Income-tax,(h) Assistant Commissioners of Income-tax or Assistant Directors of Income Tax,(i) Income-tax Officers,(j) Tax Recovery Officers,(k) Inspectors of Income-tax.

(2) Every class of income-tax authority referred to in sub-section (1) shall constitute aseperate rank and the order of heirarchy of these ranks shall be in the same orderin which each of the classes are listed in the said sub-section.

(3) The income-tax authorities shall exercise all, or any of, the powers and perform all,or any of, the functions conferred on, or assigned to, them by or under this Act.

Recruitment, appointment and control of income-tax authorities111. (1) Every income-tax authority and executive and ministerial staff (collectively referred

to as “income-tax personnel”) employed in the execution of this Act shall be deemedto be engaged in public services in connection with the affairs of the Union withinthe meaning of Article 309 of the Constitution and all the provisions of theConstitution shall apply accordingly.

(2) The Central Government may recruit such persons, as it thinks fit, as income-taxpersonnel in accordance with the Chapter I of Part XIV of the Constitution ofIndia.

(3) The direct recruitment of Assistant Commissioner of Income-tax shall be throughthe Civil Services Examination annually conducted by the Union Public ServiceCommission.

(4) The Central Government may authorize the Board to recruit income-tax personnel,below the rank of an Assistant Commissioner, subject to the rules and orders of theCentral Government in this behalf.

(5) The Board may authorize an income-tax authority (not below the rank ofCommissioner of Income Tax) to recruit the income-tax personnel subject to therules and orders of the Central Government in this behalf.

(6) Any person recruited under sub-section (2), sub-section (3), sub-section (4) orsub-section (5) may be appointed by the Board in accordance with the rulesprescribed in this behalf.

(7) The Board may prescribe, by rules, that any income-tax personnel shall besubordinate to such other income-tax personnel, as may be specified therein.

(8) The instructions, directions or orders of an income-tax personnel shall be bindingon any other income-tax personnel sub-ordinate to him, subject to rules prescribedin this behalf.

Establishment of functional units112. (1) The Board shall, for the purposes of this Act, establish by notification, the following

functional units within the Department, namely:-(a) Communication Unit;(b) Filers Compliance Monitoring Unit(c) Examination Unit;(d) Verification Unit;(e) Technical Assistance Unit;

61(f) Collection Unit;(g) Judicial Management Unit; and(h) such other functional units as may be prescribed having regard to

the need or the expediency to do so.(2) The Board may, by rules, establish as many functional units referred to in sub-

section (1) at such locations in the country, as it considers necessary or expedientto do so having regard to the volume and nature of the work load and thegeographical spread.

(3) Every functional unit referred to in sub-section (1) shall comprise the followingincome-tax authorities, namely: -(a) Principal Commissioner or Principal Director;(b) Additional Commissioner or Additional Director or Joint Commissioner or

Joint Director, as the case may be; and(c) Deputy Commissioner or Deputy Director or Assistant Commissioner or

Assistant Director or Income-tax Officer, as the case may be;(4) Every functional unit may be assisted by such other income-tax authorities and

executive or ministerial staff as may be considered necessary for the execution offunctions assigned to the Unit.

Powers and Functions of Communication Unit113. (1) The Communication Unit referred to in sub-section (1) of section 112 shall perform

the communication functions.(2) The communication function referred to in sub-section (1) shall include the following

functions: -(a) sending communications or notices or summons or references or orders to the

taxpayers or any other person;(b) receiving communications or documents or accounts or statements or reports

from the taxpayers or any other person;(c) facilitating the conduct of personal hearing, in case requested by the taxpayer

or any other person;(d) providing copies of the record of the tax examination proceedings to the

taxpayer or any other person, upon request, subject to other provisions of theAct; and

(e) such other functions as may be assigned to the Communication Unit for thepurposes of this Act in the prescribed manner.

(3) The communications, notices, summons, documents or accounts etc. referred to insub-section (2) shall be sent or received by the Communication Unit in electronicmode under digital authentication in the prescribed manner.

Powers and Functions of Filers Compliance Monitoring Unit114. (1) The Filers Compliance Monitoring Unit referred to in sub-section (1) of section

112 shall perform the functions of: -(a) monitoring compliance by non-filers and stop-filers of-

(i) any return of income; and(ii) statement of financial transactions.(iii) any other statement or report required to be filed under this Act.

(b) such other functions as may be assigned to the Filers Compliance MonitoringUnit for the purposes of this Act in the prescribed manner.

62(2) The Filers Compliance Monitoring Unit shall have the power to pursue non-filers

and stop-filers through electronic communication so as to ensure compliance withthe filing requirements.

Powers and Functions of Examination Unit115. (1) The Examination Unit referred to in sub-section (1) of section 112 shall be

responsible for examining any return of income or case and making assessment.(2) The Examination Unit shall, for the purposes of carrying out the examination,

perform such functions as may be necessary to do so, including the following: -(a) identification of points or issues material for the determination of any liability

(including refund) under this Act,(b) seeking information or clarification on points or issues so identified,(c) analysis of the material furnished by the person or any third party,(d) such other functions for the purposes of tax examination as may be assigned

to the Unit in the prescribed manner.(3) The Examination Unit shall, for the purpose of carrying out the examination, exercise

the power -(a) to call for explanation, clarification, information, documents, accounts or

statements on such points or matters as may be necessary for carrying out theexamination;

(b) to make reference to the verification unit for verification on points or issuesidentified therein; and

(c) as may be vested in the Examination Unit under any other provision of thisAct.

(4) No Examination Unit shall perform both the functions of examination and makingassessment in the same case.

Powers and Functions of Verification Unit116. (1) The Verification Unit referred to in sub-section (1) of section 112 shall perform the

verification functions.(2) The verification functions referred to in sub-section (1) shall include the following

functions:-(a) field enquiry;(b) cross verification;(c) examination of books of accounts;(d) examination of witnesses and recording of statements; and(e) such other functions for the purposes of verification as may be assigned tothe Verification Unit in the prescribed manner.

(3) The income-tax authorities assigned to the Verification Unit shall, for the purposeof performing the verification function, exercise all or any of the powers specifiedin section 143, section 144 or section 145.

(4) The Verification Unit shall, after conducting the necessary verification, makeavailable the outcome of such verification in the prescribed manner.

Powers and Functions of Technical Assistance Unit117. (1) The Technical Assistance Unit referred to sub-section (1) of section 112 shall

provide technical assistance wherever called upon to do so for the performance ofthe various functions under this Act.

63(2) The technical assistance referred to in sub-section (1) shall include any assistance

or advice on legal, accounting, forensic, information technology, valuation, transferpricing, data analytics, management or any other technical matter which may berequired for the purposes of this Act in a specific case or a class of cases.

(3) The Technical Assistance Unit shall make available its advice in the prescribedmanner.

(4) The advice of the Technical Assistance Unit will be recommendatory in nature andshall not be binding on any functional unit or income-tax authority in theperformance of its functions.

(5) Any advice rendered by the Technical Assistance Unit shall not be construed asinterference with the discretion of any income-tax authority in the exercise of hisfunctions.

Powers and Functions of Collection Unit118. (1) The Collection Unit referred to in sub-section (1) of section 112 shall be responsible

for monitoring and enforcing compliance with obligations for payment of anyamount under this Act.

(2) The responsibility for monitoring and enforcing compliance referred to in sub-section (1) shall include:-(a) monitoring compliance with payment of any tax, additional income-tax, interest,penalty, fee, fine or any other sum payable;(b) enforcing the collection and recovery of any tax, additional income-tax, interest,fee, penalty, fine or any other sum payable under this Act;(c) refund of any excess amount along with applicable interest to which the

taxpayer is entitled under this Act; and(d) such other functions for the purposes of this Act as may be assigned to theCollection Unit in the prescribed manner.

(3) The income-tax authorities assigned to the Collection Unit shall, for the purpose ofperforming the responsibility for monitoring and enforcing compliance referred toin sub-section (1), exercise all or any of the powers vested under Chapter-VIII ofthis Act.

Powers and Functions of Judicial Management Unit119. (1) The Judicial Management Unit referred to sub-section (1) of section 112 shall be

responsible for managing litigation and representing the Department in appellateforums.

(2) The income-tax authorities assigned to the Judicial Management Unit shall, for thepurpose of managing litigation and representation before appellate forums, exerciseall or any of the powers as may be necessary under this Act.

Power of higher authorities120. (1) Every member of a functional unit shall have all the powers vested in that unit

under this Act for the purposes of performing its functions.(2) An income-tax authority, higher in rank, shall concurrently exercise all the powers

which are vested under this Act in an income-tax authority, lower in rank, for thepurposes of making enquiries on any issue in a proceding pending with the authoritylower in rank.

64(3) The subordinate income-tax authority shall cease to exercise the power to hold the

enquiry referred to in sub-section (1) in respect of the issue, while the superiorincome-tax authority chooses to exercise the power therein.

Proceedings before tax authorities to be judicial proceedings121. (1) Any proceeding under this Act before an income-tax authority shall be deemed to

be a judicial proceeding within the meaning of section 193 and section 228 of theIndian Penal Code, 1860, and for the purposes of section 196 of the Indian PenalCode, 1860.

(2) Every income-tax authority shall be deemed to be a Civil Court for the purposes ofsection 189, but not for the purposes of Chapter XXVI of the Code of CriminalProcedure, 1973.

C. Jurisdiction

Power to assign jurisdiction122. (1) The Board may by notification in the Official Gazette, assign jurisdiction to

functional units for the performance of their functions having regard to funtionalspecialisation, optimal utilization of resources by way of economies of scale, andminimal interface with the tax payer.

(2) The Board may, by notification in the Official Gazette, assign jurisdiction for theexercise of the powers and performance of the functions by all, or any of, theincome-tax authorities.

(3) The Board may, by notification in the Official Gazette, authorise any income-taxauthority to assign jurisdiction to all, or any of, the other income-tax authorities,who are subordinate to it, for the exercise of the powers and performance of thefunctions.

(4) The income-tax authorities authorized under sub-section (2) may, by notificationin the Official Gazette, assign jurisdiction for the exercise of the powers andperformance of the functions by all, or any of, the income-tax authorities who aresubordinate to it.

(5) The jurisdiction under sub-section (2) may be assigned having regard to any oneor more of the following criteria, namely:-(a) territorial area;(b) person or class of persons;(c) income or class of income; and(d) cases or class of cases.

(6) Every functional unit or income-tax authority shall have jurisdiction in respect ofthe income accruing, or received, within the area over which the unit or the authorityhas been vested with jurisdiction under this section, regardless of any thing to thecontrary contain in any provision of this Act, and shall exercise all the relventpowers conferred under this Act accordingly.

(7) The Principal Chief Commissioner, Principal Director General, Chief Commissioneror Director General, if authorized by the Board, may direct two or more income-taxauthorities (whether of same rank or not) to exercise and perform, concurrently, thepowers and functions conferred on, or assigned to, them.

(8) The income-tax authority being lower in rank shall follow the directions of theincome-tax authority being higher in rank, if two or more income-tax authorities

65of different rank have been directed under sub-section (7) to exercise and performconcurrently.

(9) The Board may direct any income-tax authority being an authority higher in rank,to exercise the powers and perform the functions of the income-tax authority beingan authority lower in rank.

Dispute relating to jurisdiction123. (1) Any dispute relating to jurisdiction of functional unit or any income-tax authority

shall be decided by the Principal Chief Commissioner under whom the functionalunit or the income-tax authority, as the case may be, functions.

(2) Any dispute relating to jurisdiction of the functional unit or income-tax authoritywhere it relates to areas within the region of different Principal Chief Commissionersshall be decided by consensus between the Principal Chief Commissioners and ifthey are not in agreement, by the Board, or by such Principal Chief Commissioneras the Board may direct.

(3) No person shall be entitled to question the jurisdiction of a functional unit-(a) after the expiry of one month from the date on which he was served with the

notice under sub-section (1) of section 173, if the person has furnished areturn under sub-section (1) of section 161;

(b) after the expiry of the time allowed for issue of the notice under sub-section(1) of section 169, under sub-section (1) of section 170 or under sub-section(1) of section 182, if no return has been filed; and

(c) after the completion of assessment.(4) The functinal unit or income-tax authority shall refer to the Principal Chief

Commissioner any objection raised by the person relating to its jurisdiction if thefunctional unit or income-tax authority is not satisfied with the correctness ofsuch objection.

Power to transfer cases124. (1) The Board may prescribe the following relating to transfer of cases from one

functional unit or income-tax authority to another unit or authority, namely:-(a) the circumstances under which a case can be transferred;(b) the income-tax authority who can exercise the power to transfer; and(c) any other matter connected thereto.

(2) No case shall be transferred without giving the person, whose case is beingtransferred, an opportunity of being heard in the matter, wherever it is possible todo so, and after recording the reasons for the transfer.

(3) However, it shall not be necessary to provide an opportunity of being heard in thematter, if the case is being transferred from -(a) a functional unit to another functional unit; or(b) an income-tax authority to another income-tax authority located in the same

city.(4) The transfer of a case under this sectiion may be made at any stage of the

proceedings, and it shall not be necessary to re-issue any notice already issued bythe Department.

Change of incumbent125. (1) The functional unit which suceeds any other unit for any reason, shall continue

the proceeding from the stage at which it was left by its predecessor unit.

66(2) The income-tax authority who succeeds another authority as a result of change in

jurisdiction or any other reason, shall continue the proceeding from the stage atwhich it was left by his predecessor.

(3) A person shall not be entitled to any opportunity of being heard before passingany order under this Act in his case merely on the consideration that there hasbeen a change in the incumbent functional unit.

(4) However, in the case of sub-section (2), an assesse may demand that he may beallowed an opportunity of being heard before passing any order under this Act inhis case if there has been a change in the incumbent income-tax authority.

D. Enforcement: Search and seizure

Authorization to conduct Search and seizure126. (1) The Competent Investigating Authority may authorise any Authorised Officer to

carry out search and seizure operation, if he has, in consequence of information inhis possession, reason to believe that -(a) any person to whom a summon under sub-section (1) of section 142, or a

notice under section 169 or section 170 or section 173 or section 174 wasissued, has omitted, or failed, to furnish the material as required by suchsummon or notice;

(b) any person to whom a summon or notice as aforesaid has been or might beissued will not, or would not, produce or cause to be produced, any materialwhich will be useful for, or relevant to, any proceeding under this Act or underthe allied Acts, or

(c) any person is in possession of any incriminating material which representseither wholly or partly the income or property which has not been, or wouldnot be, disclosed for the purposes of this Act or the allied Acts, (hereinafter inthis section referred to as the undisclosed income or property).

(2) The Authorised Officer shall, in pursuance to an authorisation issued under sub-section (1), carry out the search and seizure operation and, for this purpose, haveall the powers to -(a) enter and search any building, place, vessel, vehicle or aircraft where the

Competent Investigating Authority has reason to suspect that anyincriminating material, referred to in sub-section (1), are kept;

(b) break open the lock of any door, box, locker, safe, almirah or other receptacleor exercising the powers conferred by clause (a) where the keys thereof arenot available;

(c) search any person who has got out of, or is about to get into, or is present in,the building, place, vessel, vehicle or aircraft, if the Authorised Officer hasreason to suspect that such person has secreted about his person any suchmaterial;

(d) require any person who is found to be in possession or control of any type ofmaterial, being books of account or other documents, maintained in the formof electronic record or otherwise, to afford the Authorised Officer the necessaryfacility to inspect such material;

(e) seize any such material, not being stock-in-trade, found as a result of suchsearch;

(f) seize any stock in trade of bullion, precious or semi-precious stones or jewellery,found as a result of such search;

67(g) place marks of identification on any material, being books of account or other

documents, or make or cause to be made extracts or copies therefrom;(h) make a note or an inventory of any such material.

(3) A Competent Investigating Authority may exercise the powers of search and seizureconferred under sub-section (1), if he exercises jurisdiction over the person referredto in sub-section (1).

(4) However, the Competent Investigating Authority may also exercise the powers ofsearch and seizure conferred under sub-section (1), if -(a) the building, place, vessel, vehicle or aircraft, referred to in sub-section (2), is

located within the area of his jurisdiction regardless of the fact that he doesnot have jurisdiction over the person referred to in sub-section (1); and

(b) he has reason to believe that any delay in getting the authorisation from theCompetent Investigating Authority having jurisdiction over such personmay be prejudicial to the interests of the revenue.

Consequential authorisation127. The Competent Investigating Authority may issue a consequential authorisation

to any Authorised Officer to exercise the powers under sub-section (2) of section126 in respect of any building, place, vessel, vehicle or aircraft, if he, inconsequence of information in his possession, has reason to suspect that anymaterial in respect of which an authorisation under sub-section (1) of section 126has been issued by the same, or any other, Competent Investigating Authority are,or is, kept in any such building, place, vessel, vehicle or aircraft.

Assistance of police officer etc.128. The Authorised Officer may requisition the services of any police officer of any

officer of the Central Government, or of both, to assist him for all or any of thepurposes specified in sub-section (2) of section 126 and it shall be the duty ofevery such officer to comply with such requisition.

Prohibitory order129. (1) The Authorised Officer, if he is satisfied that it is not practicable to seize any

material, may serve an order on the owner or the person, who is in immediatepossession or control of such material, that he shall not remove, part with orotherwise deal with it except with his previous permission.

(2) The order under sub-section (1) shall remain in force for a period not exceedingtwo months from the end of the month in which the order was served and theAuthorised Officer may take such steps as may be necessary for ensuringcompliance with the order.

Statement during search130. (1) The Authorised Officer may, during the course of the search or seizure, examine

on oath any person who is found to be in possession or control of any material.(2) The examination of a person under sub-section (1) may not be merely in respect of

material found in the course of search but also in respect of any matter relevent forthe purpose of any investigation connected with any proceeding under this Act orthe allied acts.

68(3) The statement made by the person during the examination under sub-section (1)

may be used in evidence in any proceeding under the under this Act or the alliedacts.

Provisional attachment during search131. (1) The Authorised Officer may provisionally attach any property belonging to any

person during the course of search and seizure or within one hundred and twentydays from date of execution of last authorisation for search, if he is satisfied that itis necessary so to do for the purpose of protecting the interest of revenue

(2) No provisional attachment under sub-section (1) shall be made except with previousapproval of the Competent Investigating Authority.

(3) Any provisional attachment made under sub-section (1) shall cease to have effectafter expiry of one year from the end of the month in which the attachment orderwas made.

Reference for valuation132. (1) The Authorised Officer may, during the course of search and seizure or within one

hundred and twenty days from date of execution of last authorisation for search,make reference to Valuation Officer requiring him to -(a) estimate the fair market value of any property; and(b) submit a report of the estimate within a period of one hundred and twenty

days from the receipt of such referrence.

Reasons not to be disclosed133. The reasons recorded by the Competent Investigating Authority under section

126 or section 127 for the purpose of issuing of authorization thereunder, shall notbe disclosed to any person, authority or Tribunal.

Powers to requisition material taken into custody134. (1) The Competent Investigating Authority may authorise any income-tax authority

(hereinafter referred to as the "Requisitioning Officer") to requisition the material,which has been taken into custody by any officer or authority acting under anyother law for the time being in force.

(2) The authorisation under sub-section (1) shall be issued by the CompetentInvestigating Authority if he has, in consequence of information in his possession,reasons to believe that -(a) any person to whom a summons under sub-section (1) of section 145, or a

notice under section 169 or section 170 or section 173 or section 174, wasissued, has omitted or failed to produce, or cause to be produced, such material;or

(b) any person to whom a summons or notice as aforesaid has been or might beissued will not, or would not, produce or cause to be produced, such materialwhich will be useful for, or relevant to, any preceding under this Act or theallied acts; or

(c) any person is in possession of any material which represents either wholly orpartly tax base or property which has not been, or would not be, disclosed forthe purposes of this Act or the allied Acts.

69(3) The officer or authority referred to in sub-section (1) shall deliver the material to

the Requisitioning Officer either forthwith or when such officer or authority is ofthe opinion that it is no longer necessary to retain the same in his or its custody.

Retention and release of books of account or documents seized or requisitioned135. (1) The Authorised Officer shall hand over the books of account or document seized

under section 126, within a period of sixty days from the date on which last of theauthorisation for search was executed, to the unit or income-tax authority havingjurisdiction, if the Authorised Officer has no jurisdiction over the person fromwhom the books of accounts or documents were seized.

(2) The Requisitioning Officer shall hand over the books of account or documentdelivered under section 134, within a period of sixty days from the date on whichbooks of account or document were received, to the unit or income-tax authorityhaving jurisdiction, if the Requisitioning Officer has no jurisdiction over the personfrom whom the books of accounts or documents were taken into custody underany other law for the time being in force.

(3) The officers, referred to in sub-sections (1) and (2), shall, on an application madeby the person referred therein, allow him to make copies of, or take extracts from,the books of account or document seized or requisitioned.

(4) The officers, referred to in sub-sections (1) and (2), may retain the books of accountor documents, seized or requisitioned, up to a period of thirty days from the date ofassessment under section 183.

(5) The officers, referred to in sub-sections (1) and (2), may retain the books of accountsor documents seized beyond the period specified in sub-section (4) after obtainingthe approval of the Chief Commissioner or Commissioner.

(6) The Chief Commissioner, or Commissioner, shall not allow the retention of thebooks of account seized beyond a period of thirty days from the date on which theproceedings under this Act, for which such books of account or document arerelevant, are completed.

(7) The officer, referred to in sub-sections (1) and (2), may, with the approval of theChief Commissioner or Commissioner, return any books of account or documentbefore completion of assessment or any other relevant proceedings, after retaininga copy or extract of such books of account or document, if he is satisfied that thereturn of such books of account or document shall not adversely affect the interestof revenue.

Delivery of material belonging to other persons136. (1) The unit or income-tax authority, having jurisdiction over the person in whose

case search and seizure operation was carried out under section 126, or requisitionwas made under section 134, shall hand over any material to the unit or income-taxauthority having jurisdiction over another person, if he is satisfied that the materialseized, or requisitioned, belongs to the other person.

Retention and application of seized or requisitioned assets137. (1) The Collection Unit may recover the amount of liability, referred to in sub-section

(2),-(a) out of the material, other than books of accounts or documents, (hereinafter

referred to as ‘assets’) seized under section 126 or requisitioned under section134; or

70(b) by any other mode laid down under this Act.

(2) The amount of liability shall be the aggregate of -(a) the amount of any liability existing under this Act and any allied Act, till the

date of search under section 126 or requisition under section 134;(b) the amount of any liability under this Act, or under any allied Act, determined

between the date of the search, or requisition, and the date of completion ofthe assessment in consequence to the search or the requisition;

(c) the amount of any liability determined on completion of the assessment inconsequence to the search or the requisition; and

(d) the amount of any liability under this Act, or under any allied Act, determinedon or after the completion of the assessment in consequence to the search, orthe requisition, and till the date of release of the assets.

(3) The Collection Unit may, on an application made by the person from whose custodythe assets were seized, release such portion of the assets as remains after recoveryof the amount of liability referred to in clause (a) of sub-section (2) to the person,after obtaining prior approval of the Chief Commissioner or the PrincipalCommissioner.

(4) No release under sub-section (3) shall be made after a period of one hundred andtwenty days from the date on which the first of the authorization for search undersection 126 was executed.

(5) The assets, other than money, shall be deemed to be under distraint as if suchdistraint was effected by the Collection Unit and the recovery of any liability outof such assets shall be effected in the manner laid down in The Third Schedule.

(6) The Collection Unit shall, within the time and subject to such conditions as may beprescribed, release to the person from whose custody the assets were seized, anyasset or proceeds thereof, which remains after the liabilities referred to in sub-section (1) are discharged.

(7) The Collection Unit may release any seized or requisitioned asset (other thancash) before completion of assessment in consequence of search or requisition, ifthe concerned person deposits with the Collection Unit an amount of money equalto the value of such asset on the date of the release.

(8) The amount deposited under sub-section (7) shall be deemed to be cash seized orrequisitioned for the purposes of this Act.

Presumption of ownership etc.138. (1) It shall be presumed that any material which is found in the course of search and

seizure action, in posession or control of a person,-(a) belongs to the person; and(b) the contents thereof are true.

(2) It shall be presumed that the signature or the handwriting found in any material,which purports to be, or reasonably assumed to be, the signature or the handwritingof any person, are in the handwriting of that person.

(3) It shall be presumed that a document, which is stamped, executed or attested, isduly stamped, executed or attested by the person by whom it purports to havebeen executed or attested.

(4) The presumption under sub-section (1) shall also apply to a case, where anymaterial has been delivered to the requisitioning officer in accordance with theprovisions of section 134 as if they had been found in the possession, or control,of the person referred to in section 134.

71Code of Criminal Procedure to apply

139. The provisions of the Code of Criminal Procedure, 1973, relating to search andseizure shall apply, so far as may be, to search and seizure operation under thissub-chapter.

Power to make rules relating to search and seizure140. The Board may make rules-

(a) to provide for the procedure to be followed by the authorised officer -(i) for obtaining ingress into any building, place vessel, vehicle or aircraft to

be searched where free ingress thereto is not available;and(ii) for ensuring safe custody of any material seized;and

(b) any other matter in relation to search and seizure operation under this sub-chapter.

Interpretation141. For the purpose of this sub-chapter, -

(a) “material” includes books of accounts, other documents, electronic records,money, bullion, jewellery, precious or semi precious stones or any othervaluable article or things;

(b) “police officer” shall include the officers and personnel of Central ReservePolice Force and Central Industrial Security Force; and

(c) “officer of the Central Government” shall include the officer and personnel ofany public sector companies.

(d) “authorised officer” means any income-tax authority who is authorised by theCompetent Investigating Authority to conduct search and seizure undersection 126 or to requisition the material taken into custody under section 134.

E. Enforcement: Survey and other enquiries

Powers regarding discovery, production of evidence, etc.142. (1) The prescribed income-tax authorities shall have the same powers as are vested in

a court under the Code of Civil Procedure, 1908 when trying a suit, in respect of thefollowing matters, namely:-(a) discovery and inspection;(b) enforcing the attendance of any person, including any officer of a banking

company and examining him on oath;(c) compelling the production of books of account and other documents; and(d) issuing commissions.

(2) The powers conferred under sub-section (1) shall be exercised only in the courseof any proceeding under this Act, or for making any enquiry or investigation forthe purposes thereunder.

(3) Any income-tax authority prescribed for the purposes of sub-section (1) may,subject to the rules made in this behalf, impound any books of account and otherdocuments produced before it, for reasons to be recorded in writing, and retainthem in his custody for such period as he thinks fit.

(4) No income-tax authority shall retain in his custody any such books or documentsfor a period exceeding fifteen days (exclusive of holidays) without obtaining theapproval of -

72(a) Principal Commissioner, if the income-tax authority is below the rank of

Commissioner; and(b) Chief Commissioner, in any other case.

Power of survey143. (1) The prescribed income-tax authority may enter, or authorise any other income-tax

authority to enter, any office, or any other place at which a business or charitableactivity, is carried out by a person, if -(a) he has reason to suspect that the person has not complied with the provisions

of this Act; and(b) the place is -

(i) within the limits of the area assigned to him; or(ii) occupied by any person in respect of whom he exercises jurisdiction.

(2) No action under sub-section (1) shall be taken by the income-tax authority withoutobtaining the prior approval of -(a) his immediate supervisory income-tax authority, if the income-tax authority is

below the rank of Commissioner; and(b) Chief Commissioner, in any other case.

(3) The income-tax authority, referred to in sub-section (1), shall enter -(a) any place of business referred to therein only during the hours at which such

place is open for the conduct of business; and(b) any office, place of charitable activity, or any other place, only after sunrise

and before sunset.(4) On entering the place, the income-tax authority may require any person, who may

be attending in any manner to the business at the place, to -(a) afford him to inspect the books of accounts or documents or electronic records

available at the place;(b) afford him to check or verify the cash, stock or other valuable article or thing

found there; and(c) furnish any information relevant, or useful, for the proceedings under this

Act, or the Income-tax Act, 1961, in respect of the person or any other person.(5) For the purposes of this section, any place at which a business or charitable

activity is carried out includes a place-(a) which is not the principal place of such business or charitable activity;(b) where any business or charitable activity is being carried out and the tax base

relating to such business or activity is not to be included in the total tax baseunder any provision of this Act;

(c) where any of the books of account, documents, electronic records, cash,stock-in-trade or valuables, relating to the business or charitable activity,referred to in sub-clause (b), are kept; or

(d) where any of the books of account, documents, electronic records, or otherrecord containing the particulars regarding deduction of tax at source, orcollection of tax at source, made, or required to be made, under this Act, arekept.

(6) On entering the place, the income tax authority may -(a) place marks of identification on the books of account, documents or record

inspected by him and take extracts, or copies, therefrom;(b) impound any books of account, documents or record inspected by him, after

recording the reasons for doing so;

73(c) make an inventory of cash, stock or valuables; or(d) examine on oath any person if his statement would be useful for, or relevant

to, any proceeding under this Act.(7) The statement made by any person under clause (d) of sub-section (5) may be

used in evidence in any proceeding under this Act.(8) It shall be presumed that any material which is found in the course of survey

action, in posession or control of a person,-(a) belongs to the person; and(b) the contents thereof are true.

(9) It shall be presumed that the signature or the handwriting found in any material,which purports to be, or reasonably assumed to be, the signature or the handwritingof any person, are in the handwriting of that person.

(10)It shall be presumed that a document, which is stamped, executed or attested, isduly stamped, executed or attested by the person by whom it purports to havebeen executed or attested.

(11)The income-tax authority acting under this section shall, on no account, remove orcause to be removed any cash, stock or other valuable article or thing, from theplace wherein he has entered.

(12)No income-tax authority shall retain in his custody any such books or documentsfor a period exceeding thirty days (exclusive of holidays) without obtaining theapproval of -

(a) Principal Commissioner, if the income-tax authority is below the rank ofCommissioner; and(b) Chief Commissioner, in any other case.

(13) The income-tax authority, other than an Inspector, shall have all the powers undersub-section (1) of section 142 for enforcing compliance, if a person refuses, orevades, to-

(a) afford the facility to the income-tax authority to inspect books of accountsor other documents;(b) allow checking or verifying any cash, stock or other valuable article orthing;(c) furnish any information; or(d) have his statement recorded.

Power to call for information144. (1) For the purposes of this Act, the Board may, regardless of anything to the contrary

contained in any law for the time being in force, require -(a) any prescribed person to furnish the prescribed information within such time

and in such form and manner as may be prescribed; and(b) any prescribed income-tax authority to call for the prescribed information in

such form and manner as may be prescribed.(2) Any income-tax authority, not below the rank of an Income Tax Officer, may require

any person to furnish any information as may be useful for, or relevant to anyenquiry or proceeding, pending before him under this Act, in such form, mannerand within such time as may be specified by him.

(3) Without prejudice to the generality of the definition of the term ‘person’, it shall,for the purposes of this section, include a banking company or any officer thereof.

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Selection of information for verification145. (1) The Department may, -

(a) select any information in its possesion for the purposes of verification;(b) verify the information so selected; and(c) make assessment, modification or review, as the case may be, on the basis of

the outcome of the verification.(2) The selection of the information for the purposes of sub-section (1) shall be made

in accordance with the risk management strategy formulated by the Board.(3) The information selected for verification shall be referred to the Verification Unit

for carrying out the necessary verification and making available a report on theoutcome thereof, in the prescribed manner.

(4) Upon receiving the report, -(a) in a case where no return of income has been filed, -

(i) the Communication Unit shall serve on the person a notice requiring himto furnish a return of income for the relevant financial year; and

(ii) the return so furnished may be selected for examination in accordancewith the risk management strategy referred to in sub-section (3) of section172, and all other provisions of this Act shall apply accordingly;

(b) in a case where no return is furnished in response to notice under sub-clause(i) of clause (a), the Examination Unit shall make best judgement assessmentunder section 182 after taking into account the report and any other material inits’ possession, amd all other provisions of this Act shall apply accordingly.

(c) in a case where the return of income has been filed under any provision of thisAct and the said return has not been selected for examination, the ExaminationUnit shall, if required, modify the intimation accordingly under section 185;

(d) in a case where the return of income has been filed under any provision of thisAct, and assessment have been completed, the Examination Unit shall, ifrequired, modify the assessment under section 185;

(e) in a case where the return of income has been filed under any provision of thisAct, and preceedings for assessment are pending, the report shall be takeninto account for making assessment.

(5) No order of assessment or modification referred to in sub-section (3) shall be madewithout giving the person a reasonable opportunity of furnishing his objections,if any.

F - Allotment of Identification Number

Permanent Account Number146. (1) Every prescribed person shall make an application for the allotment of a permanent

account number and the applicant shall be allotted a permanent account number.(2) Any person not falling under sub-section (1) may make an application for a

permanent account number and he shall also be allotted a permanent accountnumber.

(3) A permanent account number may, having regard to the nature of transactions asmay be prescribed, be allotted to any other person, whether or not an applicationis made by him.

(4) Any person who has been allotted a permanent account number shall quote thenumber in the transactions, or documents, as may be prescribed.

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Power of the Board in respect of the Permanent Account Number147. The Board shall prescribe the following in respect of the permanent account

number:-(a) the form and the manner in which an application may be made for the allotment

of a permanent account number and the particulars which such applicationshall contain;

(b) the income-tax authority, or any other person, authorised to receive theapplication or allot the permanent account number;

(c) the categories of transactions in relation to which Permanent Account Numbershall be quoted by every person in the documents pertaining to suchtransactions;

(d) the categories of documents in which Permanent Account Number shall bequoted by every person;

(e) class, or classes, of persons to whom the provisions of this section shall notapply;

(f) the form and the manner in which the person who has not been allotted aPermanent Account Number shall make his declaration;

(g) the manner in which the Permanent Account Number shall be quoted in respectof the categories of transactions referred to in clause (c); and

(h) any other matters connected therewith.

Allotment of Withholding Account Number148. (1) Every person who is required to withhold tax in accordance with the provisions of

sub-chapter B of Chapter VIII, shall within such time as may be prescribed, applyto the Department for the allotment of a Withholding Account Number.

(2) Upon allotment of Withholding Account Number, the allottee shall quote thenumber-(a) in all challans for the payment of withholding tax;(b) in all certificates furnished to withholdees;(c) in all the statements and the certificates of withholding tax; and(d) in all other documents pertaining to such transactions as may be prescribed.

Document Identification Number149. (1) The Department, any income tax authority, or any other person acting on their

behalf, shall allot a computer generated Document Identification Number in respectof every notice, order, letter or any correspondence issued by him to any otherincome-tax authority or any other person and such number shall be quoted thereon.

(2) The Department, any income tax authority, or any other person acting on theirbehalf, shall accept any document, letter or correspondence from any person onlyafter allotting and quoting a computer generated Document Identification Number.

G. Communication and Notice

Mode of communication150. (1) All communications between the Department, and the person, or his authorized

representative, shall be exchanged by electronic mode in the prescribed manner;(2) All internal communications in the Department shall be exchanged by electronic

mode in the prescribed manner.

76(3) The Board may make rules providing for -

(a) modes of communication for delivering or transmitting a copy thereof, to theperson therein named,-(i) personally or to any other person duly nominated by the person named

therein;(ii) by post or by such courier service as may be approved by the Board;(iii) in such manner as provided under the Code of Civil Procedure, 1908 for

the purposes of service of summons;(iv) in the form of any electronic record as provided in Chapter IV of the

Information Technology Act, 2000; or(v) by any other means of transmission of documents;

(b) the addresses (including the address for electronic mail or electronic mailmessage) to which the communication referred to in sub-section (1) may bedelivered or transmitted to the person therein named.

(4) Any communication which is sent by post, or courier service, shall be deemed tohave been served on the person to whom it is addressed on the fifth day after theday on which the communication is sent if the address is in India and, where theaddress is not in India, twenty days suceeding the day when the communicationwas posted.

(5) The provision of sub-section (4) shall apply regardless of the fact that the notice,requisition, order or communication has not been actually received by the person.

(6) A person shall, on an application made by him, be entitled to receive a copy of thenotice, requisition, order or communication.

(7) A communication shall be treated as having been served on the person to whom itis addressed on the date on which the person refuses to accept the delivery ofletter or was informed that the letter was at the post office, if the person -(a) refuses to accept delivery of a letter addressed to him; or(b) fails to collect a letter after being informed that the letter is available for

collection at a post office.

Service of notice in certain cases151. (1) Any notice under this Act in case of a Hindu undivided family, in respect of which

a finding of total partition has been recorded by the Department under section 201,shall be served on the person who was the last manager of the Hindu undividedfamily.

(2) The notice referred to in sub-section (1), in a case where the last manager of theHindu undivided family is dead, shall be served on all adults who were members ofthe Hindu undivided family immediately before the partition.

(3) Any notice under this Act, in case of an unicorporated body which standsdissolved, shall be served on any person who was a participant (not being a minor)immediately before its dissolution.

Authentication of notices and other documents152. (1) Every document, notice, order, letter or any other communication required to be

issued, served or given for the purposes of this Act by the Department shall beauthenticated by, -(a) indicating the name of the Department; and(b) printing or stamping the common seal of the Department; and(c) quoting the Document Identification Number;

77(2) The document, notice, order, letter or any other communication referred to in sub-

section (1) shall not bear the name or signature of any income-tax authority orexecutive or ministerial staff employed in the administration of this Act.

Personal hearing and deposition exclusively through video conferencing153. (1) The person or his authorized representative, as the case may be, shall be entitled to

seek personal hearing so as to make his oral submissions or present his casebefore the Department and such hearing shall be conducted exclusively throughvideo conferencing in the prescribed manner.

(2) Any examination or recording of the statement of the person or any other person(other than statement recorded in the course of search and seizure under section126 or section 134 or survey under section 143 shall be conducted by the Departmentexclusively through video conferencing in the prescribed manner.

(3) The Department shall establish such facilities for video conferencing as may benecessary, so as to ensure that the person, or his authorized representative, or anyother person referred to in sub-section (2) or sub-section (3) is not denied thebenefit merely on the consideration that such person does not have access tovideo conferencing at his end.

Electronic record as evidence154. (1) All electronic record shall constitute evidence within the meaning of section 3 of

The Indian Evidence Act, 1872, and shall accordingly be admissible as evidence inany proceedings under this Act.

(2) The admissibility of electronic record as evidence shall be in accordance with theprovision of section 65A and section 65B of The Indian Evidence Act, 1872.

(3) The legal recognition of electronic records shall be determined by the provisionsof The Information Technology Act, 2000 to the extent such provisions are notrepugnant to the provisions of this Act or rules made thereunder.

(4) The evidentiary value of electronic records shall be determined by the provision ofThe Indian Evidence Act, 1872 to the extent such provisions are not repugnant tothe provisions of this Act or rules made thereunder.

Communication deemed to be valid in certain circumstances155. (1) A communication which is required to be served upon a person for the purposes of

assessment under this Act shall be deemed to have been duly served upon him inaccordance with the provision of this Act if the person has appeared in anyproceeding or co-operated in any enquiry relating to an assessment.

(2) The person, referred to in sub-section (1), shall be precluded from taking anyobjection in any proceeding or inquiry under this Act that the communication was-(a) not served upon him;(b) not served upon him in time; or(c) served upon him in an improper manner.

(3) However, the provisions of this section shall not apply, if the person has raisedthe objection in the first available opportunity.

Publication of Forms, notices etc.156. (1) The Board shall specify the forms, notices, declarations, returns, statements, tables,

and other documents required to be furnished under this Act and publish them forthe efficient administration of this Act.

78(2) The documents referred in sub-section (1) shall be made available to the public on

the website of the Department or at its main office and at other locations, or by mailor electronically, as the Board may prescribe.

Defect or mistake in form not to affect validity of communication or order157. (1) No communication, return, assesment, form, certificate, or other proceeding

purporting to be in accordance with the provisions of the Act shall be quashed, ordeemed to be void or voidable for want of form, or be affected by reason of amistake, defect or omission, if it conforms is in substance to the intent and meaningof this Act, and where the person assessed or intended to be assessed or affectedthereby, is reasonably described or identified.

(2) Without prejudice to the generality of sub-section (1), if the notice of assessmentis duly served on the person and contains in substance and effect all relevantparticulars, the assessment shall not be affected or impugned by reason of -(a) a mistake as to the name or surname of the person, the amount of income

assesed, or the amount of tax charged; or(b) any variance between the assessment and the notice thereof.

(3) Without prejudice to the generality of sub-section (1) and sub-section (2), nonotice, assessment, form, certificate, or other proceeding purporting to be inaccordance with the provisions of this Act shall be quashed, or deemed to be voidor voidable or be affected by reason of any variance in the designation of theincome-tax authority who signed or executed such notice, assessment, form,certificate or other proceeding, as the case may be.

Extension of due dates158. When the last day for performing an act specified under this Act falls on a day on

which the Department is not open to the public for business, the act shall beconsidered timely if it is performed on the next succeeding day on which theDepartment is open for business.

Deemed date of receipt159. A declaration, appeal or other document, other than a payment, shall be

considered filed on the date it is stamped, as received by the Department or, in thecase of filing by post, within five days of the date of the postmark.

H. Taxpayer Assistance

Tax Return Preparer160. (1) The Board may, without prejudice to the provisions of section 161, frame a Tax

Return Preparer Scheme so as to allow a Tax Return Preparer to prepare and furnishthe return of income of any specified class of persons, in accordance with theScheme.

(2) Every Tax Return Preparer shall affix his signature on the return so prepared byhim.

(3) The Scheme framed by the Board under this section may provide for the followingnamely:-(a) the manner in which and the period for which the Tax Return Preparers shall be

authorised to prepare and furnish the return of income;(b) the eligibility criteria for a person to qualify as a Tax Return Preparer;

79(c) the code of conduct for the Tax Return Preparer;(d) the duties and obligations of the Tax Return Preparer;(e) the circumstances under which the authorisation given to a Tax Return Preparer

may be withdrawn;(f) any other matter which is required to be, or may be, specified by the Scheme

for the purposes of this section.(4) For the purposes of this section,-

(a) “Tax Return Preparer” means any individual who has been authorised to actas a Tax Return Preparer under the Scheme framed under this section;

(b) “Tax Return Preparer Scheme” means a Scheme framed by the Board andnotified in the Official Gazette, providing for preparing and furnishing of thereturn of income through a Tax Return Preparer; and

(c) “specified class of persons” means any person who is required to furnish areturn of income under this Act, other than a company or a person, whoseaccounts are required to be audited under section 59.

I. Assessment Procedure

Self-reporting of income161. (1) Every person shall furnish a return of income for the financial year before the due

date.(2) The person referred to in sub-section (1) shall be the following,-

(a) an individual, if his gross total income from ordinary sources exceeds thethreshold limit, as specified in Paragraph A of The First Schedule;

(b) a Hindu undivided family, if its gross total income from ordinary sourcesexceeds the threshold limit, as specified in Paragraph A of The First Schedule;

(c) an association of person, body of individuals or artificial juridical person, ifit’s gross total income from ordinary sources exceeds the threshold limit; or

(d) a company;(e) a limited liability partnership;(f) a firm;(g) a co-operative society;(h) an investment pooling vehicle;(i) a non-profit organisation;(j) a private trust;(k) a political party;(l) a local authority;(m) a person, who is a resident and holds, as a beneficial owner or otherwise, any

asset (including any financial interest in any entity) located outside India;(n) a person, who has a signing authority in any account located outside India;(o) a person, who is a resident and is a beneficiary of any asset (including any

financial interest in any entity) located outside India;(p) a person, who intends to claim refund of any amount paid to the Central

Government by him or on his behalf;(q) a person, who intends to carry forward the loss or any part thereof in accordance

with the provisions of this Act;(r) a person, who derives any income from special sources and is liable to pay

income-tax thereon;

80(s) any other person, not being a person referred to in clauses (a), (b) and (c), if

his gross total income from ordinary sources exceeds the threshold limit;and(t) any other person as may be prescribed;

(3) The return of income referred to in sub-section (1) shall be a return in respect ofthe total income of the person referred to in sub-section (2) or the total income ofany other person in respect of which such person is assessable for the relevantfinancial year.

(4) The return of income shall be,-(a) verified in the prescribed form and manner and setting forth such other

particulars as may be prescribed; and(b) furnished to the Department in the prescribed manner.

(5) The forms of the return referred to in sub-section (4) shall, in such cases as may beprescribed, require the person to furnish particulars relating to the following:-(a) income exempt from tax;(b) assets and liabilities of the prescribed nature and value;(c) bank account and credit card held;(d) assets (including financial interest in any entity) and liabilities held outside

India;(e) expenditure exceeding the prescribed limits incurred by him; and(f) such other outgoings as may be prescribed.

(6) A person may furnish a return of income on his own accord by the due date, if heis otherwise not required to furnish a return of income under sub-section (1); andall the provisions of this Act shall, as far as may be, apply as if it is a returnfurnished under that sub-section.

(7) A return of income shall be treated as non est and shall be deemed to have neverbeen filed, if -(a) it was otherwise not required to be filed under sub-section (1);(b) it has not been filed under sub-section (6); and(c) it has not been filed in response to a notice issued under any provision of thisAct.

(8) A return of income treated as non est under sub-section (7) shall not be admissibleas evidence in any proceeding under this Act or any other law in force.

Certificate of income162. (1) A person shall furnish a certificate of income for the financial year, if -

(a) he is otherwise not required to file a return of income under sub-section (1) ofsection 161;(b) he does not intend to file a return of income under sub-section (6) of section161; and(c) he has, -

(i) furnished a return or a certificate for the immediately preceeding financialyear;

(ii) been assessed for the immediately preceeding financial year; or(iii) not furnished a return, or a certificate, in response to a notice served

under section 169 for the immediately preceeding financial year.(2) The certificate under sub-section (1) shall be furnished by the due date for the

relevant financial year.(3) The certificate of income shall be,-

81(a) verified in the prescribed form and manner and setting forth such other

particulars as may be prescribed; and(b) furnished to the Department in the prescribed manner.

(4) The provisions of this section shall, regardless of anything to the contrary in anyprovision of this Act, also apply in relation to the financial year begining on thefirst day of April, 2013 and subsequent financial years.

Belated return163. (1) A person may, regardless of anything to the contrary in sub-section (1) of section

161, furnish a return of income for any financial year after the due date if no noticeunder sub-section (1) of section 169 or sub-section (1) of section 170 has beenserved on him.

(2) The return furnished under sub-section (1) (hereafter referred to as “belated return”)under sub-section (1) may be furnished any time before the expiry of seven yearsfrom the end of the relevant financial year or before the completion of theassessment, whichever is earlier.

Modification statement for revising return164. (1) A person may furnish a modification statement revising his return of income filed

under section 161 or section 163, if-(a) he discovers any omission, or any wrong statement, in the return of incomefurnished by him; and(b) the discovery has the effect of reducing, or increasing, his liability under thisAct.

(2) The modification statement referred to in sub-section (1) shall be,-(a) verified in the prescribed form and manner and setting forth such other

particulars as may be prescribed; and(b) furnished to the Department in the prescribed manner.

(3) No modification statement under sub-section (1) shall be filed, -(a) in a case where the discovery has the effect of reducing the liability under thisAct, after the expiry of twelve months from the end of the relevant financial year orbefore the completion of the assessment, whichever is earlier; and(b) in a case where the discovery has the effect of increasing the liability underthis Act, after the expiry of seven years from the end of the relevant financial year.

(4) However, a person may, regardless of anything to the contrary in sub-section (3),file a modification statement under sub-section (1) anytime before the expiry ofseven years from the end of the relevant financial year, if the discovery relatesexclusively to any claim of pre-paid taxes.

(5) For the purposes of this section, -(a) “reducing the liability ”, with all its grammatical variations means -

(i) reducing the amount of tax payable (including a nil amount) in respect ofthe financial year;

(ii) increasing the loss to be carried forward for the financial year; or(iii) increasing the claim for pre-paid taxes.

(b) “increasing the liability”, with all its grammatical variations means -(i) increasing the amount of tax payable (including a nil amount) in respect

of the financial year;(ii) increasing the loss to be carried forward for the financial year; or(iii) reducing the claim for pre-paid taxes.

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Defective return165. (1) The Department may intimate to a person about the deficiency in the return of

income furnished, if the return is found to be defective on account of the factthat -(a) it has not been furnished in the prescribed form and manner; or(b) it does not contain the requisite particulars.

(2) The Department shall allow an opportunity to the person whose return has beenfound to be defective under sub-section (1), to remove the deficiency within thirtydays from the service of the intimation.

(3) The Department shall treat the return filed by a person as invalid, if the deficiencyreferred to in sub-section (1) is not removed within the time allowed and theprovisions of the Act shall apply as if the person has failed to furnish the return.

Acknowledgment of return166. On receipt of any return of income for any financial year, the Department, or any

other person authorised by the Board in this behalf, shall issue an electronicacknowledgement for receipt of the return.

Reporting of international transaction167. (1) Every person who has entered into an international transaction during the financial

year shall furnish a report of the transaction to the Transfer Pricing Officer on orbefore the due date.

(2) The report referred to in sub-section (1) shall be obtained from an accountant inthe prescribed form duly signed and verified in the prescribed manner by suchaccountant.

Furnishing of tax audit report168. Every person, who is required to obtain a report of audit under section 59, shall

furnish the report to the Department by the due date of furnishing the returnunder section 161.

Issue of notice to stop-filer169. (1) The Department may serve a notice on a stop-filer requiring such person to furnish

a return of income for the relevant financial year.(2) The notice under sub-section (1) may be issued at any time after the due date but

before the expiry of seven years from the end of the relevant financial year(3) The stop-filer shall, within thirty days from the date of receipt of the notice, -

(a) furnish the return for the relevent financial year, if he is otherwise required tofurnish a return under section 161; and

(b) in any other case, furnish a certificate of income under section 162 for therelevant financial year.

(4) The return of income referred to in sub-section (1) shall be furnished and verifiedin the form and manner, and setting forth such particulars, as prescribed undersub-section (4) of section 161.

(5) The certificate of income referred to in clause (b) of sub-section (3) shall befurnished and verified in the form and manner, and setting forth such particulars,as prescribed under section 162.

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Issue of notice to non-filer170. (1) The Department may serve a notice on a non-filer requiring him to furnish a return

of income for the relevant financial year.(2) The notice under sub-section (1) may be issued at any time after the due date but

before the expiry of seven years from the end of the relevant financial year.(3) The non-filer shall, within thirty days from the date of receipt of the notice, -

(a) furnish the return for the relevent financial year, if he is otherwise required tofurnish a return under section 161; and

(b) in any other case, furnish a certificate of income under section 162 for therelevant financial year.

(4) The return of income shall be furnished and verified in the form and manner, andsetting forth such particulars, as prescribed under sub-section (4) of section 161.

(5) The certificate of income referred to in clause (b) of sub-section (3) shall befurnished and verified in the form and manner, and setting forth such particulars,as prescribed under section 162.

Processing of return171. (1) The Department shall process the return furnished under section 161 in the

following manner, namely :-(a) the total income or loss shall be computed after making the followingadjustments, namely:-

(i) any arithmetical error in the return;(ii) an incorrect claim, if such incorrect claim is apparent from the existence of

any information in the return;(iii) disallowance of loss claimed, if the return has been furnished beyond the

due date specified under sub-section (1) of the section 161;(iv) disallowance expenditure indicated in the audit report but not taken into

account in computing the total income in the return; or(v) disallowance of deduction claimed under any provision of Chapter III

under part “E-Tax Incentives”, if the return is furnished beyond the duedate specified under sub-section (1) of section 161;

(b) the tax, additional income-tax, fee and interest, if any, shall be computed onthe basis of the income computed under clause (a); and

(c) the sum payable by, or the amount of refund due to, the person shall bedetermined after adjustment of the tax, additional income-tax, fee and interest,if any, computed under clause (b) by any pre-paid taxes and any other amountpaid by way of tax, fee and interest.

(2) The Department shall send an intimation in the prescribed form to the personspecifying the total income so computed, the liability to pay tax, additional income-tax, fee and interest, if any, on the total income, the amount of credit allowed forprepaid taxes and the sum payable by, or refundable to, him and such otherparticulars as may be prescribed.

(3) The Department shall not send any notice of demand under section 191 in respectof any sum payable on account of any adjustment made under sub-section (1), ifthe return is processed after the expiry of twelve months from the end of the monthin which the return is furnished.

(4) The Department may make a scheme for centralised processing of returns, for thepurposes of processing the return under sub-section (1), with a view to expeditiously

84determining the sum payable by, or the refund due to, the person.

(5) For the purposes of this section,-(a) “an incorrect claim apparent from the existence of any information in the

return” shall mean a claim, on the basis of an entry, in the return -(i) of an item, which is inconsistent with another entry of the same, or some

other item, in such return;(ii) in respect of which information required to be supplied to substantiate

such entry has not been so furnished; or(iii) in respect of a deduction, where such deduction exceeds the specified

statutory limit which may have been expressed as monetary amount,percentage, ratio or fraction;

(b) “any sum payable on account of any adjustment” referred to in sub-section(3) means the aggregate of,-(i) tax payable on the total income determined pursuant to processing under

sub-section (1) as reduced by the tax payable on the total income declaredin the return;

(ii) the interest payable on the amount determined under sub-clause (i);(iii) additional income-tax payable; and(iv) fee payable.

Selection of cases for examination172. (1) The Department may select any case for the purposes of examination where, -

(a) the Department is in possession of information;(b) a return of income has been filed under any provision of this Act;(c) a notice for furnishing of return of income has been issued under section 169;and(d) a notice for furnishing of return has been issued under section 170.

(2) A case selected under sub-section (1) may be subjected to any of the followingtypes of examination:-(a) single issue examination;(b) limited examination; and(c) full examination.

(3) The selection of the case referred to in sub-section (1) and the type of examinationto be conducted under sub-section (2) shall be made in accordance with the riskmanagement strategy formulated by the Board.

(4) Any case selected for single issue examination, if considered necessary or expedientto do so in the interest of revenue, may be converted into limited or full examination,as the case may be, in the prescribed manner.

(5) Any case selected for limited examination, if considered necessary or expedient todo so in the interest of revenue, may be converted into full examination, in theprescribed manner.

(6) No information relating to the risk management strategy shall, regardless of anythingto the contrary contained in any other Act for the time being in force, be disclosedto any person.

Communication about selection173. (1) The Communication Unit shall communicate to the person that his case has been

selected for the purposes of single issue, limited or full examination in the prescribedmanner.

85(2) No communication referred to in sub-section (1) shall be sent to the person-

(a) in a case where a return has been furnished, after the expiry of six months fromthe end of the month in which the return has been filed;

(b) in a case where a return has not been furnished in response to a notice, afterthe expiry of six months from the end of the month in which such notice isissued;

(c) in a case referred to in clause (a) of sub-section (1) of section 172, after theexpiry of seven years from the end of the financial year to which the incomewas first assessable;

(d) in any other case, after the end of eighteen months from the end of the relevantfinancial year to which the income relates.

(3) The communication referred to in sub-section (1) shall specify the followingparticulars, namely: -

(a) the type of examination for which the case has been selected;(b) financial year for which the case has been selected for examination;(c) the statutory time limit for completion of assessment in the case;

(d) rights and obligation of the person in the course of examinationproceedings;(e) manner of communication by which the person can interact with theDepartment;

(f) manner of conducting personal hearing upon request by the taxpayer;(g) manner of obtaining copies of documents available on record; and

(h) consequences of non-compliance at various stages of the examinationprocess; and taxpayer assistance services which can be availed.

Notice for examination174. For the purpose of conducting examination under this Chapter, the Communication

Unit shall serve on a person a notice requiring him, on a date to be specifiedtherein, -(a) to furnish, or cause to be furnished, any evidence on which the person may

rely in support of the return;(b) to furnish, or cause to be furnished, such accounts or documents, or

information or statement in such form and on such points or matters, as theExamination Unit may require; or

(c) to furnish in writing, and verified in the prescribed manner, information insuch form and on such point or matter (including the statement of all assetsand liabilities of the person, whether included in the accounts or not) as theExamination Unit may require.

Enquiry for examination175. (1) The Examination Unit or an income-tax authority may, in the case of a person, direct

the Verification Unit to make such enquiry, as it considers necessary, for thepurposes of determining the total income, and the tax liability thereon, for therelevant financial year.

(2) The Verification Unit shall conduct the necessary enquiry referred to in sub-section (1) and make available the outcome of enquiry in the prescribed manner.

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Technical Assistance176. (1) Any unit or income-tax authority may, at any stage of the proceedings, seek advice

from the Technical Assistance Unit on any legal, accounting, forensic or any othertechnical matter as may be necessary for the purposes of this Act.

(2) The advice rendered by the Technical Assistance Unit may be taken intoconsideration by any unit or income-tax authority referred to in sub-section (1), asdeemed fit.

Special Audit177. .(1) The Department may direct any person to get his accounts audited by an

accountant, if at any stage of the proceeding, it is of the opinion that it is necessaryto do so, having regard to the interest of revenue and -(a) the nature and complexity of the accounts;(b) volume of the accounts;(c) doubts about the correctness of the accounts;(d) multiplicity of transactions in the accounts; or(e) specialised nature of business activity of the person.

(2) The Department shall not issue any direction under sub-section (1) unless theperson has been given a reasonable opportunity of being heard and prior approvalof the Chief Commissioner or Commissioner has been obtained.

(3) The provisions of sub-section (1) shall have effect regardless of the fact that theaccounts of the person have been audited under any other law for the time beingin force or otherwise.

(4) The accountant shall, for the purposes of sub-section (1), be nominated by theChief Commissioner or Commissioner.

(5) The accountant shall furnish a report of its findings on specific points as theDepartment may require and all other issues material for the computation of totalincome or loss and the tax liability thereon.

(6) The report referred to in sub-section (5) shall be in the prescribed form duly signedand verified by the accountant and setting forth such particulars as may beprescribed.

(7) The accountant shall furnish the report referred to in sub-section (6) within thetime allowed by the Department.

(8) The Department may extend the time allowed under sub-section (7) by such furtherperiod or periods as it thinks fit, for reasons to be recorded in writing.

(9) However, the aggregate of the period allowed under sub-section (7) and the furtherperiod or periods allowed under sub-section (8) shall not exceed the period of ninemonths from the end of the month in which the direction under sub-section (1) isissued by the Department.

(10) The accountant shall furnish the report referred to in sub-section (5) to theDepartment and a copy of the same to the person.

(11) The remuneration of the accountant and other expenses of any audit under sub-section (1) shall be determined and paid by the Department in accordance withsuch guidelines as may be prescribed.

Determination of value of assets178. (1) The Department may, for the purposes of assessment, make a reference to a

Valuation Officer to estimate -(a) the value of any asset, investment or expenditure; and

87(b) the volume, weight and value of any mineral extracted from any mineduring the financial year.

(2) The Department may make a reference to the Valuation Officer under sub-section (1) whether or not it is satisfied about the correctness or completeness ofthe accounts of the person.

(3) In pursuance to a reference made under sub-section (1), the Valuation Officer shall,for the purpose of estimating thereunder and subject to the rules in this behalf,have all the powers to-(a) enter any land, mine, building or other place belonging to, or occupied by, the

person in connection with whose assessment the reference has been made;(b) require any person in charge of, or in occupation or possession of, the land,

mine, building or other place to afford him the necessary facility to survey orinspect the land, mine, building or other place;

(c) inspect any asset, in respect of which the reference has been made;(d) inspect any books of account, document or record which may be relevant for

the purpose of making the estimate in respect of which the reference has beenmade;

(e) gather any other information which may be relevant for the purposes of makingthe estimate.

(4) The Valuation Officer shall, by order in writing, make an estimate after taking intoaccount,-

(a) such evidence as the person may produce; and(b) the material in his possession, in respect of which an opportunity ofbeing heard has been provided to the person.

(5) The Valuation Officer may make an estimate to the best of his judgement, if theperson does not cooperate or comply with his direction.

(6) The Valuation Officer shall send a copy of the report of the estimate to theDepartment and the person within a period of nine months from the end of themonth in which a reference is made under sub-section (1).

(7) The Department shall, on receipt of the report of the Valuation Officer, proceed tocompute the total income of the person in conformity with the value estimated bythe Valuation Officer.

(8) However in a case where the variation, if any, between the value estimated by theValuation Officer and the value declared by the person is less than five per cent ofthe value declared, the value so declared shall be adopted by the Department forcomputing the total income of the person.

Determining the consequences of an impermissible avoidance arrangement179. (1) The Department shall, for the purposes of determining consequences of an

impermissible avoidance arrangement under section 89, serve on the person anotice requiring him, on a date to be specified therein, to produce, or cause to beproduced, any evidence or particulars -

(a) which may be required for the purposes of determining suchconsequences; or(b) which the person may rely upon in support of his claim, if any, that theprovisions of section 90 are not applicable to his case.

(2) On the day specified in the notice issued under sub-section (1), or as soon afterwardsas may be, the Department shall, by an order in writing, determine the consequences,if any, under section 89, after, -

88(a) hearing such evidence and after taking into account such particulars asthe person may produce; and(b) taking into account all relevant material in posession of the Department.

(3) Upon the determining the consequences, if any, the Department shall issue directionto the Examination Unit to make such adjustment to the total income, or the taxliability, in the case of the person and any other party to the arrangement, that arenecessary, appropriate and consistent.

(4) No order under sub-section (2) shall be issued after twelve months from the end ofthe month in which the notice under sub-section (1) is issued.

Assessment180. (1) The Examination Unit shall, for the purpose of making assessment, serve on a

person a notice requiring him to show-cause why the total income for the relevantfinancial year should not be determined at the amount, and for the reasons, specifiedtherein.

(2) The person referred to in sub-section (1) shall be the person to whom acommunication about selection of his case has been issued under section 173.

(3) The show-cause shall be prepared by the Examination Unit after taking intoaccount -

(a) the information in possession of the Department, if any;(b) the information, statements, documents, accounts, explanation or

objection furnished by the person in the course of examination, if any;(c) the outcome of enquiry made available by the Verification Unit, if any;(d) the advice made available by the Technical Assistance Unit, if any;(e) the report of the Valuation Officer, if any;(f) the report of special audit by the accountant, if any;(g) the order determining the consequences of an impermissible avoidance

arrangement, if any;(h) the statement of the person, or any other person, recorded on oath, if

any;(i) the oral submissions made by the person in the course of personal hearing,

if any; and(j) any other information which is material for determination of total income

and tax liability thereon.(4) No material referred to in clauses (a) to (j) of sub-section (3) shall be taken into

account for the purpose of making assessment unless an opportunity of beingheard has been provided to the person in respect thereof.

(5) The person shall file a response to the show-cause notice before the expiry of onemonth from the end of the month in which the show-cause notice is issued.

(6) The Examination Unit shall complete the assessment -(a) in a case where no response is furnished under sub-section (5), on thebasis of the show-cause notice; and(b) in a case where a response is furnished under sub-section (5), aftertaking into account -

(i) the material referred to in clauses (a) to (k) of sub-section (3); and(ii) the response to the show-cause notice, furnished under sub-section (5).

89(7) The Examination Unit shall, on the basis of the assessment made under sub-

section (6), determine the sum payable by, or refundable to, the person after adjustingthe pre- paid taxes, or amount refunded to the person prior to such determination.

(8) No order shall be passed under sub-section (6), after the expriy of two months fromthe end of the month in which the show-cause is issued.

Assessment in large cases181. (1) The Examination Unit shall, for the purposes of making assessment in an large

case, serve a draft of the order of assessment on a person. (2) The large case referred to in sub-section (1) shall be a case, where -

(a) the draft of the order of assessment is likely to result in any variation inthe total income or computation of tax which is prejudicial to the person; and(b) the variation exceeds the monetary limit of rupees twenty five lakhs.

(3) The person referred to in sub-section (1) shall be the person to whom acommunication about selection of his case has been issued under section 173.

(4) The draft order shall be prepared by the Examination Unit after taking into accountthe material referred to in clauses (a) to (k) of sub-section (3) of section 180.

(5) The person may, within one month from the end of the month in which the draftorder is received,-(a) furnish his acceptance of the draft order, to the Examination Unit;(b) furnish his objections, if any, to the draft order with, -

(i) the Examination Unit for completion of assesment; or(ii) the Dispute Resolution Panel for resolution of disputes.

(6) The Examination Unit shall complete the assessment, by an order, on the basis ofthe draft order, if -(a) no objections are furnished within the period specified in sub-section (5); or(b) the person communicates to the Examination Unit the acceptance of the draft

order.(7) The Examination Unit shall, in cases where the person furnishes his objection to

the Unit, complete the assessment, by an order, after taking into account -(i) the material referred to in clauses (a) to (k) of sub-section (3) of section 180;

and(ii) the objection to the draft order, furnished under sub-section (5).

(8) The Examination Unit shall, in cases where the person furnishes his objection tothe Disput Resolution Panel, complete the assessment, by an order, in confirmitywith the directions issued by the Dispute Resolution Panel under section 184.

(9) No order shall be passed -(a) under sub-section (6) or sub-section (7), after the expiry of one month from

the end of the month in which the the time allowed to file the response undersub-section (5), expires; and

(b) under sub-section (8), after the expiry of one month from the end of the monthin which the direction of the Dispute Resolution Panel is received by theExamination Unit;

(10) No further opportunity of being heard shall be required to be provided to theperson before passing the order of assessment under sub-section (6), (7) or (8).

Best judgement assessment182. (1) The Department shall make the assessment of the total income to the best of its

judgement, if-

90(a) the person fails to,-

(i) comply with all the terms of a notice issued under sub-section (1) ofsection 174;

(ii) comply with a direction issued under section 177; or(b) the person fails to regularly follow the method of accounting provided in sub-

section (1), or the income computation and disclosure standards notified undersub-section (2), of section 60;or

(c) it is not satisfied about the correctness or completeness of the accounts ofthe person.

(2) The Department shall, in making the assessment under sub-section (1), take intoaccount all relevant material which has been gathered or is available on record.

(3) The Department shall, before making the assessment under sub-section (1), providethe person an opportunity of being heard by serving a notice calling upon theperson to show cause, on a date and time to be specified in the notice, why theassessment should not be completed to the best of its judgement.

(4) It shall not be necessary to give an opportunity under sub-section (3) before themaking of an assessment under this section, in a case where a notice under section174 has been issued.

Assessment of search and seizure cases183. (1) Every searched person shall be liable to pay specified tax in respect of his

undisclosed income for the block period, calculated at the rate provided in theFirst Schedule and in the manner provided therein.

(2) The Competent Investigating Officer shall serve a notice on a searched personrequiring him to show-cause why -(a) he should not be charged to specified tax in respect of his undisclosed

income of the block period, determined at the amount, and for the reasons,specified therein;

(b) prosecution under Chapter-XI of this Act should not be launched in respectof the offences specified therein.

(3) No show-cause notice under sub-section (1) shall be issued except with the priorapproval of the Competent Investigating Authority.

(4) No show-cause notice under sub-section (1) shall be issued after the expiry oftwelve months from the end of the month in which the search was initiated.

(5) On receipt of the show-cause notice, the person shall, within sixty days from theend of the month in which the notice is issued, -(a) make payment of the amount of specified tax, interest and fee relating to so

much of the undisclosed income which he intends to accept;(b) furnish to the Adjudicating Authority, -

(i) his acceptance, in full or in part, of the determination of the undisclosedincome and specified tax thereon; and

(ii) his objections, in full or in part, against the determination of theundisclosed amount and tax thereon.

(6) Upon receiving the objection, the Adjudicating Authority may -(a) call for and examine the record of any proceeding relating to the searched

person; and(b) make, or cause to be made, such further enquiry, as it thinks fit.

(7) The Adjudicating Authority shall make an assessment determining the undisclosedincome of the searched person for the block period after taking into account the -

91(a) show-cause notice;(b) evidence found as a result of search or requisition;(c) evidence available with the Department relating to the searched person;(d) objections, or acceptance, furnished by the person;(e) supporting evidence furnished by the person;(f) records relating to the searched person;(g) results of any enquiry made, or cause to be made; and(h) report of the Valuation Officer, Transfer Pricing Unit, any other unit or income-

tax authority, if any.(8) The Adjudicating Authority shall, on the basis of the assessment of undisclosed

income made under sub-section (7), determine the sum payable by the person afteradjusting the amount paid by the searched person on the undisclosed incomeprior to such determination.

(9) The Adjudicating Authority may direct that no prosecution under this Act shall belaunched against the searched person, having regard to -(a) co-operation extended by the searched person in the course of search and

seizure operation and thereafter till the completion of proceedings under thissection;

(b) proportion of undisclosed income determined in the show-cause notice whichhas been accepted by the searached person under sub-section (5); and

(c) such other circumstances of the case as considered relevant.(10) No refund shall be allowed to the searched person in respect of any amount paid

towards specified tax on undisclosed income before the assessment by theAdjudicating Authority under sub-section (7).

(11) The Adjudicating Authority shall be a collegium of three Principal Commissionersto be appointed by the Board.

(12) Every direction issued by the Adjudicating Authority shall be binding on theDepartment.

(13) No assessment under sub-section (7) shall be made unless an opportunity ofbeing heard has been given to the searched person and to the Department.

(14) No assessment under sub-section (7) shall be made after the expiry of nine monthsfrom the end of the month in which the show-cause notice is issued to the searchedperson.

(15) The Board may by rules lay down the procedure for efficient functioning of theAdjudicating Authority for expeditious disposal of the objections filed by thesearched persons.

(16) For the purposes of this section, -(a) “block period” means the period comprising -

(i) seven financial years immediately preceeding the financial year in whichthe search was initiated; and

(ii) the period commencing from first day of the financial year in which thesearch is initiated upto the date of conclusion of the search;

(b) “conclusion of search” means the execution of last of the authorisations forsearch or requisition, as the case may be;

(c) “initiation of search” with all its grammatical variations, means the executionof the first of the authorisation for search or requisition, as the case may be;

(d) “notings” include notation, jotting, scrible, reminder, scrawl,annotation, datum,agenda, minute,entry,memorandam,journal, inscription;

92(e) “record” includes book of accounts, document, loose paper, documentation,

data, file, dossier, information, note book, diary and report, whether in physicalor electronic form;

(f) “searched person” means a person in whose case -(i) an authorization for search and seizure action under section 126 has been

executed; or(ii) a consequential authorisation under section 127 has been executed; or(iii) an authorization for requision of material under section 134 has been

executed;(g) “specified tax” means tax on undisclosed income calculated at the rate specified

in the First Schedule and in the manner provided therein;(h) “undisclosed income” means -

(i) any income of the block period represented, by any valuable, stock-in-trade, moveable or immoveable property, transaction or noting in anyrecord, found in the course of search, or delivered in requisition, to theextent such income has -(A) not been recorded, on or before the date of initiation of search, in the

books of account or other documents maintained in the regular courserelating to the block period; or

(B) otherwise not been disclosed to the Department before the date ofthe initiation of search; and

(ii) any income of the block period represented, by any entry in respect of anexpense recorded in the books of account or other documents maintainedin the normal course relating to the block period, which is found to befalse and would not have been found to be so had the search not beenconducted;

(i) “valuables” include money, bullion, jewellary, precious or semi-precious stones,valuable artcles or thing.

Dispute Resolution Panel184. (1) The Dispute Resolution Panel shall be a collegium of three Commissioners to be

appointed by the Board.(2) The Dispute Resolution Panel shall -

(a) seek to resolve the disputes raised by the person in his objections furnishedunder section 186 against the draft order; and

(b) issue directions, as it think fit, to the Examination Unit to enable it to completethe assessment.

(3) The person shall, at the time of furnishing his objections against the draft order,be required to -(a) make an offer of settlement on issues in respect of which he would like to

resolve the disputes; and(b) identify the issues in respect of which he would like to contest.

(4) Upon receiving the objection, the Dispute Resolution Panel may -(a) call for and examine the record of any proceeding relating to the draft order; or(b) make, or cause to be made, such further enquiry, as it thinks fit.

(5) The Dispute Resolution Panel shall, after hearing the person and the Department,make a counter-offer of settlement to him on the relevant issues.

(6) The Dispute Resolution Panel shall issue directions, -

93(a) affirming the counter-offer of settlement on settled issues, including directions

for reduction or waiver of penalty, or granting of immunity from proscution;(b) confirming, reducing or enhancing the variation in the total income, or the

computation of tax liability, arising on account of contested issues; and(c) which it may consider fit in the circumstances of the case.

(7) The Dispute Resolution Panel shall, before issuing any direction under this section,take into account the following,-(a) draft order;(b) records relating to the draft order;(c) report of the valuation officer, Transfer Pricing Unit, any other unit or income-

tax authority, if any;(d) objections, or acceptance furnished by the person;(e) evidence furnished by the person, if any;(f) supporting evidence furnished by the person, if any;(g) result of any enquiry made by, or cause to be made by it; and(h) evidence collected by, or caused to be collected by it, if any.

(8) The Dispute Resolution Panel shall not issue any direction under this section soas to -(a) set aside any variation proposed in the draft order;(b) cause any further enquiry to be made by the Examination Unit; or(c) waive any amount of interest, fee or additional income-tax payable under this

Act.(9) If the members of the Dispute Resolution Panel differ in opinion on any point, the

point shall be decided according to the opinion of the majority.(10) Every direction issued under this section, by the Dispute Resolution Panel, shall

be binding on the Examination Unit.(11) No direction under this section shall be issued unless an opportunity of being

heard is given to the person and the Department on such directions which areprejudicial to their interest.

(12) No direction under this section shall be issued after nine months from the end ofthe month in which the objections are furnished to the Dispute Resolution Panel.

(13) The Board may make rules for the efficient functioning of the Dispute ResolutionPanel so as to expeditiously dispose of the objections filed under sub-section (5)of section 181.

(14) For the purposes of this section, -(a) “contested issues” means -

(i) the issues in respect of which a counter-offer of settlement has beenmade under sub-section (5) but has not been accepted by the person;and

(ii) the issues referred to in clause (b) of sub-section (3); and(b) “settled issues” means issues in respect of which a counter-offer of settlementhas been made under sub-section (5) and accepted by the person.

Modification of assessments185. (1) The Department may, if it considers necessary, modify any assessment order of a

person so as to determine the correct amount of loss, income, tax (including a nilamount) or any other sum payable under this Act in respect of the relevant financialyear in accordance with the provisions of this section.

94(2) The original assessment shall be modified under sub-section (1) to give effect only

to, -(a) the outcome of any enquiry conducted in respect of the information received

by the Department regardless of whether the information is received before,or after, the original assessment; and

(b) the outcome of any decision referred to in sub-section (5), which is prejudicialto the person.

(3) No modification under this section shall be made so as to increase the loss to becarried forward or decrease the amount of income, tax or any other sum payableunder this Act.

(4) The provisions of sub-section (1) shall not apply to any information, if -(a) the information was available on record at the time of passing the original

assessment but the enquiry in respect of the information had not been initiatedprior to the completion of the original assessment; or

(b) the enquiry in respect of the information had been completed and a report onoutcome of the enquiry was available on record prior to the completion of theoriginal assessment.

(5) For the purposes of this section and section 186, -(a) “assessment order” includes an intimation, a modified assessment order anda review order;(b) “enquiry” includes verification;(c) “information” includes -

(i) any new information, which may lead to a variation in the loss, income,tax (including a nil amount) or any other sum payable under this Actdetermined in the original assessment in respect of the relevant financialyear;

(ii) any finding in the case of the person in any other financial year, whichmay lead to a variation in the loss, income, tax (including a nil amount) orany other sum payable under this Act in the original assessment of therelevant financial year;

(iii) any decision, prejudicial to the person, rendered by Appellate Tribunal,High Court or Supreme Court in his case or in the case of any otherperson, under this Act or the Income-tax Act, 1961; and

(iv) any decision, prejudicial to the person, rendered by a court in his case orin the case of any other person, under any other law;

(d) “modified assessment order” means an order under this section;(e) “original assessment”, means an assessment order which is sought to be

modified under this section; and(f) “record” means all records available with the Examination Unit at the time of

passing of the original assessment.

Procedure for modification186. (1) The Examination Unit shall, for the purpose of modification, serve on a person a

notice requiring him to show-cause why the original assessment for the relevantfinancial year should not be modified, specifying therein, the nature and amountof, and the reasons for, the proposed modification.

(2) The show-cause shall be prepared by the Examination Unit after taking intoaccount -(a) the information in possession of the Department;

95(b) the information, statements, documents, accounts, explanation or objection

submitted by the person upto the passing of original assessment;(c) the outcome of enquiry made in respect of the information;(d) the advice made available by the Technical Assistance Unit;(e) the report of the Valuation Officer if any in respect of the information;(f) the report of special audit by the accountant;(g) the order of the Transfer Pricing Officer;(h) the order determining the consequences of an impermissible avoidance

arrangement;(i) the statement of the person, or any other person, recorded on oath;(j) the oral submissions made by the person in the course of hearing; and(k) any other information which is material for the purposes of modification.

(3) No material shall be taken into account for the purpose of modification unless anopportunity of being heard has been provided to the person in respect thereof.

(4) The person shall file a response to the show-cause notice before the expiry of onemonth from the end of the month in which the show-cause notice is issued.

(5) The Examination Unit shall, by an order, modify the original assessment -(a) in a case where no response is furnished under sub-section (4), on the basis

of the show-cause notice; and(b) in a case where a response is furnished under sub-section (4), after taking

into account the material on record and the the response to the show-causenotice, furnished under sub-section (4).

(6) The Examination Unit shall, on the basis of the modification made under sub-section (5), determine the sum payable by, or refundable to, the person after adjustingthe pre- paid taxes, or amount refunded to the person prior to such determination.

(7) No order of modification shall be passed under sub-section (5), after the expriy ofsix months from the end of the month in which the show-cause is issued.

Review of order187. (1) The Department may, if it considers necessary, review any assessment order of a

person so as to determine the correct amount of loss, income, tax (including a nilamount) or any other sum payable under this Act in respect of the relevant financialyear in accordance with the provisions of this section.

(2) The original assessment shall be reviewed under sub-section (1), if -(a) the facts in the case have not been correctly determined;(b) the instruction of the Board has not been followed; or(c) the judicial decisions, prejudicial to the person have not been followed.

(3) The fact in the case shall be deemed not to have been correctly determined, if -(a) the original assessment has been made without making enquiry or verification

which should have been made in the interest of revenue; or(b) the original assessment has been made allowing any claim, relief or deduction,

without probe.(4) The instructions of the Board shall be deemed not to have been followed, if any

ruling, order, direction or instruction issued by the Board has not been correctlyapplied.

(5) The judicial decisions prejudicial to the person shall deemed not to have beenfollowed, if effect has not been given to -

96(a) any decision, prejudicial to the person, rendered by Appellate Tribunal, High

Court or Supreme Court in his case or in the case of any other person, underthis Act or the Income-tax Act, 1961; or

(b) any decision, prejudicial to the person, rendered by any court in his case or inthe case of any other person under any other law;or

(c) decision of the Supreme Court to grant special leave in a petition filed againstany order of a jurisdictional High Court subsequent to the passing of theoriginal assessment.

(6) The power of the Department under sub-section (1) to review an order shall notextend to such matters,-(a) against which an appeal is pending before the Commissioner (Appeals); or(b) as has been considered and decided in any appeal.

(7) No review under this section shall be made so as to -(a) increase the loss to be carried forward;(b) decrease the amount of income, tax or any other sum payable under this

Act; or(c) cancel the original assessment and direct a fresh assessment.

(8) For the purposes of this section and section 188, -(a) “assessment order” includes an intimation, a modified assessment order anda review order ;(b) “modified assessment order” means an order under section 185; and(c) “original assessment”, means an assessment order which is sought to be

reviewed under this section; and(e) “review order” means an order under this section.

Procedure for amendment upon review188. (1)The Examination Unit shall, upon review of any assessment order, serve on a person

a notice requiring him to show-cause why the original assessment for the relevantfinancial year should not be amended, specifying therein, the nature and quantamof, and the reasons for, the proposed amendment.

(2) The show-cause shall be prepared by the Examination Unit after taking intoaccount -(a) the information in possession of the Department;(b) the information, statements, documents, accounts, explanation or objection

submitted by the person upto the passing of original assessment;(c) the outcome of enquiry made in respect of the information;(d) the advice made available by the Technical Assistance Unit;(e) the report of the Valuation Officer if any in respect of the information;(f) the report of special audit by the accountant;(g) the order determining the consequences of an impermissible avoidance

arrangement;(h) the statement of the person, or any other person, recorded on oath;(i) the oral submissions made by the person in the course of hearing;(j) any other information which is material for the purposes of modification and(k) the prevailing law on the issues.

(3) No material shall be taken into account for the purpose of amendment unless anopportunity of being heard has been provided to the person in respect thereof.

97(4) The person shall file a response to the show-cause notice before the expiry of one

month from the end of the month in which the show-cause notice is issued.(5) The Examination Unit shall, by an order, amend the original assessment -

(a) in a case where no response is furnished under sub-section (4), on the basisof the show-cause notice; and

(b) in a case where a response is furnished under sub-section (4), after takinginto account the material on record and the the response to the show-causenotice, furnished under sub-section (4).

(6) The Examination Unit shall, on the basis of the amendment made under sub-section(5), determine the sum payable by, or refundable to, the person after adjusting thepre- paid taxes, or amount refunded to the person prior to such determination.

(7) No order of amendment under sub-section(5) shall be passed by any ExaminationUnit comprising of any income-tax authority who was associated in the passing ofthe original order.

(8) No order of amendment under sub-section (5) shall be made after the expiry of oneyear from the end of the financial year in which the order sought to be reviewedwas passed.

Rectification of mistake189. (1) The Department may rectify any order passed by it under this Act in respect of

any mistake therein apparent from the record.(2) A mistake apparent from the record in relation to an order shall include -

(a) a mistake deemed to be apparent from the record; and(b) a mistake which becomes apparent under any prescribed circumstances arising

after the date of passing of the order or intimation;(3) A mistake shall be deemed to be apparent from the record, if the order sought to be

rectified is not in accordance with -(a) the decision of the Supreme Court, or the jurisdictional High Court, renderedsubsequent to the passing of such order or intimation;(b) any finding, or direction, contained in an order passed in the case of the

person for any other financial year by -(i) any authority, or Court, in any proceeding under this Act by way of

appeal, reference or revision; or(ii) a Court in any proceeding under any other law in so far as it has a bearing

on the liability under this Act; or(c) any finding, or direction, contained in an order passed in the case of any other

person for any financial year by-(i) any income-tax authority under the Act; or(ii) by a court in any proceeding under any law in so far as it has a bearing on

his liability under this Act.(4) A mistake apparent from the record shall not include a mistake on a matter in the

order which has been decided in appeal or revision.(5) For the purposes of this section and section 190, -

(a) “order” includes an intimation, an assessment order, a modified assessmentorder, a review order, a penalty order and any other order under this Act; and

(b) “record” means all records available with the Department at the time of passingof the order.

98

Procedure for rectification190. (1) A rectification under section 189 shall be made by the Department,-

(a) on its own motion; or(b) on an application made to it by the person in whose case the order sought to

be amended has been passed.(2) The application referred to in sub-section (1) shall be,-

(a) verified in the prescribed form and manner and setting forth such otherparticulars as may be prescribed; and

(b) furnished to the Department in the prescribed manner.(3) No application for rectification shall be furnished by the person, after the expiry of

seven years from the end of the financial year to which the order relates or sixmonths from the end of the month in which the order sought to be rectified waspassed, whichever is later.

(4) An application for rectification received by the Department shall be decided withina period of six months from the end of the month in which the application isreceived, failing which the person shall be entitled to cost under section 248.(5) No rectification under this section shall be made by the Department on itsown motion, after the expiry of seven years from the end of the financial year towhich the order relates or six months from the end of the month in which the ordersought to be rectified was passed, whichever is later.

(6) The Department shall not make any rectification, which has the effect of enhancingan assessment or reducing a refund or otherwise increasing any liability of theperson under this Act, unless the Department has given to the person a reasonableopportunity of being heard.

Notice of demand191. (1) Any sum payable under this Act for any financial year shall be demanded by the

Department by serving upon the person a notice of demand in the prescribed formand manner.

(2) The Department may aggregate the sum payable under various provisions of thisAct and issue a consolidated notice of demand under sub-section (1) as considerednecessary.

(3) The Department may revise the notice of demand consequent to any change in thesum payable determined by the Department under this Act from time to time, andserve on the person the revised notice of demand.

Time limits for completion of assessment or reassessments192. (1) The time limit for completion of an assessment proceeding under this Act, in

respect of the nature of the proceedings referred to in column (2) of the Table – 4,shall be the period of limitation specified in corresponding entry in Column (4) ofthe said Table, as reckoned from the date mentioned in corresponding entry inColumn (3) thereof.

99Table-4

Limitation for completion of assessment

SL No. Nature of proceedings Date from which limitation Period of is reckoned limitation

(1) (2) (3) (4)

1. Assessment under Last date of the financial Twenty onesection 180 year in which – months

(a) the return of income is furnished; or

(b) the notice calling for return of income is served upon the taxpayer, if no return is

furnished.2. Assessment in large Last date of the financial Twenty four

cases under section 181 year in which – monthswhere draft order is (a) the return of incomeaccepted or objections is furnished; orare furnished before the (b) the notice calling forExamination Unit return of income is

served upon the taxpayer, if no return is furnished.

3. Assessment in large Last date of the financial Thirty monthscases under section 181 year in which –where objections are (a) the return of income isfurnished before the furnished; orDispute Resolution (b) the notice calling forPanel return of income is

served upon the taxpayer, if no return is furnished.

4. Best judgement Last date of the financial Twenty fourassessment under year in which – monthssection 182 (a) the return of income is

furnished; or(b) the notice calling for return of income is served upon the taxpayer, if no return is furnished.

5. Assessment in Search Last date of the month in Twenty fourand Seizure cases which the search was monthsunder section 183 concluded

6. Modification of Last date of the financial Four yearsassessment under year in which the originalsection 185 to give assessment order was

100effect to outcome of an passedenquiry

7. Modification of Last date of the financial Four yearsassessment under year in which the originalsection 185 to give assessment order waseffect to outcome of any passeddecision of AppellateTribunal or Court whichis prejudicial to thetaxpayer.

8. Review of assessment Last date of the financial One yearunder section 187 year in which the order sought

to be reviewed was passed

9. An assessment required Last date of the financial One year to be made in pursuance year in which the appellateto an appellate order order is received by thepassed by Commissioner Department.(Appeals) or AppellateTribunal setting aside orcancelling the originalassessment

10. An assessment required Last date of the financial One yearto be made in pursuance year in which the orderto an order of review of review is passed by themade by the Department Department.under section 187

11. An assessment required Last date of the financial One yearto be made in pursuance year in which the orderto the revival of any of revival of proceedings isproceeding under this received by the Department,Act or proceedings are deemed

to be revived.

(2) In a case where an assessment is required to be made as consequence of, or to giveeffect to, any finding or direction contained in an appellate order passed by theCommissioner (Appeals), Appellate Tribunal, High Court or Supreme Court, thelimitation for completion of assessment provided in sub-section (1) shall not apply.

(3) In a case where an assessment is required to be made as consequence of, or to giveeffect to, any finding or direction contained in an appellate order passed by theCommissioner (Appeals), Appellate Tribunal, High Court or Supreme Court, thelimitation for completion of assessment provided in sub-section (1) shall not apply.

101(4) In computing the period of limitation for the purposes of this section, the following

period or time shall not be included, namely:-(a) the time taken in giving an opportunity of hearing to the person on change of

incumbent under section 125;(b) the period during which the assessment proceeding is stayed by an order or

injunction of any court;(c) the period commencing from the date on which the Department directs the

taxpayer to get his accounts audited by an accountant under section 177 andending with the last date on which the special audit report under that sectionis furnished;

(d) the period commencing from the date on which the Department makes areference to the Valuation Officer under section 178 and ending with the dateon which the report of Valuation Officer under that section is furnished;

(e) the period commencing from the first day of the month in which the notice forthe purpose of determining consequences of an impermissible avoidancearrangement under section 180 is served on the person and ending with thelast day of the month in which the order determining the consequences underthat section is passed;

(f) the period commencing from the date on which an application is made beforethe Authority for Advance Rulings under section 306 and ending with thedate on which the order rejecting the application under section 307 is receivedby the Commissioner; or

(g) the period commencing from the date on which an application is made beforethe Authority for Advance Rulings under section 306 and ending with thedate on which the advance ruling pronounced by the Authority under section309 is received by the Commissioner.

(5) The period of limitation available to the Department for making an order ofassessment, modification or review shall not be less than sixty days, if the periodimmediately after the exclusion of the time or period specified in subsection (4) isless than sixty days.

(6) In this section-(a) assessment of an income for a financial year shall be deemed to have been

made in pursuance to an appellate order passed by the Commissioner (Appeals)or Appellate Tribunal for that financial year, if the appellate order relates toanother financial year and the income is excluded from the total income of thetaxpayer for such other financial year; or

(b) assessment of an income in the case of a taxpayer shall be deemed to havebeen made in pursuance to an appellate order passed by the Commissioner(Appeals) or Appellate Tribunal for that taxpayer, if the appellate order relatesto another taxpayer and the income is excluded from the total income of suchother taxpayer.

102

J. Procedure for assessment of unincorporated body

Assessment of unincorporated body193. (1) The assessment of an unincorporated body for any financial year shall be made in

the manner provided in this section.(2) The total income of the unincorporated body for the financial year shall be

determined in accordance with the provisions of this Act.(3) The total income determined under sub-section (2) shall be apportioned into two

parts, namely:-(a) the total income declared by the unincorporated body in the return of

income; and(b) the excess of the total income assessed over the total income declared by

the unincorporated body in the return of income.(4) The amount referred to in clause (a) of sub-section (3) shall be apportioned between

the participants in accordance with the instrument of agreement between them.(5) The share of each participant (including loss, if any) determined under sub-section

(4) shall be aggregated with any salary, remuneration, interest, commission or anyother payment not being capital in nature, and the aggregated amount shall bereferred to as “adjusted share”.

(6) The adjusted share determined under sub-section (5) shall, in the case of eachparticipant, be included in their respective gross earnings from the business andassessed to tax accordingly.

(7) The amount referred to in clause (b) of sub-section (3) shall not be included inthe total income of any participant regardless of whether such amount isapportioned between the participants or not.

(8) The income tax payable by the unincorporated body shall be the amountcalculated in accordance with the formula -

A x B

Where A = the maximum marginal rate; andB = the excess of the total income assessed over the total income declared by the unincorporated body in the return of income.

(9) The unincorporated body shall be liable to pay tax on its total income at themaximum marginal rate, if -(a) there is no instrument of agreement between the participants;(b) the share of any participant is unknown; or(c) any of the participants has not obtained the Permanent Account Number.

(10) An unincorporated body may retain out of the adjusted share of each participant inthe income of the unincorporated body an amount equivalent to the tax which maybe levied on the participant in respect of that share, till such time as the tax is paidby the participant.

(11) The Department may make a reallocation of the total income of theunincorporated body between, or among, the participants-(a) to reflect economic reality if the instrument of agreement does not have

substantial economic effect; or(b) to reflect the respective contribution of the participants to the unincorporated

body of capital, expertise and labour.

103(12) In this Act, all properties of the unincorporated body shall be treated as if it were

owned by the unincorporated body and not its participants regardless of thefact that the property is registered or recorded in the name of any of its participants.

Assessment of unincorporated body in case of change in its constitution194. (1) The Department shall, in a case where a change has occurred in the constitution of

an unincorporated body, make a single assessment in respect of the entire financialyear in which the change has occurred.

(2) For the purposes of this section, a change in the constitution of an unincorporatedbody is said to have taken place, if-(a) one, or more, of the participants cease to be participants;(b) one, or more, new participants are admitted; or(c) all the participants continue with a change in their respective shares or in

the shares of some of them.(3) The provisions of this section shall not apply, if the change in constitution is on

account of the death of a participant or on account of the retirement of all theparticipants.

Assessment on the retirement or death of the participant195. (1) The Department shall make separate assessments on any two unincorporated

bodies, if-(a) one unincorporated body succeeds another unincorporated body; and(b) the succession is by virtue of retirement of all participants in the

unincorporated body or death of any of the participants.(2) The separate assessments shall be made in accordance with the provisions of

section 196 as if-(a) the unincorporated body, succeeding the other unincorporated body, is the

successor; and(b) the unincorporated body being succeeded is the predecessor.

Assessment upon business reorganisation196. (1) The assessment of the predecessor and the successor in a business reorganisation

shall, in respect of the financial year in which the business reorganisation isundertaken, be made in the manner provided in this section.

(2) The predecessor shall be assessed in respect of the income for the period beginningwith the first day of the financial year and ending on the day immediately precedingthe date of business reorganisation.

(3) The successor shall be assessed in respect of the income for the period beginningwith the date of business reorganisation and ending on the last day of the financialyear.

(4) Any proceeding under this Act taken against the predecessor shall be deemed tohave been taken against the successor and may be continued against the successorfrom the stage at which it stood on the date of the business reorganisation, if thepredecessor does not exist or cannot be found.

(5) Any proceeding under this Act may be taken against the successor, which couldhave been taken against the predecessor if he existed or was found.

104

K. - Procedure for assessment in special cases

Representative assessee197. (1) For the purposes of this Act, “representative assessees” in respect of a person

means-(a) the agent of a non-resident, if the person is a non-resident;(b) the guardian, manager, or whosoever receives or is entitled to receive any

income on behalf of a minor, or an indisposed person;(c) the Court of Wards, the Administrator-General, the Official Trustee, any

receiver or manager (including any individual, whatever be his designation,who manages property on behalf of the person) appointed by, or under, anyorder of a court, if such individual receives, or is entitled to receive, income onbehalf, or for the benefit, of the person;

(d) a trustee appointed under an oral trust, or a trust declared by a duly executedinstrument in writing whether testamentary or otherwise, if -(i) he receives or is entitle to receive income on behalf, or for the benefit, of

the person; and(ii) the person is a trust;

(e) the legal representative, or the executor, if the person dies;(f) a participant, or the legal representative of the deceased participant, in the

case of dissolution of an unincorporated body; and(g) the liquidator appointed under section 275 , of the Companies Act, 2013 in the

case of a company.(2) The “agent” in relation to a non-resident includes -

(a) any person in India -(i) who is employed by, or on behalf of, the non-resident;(ii) who has any business connection with the non-resident;(iii) from, or through, whom the non-resident is in receipt of any income,

whether directly or indirectly; or(iv) who is the trustee of the non-resident; and

(b) any other person who has acquired, by means of transfer, a capital asset inIndia from the non-resident.

(3) A broker in India who, in respect of any transactions, does not deal directly with,or on behalf of, a non-resident principal but deals with, or through, a non-residentbroker shall not be deemed to be an agent under this section in respect of suchtransactions, if the following conditions are fulfilled, namely:-(a) the transactions are carried on in the ordinary course of business through the

first mentioned broker; and(b) the non-resident broker is carrying on such transactions in the ordinary course

of his business and not as a principal.(4) The “executor” in relation to the estate of a deceased person means -

(a) an individual, if such individual is the only executor; or(b) an association of persons comprising all the executors, if there are more than

one executor, and includes an Administrator or other individual administeringthe estate.

(5) No person shall be treated as an agent of a non-resident unless he has had anopportunity of being heard by the Department as to his liability to be treated assuch.

105

Rights and obligations of a representative assessee198. (1) Every representative person shall, in his representative, be liable to assessment

only in respect of the income of the person represented by him (hereinafter in thissub-chapter referred to as the principal).

(2) Every representative person shall, subject to the provisions of sub-section (3),have the same duties, responsibilities and liabilities as if the income accrued to, orreceived or owned by, him.

(3) The tax on income of the representative assessee shall be levied upon, and recoveredfrom, him in the manner, and to the extent, as it would have been leviable upon, andrecoverable from, the principal.

(4) Any representative assessee, or any individual who apprehends that he may beassessed as a representative assessee, may retain a sum equal to his estimatedliability under this sub-chapter out of the money payable by him to the principal onwhose behalf he is liable to pay tax.

(5) The representative assessee, or the individual referred to in sub-section (4), in theevent of disagreement between him and the principal as to the amount to be soretained, may apply to the Department for a certificate stating the amount to be soretained pending final settlement of the liability.

(6) Upon receipt of the application under sub-section (5), the Department shall issue,within a period of one month from the date of receipt of the application, the certificatestating the amount to be retained by the representative assessee or the individual.

(7) The certificate issued under sub-section (6) shall be the warrant for retaining theamount specified therein by the representative assessee or the individual.

(8) The amount recoverable from the representative assessee, or the individual referredto in sub-section (4), at the time of final settlement shall not exceed the amountspecified in such certificate, except to the extent to which the representativeassessee, or the individual, may have additional assets of the principal at that time.

(9) Every representative assessee who, as such, pays any sum under this Act, shall beentitled to -(a) recover the sum so paid from the principal; or(b) retain an amount equal to the sum so paid out of any moneys that may be in

his possession, or may come to him, in his representative capacity.(10) In the case of a representative assessee referred to in clauses (e), (f) or (g) of sub-

section (1) of section 197,-(a) any proceeding taken against the principal before his death or its dissolution

or the appointment of the liquidator, shall be deemed to have been takenagainst the representative assessee and may be continued against him fromthe stage at which it stood on the date of the death or dissolution or theappointment; and

(b) any proceeding which could have been taken against the principal may betaken against the representative assessee, if the principal had survived orexisted or the liquidator had not been appointed.

Direct assessment or recovery not barred199. Nothing in this sub-chapter shall prevent -

(a) the direct assessment of the principal; or(b) the recovery of any sum payable under this Act from the principal.

106Remedy against property in cases of representative assessee

200. The Department shall have the same remedy against all property of any kindvested in, or under the control or management of, any representative assessee asit would have against the property of the principal, in as full and ample a manner,whether the demand is raised against the representative assessee or against theprincipal direct.

Assessment after partition of a Hindu undivided family201. (1) A Hindu undivided family, hitherto assessed as undivided, shall be deemed, for

the purposes of this Act, to continue to be a Hindu undivided family, except where,and in so far as, a finding of partition has been given under this section in respectof the Hindu undivided family.

(2) The Department shall -(a) make an enquiry into the claim of partition made by, or on behalf of, any

member of a Hindu undivided family, hitherto assessed as undivided, at thetime of making the assessment;

(b) give notice of the enquiry to all members of the family; and(c) record a finding as to whether there has been a total, or partial, partition of the

joint family property and, if there has been such a partition, the date on whichit has taken place.

(3) The income of the Hindu undivided family, hitherto assessed as undivided, shall,for the financial year in which the partition took place, be the income in respect ofthe period upto the date of partition, as if no partition had taken place.

(4) Each member, or group of members, of the Hindu undivided family, hitherto assessedas undivided, shall be jointly and severely liable for tax on the income of anyfinancial year or period, upto the date of partition, and the tax shall be recoveredfrom him, or them, accordingly.

(5) For the purposes of this section, the several liability of any member, or group ofmembers, shall be computed according to the portion of the joint family propertyallotted to him, or to them, upon the partition.

(6) The provisions of this section shall, so far as may be, apply in relation to the levyand collection of any tax, additional income-tax, interest, fee, fine, penalty or othersum in respect of any period upto the date of the partition, whether total or partial,of a Hindu undivided family as they apply in relation to the levy and collection oftax in respect of any such period.

(7) For the purposes of this Act, no claim of partial partition of a Hindu undividedfamily shall be enquired into, or recognised as such.

(8) In case of a partial partition of a Hindu undivided family -(a) the Hindu undivided family shall continue to be assessed under this Act as if

no partial partition had taken place; and(b) the liability of that Hindu undivided family or its members under this Act,

before or after the partial partition, shall remain the same.(9) In this section,—

(a) “partition” means—(i) where the property admits of a physical division, such division of the

property, but a physical division of the income without a physical divisionof the property producing the income shall not be deemed to be apartition; or

107(ii) where the property does not admit of a physical division, such division

as the property admits of, but a mere severance of status shall not bedeemed to be a partition;

(b) “partial partition” means a partition which is partial as regards the personsconstituting the Hindu undivided family, or the properties belonging to theHindu undivided family, or both.

Assessment of non-resident in respect of occasional shipping business202. (1) The assessment of the income of a non resident from the business of operation of

ships (including an arrangement such as slot charter, space charter or joint charter)shall, regardless of anything to the contrary contained in any other provisions ofthis Act, be made in accordance with the provisions of this section.

(2) The master of a ship belonging to, or chartered by, a non-resident shall, before thedeparture of the ship, furnish to the Department a return of the full amount oftransportation charges accrued to, or received by, the owner or charterer, since thelast arrival of the ship in that port.

(3) The requirement of furnishing the return shall be deemed to have been compliedwith, if -(a) the Department is satisfied that-

(i) it is not possible for the master of the ship to furnish the return before thedeparture of the ship from the port; and

(ii) the master of the ship has made satisfactory arrangements for furnishingthe return and payment of tax; and

(b) the return is furnished within a period of thirty days of the departure of theship by any person authorized by the master of the ship.

(4) On receipt of the return, the Department shall -(a) assess the income referred to in sub-section (1) in accordance with serial

number 8 of the Table under Paragraph 1 of the Tenth Schedule, after callingfor such documents as it deems fit; and

(b) determine the sum payable as tax thereon at the rates applicable to the totalincome of a foreign company.

(5) The sum determined under sub-section (4) shall be payable by the master of theship or any other person authorised by him.

(6) A port clearance shall not be granted to the ship until the Commissioner of Customs,or other officer duly authorised to grant it, is satisfied that the tax assessable underthis section has been duly paid or that satisfactory arrangements have been madefor the payment.

(7) Nothing in this section shall prevent the assessment of the income, referred to insub-section (1), for the relevant financial year of the owner, or charterer, of the shipin accordance with the other provisions of this Act, at his option.

(8) Any payment of tax made under this section shall be treated as advance tax, incase an assessment is made as envisaged in sub-section (7).

Assessment of persons leaving India203. (1) The income of an individual for part of a financial year may be charged to tax in that

financial year, if -(a) it appears to the Department that the individual may leave India during the

financial year or shortly after its expiry; and(b) has no intention of returning to India.

108(2) The part of a financial year, referred to in sub-section (1), shall be the period

beginning with the first day of the financial year and ending with the probable dateof departure of the individual from India.

(3) For the purposes of charging the individual, as required by sub-section (1), theDepartment may require the individual to furnish the return of income within thetime specified therein, which shall not be less than seven days.

(4) The Department shall, regardless of anything to the contrary contained in anyother provisions of this Act, also require the individual to furnish the returns ofincome, within the time specified therein, which shall not be less than seven days,-(a) for the financial year for which the due date for filing of return has not expired;

and(b) for such other financial years for which no return of income has been filed

which was otherwise required to be filed.(5) The Department shall, upon receipt of the return, or after the expiry of the time

allowed for furnishing the return under sub-section (3) or sub-section (4), proceedto make assessment in accordance with the provisions of this Act in so far as theyapply.

(6) The Department may estimate the income of the individual for part of a financialyear, if -(a) sufficient time is not available to call for the return before the probable departure

of the individual and complete the process of assessment; or(b) it cannot be readily determined in accordance with this Act.

. Assessment of an unincorporated body formed for a particular event or purpose204. (1) The income of an unincorporated body for part of a financial year may, regardless

of anything to the contrary contained in this Act, be charged to tax in that financialyear, if-(a) it appears to the Department that the unincorporated body has been formed

for a particular event or purpose; and(b) it is likely to be dissolved in the financial year or shortly after its expiry.

(2) The part of a financial year, referred to in sub-section (1), shall be the periodbeginning with the first day of the financial year and ending with the probable dateof disolution of the unincorporated body.

(3) For the purposes of charging the unincorporated body, as required by sub-section(1), the Department may require the unincorporated body to furnish the return ofincome within the time specified therein, which shall not be less than seven days.

(4) The Department shall, regardless of anything to the contrary contained in anyother provisions of this Act, also require the unincorporated body to furnish thereturns of income, within the time specified therein, which shall not be less thanseven days,-(a) for the financial year for which the due date for filing of return has not expired;

and(b) for such other financial years for which no return of income has been filed

which was otherwise required to be filed.(5) The Department shall, upon receipt of the return, or after the expiry of the time

allowed for furnishing the return under sub-section (3) or sub-section (4), proceedto make assessment in accordance with the provisions of this Act in so far as theyapply.

109(6) The Department may estimate the income of the unincorporated body for part of a

financial year, if -(a) sufficient time is not available to call for the return before the probable disolution

of the unincorporated body and complete the process of assessment; or(b) it cannot be readily determined in accordance with this Act.

Assessment of persons likely to transfer property to avoid tax205. (1) The income of a person for part of a financial year may, regardless of anything to

the contrary contained in this Act, be charged to tax in that financial year, if-(a) it appears to the Department that the person is likely to charge, sell, transfer,

dispose of or otherwise part with any of his assets; and(b) the person will not be left with sufficient assets for payment of the liability

under this Act.(2) The part of a financial year, referred to in sub-section (1), shall be the period

beginning with the first day of the financial year and ending with the probable dateof alienation of the asset.

(3) For the purposes of charging the person as required under sub-section (1), theDepartment may require the person to furnish the return of income within the timespecified therein, which shall not be less than seven days.

(4) The Department shall, regardless of anything to the contrary contained in anyother provisions of this Act, also require the person to furnish the return of income,within the time specified therein, which shall not be less than seven days,-(a) for the financial year for which the due date for filing of return has not expired;

and(b) for such other financial years for which no return of income has been filed

which was otherwise required to be filed.(5) The Department shall, upon receipt of the return, or after the expiry of the time

allowed for furnishing the return under sub-section (3) or sub-section (4), proceedto make assessment in accordance with the provisions of this Act in so far as theyapply.

(6) The Department may estimate the income of the person for part of a financial year,if -(a) sufficient time is not available to call for the return before the probable date of

alienation by the person and complete the process of assessment; or(b) it cannot be readily determined in accordance with this Act.

L. Appeals and revision

Appeal to Commissioner (Appeals)206. (1) An aggrieved person may appeal to the Commissioner (Appeals) against the

following:-(a) any order passed under this Act; or(b) an intimation issued under this Act.

(2) A person may appeal to the Commissioner (Appeal) for a declaration that nowithholding of tax was required by him on any transaction with a non-resident, ifthe person -

110(a) is required under any agreement, or other arrangement, to bear the liability

under this Act in respect of the income comprised in the transaction thereunder; and

(b) has paid the taxes to the credit of the Central Government.(3) No appeal shall lie under this section against the following orders, namely:-

(a) an interim order passed by an income-tax authority in any proceedings underthis Act;

(b) an order passed under this Act with the approval of any income-tax authorityabove the rank of the Principal Commissioner;

(c) an order passed under this Act by the Adjudicating Authority;(d) an order passed under this Act in pursuance of -

(i) an advance pricing agreement or a resolution of an assessment by way ofthe mutual agreement procedure; or

(ii) the direction of the Dispute Resolution Panel or Approving Panel; or(e) such other order or intimations as may be prescribed by the Board in this

behalf.

Form of appeal and limitation207. (1) Every appeal under section 206 shall be in the prescribed form and shall be verified

in the prescribed manner.(2) Every appeal filed by a person under section 206 shall be accompanied by a

prescribed fee.(3) The appeal filed by a person under section 206 shall be presented within thirty

days of the following:-(a) the date of service of the notice of demand, if the appeal relates to any order

or intimation in pursuance of which such notice of demand is issued;(b) the date on which the period of six months for disposing of the application

expired, if the appeal relates to not disposing of the application for rectificationunder section 267;

(c) the date of payment of the tax to the Central Government, if the appeal is filedunder sub-section (2) of section 206 ; and

(d) the date on which the communication of the order sought to be appealedagainst is served, if the appeal relates to any other matter.

(4) The appeal filed by the Commissioner under section 206 shall be presented withinthree months from the end of the month in which the assessment order, to whichthe appeal relates, is passed.

(5) The Commissioner (Appeals) may admit an appeal after the expiration of the periodspecified in sub-section (3), if-(a) he is satisfied that the appellant had sufficient cause for not preferring it

within that time; and(b) the delay in filing the appeal does not exceed one year.

(6) No appeal under this section shall be admitted unless, at the time of filing of theappeal,-(a) the person has paid the tax due in accordance with the return furnished;(b) the person has paid an amount equal to the amount of advance-tax which was

payable by him, if no return has been furnished by him.(7) The Commissioner (Appeals) may, on an application made by the person, exempt

him from the operation of the provisions of clause (b) of sub-section (6) for anygood and sufficient reason to be recorded in writing.

111

Procedure in appeal208. (1) The Commissioner (Appeals) shall fix a day and place for the hearing of the appeal,

and shall give notice of the same to the appellant and the Department againstwhose order the appeal is preferred.

(2) The following shall have the right to be heard at the hearing of the appeal, namely:-(a) the appellant, either in person or by an authorised representative; and(b) the Department or by their representative.

(3) The Commissioner (Appeals) shall have the power to adjourn the hearing of theappeal from time to time.

(4) The Commissioner (Appeals) may, before disposing of any appeal, make suchfurther inquiry as he thinks fit.

(5) The Commissioner (Appeals) may, during the proceedings before him, direct theDepartment to make inquiry and report the result of the same to him on such pointsarising out of any new question of fact or law.

(6) The Commissioner (Appeals) may, at the hearing of an appeal, allow the appellantto go into any ground of appeal not specified in the grounds of appeal, if theCommissioner (Appeals) is satisfied that the omission of that ground from theform of appeal was not willful or unreasonable.

(7) The Commissioner (Appeals) shall dispose of the appeal by an order in writing andshall state, therein, the points for determination, the decision thereon and thereason for the decision.

(8) In every appeal, the Commissioner (Appeals), where it is possible, may hear anddecide such appeal within a period of one year from the end of the financial year inwhich such appeal is filed before him under section 206.

(9) On the disposal of the appeal, the Commissioner (Appeals) shall communicate theorder passed by him to the appellant and to the Department.

(10) When the Commissioner (Appeals) passes an order in an appeal filed before itunder sub-section (7), effect shall be given to the order passed on the appeal bythe Department on the basis of such order.

Powers of the Commissioner (Appeals)209. (1) In disposing of an appeal, the Commissioner (Appeals), shall have the following

powers, namely:-(a) in an appeal against an order of assessment, he may confirm, reduce, enhance

or annul the assessment;(b) in an appeal against an order imposing a penalty, he may confirm or cancel

such order or vary it so as either to enhance or to reduce the penalty; and(c) in any other case, he may determine the issues arising in the appeal and pass

such orders thereon, as he thinks fit.(2) The Commissioner (Appeals) may consider and decide any matter which was not

considered by the Department.(3) The Commissioner (Appeals) shall not enhance an assessment or a penalty or

reduce the amount of refund unless the appellant has had a reasonable opportunityof showing cause against such enhancement or reduction.

(4) In disposing of an appeal, the Commissioner (Appeals), may consider and decideany matter arising out of the proceedings in which the order appealed against waspassed, notwithstanding that such matter was not raised before the Commissioner(Appeals) by the appellant.

112

Appellate Tribunal210. (1) The Central Government shall constitute an Appellate Tribunal consisting of as

many judicial and accountant members as it thinks fit to exercise the powers anddischarge the functions conferred on the Appellate Tribunal by this Act.

(2) A judicial member shall be a person-(i) who has for at least ten years held a judicial office in the territory of India;(ii) who has been a member of the Indian Legal Service and has held a post in GradeI of that Service, or any equivalent or higher post, for at least three years; or(iii) who has been an advocate for at least ten years.

(3) An accountant member shall be a person-(a) who has for at least ten years been in the practice of accountancy as a chartered

accountant under the Chartered Accountants Act, 1949; or(b) who has been a member of the Indian Revenue Service and has held the post

of Additional Commissioner of Income-tax or any equivalent or higher postfor at least three years.

(4) The Central Government may appoint one or more members of the Appellate Tribunalto be Vice-President or, as the case may be, Vice-Presidents thereof.

(5) The Central Government may appoint one of the Vice-Presidents of the AppellateTribunal to be the Senior Vice-President thereof.

(6) The Central Government may appoint a person who is, or has been, a Judge of theSupreme Court or a Chief Justice of a High Court to be the President of the AppellateTribunal.

(7) The Senior Vice-President or a Vice-President shall exercise such of the powersand perform such of the functions of the President as may be delegated to him bythe President by a general or special order in writing.

(8) For the purpose of sub-section (2),-(a) in computing the period during which a person has held judicial office in the

territory of India, there shall be included any period, after he has held anyjudicial office, during which the person has been an advocate or has held theoffice of a member of a Tribunal or any post, under the Union or a State,requiring special knowledge of law;

(b) in computing the period during which a person has been an advocate, thereshall be included any period during which the person has held judicial officeor the office of a member of a Tribunal or any post, under the Union or a State,requiring special knowledge of law after he became an advocate.

Qualifications, terms and conditions of service of President, Vice-President and Member

211.The qualfications, appointment, term of office, salaries and allowances, resignation,removal and the other terms and conditions of service of the President, VicePresident and other Members of the Appellate Tribunal shall be governed by theprovisions of section 184 of the Finance Act, 2017.

Appeals to the Appellate Tribunal212. (1) An aggrieved person may appeal to the Appellate Tribunal against the following:-

(a) an order passed by a Commissioner (Appeals);(b) an order passed under this Act with the approval of any income-tax authority

above the rank of the Principal Commissioner;

113(c) an order passed under this Act by the Adjudicating Authority;(d) an order passed under this Act in pursuance of -

(i) an advance pricing agreement or a resolution of an assessment by way ofthe mutual agreement procedure; or

(ii) the direction of the Dispute Resolution Panel or Approving Panel.(2) The Judicial Management Unit may, if it objects to any order passed by a

Commissioner (Appeals), appeal to the Appellate Tribunal against the order.(3) Every appeal under sub-section (1), or sub-section (2), shall be filed within sixty

days of the date on which the order sought to be appealed against is communicatedto the person or to the Judicial Management Unit, as the case may be.

(4) The Judicial Management Unit or the person may, on receipt of notice that anappeal against the order of the Commissioner (Appeals) has been preferred undersub-section (1) or sub-section (2) by the other party, file a memorandum of cross-objection against any part of the order of the Commissioner (Appeals) withinthirty days of the receipt of the notice, .

(5) The memorandum of cross objection shall be disposed of by the Appellate Tribunalas if it were an appeal presented within the time specified in sub-section (3).

(6) The Appellate Tribunal may admit an appeal, or a memorandum of cross-objection,after the expiration of the period specified in sub-section (3) or sub-section (4), if-(a) it is satisfied that the appellant had sufficient cause for not presenting it

within that time; and(b) the delay in filing the appeal does not exceed one year.

(7) An appeal, or the memorandum of cross-objection, to the Appellate Tribunal shallbe in the prescribed form and shall be verified in the prescribed manner.

(8) The appeal by an person shall be accompanied by a fee of one thousand rupees.(9) However, if the total income, in a case to which the appeal relates, as computed by

the Department is more than five hundred thousand rupees, the appeal shall beaccompanied by a fee of one per cent. of the total income as computed, subject toa maximum of ten thousand rupees.

(10) The cost of any appeal to the Appellate Tribunal shall be at the discretion of thatTribunal.

Orders of the Appellate Tribunal213. (1) The Appellate Tribunal may, after giving both the parties to the appeal an

opportunity of being heard, pass such orders thereon as it thinks fit.(2) The Appellate Tribunal may, at any time within six months from the date of the

order, with a view to rectifying any mistake apparent from the record, amend anyorder passed by it under sub-section (1), and shall make such amendment if themistake is brought to its notice by the person, the Department or suo moto.

(3) An amendment which has the effect of enhancing an assessment or reducing arefund or otherwise increasing the liability of the person, shall not be made undersub-section (2) unless the Appellate Tribunal has allowed the person a reasonableopportunity of being heard.

(4) The Appellate Tribunal, where it is possible, may hear and decide the appeal withina period of two years from the end of the financial year in which the appeal is filedunder section 212.

(5) The Appellate Tribunal shall send a copy of any orders passed under this sectionto the person and to the Judicial Management Unit.

(6) The orders passed by the Appellate Tribunal shall be final, subject to the provisions

114of this section.

(7) When the Appellate Tribunal passes an order in an appeal filed before it undersub-section (1), effect shall be given to the order passed on the appeal by theDepartment on the basis of such order.

Procedure of the Appellate Tribunal214. (1) The powers and functions of the Appellate Tribunal may be exercised and discharged

by Benches constituted by the President of the Appellate Tribunal from among themembers thereof.

(2) Subject to the provisions contained in sub-section (3), a Bench shall consist ofone judicial member and one accountant member.

(3) The President or any other member of the Appellate Tribunal authorized in thisbehalf by the Central Government may, sitting singly, dispose of any case whichhas been allotted to the Bench of which he is a member and which pertains to aperson, not being a company or a non-resident, whose total income as computedby the Department in the case does not exceed fifty lakhs rupees.

(4) The President may, for the disposal of any particular case, constitute a SpecialBench consisting of three or more members, one of whom shall necessarily be ajudicial member and one an accountant member.

(5) The President shall, on a reference received from the Board for the disposal of anyparticular case, constitute a Special Bench comprising of five members or more,two of whom shall necessarily be judicial members and two accountant members.

(6) Any point shall, in a case where the members of a Bench differ in opinion on thepoint, be decided according to the opinion of the majority, if there is a majority.

(7) The members of a Bench shall, in a case where they are equally divided in opinionon any point or points, state the point or points on which they differ and the caseshall be referred to the President of the Appellate Tribunal for hearing on suchpoint or points by one or more of the other members of the Appellate Tribunal.

(8) The point or points referred to in sub-section (7) shall be decided according to theopinion of the majority of the members of the Appellate Tribunal who have heardthe case, including those who first heard it.

(9) Subject to the provisions of this Act, the Appellate Tribunal shall have powers toregulate its own procedure and the procedure of Benches thereof in all mattersarising out of the exercise of its powers or of the discharge of its functions, includingthe place at which the Benches shall hold their sittings.

(10) The Appellate Tribunal shall, for the purpose of discharging its functions, have allthe powers which are vested in the Income-tax authorities under section 181.

(11) Any proceeding before the Appellate Tribunal shall be deemed to be a judicialproceeding within the meaning of sections 193 and section 228 of the Indian PenalCode and for the purpose of section 196 of the Indian Penal Code.

(12) The Appellate Tribunal shall be deemed to be a Civil Court for all the purposes ofsection 195 and Chapter XXXV of the Code of Criminal Procedure, 1973.

Appeals to High Court215. (1) An appeal shall lie to the High Court, from an order passed in appeal by the

Appellate Tribunal if the High Court is satisfied that the case involves thesubstantial question of law.

(2) The Income-tax Department or an Person may file an appeal to the High Court ifeither of them is aggrieved by any order passed by the Appellate Tribunal.

115(3) The appeal shall be filed in the prescribed form of memorandam of appeal precisely

stating therein the substantial question of law involved.(4) The appeal shall be filed within four months from the end of the month in which

the order appealled against is received by the person or the prescribed income-taxauthority, as the case may be.

(5) The High Court may admit the appeal after the expiry of the period referred to insub-section (4), if it is satisfied that there was sufficient cause for not filing thesame within the said period.

(6) The High Court shall, in any case, formulate a substantial question of law if it issatisfied that such question of law is involved.

(7) The appeal shall be heard only on the question so formulated, and the respondentsshall, at the hearing of the appeal, be allowed to argue that the case does notinvolve such question.

(8) Nothing in sub-section (7) shall be deemed to take away or abridge the power ofthe court to hear, for reasons to be recorded, the appeal on any other substantialquestion of law not formulated by it, if it is satisfied that the case involves such aquestion.

(9) The High Court shall decide the question of law so formulated and deliver suchjudgment thereon containing the grounds on which such decision is founded andmay award such cost as it deems fit.

(10) The High Court may determine any issue which -(a) has not been determined by the Appellate Tribunal; or(b) has been wrongly determined by the Appellate Tribunal, by reason of a decisionon such question of law as is referred to in sub-section (1).

(11) The provisions of the Code of Civil Procedure, 1908, relating to appeals to the HighCourt shall, so far as may be, apply in the case of appeals under this section.

(12) Tax shall be payable in accordance with the assessment made in any casenotwithstanding that an appeal has been preferred to the High Court.

(13) When the High Court delivers a judgement in an appeal filed before it under sub-section (9), effect shall be given to the order passed on the appeal by the Departmenton the basis of a certified copy of judgement.

Case before High Court to be heard by not less than two Judges216. (1) An appeal filed before the High Court under section 215 shall be heard by a bench

of not less than two Judges of the High Court, and shall be decided in accordancewith the opinion of such Judges or of the majority, if any, of such Judges.

(2) In the absence of such majority, the Judges shall state the point of law upon whichthey differ and the case shall then be heard upon that point only by one or more ofthe other Judges of the High Court.

(3) The point of law, which has been stated, shall be decided according to the opinionof the majority of the Judges who have heard the case including those who firstheard it.

Appeals to the Supreme Court217. (1) An appeal shall lie to the Supreme Court from any order of the High Court on the

basis of a certificate of fitness by the High Court.(2) The provisions of the Code of Civil Procedure, 1908, relating to appeals to the

Supreme Court shall, so far as may be, apply in the case of appeals under sub-section (1) as they apply in the case of appeals from decrees of a High Court.

116(3) The Department shall give effect to the order of the Supreme Court on the basis of

certified copy of the judgment delivered by the Court in an appeal filed before it.

Filing of appeal by the Department218. (1) The Board may, from time to time, issue orders, instructions or directions to the

Department, fixing such monetary limits as it may deem fit, for the purpose ofregulating filing of appeal by the Department under the provisions of this Chapter.

(2) Where in pursuance of the orders, instructions or directions issued under sub-section(1), the Judicial Management Unit has not filed any appeal on on any issuein the case of a person for any financial year, it shall not preclude the Unit fromfiling an appeal on the same issue in the case of -(a) the same person for any other financial year; or(b) any other person for the same or any other financial year year.

(3) Notwithstanding that no appeal or application for reference has been filed by theDepartment pursuant to the orders or instructions or directions issued under sub-section (1), it shall not be lawful for a person, being a party in any appeal orreference, to contend that the income-tax authority has acquiesced in the decisionon the disputed issue by not filing an appeal or application for reference in anycase.

(4) The Appellate Tribunal or Court, hearing such appeal or reference, shall haveregard to the orders, instructions or directions issued under sub-section (1) andthe circumstances under which such appeal filed or not filed in respect of any case.

CHAPTER - VIIICOLLECTION AND RECOVERY

A. General

Modes of collection and recovery219. (1) Any amount payable under this Act in respect of any financial year shall be payable,

collected or recovered in accordance with the provisions of this Chapter.(2) Without prejudice to the generality of the provisons of sub-section (1), the amount

payable under this Act shall be paid, collected or recovered by the followingmodes: -(a) withholding tax(b) advance tax;(c) self-assessment tax;(d) tax credit;(e) foreign tax credit; and(f) any amount collected or recovered from the person, or any other person against

the liability of the person.

Bar against direct demand on person220. (1) A person shall be liable to pay any amount payable under this Act regardless of

the fact that -(a) no provision has been made under this Act for withholding of tax at source;(b) tax was required to be withheld under this Act, but has not been withheld in

accordance with the provision of this Chapter.

117(2) A person shall not be called upon to pay any amount which has been withheld

regardless of the fact that such amount was not paid to the credit of the CentralGovernment or as the Board directs.

Bar against certain pleas221. (1) It shall not be lawful for any withholding agent to contend that he is not liable to

withhold tax for the reason that the payment does not constitute income within themeaning of this Act.

(2) It shall not be lawful for any person who has failed to withhold tax to contend thathe has fulfilled his obligation to withhold tax for the reasons that the withholdeehas -(a) furnished his return of income under section 161;(b) taken into account the sum on which tax was required to be withheld, for

computing the income in the return of income; and(c) paid the tax due on the income declared by him in such return of income.

B. Withholding tax

Liability to withhold tax222. (1) Every withholding agent shall withhold income-tax at the appropriate rate on

specified transactions at the time of its undertaking.(2) The specified transaction referred to in sub-section (1) shall, in the case of a

resident withholdee, be the transaction of the nature specified in Column 2 ofTable - 5, and the appropriate rate referred to in sub-section (1) shall be the rate inthe correspondng entry in Column 3 of the said Table:

Table - 5Rates of withholding tax in the case of resident withholdee

S. Nature of transaction RateNo.1. Payment of salary to employees Average rate2. Payment for executing a contract in respect of - One per cent.

(a) works;(b) service;(c) broadcasting and telecasting;(d) supply of labour;(e) advertisement; or(f) transportation other than by railways

3. Payment of consideration for transfer of any immoveable One per cent. property (other than agricultural land)

4. Payment under a life insurance policy, including the One per centsum allocated by way of bonus on such policy

5. Payment of rent for machinery, plant or equipment One per cent6. Sale of alcoholic liquor for human consumption Two per cent7. Sale of any forest produce Two per cent8. Sale of scrap Two per cent9. Sale of minerals Two per cent10. Sale of motor vehicle of value exceeding ten lakh rupees Two per cent11. Grant of lease or licence or contract for parking lot Two per cent

11812. Grant of lease or licence or contract for toll plaza Two per cent13. Grant of lease or licence or contract for mining or quarrying Two per cent14. Transfer of any right or interest either in whole or part in any Two per cent

parking lot, toll plaza, mine or quarry15. Payment of rent for immoveable property or furniture Ten per cent.16. Payment of interest Ten per cent.17. Payment of dividend Ten per cent.18. Payment of distributed income Ten per cent.19. Payment of commission or brokarage Ten per cent.20. Payment of fees for professional or technical services Ten per cent.21. Payment of fees for prescribed services Ten per cent.22. Payment for royalty or non-compete fee Ten per cent.23. Payment from any account maintained with the Ten per cent.

National Pension System Trust24. Payment to the employee under the Employee’s Ten per cent.

Provident Fund Scheme, 195225. Payment of winnings Thirty per cent.-------------------------------------------------------------------------------------------------------------

(3) The specified transaction referred to in sub-section (1) shall, in the case of a non-resident withholdee, be the transaction of the nature specified in Column 2 ofTable - 6 and the appropriate rate referred to in sub-section (1) shall be the rate inthe correspondng entry in Column 3 of the said Table:

Table - 6Rates of withholding tax in the case of non-resident withholdee

S. Nature of Transaction RateNo.

1. Payment of investment income by way of -(i) interest Fifteen per cent.(ii) dividend Fifteen per cent.(iii) distributed income Fifteen per cent.(iv) capital gains Fifteen per cent.(v) any other investment income Fifteen per cent.

2. Payment by way of royalty or fees for technical services Fifteen per cent.3. Payment to a non-resident sportsman, not being a citizen

of India, for-(i) participation in India in any game or sports; Fifteen per cent(ii) advertisement; or(iii) contribution of articles relating to any game or sport in newspapers, magazines or journals in India.

4. Payment to a non-resident entertainer, not being a citizenof India, for his performance in India Fifteen per cent.

5. Payment of winnings Thirty per cent.6. Payment of other income Fifteen per cent.-------------------------------------------------------------------------------------------------------------------

119(4) However, the appropriate rate referred to in sub-section (1) shall, in a case where

the withholdee has failed to furnish his Permanent Account Number to thewithholding agent, be the higher of the following rates:-(a) thirty per cent; and(b) the rate specified in sub-section (2).

(5) The provisions of sub-section (4) shall not apply to a non-resident withholdee,not being a company, or to a foreign company, in respect of such , as may beprescribed.

(6) The withholding agent may, at his option, pay to the Central Government the taxon any perquisite which is not provided by way of monetary transaction inaccordance with the rules made in this behalf.

(7) The obligation to comply with sub-section (1) shall apply and extend to allwithholding agents, resident or non-resident, whether or not the non-residentwithholdee has-(a) a residence, place of business or business connection in India; or(b) any other presence in any manner whatsoever in India.

Payment and witholding of tax223. (1) The liability to withhold income-tax under section 222 shall arise at the time of

settlement of the specified transactions by way of -(a) payment in cash;(b) issue of a cheque or draft;(c) credit to any account, whether called “Suspense account” or by any other

name; or(d) any other mode as may be prescribed.

(2) The withholding agent shall, before making any payment in kind, wholly or partly,ensure that the amount of tax required to be withheld in respect of the transactionhas been paid to the credit of the Central Government.

(3) The withholding agent may adjust any deficiency, or excess, arising out of anyprevious withholding or non-withholding during the financial year in respect ofthe specified transactions referred to in section 222 in respect of the samewithholdee.

(4) For the purposes of withholding of tax, the payment shall be increased to suchamount as would, after withholding of tax thereon at the rates specified in theTable - 5 be equal to the net amount payable under an agreement, or any otherarrangement, if the tax chargeable on any income is to be borne by the withholdingagent in pursuance to such agreement or arrangement.

Certificate for deduction at lower rate224. (1) The withholdee may make an application, in the prescribed form and manner, to the

Department seeking a certificate for withholding of tax at a lower rate from paymentsto be received by him.

(2) However, in a case where the payment is to be made to a non resident withholdee,the withholding agent may also make an application, in the prescribed form andmanner, to the Department seeking a certificate for withholding of tax at a lowerrate.

(3) The Department may issue to the withholding agent or the withholdee, as the casemay be, such certificate as may be appropriate, if it is satisfied that the total incomeof the withholdee justifies withholding of tax at a lower rate.

120(4) The certificate issued by the Department under sub-section (3) may be cancelled

any time before the expiry of the validity of the certificate for reasons to berecorded in writing.

(5) The withholding agent shall withhold tax at the rate specified in the certificate, onthe payments specified therein, during the period of its validity.

(6) The Board may, having regard to the convenience of the withholdee, the wihholdingagent, and the interest of revenue, prescribe the specified transactions in respectof which, and the circumstances under which,-(a) a withholding agent making any payment to a non-resident withholdee can

make an application to the Department to determine, by general or specialorder, the appropriate proportion of the sum on which tax is to be withheldunder section 222;

(b) an application may be made for the grant of the certificate and the conditionssubject to which such certificate may be granted and providing for all othermatters connected therewith; and

(c) any other matter incidental to efficient implementation of this section.

Payment of withholding tax, certificate of withholding, etc.225. (1) Every withholding agent shall pay the sum withheld to the credit of the Central

Government within the time, and in the manner, prescribed.(2) Every withholding agent shall furnish, within the prescribed time, to the withholdee

a certificate to the effect that tax has been withheld and specifying the particularsas may be prescribed.

Reporting of transactions without withholding of tax226. (1) Every withholding agent shall deliver, or cause to be delivered, a statement in

respect of payment of interest to residents without withholding of tax.(2) The withholding agent referred to in sub-section (1) shall be any -

(a) permitted financial institution; or(b) co-operative society.

(3) The Central Government may, by notification in the Official Gazette, require anywithholding agent to deliver, or cause to be delivered, a statement in respect ofany payment without withholding of tax.

(4) The Board shall prescribe the following in respect of the statement under thissection:-(a) the period in respect of which the statement is to be furnished;(b) the form of the statement and the particulars therein;(c) the manner of verification of the statement;(d) the time by, and the medium in, which the statement is to be delivered;(e) the income-tax authority, or any other person, authorised to receive the

statement; and(f) any other matter connected therewith.

No withholding of tax in certain cases227. (1) No tax shall be withheld from any payment made by a withholding agent, if -

(a) the withholding agent is an individual or a Hindu undivided family;(b) the withholding agent is not liable to audit under section 59 during the financial

year immediately preceeding the financial year in which the payment ismade; and

121(c) the payment is not in the nature of salary or rent from immoveable property.

(2) Without prejudice to the generality of the provisions of sub-section (1), no taxshall be withheld in respect of the following transactions, namely:-(a) any interest payable, if the aggregate amount of interest payable during the

financial year does not exceed,-(i) fifty thousand rupees, in a case where the interest is payable by permitted

financial institutions to a senior citizen; and(ii) ten thousand rupees, in any other case

(b) any interest payable by the Central Government under any provision of thisAct or the Income-tax Act, 1961;

(c) any interest payable by a firm to a partner of the firm;(d) any interest paid by Offshore Banking Unit to a non-resident or a person not

ordinarily resident in India;(e) any interest payable on the amount of compensation awarded by the Motor

Accidents Claims Tribunal, if the aggregate amount of the interest paid duringthe financial year does not exceed one hundred thousand rupees;

(f) any interest payable to,-(i) any banking company;(ii) any co-operative bank;(iii) any financial corporation established by or under a Central or State or

Provincial Act;(iv) any insurer;(v) any investment pooling vehicle; or(vi) any institution, association or body, or class of institutions, associations

or bodies, which the Central Government may notify in this behalf in theOfficial Gazette;

(g) any interest payable on any security issued by a company, if the security is-(i) in dematerialised form; and(ii) listed on recognized stock exchange in India;

(h) any amount payable on maturity, or redemption, of a zero coupon bond;(i) any dividend paid to a person by a company, if the aggragate amount of

dividend paid during the financial year does not exceed ten thousand rupees;(j) any dividend paid to a person by an investment pooling vehicle, if the

aggragate amount of dividend paid during the financial year does not exceedten thousand rupees;

(k) any income by way of capital gains arising from the transfer of securitiespayable to a Foreign Institutional Investor;

(l) any payment to any person for, or on behalf of, the National Pension SystemTrust;

(m) any payment for executing a contract in respect of any work, service,advertising, broadcasting and telecasting, supply of labour for carrying outany works or service, if -(i) the amount of any payment during the financial year does not exceed

thirty thousand rupees; and(ii) the aggregate amount of the payments during the financial year does not

exceed hundred thousand rupees;(n) any payment to a contractor in respect of a contract for, or carriage of, goods

or passengers by any mode of transport, other than by railways, if -(i) the contractor is an individual or Hindu undivided family;

122(ii) the contractor owns ten or less goods carriages at any time during the

financial year; and(iii) furnishes a declaration to that effect along with his Permanent Account

Number to the person making the payment;(o) any payment to a contractor in respect of a contract for, or carriage of, goods

or passengers by any mode of transport, other than by railways, if -(i) the amount of any payment during the financial year does not exceed

thirty thousand rupees; and(ii) the aggregate amount of the payments during the financial year does not

exceed hundred thousand rupees;(p) any payment of commission or brokerage, if the aggregate amount of the

payments during the financial year does not exceed fifteen thousand rupees;(q) any payment of rent by, -

(i) an individual or a Hindu undivided family, who is not liable to audit undersection 59 in the financial year immediately preceeding the financial yearin which the payment is made, if the monthly rent is less than fiftythousand rupees; and

(ii) any other withholding agent, if the aggregate amount of the paymentsduring the financial year does not exceed one hundred and eighty thousandrupees;

(r) any payment of compensation on acquisition of immovable property, if theaggregate amount of the payments during the financial year does not exceedone hundred thousand rupees;

(s) any payment in respect of winnings, if the amount of the payment does notexceed ten thousand rupees;

(t) any payment in the nature of royalty, fees for professional or technical services,or non-compete fees, if the amount of payment during the financial year doesnot exceed thirty thousand rupees;

(u) specified payments to any institution, association or body or class ofinstitutions, associations or bodies as may be notified by the CentralGovernment in the Official Gazette, in this behalf;

(v) any payment not includible in the total income under section 9; and(w) any payment to a person not liable to income-tax under section 10.

(3) The amounts referred to in clause (a) of sub-section (2) shall, in a case where thepayment is by a banking company, co-operative society or a public company, bethe aggregate of all the amounts paid by all their branches.

Credit for withholding tax228. The Board may, for the purposes of giving credit in respect of withholding tax,

make such rules for the purposes of-(a) giving credit to the withholdee, or any other person;(b) the financial year for which such credit may be given; and(c) any other matter connected therewith.

Interpretation229. In this Chapter,

(a) ‘any game’ shall not include a game the winnings wherefrom are taxable undersub-item (iii) of item 3 of Table of the First Schedule;

123(b) ‘average rate’ means the average rate of income-tax on salary paid during the

financial year computed on the basis of the rates specified in rule 1 of the FirstSchedule;

(c) ‘broadcasting and telecasting’ includes production of programmes forbroadcasting;

(d) “buyer” means a person who obtains in any sale, by way of auction, tender, orany other mode, goods of the nature specified in the Table - 5 in section 222,or the right to receive any such goods, but does not include,-(i) a public sector company, the Central Government, a State Government,

an embassy, a high commission, legation, commission, consulate andtrade representation of a foreign State, and a club; or

(ii) a buyer in the retail sale of such goods, purchased by him for personalconsumption;

(e) ‘consideration for transfer’ includes- (i) payment of compensation on compulsory acquisition; and(ii) consideration under an agreement for development;

(f) ‘contract’ and ‘contractor’ includes ‘sub-contract’ and ‘sub-contractor’respectively;

(g) ‘furniture’ includes fixtures and fittings;(h) ‘fees for professional or technical services’ includes remuneration, fees, prize,

brokerage or commission, by whatever name called, other than payment ofsalary to a director of a company;

(i) ‘immoveable property’ means(i) land;(ii) building (including factory building); and(iii) land appurtenant to a building (including factory building);

(j) “Joint Development agreement” means registered agreemet in which a personowning land or building or both, agrees to allow another person to develop areal estate project on such land or building or both, in consideration of ashare, being land or building or both in such project, whether with or withoutpayment of partof the consideration or building or both.

(k) “lessee or licensee” means a person other than a public sector company whois granted a lease or licence or is awarded a contract;

(l) “lessor or licensor” means a person who grants a lease or licence or entersinto a contract or otherwise transfers, wholly or partly, any right or interest toa lessee or licensee;

(m) “lower rate” includes a nil rate;(n) “mine or quarry” shall not include a mine or quarry of mineral oil;(o) “minerals” means the minerals and the group of minerals specified in The

Fifteenth Schedule;(p) “payment from any account maintained with the National Pension System

Trust” means any amount actually paid out of the account other than theamounts referred to in item number 15 or item number 16 of The FourthSchedule;

(q) “scrap” means waste from the manufacture or mechanical working of materialswhich is unusable because of breakage, wear and tear and other reasons;

(r) “seller” means,-(i) the Central Government, a State Government or any local authority;

124(ii) a corporation, or authority, established by, or under, a Central, State, or

Provincial Act;(iii) any company, firm or co-operative society;and(iv) an individual or a Hindu undivided family, if he is liable to tax audit under

section 59 during the financial year immediately preceding the financialyear in which the goods of the nature specified in column 2 of Table - 5 (atserial no 6 to 10) in section 222 are sold;

(s) ‘service contract’ includes a contract for job work;(t) ‘winnings’ means winnings from any horse race, lottery, crossword puzzle,

card game, gambling, betting, casino or other game of any sort;(u) “withholding agent” means the payer, seller, lessor or licensor, as the case

may be, who undertakes the transactions specified in column (2) of Table-5 insection 222;

(v) “withholdee” means the payee, buyer, lessee or licensee as the case may be,who is a counterpart of the withholding agent in the relevant transactions;

(w) “withholding of tax” means deduction or collection of tax, as the case may be,by the withholding agent;

(x) “withholding tax” means the tax required to be withheld by the withholdingagent;

C. Withholding statements

Furnishing of withholding statements230. (1) Every withholding agent shall furnish a statement of withholding tax in accordance

with sub-section (4) for the period as may be prescribed.(2) The statement of withholding tax furnished under sub-section (1) may be revised

so as to rectify any mistake, or to add, delete or update the information furnished,therein.

(3) The Board shall prescribe the following in respect of the statement of withholdingtax under sub-section (1), the revised statement under sub-section (2) and thecertificate under sub-section (3), namely: -(a) the period in respect of which the statement is to be furnished;(b) the form of the statement and the particulars therein;(c) the manner of verification of the statement ;(d) the time by, and the medium in, which the statement is to be delivered;(e) the Directorate, Unit, income-tax authority, or any other person, authorised to

receive the statement; and(f) any other matter connected therewith.

Certificate of no withholding of tax231. (1) Every withholding agent shall furnish a certificate of no withholding of tax, if -

(a) he has been alloted a Withholding Account Number; and(b) he is not required to withhold tax on any specified transactions under Sub-

Chapter - B of this Chapter for the relevant period.(2) The Board shall prescribe the following in respect of the certificate of no

withholding of tax under sub-section (1), namely: -(a) the period in respect of which the certificate is to be furnished;(b) the form of the certificate and the particulars therein;(c) the manner of verification of the certificate;

125(d) the time by, and the medium in, which the certificate is to be delivered;(e) the Directorate, Unit, income-tax authority, or any other person, authorised to

receive the certificate; and(f) any other matter connected therewith.

Processing of withholding statements232. (1) The Department shall process the withholding statement received under section

230 in the following manner, namely :-(a) the withholding tax liability under this Chapter shall be computed after making

the following adjustments, namely -(i) any arithmetical error in the statement;(ii) an incorrect claim, apparent from any information in the statement;

(b) the interest payable, if any, shall be computed on the basis of the withholdingtax liability as computed in the statement;

(c) the fee for default in filing, if any, of withholding statements shall be computedin accordance with the provisions of section 247; and

(d) the aggregate sum payable by, or the amount of refund due to, the withholdingagent, shall be determined after adjustment of the amounts computed underclauses (a) to (c) against any amount paid under section 223.

(2) The Department shall send an intimation in the prescribed form to the withholdingagent specifying the aggregate sum determined to be payable by, or the amount ofrefund due to, him and such other particulars as may be prescribed.

(3) The Department shall not send any notice of demand under section 191 in respectof any sum payable on account of any adjustment made under sub-section (1), ifthe withholding statement is processed after the expiry of twelve months from theend of the month in which it is furnished.

(4) The Department may make a scheme for centralised processing of withholdingstatements, for the purposes of processing of withholding statements under sub-section (1), with a view to expeditiously determining the aggregate sum payableby, or the amount of refund due to, the withholding agent.

(5) In this section,“an incorrect claim apparent from any information in the statement”shall mean a claim, on the basis of an entry, in the withholding statement -(a) of an item, which is inconsistent with another entry of the same, or some other

item, in such statement; and(b) in respect of rate of withholding of tax, where such rate is not in accordance

with the provisions of this Act.

D. Advance Tax

Liability to pay advance income-tax233. (1) Every person shall be liable to pay advance income-tax during any financial year in

respect of his total income of the financial year.(2) No advance income-tax shall be payable, if -

(a) the person is a senior citizen; or(b) the amount of advance income-tax payable is less than ten thousand rupees.

Computation of advance tax234. (1) The amount of advance income-tax payable by a listed company in the financial

126year shall be computed for each advance-tax period in the following manner, namely:-(a) the company shall first estimate it’s total income in the prescribed manner and

calculate the income-tax thereon at the rate in force;(b) the income-tax so calculated shall be reduced by -

(i) the amount of income-tax withheld during the relevant advance-tax periodfrom any income which is taken into account in estimating the total income;

(ii) the proportionate amount of foreign tax credit under section 239 for thefinancial year, determined in the prescribed manner; and

(c) the balance amount of income-tax shall be the advance income-tax payable forthe relevant advance-tax period.

(2) The amount of advance income-tax payable by any person, other than a listedcompany referred to in sub-section (1), in the financial year shall be computed inthe following manner, namely:-(a) the person shall first estimate his total income and calculate income-tax thereon

at the rates in force in the financial year;(b) the income-tax so calculated shall be reduced by -

(i) the amount of income-tax which would be liable to be withheld during thefinancial year from any income which is taken into account in estimatingthe total income;

(ii) the amount of credit under section 239 for the financial year; and(c) the balance amount of income-tax shall be the advance income-tax payable.

(3) The Board may, for the purposes of estimating the total income under this section,make such rules as it may consider necessary and expedient to do so.

Instalment of advance income-tax235. (1) The advance income-tax payable by a listed company shall be paid in four

instalments during the financial year on or before the dates specified in Column (1)of Table 7 and shall be equal to the amount specified in corresponding entry inColumn (2) of the Table:

TABLE - 7Date of instalment Amount payable

(1) (2)On or before the 15th July The whole amount of income-tax payable in

respect of the total income of the firstquarter of the financial year.

On or before the 15th October The whole amount of income-tax payable inrespect of the total income of the first six monthsof the financial year, as increased by theamount of shortfall, if any, in payment of theearlier instalment.

On or before the 15th January The whole amount of income-tax payable inrespect of the total income of the first ninemonths of the financial year, as increased bythe amount of shortfall, if any, in payment ofthe earlier instalment or instalments.

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On or before the 25th March The whole amount of the income-tax payablein respect of the total income of the whole ofthe financial year, as reduced by the amountor amounts, if any, paid in the earlierinstalment or instalments.

(2) The advance income-tax payable by any person other than a listed company referredto in sub-section (1) shall be paid in four instalments during the financial year onor before the dates specified in Column (1) of Table - 8 and shall be equal to theamount specified in corresponding entry in Column (2) of the Table.

TABLE 8

Date of instalment Amount payable(1) (2)

On or before the 15th July Not less than twenty per cent of such advancetax.

On or before the 15th October Not less than fifty per cent of such advancetax, as reduced by the amount, if any, paid inthe earlier instalment.

On or before the 15th January Not less than eighty per cent of such advancetax, as reduced by the amount or amounts, ifany, paid in the earlier instalment orinstalments.

On or before the 25th March The whole amount of such advance tax asreduced by the amount, or amounts, if any,paid in the earlier instalment or instalments.

(3) However, a person shall pay the whole amount of advance income-tax during eachfinancial year in a single instalment on or before the 25th March, if the person optsto declare profits of business on a presumptive basis, at the rates specified in TheTwelth Schedule, under the provisions of sub-section (2) of section 35.

(4) Any amount of advance income-tax paid after 25th March but before the expiry ofthe financial year shall be treated as advance income-tax paid during the financialyear.

(5) Every person who is liable to pay advance income-tax shall, of his own volition,pay the appropritate percentage of the advance income-tax on or before the duedates.

(6) The person may increase or reduce the payment of remaining instalments of theadvance income-tax in accordance with his estimation of the total income.

128Estimate by the person

236. (1) Every person, who is liable to pay advance income-tax under section 233, shall filean estimate of the tax payable for the financial year by the 15th January of therelevant financial year.

(2) The estimate under sub-section (1) shall be in the prescribed form and filed in theprescribed manner.

(3) The estimate may be revised any time during the financial year and any increase inthe tax payable shall be paid along with the immediately following instalment.

(4) The Board may exempt a class of persons from filing an estimate under sub-section(1) in the manner as may be prescribed having regard to the smallness of theamount of advance tax payable.

Order for payment of advance income-tax237. (1) The Department may, at any time during the financial year but not later than the

last day of February,-(a) order any person liable to pay advance income-tax calculated in the manner

laid down in section 235, to pay the tax; and(b) issue to the person a notice of demand under section 191 specifying the

instalment or instalments in which the tax is to be paid.(2) The Department may amend the order and the notice of demand under sub-

section (1), if -(a) a return of income is furnished by the person after the order is passed;(b) a notice calling for a return is issued after the order is passed;(c) a regular assessment of the person has been made after the order is passed; or(d) an order of the Tribunal, High Court or Supreme Court, which has the effect of

increasing the tax liability of the person, has been made after the order ispassed.

(3) Any person who has been served with the order or notice of demand under sub-section (1), may send an intimation in the prescribed form to the Department to theeffect that the advance tax payable by him in his estimation, calculated in themanner laid down in section 235, is at variance with the amount specified in theorder.

(4) The intimation under sub-section (3) shall be filed in the prescribed form andmanner on or before the due date or each of the due dates specified in section 235falling after the date of the intimation; and the amount of advance tax payable asper the intimation shall be paid accordingly.

E. Tax relief in respect of arrears or advance receipts

Tax relief for arrears or advance receipts238. (1) The Department shall, on an application made to him by any person, grant such

relief as may be prescribed, if-(a) the person is in receipt in any financial year of any arrears, or advance, of

salary or family pension relating to any other financial year; or

129(b) the accumulated balance due to the person participating in an approved

provident fund is included in his total income.(2) The relief referred to in sub-section (1) shall not be allowed in respect of any

compensation received towards retrenchment or voluntary retirement.

F. Foreign tax credit

Foreign tax credit239. (1) A person shall be allowed credit of income-tax paid by withholding or otherwise,

in any other country under the law in force in that country, in accordance with theprovisions of this section.

(2) The foreign tax credit under sub-section (1) shall be allowed against the Indianincome-tax payable by the person on his income which has accrued, or received,during the financial year outside India, in accordance with the agreement enteredinto with such other country under section 5.

(3) However, in a case where there is no agreement under section 5 with the othercountry, the amount of foreign tax credit allowable under sub-section (2) shall bedetermined -(a) at the Indian rate of tax or the rate of tax of the other country, whichever is

lower;or(b) at the Indian rate of tax, if both the rates are equal.

(4) A person shall, regadless of anything contained in sub-section (3), not be entitledto foreign tax credit against the Indian income tax payable by him in respect of anyincome referred to therein, if -

(i) the income is also deemed to accrue, or received, in India; and(ii) no agreement under section 5 has been entered into with the other country

in which the income has accrued.(5) The Central Government may prescribe the method of computing the amount of

foreign tax credit, the manner of claiming foreign tax credit and such other particularsas are necessary for the relief or avoidance of double taxation.

G. Minimum Alternate Tax Credit

Credit for minimum alternate tax paid by a company240. (1) The credit for minimum alternate tax paid by company under the Income-tax Act,

1961 (hereafter referred to as MAT credit) shall be allowed to it in accordance withthe provisions of this section

(2) The MAT credit for a financial year to be allowed under sub-section (1) shall notexceed one-tenth of the amount brought forward from the financial year immediatelypreceding the commencement of this Act.

(3) No interest shall be payable on MAT credit allowed under sub-section (1).

Credit of minimum alternate tax not to be allowed in certain cases241. (1) The provisions of section 240 shall not apply, in the case of conversion of a private

company or unlisted public company into a limited liability partnership under theLimited Liability Partnership Act, 2008, to the successor limited liability partnership.

130(2) In this section, the expressions “private company” and “unlisted public company”

shall have the meaning respectively assigned to them in the Limited LiabilityPartnership Act, 2008.

H. Self Assessment Tax

Self-assessment tax242. (1) The person shall be liable to pay, before furnishing the return of income under this

Act for any financial year, the aggregate of the following amounts as self-assessment tax:-(a) the amount of tax payable on the basis of return of income, as reduced by the

following amounts -(i) income-tax withheld on any specified transaction relating to the financial

year;(ii) advance tax paid during the relevant financial year;(iii) income-tax paid in any other country, in respect of which foreign tax

credit is allowable under secion 239;(iv) any other tax payment, for which credit is allowable under any provision

of this Act; and(b) the amount of interest and fee payable under any provisions of this Act for

such financial year.(2) The amount paid as self-assessment tax for any financial year shall first be adjusted

towards the interest and fee payable under any provisions of this Act and thebalance, if any, shall be adjusted towards the tax payable, if the amount of the self-assessment tax paid falls short of the self-assessment tax payable under sub-section (1).

I. Indemnity

Indemnity243. Every person deducting, retaining, or paying any tax in pursuance of this Act in

respect of income belonging to another person is hereby indemnified for thededuction, retention, or payment thereof.

J. Interest

Interest payable to the Central Government244. (1) An person shall be liable to pay interest on any shortfall in the amount payable by

him under this Act for the period from the day immediately following the date onwhich such amount was payable to the date of actual payment.

(2) The period under sub-section (1) shall not include any period of delay in disposalof appeal by the Commissioner (Appeals) in excess of the period of one yearallowed under sub-section (8) of section 208.

(3) The liability to pay interest under sub-section (1) shall be computed at periodicalintervals in the prescribed manner.

(4) The amount of interest referred to in sub-section (1) shall be calculated at the ratespecified in column (3) of Table 9 for the period specified in corresponding entryin column (2) of the said Table:

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Table-9Sl. No. Period Rate of interest

(1) (2) (3)(i) First twelve months 12 per cent per annum(ii) Next twelve months 18 per cent per annum(iii) Next twelve months 24 per cent per annum(iv) Next twelve months 30 per cent per annum(v) Balance period till the date of actual payment 36 per cent per annum

___________________________________________________________________(5) However, the amount of interest shall, in a case where the person furnishes a bank

guarantee for the entire period within sixty days from the day immediately followingthe date on which such amount is payable, be calculated at the rate specified incolumn (3) of Table 10 for the period specified in the corresponding entry in column(2) of the said Table:

Table-10Sl. No. Period Rate of interest

(1) (2) (3)(i) First twelve months 12 per cent per annum(ii) Next twelve months 15 per cent per annum(iii) Next twelve months 18 per cent per annum(iv) Next twelve months 21 per cent per annum(v) Balance period till the date of actual payment 24 per cent per annum

___________________________________________________________________

Interest payable by the Central Government245. (1) The Central Government shall pay to a person, simple interest on any amount

refundable to him under this Act in respect of any financial year, for the periodfrom the day immediately following the date on which the return of income for thefinancial year is filed or the date on which such amount is paid, whichever is later,to the date on which the refund is granted.

(2) A person shall be entitled to receive simple interest on the amount of interestreceivable by him under sub-section (1) for the period from the date of grant ofrefund under that sub-section to the date of actual payment of such interest, ifsuch interest is not paid to him along with the refund.

(3) The amount of interest referred to in sub-section (1) shall be calculated at the ratespecified in column (3) of Table 11 for the period specified in corresponding entryin column (2) of the said Table:

Table-11Sl. No. Period Rate of interest

(1) (2) (3)(i) First twelve months 6 per cent per annum(ii) Next twelve months 9 per cent per annum(iii) Next twelve months 12 per cent per annum(iv) Next twelve months 15 per cent per annum(v) Balance period till the date of actual payment 18 per cent per annum

___________________________________________________________________

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Manner of computation of interest and waiver thereof to be prescribed246. (1) The Board may prescribe the manner of computation of interest payable by, or to

the, person and all other matters connected therewith.(2) The Board may, having regard to the hardship caused to the person and the

interest of revenue, prescribe the circumstances, manner and all other connectedmatters for providing relief by reducing the interest payable or refunding the interestpaid so, however, that the aggregate of the amount so reduced, or refunded, shallnot exceed fifty per cent. of the total interest payable.

K. Fee payable in certain cases

Fee for filing defaults247. (1) Every person shall be liable to pay a fee , if he fails to deliver or cause to be

delivered any return by the relevant due date as specified under this Act.(2) The fee referred to in sub-section (1) shall be paid for every single day in the

period during which the failure to deliver or cause to be delivered continues.(3) The period referred to in sub-section (2) shall be reckoned from the day following

the due date for delivering or cause to be delivering to the day immediatelypreceeding the date of delivery.

(4) The amount of fee referred to in sub-section (1) shall be calculated at the ratespecified in column (3) of Table 11 for the period specified in corresponding entryin column (2) of the said Table:

Table-12

Sl.No. Period of failure Amount(1) (2) (3)(i) First 180 days 100 rupees per day(ii) Next 180 days 200 rupees per day(iii) Balance period till the date of filing 300 rupees per day

___________________________________________________________________(5) However, the amount of fee referred to in sub-section (1) shall, in the case of

failure to furnish a certificate of income under section 162, be a lumpsum amountspecified in column (3) of Table- 13 for the period specified in the correspondingenty in column (2) of the said Table.

Table-13

Sl.No. Period of failure Amount(1) (2) (3)(i) Upto 31st December of the financial year Nil(ii) After 31st December of the financial year 2500 rupees

___________________________________________________________________(6) The Department may levy the fee at any time regardless of the fact that the return

has not been delivered; and issue a notice of demand, accordingly.(7) For the purposes of this section, a “return” shall include a statement, form, report,

declaration, certificate or particulars.

133L. Payment of cost by Department

Payment for delayed appeal effect, rectification etc.248. (1) The Department shall pay cost to a person, if it fails to, -

(a) in a case where an application under section 190 has been made by the personfor rectification of any mistake apparent from the record , pass an order withinthree months from the end of the month in which the application has beenreceived by the Department; or

(b) in a case where an order of the Commissioner (Appeals), Appellate Tribunal,High Court, Supreme Court, or Settlement Commission has been received bythe Department, give effect to the said order within three months from the endof the month in which the said order was received by the Department.

(2) The cost referred in sub-section (1) shall be paid for every single day of the periodduring which the failure continues.

(3) The period referred to in sub-section (2) shall be reckoned from the day immediatelyfollowing the expiry of the period of three months and shall continue till the dayimmediately preceeding the date of order of rectification or appeal effect, as thecase may be, is passed.

(4) The cost shall be calculated at the rate specified in column (3) of Table 12 for theperiod specified in corresponding entry in column (2) of the said Table:

Table-14Sl.No. Period of failure Amount

(1) (2) (3)(i) First 180 days 100 rupees per day(ii) Next 180 days 200 rupees per day(iii) Balance period till the date of order 300 rupees per day

___________________________________________________________________(5) The cost payable by the Department under sub-section (1) shall be adjusted against

the amount payable by the person, if any, and the balance amount, if any, shall bepaid to the person as if it was a refund under section 249 and the provisions of thisAct shall apply accordingly.

M. RefundRefunds

249. (1) A person shall be entitled to a refund of the excess of any amount paid by him oron his behalf, or treated as paid by him or on his behalf, for any financial year, overthe amount which he is liable to pay under this Act, and such refund shall beissued in the prescribed manner.

(2) A person shall, in a case where an assessment is set aside or cancelled or an orderof fresh assessment is directed to be made in an appeal, or any other proceedingunder this Act, be entitled to the refund only on the making of the fresh assessment.

(3) The amount of refund determined under sub-section (1), or sub-section (2), shallbe adjusted against the outstanding liability for any other financial year, and thebalance amount of refund, if any, shall be issued, after giving an intimation to thiseffect to the person.

(4) The amount remaining payable under sub-section (3) shall not include any amountwhich has been stayed by the Collection Unit under section 256.

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N. Provisional recovery measures

Provisional attachment of property in certain cases250. (1) The Department may attach provisionally, by an order in writing, any property

belonging to the assessee in the manner provided in the Third Schedule, if it is ofthe opinion that it is necessary to do so for the purpose of protecting the interestof the revenue.

(2) The order referred to in sub-section (1) shall be issued with the prior approval ofthe Chief Commissioner or Principal Commissioner.

(3) Every order of provisional attachment shall cease to have effect after the expiry ofa period of six months from the date of the order made under sub-section (1).

(4) The Chief Commissioner or Principal Commissioner may, for reasons to be recordedin writing, extend the aforesaid period by such further period or periods as hethinks fit, so, however, that the total period of extension shall not in any caseexceed two years or two months from the end of the month in which the order ofassessment is completed.

Revocation of provisional attachment against bank guarantee251. (1) The Department shall, by an order in writing, revoke the provisional attachment

made under sub-section ( ), in a case where the person furnishes a guarantee froma scheduled bank for an amount not less than the fair market value of the property.

(2) The Department may accept a guarantee from a scheduled bank for an amount lessthan the fair market value of the property, if it is satisfied that such guarantee issufficient to protect the interest of revenue.

(3) The Department may, make a reference to the Valuation Officer to estimate the fairmarket value of the property for the purposes of this section, and submit a reportof such estimate within a period of thirty days from the date of reference.

(4) The order revoking the provisional attachment shall be made under sub-section (1), -(a) within a period of fifteen days from the date of receipt of guarantee; or(b) within a period of forty five days from the date of receipt of guarantee, if a

reference to the Valuation Officer has been made.

Invocation and release of bank guarantee252. (1) The Department may invoke the guarantee furnished under section 251, wholly or

in part, to recover any sum specified in a notice of demand served upon theperson, in a case where the person fails to pay the specified sum within the periodspecified in the notice.

(2) The Department shall invoke the bank guarantee if the person fails, to renew theguarantee, or to furnish a new guarantee from a schenduled bank for an equalamount, atleast fifteen days prior to the date of expiry of the guarantee.

(3) The amount realized by invoking the guarantee shall be adjusted against anyexisting liability payable by the person and the balance amount, if any, shall bedeposited in the Personal Deposit Account of the Principal Commissioner in thedesignated branch.

(4) The Department, if and when it is satisfied that the guarantee is not required anymore to protect the interest of the revenue, shall release that guarantee forthwithto the person.

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Interpretation253. In this Sub-Chapter -

(a) “designated branch” means a branch of the Reserve Bank of India or the StateBank of India or of its subsidiaries or any bank as may be appointed by theReserve Bank of India as its agent under the provisions of sub-setion (1) ofsection 45 of the Reserve Bank of India Act, 1934 at the place where the officeof the Principal Commissioner or Commissioner is situate.

(b) “scheduled Bank” means a bank included in the Second Schedule to theReserve Bank of India Act 1934.

O. Recovery

Compliance by a person with the notice of demand254. (1) Any sum specified as payable in a notice of demand, duly served upon a person

under section 191 shall be paid by the person within thirty days of the service ofthe notice, to the credit of the Central Government in the manner prescribed.

(2) The Department may reduce the period of thirty days allowed under sub-section(1) if it has any reason to believe that it will be detrimental to revenue if the fullperiod of thrity days is allowed.

Jurisdiction for collection and recovery255. (1) The Collection Unit shall have jurisdiction for enforcing the collection and recovery

of any tax, additional income-tax, interest, penalty, fee, fine or any other sum payableunder any provision of this Act and all matters connected thereto.

(2) The Collection Unit competent to take any action under this Act for the purposesof enforcing the collection and recovery of any sum payable under this Act, shallbe the Collection Unit-(a) within whose jurisdiction -

(i) the person carries on his business;(ii) the principal place of the business of the person is situated;(iii) the person resides;(iv) any movable or immovable property of the person is situated;or

(b) which has been assigned jurisdiction under section 122.(3) The Collection Unit referred to in sub-section (1), may send a certificate, in the

prescribed manner, specifying the tax arrears to be recovered, to another CollectionUnit within whose jurisdiction the person resides or has property, if the CollectionUnit -(a) is not able to recover the entire amount by sale of the property, movable or

immovable, within its jurisdiction, or(b) is of the opinion that, for the purpose of expediting, or securing, the recovery

of the whole, or any part, of the amount under this Chapter, it is necessary soto do.

(4) The Collection Unit shall, on receipt of the certificate, assume jurisdiction forrecovery of the amount of tax arrears specified therein and proceed to recover theamount in accordance with the provisions of this sub-Chapter.

(5) The Collection Unit may recover the amount specified in the certificate in respectof which the person is in default, or is deemed to be in default, by any one, or more,of the modes provided in section 219 or the Third Schedule.

136(6) The Collection Unit may, in the course of enforcement of collection and recovery,

rectify any mistake apparent from the record.(7) The Collection Unit shall have the power to extend the time for payment, or allow

payment by instalments, subject to such conditions as the Unit may think fit toimpose in the circumstances of the case.

Grant of time, instalments, stay etc.256. (1) A person who has been served with a notice of demand under section 191, may

make an application to the Collection Unit -(a) seeking extension of time for payment of the specified amount;(b) to allow payment of the specified amount in instalments, or(c) to grant stay against coercive measures for recovery of the specified amount,

in a case where appeal has been filed before the Commissioner (Appeals).(2) The Collection Unit may, on an application made by the person under clause (a) or

clause (b) of sub-section (1), by an order, extend the time for payment, or allowpayment in instalments, subject to such conditions as it may think fit to impose inthe circumstances of the case.

(3) The Collection Unit shall, by an order, dispose the application seeking stay underclause (c) of sub-section (1) in the following manner, namely: -(a) so much of the specified amount, as relates to the issues on which the prevailing

position in law is in favour of the person, shall be stayed during the pendencyof appeal;

(b) so much of the specified amount, as relates to the issues on which the prevailingposition in law is prejudicial to the person, shall be required to be paid in fullor in suitable instalments, subject to such conditions as the Unit may think fitto impose in the circumstances of the case;

(c) so much of the specified amount as relates to other issues, shall be stayedduring the pendency of appeal, subject to payment of thirty percent of theamount.

(4) The person shall be deemed to be in default in respect of whole of the specifiedamount, if the amount is not paid within the time stipulated under section 254 orwithin the time extended in the order passed under sub-section (2), as the case maybe.

(5) The person shall be deemed to be in default in respect of the whole of the amountoutstanding, if he commits default in payment of any one of the instalments interms of the order passed under sub-section (2).

(6) The person shall be deemed to be in default, if whole or part of the specifiedamount is not paid in terms of the order granting stay passed under sub-section (3).

(7) Any amount which becomes payable after giving affect to the order of theCommissioner (Appeals) may, by an order, be stayed by the Collection Unit, subjectto the condition that the person has,-(a) filed an appeal before the Tribunal against the order of the Commissioner(Appeals); and(b) paid fifty percent of the amount or made arrangements for payment of theamount to the satisfaction of the Collection Unit.

(8) The person shall be deemed to be in default, if whole or part of the amount is notpaid in terms of the order granting stay passed under sub-section (7).

(9) For the purposes of grant of stay under sub-section (3), -

137(a) “position in law is in favour of the person” shall mean a decision on the issue

in favour of the person by, -(i) the Commissioner (Appeals), Tribunal, High Court or Supreme Court in

his own case in any earlier financial year; or(ii) the Supreme Court or the jurisdictional High Court or the Tribunal in the

case any other person;(b) “position in law is prejudicial to the person” shall mean a decision on the

issue prejudicial to the person by, -(i) the Commissioner (Appeals), Tribunal, High Court or Supreme Court in

his own case in any earlier financial year; or(ii) the Supreme Court or the jurisdictional High Court or Tribunal in the case

of any other person.

Certificate of tax arrears.257. (1) The record of the Department containing the tax arrears outstanding aganist any

person shall be deemed to be a certificate of tax arrears outstanding aganist suchperson.

(2) The certificate under sub-section (1) shall stand amended from time to timeconsequent to any proceeding under this Act and the Collection Unit shall recoverthe amount so modified.

Modes of recovery258. (1) The Collection Unit may require the employer of the person to deduct from any

payment to the person such amount as is sufficient to meet the tax arrearsoutstanding aganist the person.

(2) Upon requisition under sub-section (1), the employer shall comply with therequisition and shall pay the sum so deducted to the credit of the CentralGovernment in the prescribed manner.

(3) Any part of the salary exempt from attachment in execution of a decree of a civilcourt under section 60 of the Code of Civil Procedure, 1908, shall be exempt fromany requisition made under sub-section (1).

(4) The Collection Unit may, by notice in writing, require any debtor of the person topay such amount, not exceeding the amount of debt, as is sufficient to meet the taxarrears.

(5) Upon receipt of the notice under sub-section (4), the debtor shall comply with therequisition and shall pay the sum to the credit of the Central Government in theprescribed manner within the time (not before the debt becoming due to the person)specified in the notice.

(6) A copy of the notice issued under sub-section (4) shall be forwarded to the debtorat his last address known to the Department and in the case of a joint account to allthe joint holders at their last addresses known to the Department.

(7) In a case where the notice under sub-section (4) is issued to a post office, bankingcompany, or an insurer, it shall not be necessary to produce any pass book, depositreceipt, policy or any other doucment for the purpose of any entry, endorsement orthe like being made, before making payment, regardless of any rule, practice orrequiremnt to the contray.

(8) Any claim in respect of any property, in relation to which a notice under sub-section (4) has been issued, arising after the date of the notice, shall be void asagainst any demand contained in the notice.

138(9) A debtor to whom a notice under sub-section (4) has been issued, shall not be

required to pay the amount of tax arrears specified therein, or part thereof, if heobjects to it by a statement on oath that the sum demanded, or any part thereof, isnot due to the person or that he does not hold any money for, or on account of, theperson.

(10) The debtor referred to in sub-section (9) shall be personally liable to the CollectionUnit to the extent of his own liability to the person on the date of the notice, or tothe extent of the person’s liability for any sum due under this Act, whichever isless, if it is discovered that the statement made by him was false in any respect.

(11) The Collecton Unit may amend, or revoke, any notice issued under sub-section (4)or extend the time for making any payment in pursuance of such notice.

(12) The Collection Unit shall grant a receipt to the debtor for any amount paid incompliance with a notice issued under sub-section (4), and the debtor so payingshall be fully discharged from his liability to the person to the extent of the amountso paid.

(13) Any debtor discharging any liability to the person after receipt of a notice undersub-section (4) shall be personally liable to the Collection Unit to the extent of hisown liability to the person so discharged or to the extent of the person’s liabilityfor any sum due under this Act, whichever is less.

(14) The debtor to whom a notice under sub-section (4) is sent may be proceededagainst for the realization of the amount as if it was a tax arrear from him, in themanner provided in this section and the Third Schedule, if he fails to make paymentin pursuance thereof to the Collection Unit.

(15) The Collection Unit may apply to the Court, in whose custody there is moneybelonging to the person, for payment to him of the entire amount of such money,or, if it is more than the tax due, an amount sufficient to discharge the tax liability.

(16) The Collection Unit shall effect the recovery of any tax arrear in the same manneras attachment and sale of any movable property udner the Third Schedule, if he isso authorised by the Chief Commissioner, or Commissioner, by general or specialorder.

(17) In this section,-(a) debtor in relation to a person means,-

(i) any person from whom money is due, or may become due, to the person;or(ii) any person who holds, or may subsequently hold, money for, or on account

of, the person; or(iii) any person who holds, or may subsequently hold, any money for, or on

account of, the person jointly with any other person; and(b) shares of the joint holders in the account shall be presumed, until the contrary

is proved, to be equal.

Recovery of tax arrear in respect of non-resident from his assets259. The amount of tax arrears due from a non-resident may be recovered from-

(a) any asset of the non-resident, wherever located;or(b) any amount payable by any person to the non-resident.

Recovery in the case of a company in liquidation260. (1) The liquidator of a company shall inform the Collection Unit which has jurisdiction

over the company, of his appointment within thirty days of his becoming the

139liquidator.

(2) The Collection Unit shall, within three months from the date on which it receivesthe information, intimate to the liquidator the amount which, in his opinion, wouldbe sufficient to provide for any tax arrears or any amount which is likely to becomepayable thereafter, by the company under this Act or under any law repealed bythis Act.

(3) The liquidator-(a) shall not part with any of the assets of the company, or the properties, in his

custody until he has been intimated by the Collection Unit under sub-section(2); and

(b) on being so intimated, shall set aside an amount equal to the amount intimated.(4) Upon receipt of the intimation from the Collection Unit under sub-section (2), the

amount so intimated shall, regardless of anything contained in any other law forthe time being in force, be the first charge on the assets of the company remainingafter payment of the following dues:-(a) workmen’s dues; and(b) debts due to secured creditors to the extent such debts rank under clause (iii)

of the proviso to sub-section (1) of section 325 of the Companies Act, 2013pari passu with such dues.

(5) The liquidator shall be personally liable for the payment of the amount payable bythe company, if he-(a) fails to inform in accordance with sub-section (1); or(b) fails to set aside the amount as required by sub-section (3).

(6) The obligations and liabilities attached to the liquidator under this section shallattach to all the liquidators jointly and severally in a case where there are morethan one liquidator.

(7) The provisions of this section shall prevail over anything to the contrary containedin any other law in force.

(8) For the purposes of this section,-(a) “liquidator” in relation to a company shall include a receiver of the assets of

the company;(b) “workmen’s” and “workmen’s dues” shall have the meaning assigned to it in

section 325 of the Companies Act, 2013.

Liability of manager of a company261. (1) Every person being a manager of a company during the financial year shall be,

jointly and severally, liable for the payment of any amount due under this Act inrespect of the company for the financial year, if the amount cannot be recoveredfrom the company.

(2) The provisions of sub-section (1) shall not apply, if the manager proves that non-recovery cannot be attributed to any neglect, misfeasance or breach of duty on hispart in relation to the affairs of the company.

(3) The provisions of this section shall prevail over anything contrary contained inthe Companies Act, 2013.

(4) For the purposes of this section, “manager” shall include a managing director andboth shall have the meaning respectively assigned to them in clause (53) andclause (54) of section 2 of the Companies Act, 2013.

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Joint and several liability of participants262. Every person, being a participant in an unincorporated body during the financial

year, or the representative assessee of the deceased participant, shall be jointlyand severally liable, along with the unincorporated body, for payment of anyamount payable by the unincorporated body under this Act and all the provisionsof this Act shall apply accordingly.

Recovery of tax in pursuance of agreements with foreign countries263. (1) The Board may forward a certificate to any Collection Unit for recovery of any

amount under the corresponding law in force in any country outside India from aperson having property in India, if such country, or any authority under theGovernment of that country, has entered into an agreement with India under sub-section (1) of section 5 for the purposes specified in clause (d) thereof.

(2) On receipt of the certificate under sub-section (1) from the Board, the CollectionUnit shall - (a) proceed to recover the amount specified in the certificate in the manner in

which it would proceed to recover the amount specified in a certificate undersection 257; and

(b) remit any sum so recovered by him to the Board after deducting his expensesin connection with the recovery proceedings.

(3) The Collection Unit may, in a case where a person has property in a countryoutside India, forward a certificate to the Board for recovery of the tax arrears fromthe person, if the Central Government has entered into an agreement with thatcountry under sub-section (1) of section 5 for the purposes specified in clause (d)thereof.

(4) On receipt of the certificate under sub-section (3) from the Collection Unit, theBoard may take such action thereon as it may deem appropriate having regard tothe terms of the agreement with such country.

Tax clearance certificate in certain cases264. (1) No person shall leave the territory of India unless he furnishes to the prescribed

authority an undertaking to the effect that he has made satisfactory arrangementfor discharging his tax liability, if any, in respect of any income liable to tax in India.

(2) The prescribed authority shall, on receipt of the undertaking, immediately issue tothe person a no objection certificate for leaving India.

(3) The owner, or charterer, of any ship, or aircraft, shall be personally liable to pay thewhole, or any part, of the amount payable under this Act by any person requiredto obtain a no objection certificate in accordance with the foregoing sub-sections,if the person leaves India, without the posession of the certificate, in the ship, oraircraft, of the owner or the charterer.

(4) The owner, or charterer, of any ship, or aircraft, under sub-section (3), shall bedeemed to be a person in default in respect of the liability created under sub-section (3) and such amount shall be recoverable from him in the manner providedin this Chapter as if it were tax arrears.

(5) The Board may, having regard to the interests of revenue, prescribe thecircumstances, the form and the manner, in which the undertaking is to be furnished,and any other matter connected therewith.

(6) For the purposes of this section, the expression “owner” and “charterer” include

141any representative, agent or employee empowered by the owner, or charterer, toallow persons to travel by the ship or aircraft.

Recovery by suit or under other law not effected265. (1) The several modes of recovery specified in this Chapter shall not affect in any

way,-(a) any other law for the time being in force relating to the recovery of debts due

to Government; or(b) the right of the Government to institute a suit for the recovery of the tax

arrears from the person.(2) It shall be lawful for the Department or the Government, to have recourse to any

such law or suit, regardless of the fact that the tax arrears are being recovered fromthe person by any mode specified in this sub-chapter.

CHAPTER - IXADDITIONAL INCOME-TAX

Charge of additional income-tax on under reported tax liability266. (1) Every person shall be charged by the Department to pay additional income-tax, if

the person has under-reported his tax liability for the financial year.(2) The additional income-tax under sub-section (1) shall be payable in addition to tax,

if any.(3) The liability to pay additional income-tax shall be the amount calculated at the rate

of fifty per cent. of the amount of under-reported tax liability for the financial year.(4) A person shall be deemed to have under reported his tax liability if the amount of

under reported tax liability under sub-section (5) is greater than zero.(5) The amount of under-reported tax liability for the financial year shall be, -

(a) in a case where no return of income has been furnished, the amount of taxliability determined pursuant to assessment;

(b) in a case where a return of income has been furnished declaring a loss for thefinancial year, the amount of tax liability on the amount of difference betweenthe loss claimed in the return of income first filed and the income or loss, as thecase may be, determined by the Department under this Act, from time to time;

(c) in a case where the person is liable to tax under section 122, the amount of taxliability determined in accordance with the following formula-

(A-B) + (C-D)

where A = amount of standard tax liability on the total income, determinedby the Department, from time to time;

B = the amount of standard tax liability on the total income declaredin the return of income first filed;

C = the amount of minimum alternate tax liability on the adjustedbook porfit, determined by the Department from time to time;

D = the amount of minimum altranate tax liability on the adjustedbook porfit declared in the return of income first filed;

142(d) in any other case, the difference between the amount of tax liability determined

by the Department under this Act from time to time, and the amount of taxliability declared in the return of income first filed.

(6) The amount of tax liability referred to in clause (b) of sub-section (2) shall becalculated -(a) at the maximum marginal rate in the case to which Paragraph A or Paragraph B

of the First Schedule applies; and(b) at the rate specified in the First Schedule, in all other cases.

(7) No addition or disallowance of an amount shall form the basis for imposition ofadditional income-tax to the extent the amount of addition or disallowance hasformed the basis of imposition of additional income-tax in the case of the personfor the same or financial year.

(8) The additional income-tax charged under sub-section (1) shall be increased orreduced, as the case may be, consequent to any change in the amount of under-reported tax liability for the financial year on account of any modification in theincome, loss or tax liability determined by the Department under this Act from timeto time.

(9) No opportunity of being heard shall be allowed to a person for the purposes ofcharging the additional income-tax under this section.

(10) The Board may make such rules as deemed necessary so as to eliminate the effectof double counting in determining the amount of under-reported tax liability underthis section.

CHAPTER - XPENALTIES

Penalty for misreporting of income267. (1) Every person shall be liable to a penalty, if he has misreported his income for any

financial year.(2) The penalty referred to in sub-section (1) shall be a sum which shall not be less

than, but which shall not exceed two times, the amount of tax payable in respect ofthe misreported income for the financial year.

(3) The misreported income referred to in sub-section (2) shall be the aggregate amountof the addition or disallowance made by the Department under this Act from timeto time.

(4) The aggregare amount of the addition or disallowance referred to in sub-section(3) shall be the aggregate of the amount of addition or disallowance on account ofthe following, namely:-(a) misrepresentation of facts;(b) failure to record investments in the books of account;(c) claim of expenditture not substantiated by any evidence;(d) recording of any false entry in the books of account;(e) failure to record any receipt in books of account having a bearing on the total

income; and(f) failure to report any international transaction or any transaction deemed to be

an international transaction, to which the provisions of section 167 apply;(5) The tax payable in respect of the aggregate amount of the addition, or disallowance,

shall be the amount of tax calculated on the aggregate amount of the addition ordisallowance -

143(a) at the maximum marginal rate in the case to which Paragraph A or Paragraph B

of the First Schedule applies; and(b) at the rate specified in the First Schedule, in all other cases.

(6) No addition or disallowance of an amount shall form the basis for imposition ofpenalty to the extent the amount of addition or disallowance has formed the basisof imposition of penalty in the case of the person for the same financial year.

(7) The penalty referred to in sub-section (1) shall be imposed, by an order in writing,by the Department after giving an opportunity to the person of being heard.

Penalty for other defaults268. (1) Every person shall be liable to a penalty if he has, without reasonable cause,

failed to -(a) keep and maintain any such books of account and other documents as required

by section 58 for any financial year or to retain such books of account andother documents in accordance with the rules made there under;

(b) answer any question put to him by an income-tax authority in the exercise ofits powers under this Act, if he was otherwise legally bound to state the truthof any matter touching the subject of his assessment;

(c) sign any statement made by him in the course of any proceedings under thisAct, which an income-tax authority may legally require him to sign;

(d) attend or produce books of account or documents at the place or time, if he isrequired to attend or to give evidence or produce books of account or otherdocuments, at certain place and time in response to summons issued undersub-section (1) of section 142;

(e) comply with a notice issued under section 174.(2) The sum referred to in sub-section (1) shall be any sum -

(a) which shall not be less than fifty thousand rupees but which shall not exceedthree hundred thousand rupees, in the cases referred to in clause (a) of sub-section (1); and

(b) which shall not be less than ten thousand rupees but which shall not exceedone hundred thousand rupees, in any other case referred to in sub-section (1).

Procedure269. (1) The Department shall, for the purposes of imposing any penalty under this Chapter,

issue a notice to any person requiring him to show cause why the penalty shouldnot be imposed on him.

(2) The notice referred to in sub-section (1) may be issued, -(a) in a case where penalty is sought to be imposed under section 267 and an

appeal has been preferred against the assessment, at any time within sixmonths from the end of the month in which the Department receive the orderof the Commissioner (Appeals) or the Tribunal, whichever is later;

(b) in any other case, at any time within six months from the end of the month inwhich the default is committed by the person, or the relevant proceedingsunder this Act is completed, whichever is later.

(3) Every order of penalty issued under this Chapter shall be accompanied by a noticeof demand in respect of the amount of penalty imposed and the notice of demandshall be deemed to be a notice under section 191.

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Bar of limitation for imposing penalty270. (1) No order imposing a penalty under this Chapter shall be passed after the expiry of

six months from the end of the month in which the notice for imposition of penaltyis issued under section 267 or section 268.

(2) An order imposing, or dropping the proceedings for imposing, the penalty underthis Chapter may be amended, or revived, as the case may be, if the misreportedincome is revised consequent to an appellate order, or modified, amended, orrectified by the Department from time to time.

(3) No order for amending or reviving the penalty under sub-section (2) shall bepassed after the expiry of six months from the end of the month in which the orderof amendment or modification or rectification of the misreported income is passed.

(4) In computing the period of limitation for the purposes of this section, the followingtime or period shall not be included:-(a) the time taken in giving an opportunity to the person to be reheard under

section 125; and(b) any period during which a proceeding under this Chapter for the levy of

penalty is stayed by an order, or injunction, of any court.

Power to reduce penalty271. (1) The Department may, by an order, reduce the amount of penalty imposed under

this Chapter on a person for one or more financial year, having regard to -(a) the co-operation extended by the person to the Department during the

proceedings for assessment till its completion and the proceedings for therecovery of any amount due from him; and

(b) payments made by the person in respect of taxes or any other sum payableunder this Act for the relevant financial years.

(2) The penalty under this Chapter shall, regardless of anything to the contrary insub-section (1), not be reduced below fifty percent of the minimum penalty whichis imposable for the relevant default.

(3) The Department may exercise the power under sub-section (1) on its own motionor on an application by the person.

(4) A person shall not be entitled to any relief under sub-section (1) in relation to anyother financial year at any time after the order granting the relief under sub-section(1)is passed.

(5) The order granting the relief under sub-section (1) shall be passed within a periodof twelve months from the end of the month in which the penalty was imposed.

(6) No order rejecting the application, either in full or in part, shall be passed unlessthe person has been given an opportunity of being heard.

(7) Every order made under this section shall be final and shall not be called intoquestion by any court or any other authority.

CHAPTER - XIPROSECUTION

Chapter not in derogation of any other law or any other provision of this Act272. (1) The provisions of this Chapter are in addition to, and not in derogation of, the

provisions of any other law providing for prosecution for offences thereunder.

145(2) The provisions of this Chapter shall be independent of any order under this Act

that may be made, or has not been made, on any person and any defence that theorder has not been made on account of time limitation or for any other reason, shallnot be admissible in the court in respect of any preceding under this Chapter.

Contravention of any prohibitory order273. (1) A person shall be punishable with rigorous imprisonment for a term which may

extend to two years and with fine, if such person contravenes any prohibitoryorder referred to in sub-section (1) of section 131

(2) The fine referred to in sub-section (1) shall not be less than fifty thousand rupeesor more than five lakh rupees.

Failure to afford facility of inspection to Authorised Officer274. (1) A person, who is required to afford to the Authorised Officer the necessary facility

to inspect the books of account or other documents as required under the provisionsof clause (d) of sub-section (2) of section 126, shall be punishable with rigorousimprisonment for a term which may extend to two years and with fine, if suchperson fails to afford such facility to the officer.

(2) The fine referred to in sub-section (1) shall not be less than fifty thousand rupeesor more than five lakh rupees.

Removal, concealment, transfer or delivery of property to thwart tax recovery275. (1) If a person fraudulently removes, conceals, transfers or delivers to any person,

any property or any interest therein, intending thereby to prevent that property orinterest therein from being taken in execution of a certificate under the provisionsof the Third Schedule, he shall be punishable with rigorous imprisonment for aterm which shall not be less than six months, but which may extend to two years,and with fine.

(2) The fine referred to in sub-section (1), shall not be less than fifty thousand rupeesor more than five lakh rupees.

Failure to comply with the provisions of section 260276. (1) A person being liquidator of a company shall be punishable with rigorous

imprisonment for a term which shall not be less than six months, but may extend totwo years and with fine, if such person -(a) fails to give the information as required by section 260;(b) fails to set aside the amount as required by sub-section (3) of that section; or(c) parts with any of the assets of the company, or the properties, in his custordy

in contravention of the provisions of the section (3) of 260.(2) The fine referred to in sub-section (1) shall not be less than fifty thousand rupees

or more than five lakh rupees.

Failure to pay the withholding tax277. (1) A person shall be punishable with rigorous imprisonment for a term which shall

not be less than three months, but may extend to two years and with fine, if he failsto pay to the credit of the Central Government the tax withheld by him as requiredby, or under, the provisions of sub-chapter B of Chapter VIII.

146(2) No person shall be punished under sub-section (1), unless-

(a) he is a habitual defaulter;(b) he has been served with at least two reminder notices of demand;(c) the period of default in payment of the amount of tax withheld by him alongwith

interest, is more than two years; and(d) the amount of tax withheld which remains unpaid by the due date, exceeds

rupees ten lakhs.(3) The fine referred to in sub-section (1) shall not be less than two per cent of the tax

withheld, for each month in the period of default.(4) In this section, “period of default” means the period commencing from end of the

month in which the amount of tax was withheld and ending on the last day of themonth in which the tax withheld was paid to the credit of the Central Government.

Willful attempt to evade tax, etc.278. (1) A person shall be punishable with rigorous imprisonment for a term which may

extend to seven years and with fine, if he willfully attempts in any manner to evadeany liability, under this Act, in respect of tax, interest or penalty.

(2) A person shall be punishable with rigorous imprisonment for a term which shallnot be less than three months but which may extend to three years and with fine,if a person willfully attempts in any manner to evade the payment of any liability,under this Act, in respect of tax, additional income-tax, interest, fee or penalty.

(3) For the purposes of this section, a willful attempt to evade any liability, under thisAct, in respect of tax, additional income-tax, interest, fee or penalty, or its payment,shall include a case where any person-(a) has in the possession, or control, any books of account or other documents,

relevant to any proceeding under this Act, containing a false entry or statement;or

(b) makes, or causes to be made, any false entry, or statement, in such books ofaccount or other documents; or

(c) willfully omits, or causes to be omitted, any relevant entry, or statement, insuch books of accounts or other documents; or

(d) causes any other circumstance to exist which will have the effect of enablingsuch person to evade any liability, under this Act, in respect of tax, additionalincome-tax, interest, fee or penalty, or the payment thereof.

(4) The fine referred to in sub-section (1) or sub-section (2) shall not be less than fiftythousand rupees or more than five lakh rupees.

Failure to furnish return of income279. (1) A person shall be punishable with rigorous imprisonment for a term which may

extend to two years and with fine, if he fails to furnish within due date the return ofincome which he is required to furnish under sub-section (1) of section 161 or bynotice given under section 169 or section 170.

(2) No person shall be punished under sub-section (1), unless-(a) he is a habitual defaulter;(b) he has been served with at least two notices requiring him to file the return;(c) the period of default is more than six months calculated from the end of themonth in which the time allowed for filing the return under the last notice expires;and(d) the amount of tax determined by the Department as payable by the person, as

147reduced by pre-paid taxes does not exceed one hundred thousand rupees.

(3) The fine referred to in sub-section (1) shall be a sum calculated at a rate which shallnot be less than fifty rupees or more than two hundred and fifty rupees, for everyday during which the default continues.

Failure to furnish other returns, statements, reports, etc.280. (1) A person shall be punishable with rigorous imprisonment for a term which may

extend to two years and with fine, if he fails to furnish-(a) in due time any return, statement or report which he is required to furnish

under this Act; or(b) after receipt of a notice to do so, any return, statement or report which he is

required to furnish under his Act.(2) No person shall be punished under sub-section (1), unless-

(a) he is a habitual defaulter;(b) he has been served with at least two notices requiring him to file the return,statement or report; and(c) the period of default is more than six months calculated from the end of themonth in which the time allowed for filing the return, statement or report under thelast notice expires.

(3) The fine referred to in sub-section (1) shall be a sum calculated at a rate which shallnot be less than fifty rupees or more than two hundred and fifty rupees, for everyday during which the default continues.

Failure to comply with direction under this Act281. (1) A person shall be punishable with rigorous imprisonment for a term which may

extend to one year and with fine, if he willfully fails to comply with any directionissued to him under this Act.

(2) The fine referred to in sub-section (1) shall be a sum calculated at a rate which shallnot be less than twenty rupees or more than one hundred rupees for every dayduring which the default continues.

False statement in verification, etc.282. (1) A person shall be punishable with rigorous imprisonment for a term which shall

not be less than six months but which may extend to seven years and with fine, ifhe -(a) makes a false statement in any verification under this Act, or under any rule

made under this Act; or(b) delivers an account or statement which is false, and which he either knows or

believes to be false, or does not believe to be true.(2) The fine referred to in sub-section (1) shall not be less than fifty thousand rupees

or more than five lakh rupees.

Falsification of books of account or documents, etc.283. (1) A person shall be punishable with rigorous imprisonment for a term which may

extend to seven years and with fine, if he makes, or causes to be made, any entry,or statement, which is false and which he either knows to be false or does notbelieve to be true, in any books of account or other document relevant to, oruseful, in any proceedings against him, or any other person, under this Act.

(2) The fine referred to in sub-section (1) shall be a sum calculated at a rate which shall

148not be less than twenty rupees or more than one hundred rupees, for every dayduring which the default continues.

Abetment of false return, etc.284. (1) A person shall be punishable with rigorous imprisonment for a term which shall

not be less than six months but which may extend to seven years and with fine, ifhe abets, or induces, in any manner another person to-(a) make and deliver, or cause to be delivered, an account, statement or declaration

relating to any income chargeable to tax which is false and which he eitherknows to be false or does not believe to be true; or

(b) commit an offence under sub-section (1) of section 278.(2) The fine referred to in sub-section (1) shall be a sum which shall not be less than

fifty thousand rupees or more than five hundred thousand rupees.

Offences by entities, etc.285. (1) If an offence under this Act has been committed by an entity then, regardless of

anything to the contrary contained in this Chapter, -(a) such entity shall be punished only with a fine; and(b) every person, who, at the time the offence was committed, was in charge of,

and was responsible to, the entity for the conduct of its business, shall bepunished with imprisonment and fine.

(2) The entity and the persons referred to in sub-section (1) shall be liable to beproceeded against and punished in accordance with the provisions of this Act.

(3) The person referred to in clause (b) of sub-section (1) shall not be liable to anypunishment if he proves that -(a) the offence was committed without his knowledge, consent or connivance;(b) the offence cannot be attributed to any neglect on his part; or(c) he had exercised all due diligence to prevent the commission of such offence.

(4) Any director, manager, secretary or any other officer of the entity shall also bepunished with imprisonment and fine, if it is proved that -(a) the offence was committed with his knowledge, consent or connivance;(b) the offence can be attributed to any neglect on his part; or(c) he had not exercised all due diligence to prevent the commission of such

offence.(5) For the purposes of this section, -

(a) “entity” means a body corporate, and includes —(i) an unincorporated body;and(ii) a Hindu undivided family; and

(b) “director”, in relation to —(i) an unincorporated body means a participant in the body;(ii) a Hindu undivided family, means an adult member of the family; and(iii) a company, means a whole-time director, or where there is no such director,

any other director or manager or officer, who is in charge of the affairs ofthe company.

Proof of entries in records or documents286. (1) Entries in the records, or other documents, in the custody of an income tax authority

shall be admitted in evidence in any proceeding for the prosecution of any personfor an offence under this Chapter.

149(2) The entries referred to in sub-section (1) may be proved by the production of -

(a) the records or other documents (containing such entries) in the custody ofthe income tax authority; or

(b) a copy of the entries certified by that authority, as true copy of those containedin the records or other documents in its custody.

Presumption as to assets, books of account, etc., in certain cases287. The provisions of section 138 shall, so far as may be, apply in relation to any

material found in the possession or control of any person, if the material-(a) have been seized under section 126 or requisitioned under section 134; and(b) are tendered by the prosecution in evidence against-

(i) such person; or(ii) such person and the other person referred to in section 284.

Presumption as to culpable mental state288. (1) The Court shall presume the existence of a culpable mental state on the part of the

accused in a prosecution for any offence under this Act which requires suchmental state on the part of the accused.

(2) It shall be a defence for the accused to prove the fact that he had no culpablemental state with respect to the act charged as an offence in that prosecution.

(3) For the purposes of this section “culpable mental state” includes intention, motive,knowledge of a fact, or belief in, or reason to believe, a fact.

(4) For the purposes of this section, a fact is said to be proved when the court believesthat its existence is established by a preponderance of probability.

Prosecution to be at the instance of Competent Sanctioning Authority289. (1) A person shall not be proceeded against for an offence under sections 273 to 285

except with the previous sanction of the Competent Sanctioning Authority.(2) The Competent Sanctioning Authority may issue such instruction, or direction, to

the aforesaid income-tax authorities as he may deem fit for institution of proceedingunder this sub-section.

(3) The Competent Sanctioning Authority may compound, either before or after theinstitution of proceeding, an offence under this Chapter at the prescribed rates.

(4) The Board may issue order, instruction or direction (including instruction ordirection to obtain the previous approval of the Board) to any income-tax authorityfor the proper composition of offences under this section.

(5) An offence in relation to which a punishment has been awarded by a court shallnot be compounded.

(6) Any statement made, or account or other document produced, by a person beforeany income-tax authority, other than an Inspector, shall be admissible as evidencefor the purpose of any proceeding which has been taken against the person undersub-section (1), regardless of the fact that the offence in respect of which suchproceeding was taken would be compounded.

(7) For the purposes of this section, “Competent Sanctioning Authority” shall meanthe Principal Chief Commissioner, Principal Director General, Chief Commissioneror Director General or any other income-tax authority not below the rank ofCommissioner prescribed in this behalf.

150Certain offences to be non-cognizable

290. An offence punishable under section 277 or section 278 shall be deemed to benon-cognizable within the meaning of the Code of Criminal Procedure, 1973,regardless of anything contained in that Code.

Disclosure of information by public servants291. (1) If a public servant furnishes any information, or produces any document, in

contravention of the provisions of section 326, he shall be punishable withimprisonment for a term which may extend to six months, and with fine.

(2) No prosecution shall be instituted under this section except with the previoussanction of the Central Government, which may be accorded only after givingsuch public servant an opportunity of being heard.

Punishment for second and subsequent offences.292. A person shall be punishable for the second and for every subsequent offence

with rigorous imprisonment for a term which shall not be less than six months, butwhich may extend to seven years, and with fine, if the person having been convictedof an offence under any provisions of this Chapter is again convicted of an offenceunder any of the said provisions,.

Punishment not to be imposed in certain cases.293. No person shall be punishable under any provisions of this Chapter, if he proves

that there was reasonable cause for the failure referred to in the said provision,regardless of anything to the contrary contained therein.

Power to tender immunity from prosecution294. (1) The Central Government may tender immunity to any person from prosecution for

any offence under this Act, for the time being in force, if it thinks fit to do so, forreasons to be recorded in writing, having regard to the fact that, -(a) the person has co-operated with the Department or any income-tax authority

in any proceeding under this Act; and(b) the person has made a full and true disclosure of the whole circumstances

relating to all the acts of omission or commission relating to the offence;(2) A tender of immunity made to, and accepted by, the person concerned, shall, to the

extent to which the immunity extends, render him immune from prosecution forany offence in respect of which the tender was made.

(3) The immunity granted to a person under sub-section (1) shall stand withdrawn, ifsuch person fails to comply with any condition subject to which the immunity wasgranted and thereupon the provisions of this Act shall apply as if such immunityhad never been granted.

(4) The immunity granted under this section shall be deemed to have been withdrawn,if the Central Government records a finding to the effect that the person to whomthe immunity has been tendered has -(a) willfully concealed any particular which has the effect of altering the reasons

recorded for tendering immunity under sub-section (1);(b) given any false evidence; or(c) not complied with any condition on which the tender was made.

151(5) The person, in whose case immunity has been withdrawn under sub-section (4),

may be tried for the offence in respect of which the tender of immunity was madeor for any other offence of which he appears to have been guilty in connectionthereto.

Offences by Hindu undivided families.295. (1) The karta of a Hindu undivided family shall be deemed to be guilty of the offence

and shall be liable to be proceeded against and punished accordingly, if an offenceunder this Act is commited by the Hindu undivided family.

(2) The karta shall not be liable to any punishment, regardless of anything containedin sub-section (1), if he proves that-(a) the offence was committed without his knowledge; or(b) he had exercised all due diligence to prevent the commission of such offence.

(3) Any offence committed under this Act by a Hindu undivided family shall be deemedto have also been committed by any member of the Hindu undivided family, if it isproved that the offence has been committed with the consent or connivance of, oris attributable to any neglect on the part of, the member.

(4) The member deemed to have committed the offence under sub-section (3) shall beliable to be proceeded against under this Chapter and punished accordingly.

Cognizance of offences296. No court inferior to that of a presidency magistrate or a magistrate of the First

Class shall try any offence under this Act.

Special Courts.297. (1) The Central Government, in consultation with the Chief Justice of the High Court,

may, for trial of offences punishable under this Chapter, by notification, designateone or more courts of Magistrate of the first class as Special Court for such area orareas or for such cases or class or group of cases as may be specified in thenotification.

(2) While trying an offence under this Act, a Special Court shall also try an offence,other than an offence referred to in sub-section (1), with which the accused may,under the Code of Criminal Procedure, 1973, be charged at the same trial.

(3) For the purposes of this section, “High Court” means the High Court of the Statein which a Magistrate of first class designated as Special Court was functioningimmediately before such designation.

Offences to be tried by Special Court.298. (1) The offences punishable under this Chapter shall be triable only by the Special

Court , if so designated, for the area or areas or for cases or class or group of cases,as the case may be, in which the offence has been committed regardless of anythingcontained in the Code of Criminal Procedure, 1973.

(2) Regardless of the provisions of sub-section (1), a court competent to try offencesunder section 296 -

(i) which has been designated as a Special Court under this section, shall continueto try the offences before it or offences arising under this Act after suchdesignation;

(ii) which has not been designated as a Special Court may continue to try suchoffence pending before it till its disposal;

152(3) A Special Court may, upon a complaint made by an authority authorised in this

behalf under this Act, take cognizance of the offence for which the accused iscommitted for trial.

Trial of offences as summons case.299. The Special Court shall, regardless of anything contained in the Code of Criminal

Procedure, 1973, try all offences under this Chapter as a summons case, and theprovisions of the Code of Criminal Procedure, 1973 as applicable in the case of trialof summons case, shall apply accordingly.

Application of Code of Criminal Procedure, 1973 to proceedings before Special Court.300. (1) The provisions of the Code of Criminal Procedure, 1973 (including the provisions

as to bails or bonds) shall, unless otherwise provided under this Act, apply to theproceedings before a Special Court and the person conducting the prosecutionbefore the Special Court, shall be deemed to be a Public Prosecutor:

(2) The Central Government may, regardless of the provisions of sub-section(1), alsoappoint a Special Public Prosecutor for any case or class or group of cases .

(3) A person shall not be qualified to be appointed as a Public Prosecutor or a SpecialPublic Prosecutor under this section unless he has been in practice as an advocatefor not less than seven years, requiring special knowledge of law.

(4) Every person appointed as a Public Prosecutor or a Special Public Prosecutorunder this section shall be deemed to be a Public Prosecutor within the meaning ofclause (u) of section 2 of the Code of Criminal Procedure, 1973 and the provisionsof that Code shall have effect accordingly.

Section 360 of the Code of Criminal Procedure, 1973, and the Probation of OffendersAct, 1958, not to apply

301. The provisions of section 360 of the Code of Criminal Procedure, 1973, or theProbation of Offenders Act, 1958, shall not apply to a person convicted of anoffence under this Code, if the person is of eighteen years of age or more.

CHAPTER - XIIADVANCE RULING

. Definitions302. In this Chapter, unless the context otherwise requires,-

(a) “advance ruling” means a ruling by the Authority on a question raised by theapplicant under section 306 within the scope as specified under section 303;

(b) “applicant” means any person who makes an application under sub-section(1) of section 306;

(c) “application” means an application made to the Authority under sub-section(1) of section 306;

(d) “Authority” means the Authority for Advance Rulings constituted undersection 304;

(e) “Chairman” means the Chairman of the Authority;(f) “Member” means a Member of the Authority and includes the Chairman and

the Vice Chairman.(g) “Vice Chairman” means the Vice Chairman of the Authority

153.

Scope of Ruling303. An applicant, specified in column (2) of the Table 15, may seek ruling on such

matter as specified in the corresponding entry of column (3) of the said Table.

TABLE 15————————————————————————————————————Sr.No. Applicant Scope of ruling————————————————————————————————————(1) (2) (3)————————————————————————————————————(i) Non-resident A determination in relation to a transaction

which has been undertaken, or is proposed tobe undertaken, by the applicant, and suchdetermination shall include the determinationof any question of law, or of fact, specified inthe application

(ii) Resident (a) A determination in relation to the taxliability of a non-resident arising outof a transaction which has beenundertaken, or is proposed to beundertaken, by the applicant withsuch non-resident, and suchdetermination shall include thedetermination of any question of law,or of fact, specified in the application;

(b) a determination in relation to the taxliability of the applicant, arising outof transaction which has beenundertaken or is proposed to beundertaken by such applicant andsuch determination shall include thedetermination of any question of lawor of act specified in the application.

(iii) Resident or Non-Resident A determination or decision by the Authoritywhether an arrangement, which is proposedto be undertaken by any person being aresident or a non-resident, is an impermissibleavoidance arrangement as referred to insection 89 or not.

(iv) Any class of residents, as notified A determination in respect of an issue relatingby the Central Government in the to computation of tax bases which is pendingOfficial Gazette in this behalf. before any income-tax authority, or the

Appellate Tribunal, and such determinationshall include the determination of anyquestion of law or of fact relating to such

154 computation of tax bases specified in theapplication.

Authority for Advance Ruling304. (1) The Central Government shall constitute an Authority for Advance Ruling for the

purposes of pronouncing an advance ruling.(2) The Authority shall consist of a Chairperson and such number of Vice-chairpersons,

law Members and revenue Member as the Central Government may appoint.(3) A person shall not be qualified for appointment as -

(a) the Chairperson, unless he has been a Judge of the Supreme Court or a ChiefJustice of High Court or has been a Judge of a High Court for atleast sevenyears or is a retired Judge of the Supreme Court;

(b) a Vice Chairperson unless he has been a Judge of a High Court;(c) a law Member, unless he is an officer of the Indian Legal Service, and is an

Additional Secretary to the Government of India;(d) a revenue member unless he is an officer of the Indian Revenue Service, and

is qualified to be a Member of the Board.(4) The salaries and allowances payable to, and the terms and conditions of service

of, the Members shall be such as may be prescribed.(5) The Central Government shall provide the Authority with such officers and staff,

as may be necessary, for the efficient exercise of the powers of the Authority underthis Act.

(6) The powers and functions of the Authority shall be discharged by its Benches asmay be constituted by the Chairperson of the Authority from amongst the Memberthereof.

(7) In the event of the occurrence of any vacancy in the office of the Chairperson byreason of his death, resignation or otherwise, the senior-most Vice-Chairpersonshall act as the Chairperson until the date on which a new Chairperson, appointedin accordance with the provisions of this Act to fill such vacancy, enters upon hisoffice.

(8) In case the Chairperson is uanble to discharge his functions owing to absence,illness or any other cause, the senior most Vice-Chairperson shall discharge thefunctions of the Chairperson until the date of which the Chairperson resumes hisduties.

(9) A Bench shall consist of the Chairperson or the Vice-Chairperson and one revenueMember and one law Member.

(10) The Prinicpal Bench of the Authority shall be located in National Capital Territoryof Delhi and other Benches of the Authority shall be located at the places as theCentral Government may, by notification specify.

(11) No proceeding before, or pronouncement of advance ruling by, the Authority shallbe questioned, or shall be invalid, on the ground merely of the existence of anyvacancy, or defect, in the constitution of the Authority.

155

Decision to be by majority305. (1) The Authority shall decide any point according to the opinion of majority, in a case

where the Members of the Bench differ in opinion on such point, and there is amajority.

(2) The Members of the Bench shall, if they differ in opinion on any point and areequally divided, state the point on which they differ and make a referrence to theChairperson.

(3) The Chairperson, on receipt of the reference under sub-section (2), shall -(a) either hear the point himself; or(b) refer the case for hearing on the point by one or more of the other Members.

(4) The point referred to in sub-section (2), shall be decided according to the opinionof the majority of the Members who have heard the case, including those who firstheard it.

Filing of application306. (1) An applicant may make an application for seeking advance ruling, under this

Chapter, stating the question on which the advance ruling is sought.(2) The application shall be made in such form and manner as may be prescribed, and

be accompanied by a fee of two thousand five hundred rupees.(3) An applicant may withdraw an application within thirty days from the date of filing

of the application.

Admission of application307. (1) The Authority shall, within a period of ten days from the date of receipt of an

application under section 306, issue a notice to the applicant requiring him toexplain as to why the application made by him may be allowed to be proceededwith.

(2) The Authority shall, on hearing the applicant, within a period of twenty days fromthe date of receipt of the application, by an order in writing, reject or allow theapplication to be proceeded with.

(3) The application received under section 306 shall be deemed to have been allowedto be proceeded with, if no order has been passed within the period specified insub-section (2).

(4) The Authority shall, in respect of an application which has been allowed to beproceeded with under sub-section (2) or sub-section (3), call for a report alongwith the relevant records, from the Commissioner.

(5) The Commissioner shall, after examining the records and making such enquiry asdeemed fit, furnish the report along with the records within a period of forty-fivedays from the receipt of communication from the Authority under sub-section (4).

(6) The Authority may, on the basis of the report from the Commissioner, and within aperiod of fifteen days of the receipt of the report by an order in writing, admit theapplication or declare the application as invalid.

(7) No application shall be declared invalid under sub-section (6) unless an opportunityof being heard has been given to the applicant and reasons therefore shall begiven in the order passed under that sub-section.

(8) The Authority shall not admit an application where the question raised therein, -

156(a) is already pending before any income-tax authority, Appellate Tribunal or any

court; or(b) involves determination of fair market value of any property.

(9) The Authority may, regardless of anything to the contrary contained in sub-section (8), admit the application in the case of any person falling with the class ofpersons notified under section 303 even if the question raised therein is pendingbefore any income-tax authority or Appellate Tribunal.

(10) The Authority shall send a copy of every order made under sub-section (6) to theapplicant and to the Commissioner.

Further enquiry308. (1) The Authority may, in a case where the application has been admitted under section

307, call for relevant records from the Commissioner.(2) The Authority may, upon examination of the records made available by the

Commissioner, on its own motion or on an application made by him, direct theCommissioner to -(a) make or cause to be made such further inquiry or investigation as it thinks fit

in circumstances of the case; and(b) furnish a report on outcome of such enquiry and any other matter relating

thereto.(3) The Commissioner shall be required to furnish the report referred to in sub-section

(2) within a period of sixty days from the date of receipt of communication from theAuthority.

(4) The Authority shall, if the enquiry report is not received within the period specifiedin sub-section (3), proceed to pronounce its advance ruling without such report.

Pronouncement of ruling309.(1) The Authority shall, in a case where an application is admitted under section 307,

pronounce its advance ruling, in writing, on the question specified in the application,after examining, -(a) the records made available by the Commissioner;(b) all the issues arising from the report of the Commissioner under sub-section

(5) of section 307, or under sub-section (2) of section 308; and(c) such further material as may be placed before it or obtained by it.

(2) The Authority shall, before pronouncing its Advance Ruling, provide anopportunity of being heard to the applicant and to the Commissioner.

(3) The Authority shall pronounce its Advance Ruling in writing within a period oftwelve months from end of the month in which the order admitting the applicationis passed under section 307.

(4) A copy of the Advance Ruling pronounced by the Authority, duly signed by theMembers and certified in the prescribed manner shall be sent to the applicant andto the Commissioner, as soon as may be, after such pronouncement.

Inspection of reports310.(1) No person shall be entitled to inspect, or obtain copies of, any reports made by

any income-tax authority to the Authority; but the Authority may, in its discretion,furnish copies thereof to any such person on an application made to it in thisbehalf and on payment of such fees as may be prescribed.

157(2) For the purpose of enabling any person whose case is under consideration to

rebut any evidence brought on record against him in any such report, the Authorityshall, on an application made in this behalf, and on the payment of such fees asmay be prescribed, furnish such person with a certified copy of any such report orpart thereof relevant for the purpose.

Income-tax authority or Appellate Tribunal not to proceed in certain cases311.No income-tax authority, or the Appellate Tribunal, shall proceed to decide any issue in

respect of which an application has been made by a person falling with the class ofpersons notified under section 303.

Applicability of Advance Ruling312.(1) The Advance Ruling pronounced by the Authority under section 309, shall be

binding only -(a) on the applicant in whose case the Advance Ruling has been pronounced;(b) in respect of the transaction in relation to which the Advance Ruling has been

pronounced; and(c) on the Commissioner, and the income-tax authorities subordinate to him, in

respect of the applicant and the said transaction.(2) However, the Advance Ruling referred to in sub-section (1) shall not be binding, if

there is a change in law, or fact, on the basis of which the Advance Ruling has beenpronounced.

Advance Ruling to be void in certain circumstances313.(1) The Authority may, by order, declare an Advance Ruling to be void ab initio if it

finds that the Ruling has been obtained by the applicant by fraud ormisrepresentation of facts.

(2) Upon declaring the Ruling to be void ab initio, all the provisions of this Act shallapply (after excluding the period beginning with the date of such advance rulingand ending with the date of order under this sub-section) to the applicant as ifsuch advance ruling had never been made.

(3) A copy of the order made under sub-section (1) shall be sent to the applicant andthe Commissioner.

Rectification of mistake314. The Authority may amend any order passed by it under section 308, so as to

rectify any mistake apparent on the face of record, either suo moto or on themistake being brought to its notice by the applicant or the Principal Commissioner.

Powers of the Authority315.(1) The Authority shall, for the purpose of exercising its powers, have all the powers

of a civil court under the Code of Civil Procedure, 1908 as are referred to in section167 of this Act.

(2) The Authority shall be deemed to be a civil court for the purposes of section 195 ofthe Code of Criminal Procedure, 1973, but not for the purposes of Chapter XXVI ofthe said Code.

(3) Every proceeding before the Authority shall be deemed to be a judicial proceedingwithin the meaning of sections 193 and 228 of the Indian Penal Code, and for thepurpose of section 190 of the said Code.

158

Procedure of Authority316. The Authority shall, subject to the provisions of this Chapter, have power to

regulate its own procedure in all matters arising out of the exercise of its powersunder this Act.

CHAPTER - XIIIGENERAL

Prohibited modes of loan transactions317.(1) No person shall accept from, or repay to, any other person any loan or deposit

otherwise than by an account payee cheque, account payee bank draft or use ofelectronic clearing system through a bank account, if the aggregate amount ofsuch loan or deposit in a financial year exceeds twenty thousand rupees.

(2) The provision of this section shall not apply to any loan or depost taken or acceptedfrom, or by -(a) the Government;(b) any banking company, post office savings bank or co-operative bank;(c) any corporation established by a Central, State or Provincial Act;(d) any Government company as defined in clause (45) of section 2 of the

Companies Act, 2013;(e) such other institution, association or body, or class of institutions, associations

or bodies which the Central Government may, for reasons to be recorded inwriting notify;

(f) any person having only agricultural income.(3) In this section, -

(a) “loan or deposit” means a loan or deposit of money(b) ‘loan or deposit” in relation to repayment, means -

(i) any loan or deposit of money repayable after a period or notice; and(ii) in case of a person other than a company, includes a loan or deposit of

any nature;(c) “aggregate amount of loan or deposit” in the case of repayment, means any

loan or deposit together with interest repaid during the financial year.

Prohibited modes of other transactions318. (1) No person shall receive an amount of two lakh rupees or more -

(a) in aggregate from a person in a day;(b) in respect of a single transaction; or(c) in respect of transaction relating to one event or occasion from a person,

otherwise than by an account payee cheque, account payee bank draft or useof electronic clearing system through a bank account.

(2) The provision of this section shall not apply to -(a) any receipt by -

(i) the Government;(ii) any banking company, post office savings bank or co-operative bank;

(b) loan transactions prohibited under section 317; or

159(c) such other persons or class of persons or receipts or class of receipts which

the Central Government may, for reasons to be recorded in writing notify inthe Official Gazette.

Person competent to verify return, etc.319. The returns, forms, declarations, statements, documents, accounts, certificates or

any other communication required to be furnished to the Department by a personspecified in column (2) of the Table 16 below shall be signed and verified, if required,by a person specified in Column (3) of the said Table:

TABLE 16

Sl. Person furnishing the return etc. Person to sign and verify the return etc.No.(1) (2) (3)

(1) Individual being mentally (a ) guardian of the individual; orincapacitated from attending (b) any other person duly competenthis affairs to act on his behalf

(2) Any other Individual (a) Individual himself; or(b) any person duly authorized by the

individual in this regard, if the individualis absent from India or for some otherreason it is not possible for him to signthe return, and other person holds a validpower of attorney from the individual todo so.

(3) Hindu undivided family (a) Karta of the family; or(b) any other adult member of the family if the

karta is absent from India or is mentallyincapacitated from attending to its affairs

(4) company not being resident in India Any person who holds a valid power ofattorney from the company to do so

(5) (a) Company which is being wound- Liquidator referred to in clause (g) of sub up by court or otherwise; or section 1of section 197.

(b) company where any person hasbeen appointed as the receiverof any assets of the company

(6) Company whose management has Principal officer of the companybeen taken over by the CentralGovernment or any StateGovernment under any law

(7) Any other company (a) Managing director of the company, or(b) any director of the company if there is no

managing director or the managingdirector, for any unavoidable reason is notable to sign and verify the return.

(8) Firm (a) managing partner of the firm; or

160(b) any partner (not being a minor) of the firm

if there is no managing partner or themanaging partner, for any unavoidablereason, is not able to sign and verify thereturn

(9) Limited liability partnership (a) designated partner of the limited liabilitypartnership; or

(b) any partner (not being a minor) of thelimited liability partnership if there is nodesignated partner or the designatedpartner, for any unavoidable reason, is notable to sign and verify the return

(10) Local authority Principal officer of the authority(11) Political party Chief executive officer ( whether such

Chief executive officer is known assecretary or by any other designation) ofthe party

(12) Any other association of persons Any member or the principal officer of theassociation

(13) Any other person (a) person himself; or(b) any person competent to act on this

behalf.

Appearance by registered valuer in certain matters320. (1) Any person who is entitled, or required, to attend before any income-tax authority,

or the Appellate Tribunal, in connection with any matter relating to the valuationof any asset, may attend through a registered valuer.

(2) However, the provisions of sub-section (1) shall not apply in a case where theperson is required to attend personally for examination on oath, or affirmation,under section 142.

Appearance by authorised representative321. (1) Any person who is entitled, or required, to attend before any income-tax authority,

or the Appellate Tribunal, in connection with any proceeding under this Act, mayattend through an authorised representative.

(2) However, the provisions of sub-section (1) shall not apply in a case where theperson is required to attend personally for examination on oath, or affirmation,under section 142.

(3) For the purposes of this section, “authorised representative” means a personauthorised by the assessee in writing to appear on his behalf, being(a) a person related to the assessee in any manner, or a person regularly employed

by the assessee;(b) any officer of a Scheduled Bank with which the assessee maintains a current

account or has other regular dealings;(c) any legal practitioner who is entitled to practice in any civil court in India; or(d) an accountant;(e) any person who has passed any accountancy examination recognised in this

behalf by the Board;or

161(f) any person who has acquired such educational qualifications as the Board

may prescribe for this purpose.(4) The following persons shall not be qualified to represent an assessee under sub-

section (1):-(a) a person who has been dismissed or removed from Government service;(b) a legal practitioner, or an accountant, who is found guilty of misconduct in his

professional capacity by any authority entitled to institute disciplinaryproceedings against him;

(c) a person, not being a legal practitioner or an accountant, who is found guiltyof misconduct in connection with any income-tax proceedings by theprescribed authority.

(5) The Chief Commissioner may, by an order in writing, specify the period ofdisqualification under sub-section (4), having regard to the nature of misconduct.

Power to rescind322. (1) The Central Government, the Board, or any income tax authority, shall have all the

powers to rescind any notification, approval or order issued by it under anyprovision of this Act for reasons to be recorded in writing.

(2) The powers conferred under sub-section (1) in respect of notification approval ororders, as the case may be, issued in case of any specific person, shall be exercisedonly after the person has been given a reasonable opportunity of showing causeagainst the proposed withdrawal.

Certain transfers to be void323. (1) A charge on, or transfer of, any asset of a person in favour of any other person,

shall be void as against any claim in respect of any sum payable by the personunder this Act, if the person creates a charge on, or tranfers, any of his asset infavour of the other person during the pendency of any proceeding under this Actor after the completion thereof.

(2) The charge, or transfer, referred to in sub-section (1) shall not be void, if it ismade—(a) for adequate consideration and,-

(i) without notice of the pendency of such proceeding; or(ii) without notice of such sum payable by the assessee; or

(b) with the previous permission of the Department.(3) This section applies to cases where the amount of sum payable, or likely to be

payable, under this Act exceeds five thousand rupees and the asset charged, ortransferred, exceed ten thousand rupees in value.

(4) For the purposes of this section, “asset” shall not include any business tradingasset.

Bar of suits in civil courts324. (1) No suit shall be brought in any civil court to set aside, or modify, any proceeding

taken, or order made, under this Act.(2) No prosecution, suit or other proceeding shall lie against the Government, or any

officer of the Government, for anything in good faith done, or intended to be done,under this Act.

162

Rounding off325. (1) The amount of income computed in accordance with the foregoing provisions of

this Act shall be rounded off to the nearest multiple of five hundred rupees.(2) Any amount payable, or receivable, by the person under the provisions of this Act

shall be rounded off to the nearest multiple of hundred rupees.(3) The Board may prescribe the method of rounding off under sub-section (1) or sub-

section (2).

Power to disclose information in respect of person326. (1) No information in respect of any person, except as provided in sub-section (2),

shall be provided to any person by,—(a) the Board;(b) any income-tax personnel; or(c) any person, agency or authority engaged in any manner in the administration

of this Act.(2) The Board, or any person specified by it by an order in this behalf, may furnish, or

cause to be furnished, any information in respect of an person to any other personperforming any functions under—(a) any law relating to the imposition of any tax, duty or cess, or to dealings in

foreign currency; or(b) any other law as the Central Government may, if in its opinion it is necessary

so to do in the public interest, specify by notification in this behalf.(3) The information referred to in sub-section (2) shall be only such information which

fulfils the following conditions, namely:—(a) the information is received or obtained by the Board, or any person specified

by it by an order under that sub-section, in the performance of its or hisfunctions under this Act; and

(b) the information is, in the opinion of the person furnishing the information,necessary for the purpose of enabling the other person receiving theinformation to perform the functions under the laws referred to in that sub-section.

(4) The Chief Commissioner or the Commissioner may furnish, or cause to be furnished,to any person any information relating to any person received or obtained by anyincome-tax personnell in the performance of his functions under this Act, if—(a) the person makes an application to the Chief Commissioner or the Commissioner

in the prescribed form; and(b) the Chief Commissioner or the Commissioner is satisfied that it is in the public

interest so to do.(5) The decision of the Chief Commissioner or the Commissioner under sub-section

(4) shall not be called in question in any court of law.(6) The Central Government may, notwithstanding anything in this section or under

any other law for the time being in force, direct, by a notified order, that noinformation shall be furnished under sub-section (2) or sub-section (4) in respectof such matters relating to such class of persons, or to such authorities, as may bespecified in the order.

(7) The Board shall cause to be published, electronically at the departmental website orthrough any other mode approved by the Central Government, annually, and atsuch intervals as it may deem fit, such information and data relating to the taxpayersfor the financial year, and in such manner, as may be prescribed.

163(8) The Board may, subject to the control of the Central Government, by notification in

the Official Gazette of India, make rules for release of information and data relatingto the taxpayers required by any educational and research institutions, think tanks,individuals and other persons intending to use the information and the data foreducational or research purposes.

Publication of information respecting persons in certain cases327. (1) The Central Government may, if it is of the opinion that it is necessary, or expedient,

in the public interest so to do, cause to be published in any manner the name andany other particular relating to any proceeding, or prosecution, under this Act inrespect of-(a) any person;(b) any participant of an unincorporated body; or(c) any director, managing agent, secretary, treasurer, or manager of the company.

(2) No publication under this section shall be made in relation to any penalty imposedunder this Act until the time for presenting an appeal to the Commissioner (Appeals)has expired without an appeal having been presented or the appeal, if presented,has been disposed of.

Power to make rules328. (1) The Board may, subject to the control of the Central Government, by notification in

the Gazette of India, make rules for the whole or any part of India for carrying outthe purposes of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, suchrules may provide for all or any of the following matters :—(a) the characterization, timing and the situs of any income and expenditure;(b) the ascertainment and determination of any class of income;(c) the manner in which and the procedure by which the income shall be arrived

at, in the case of—(i) agriculture income;(ii) a person residing outside India;(iii) a person whose total income includes income referred to in section 8;

(d) the determination of the amount of expenditure allowable under this Act insuch manner, to such extent, and on such basis and conditions, as appears tothe Board to be proper and reasonable;

(e) the methods by which an estimate of any income liable to tax, or expenditureliable to deduction, may be made, if such income or expenditure can not bedefinitely ascertained, or can be ascertained only with an amount of troubleand expense to the assessee which in the opinion of the Board is unreasonable;

(f) the form and manner in which any document, application, claim, return orinformation may be made or furnished and the fees that may be levied inrespect of any document, application or claim;

(g) the class or classes of persons who shall be rquired to furnish any document,application, claim, return or information in electronic form;

(h) the form and manner in which a document, application, claim, return orinformation may be furnished electronically;

(i) the document, statement, receipt, certificate or report which, regardless ofanything to the contrary contained in this Act, may not be furnished alongwith the return but shall be produced before the Department on demand;

164(j) the computer resource or the electronic record to which a document,

application, claim, return or information may be transmitted electronically;(k) the manner in which any document, application, claim, return or information

required to be filed under this Act may be verified;(l) the authority, agency or organisation who may receive any application, claim,

return or information on behalf of the Board or the Department;(m) the procedure to be followed in calculating interest payable by assessees or

interest payable by Government to persons under any provision of this Act,including the rounding off of the period for which such interest is to becalculated in cases where such period includes a fraction of a month, andspecifying the circumstances in which and the extent to which petty amountsof interest payable by persons may be ignored;

(n) the form and manner in which any appeal or cross-objection may be filedunder this Act, the fee payable in respect thereof and the manner in whichintimation of any such order as is referred to in clause (d) of sub-section (3) ofsection 207 may be served;

(o) the circumstances in which, the conditions subject to which and the mannerin which, the Commissioner (Appeals) may permit an appellant to produceevidence which he did not produce or which he was not allowed to producebefore the Department;

(p) the maintenance of a register of persons referred to in section 321, other thanlegal practitioners or accountants, practising before income-tax authoritiesand for the constitution of and the procedure to be followed by the authorityreferred to in sub-section (4) of that section;

(q) the issue of certificate verifying the payment of tax by persons;(r) the authority to be prescribed for any of the purposes of this Act;(s) the procedure for giving effect to the terms of any agreement for the granting

of relief in respect of double taxation or for the avoidance of double taxationwhich may be entered into by the Central Government under this Act; and

(t) any other matter which by this Act is to be, or may be, prescribed.(3) Any order made, proceeding initiated or conducted, or liability or obligation

discharged, in accordance with the Rules framed under this section shall be deemedto be duly made, initiated, conducted or discharged, in accordance with theprovisions of this Act.

(4) The power to make rules conferred by this section shall include the power to giveretrospective effect, from a date not earlier than the date of commencement of thisAct, to the rules or any of them and, unless the contrary is permitted, no retrospectiveeffect shall be given to any rule so as to prejudicially affect the interests of persons.

Rules and certain notifications to be placed before Parliament329.(1) The Central Government shall cause to be laid before each House of Parliament,

while it is in session for a total period of thirty days, every rule, notification, treaty,protocols, approval, circular or order issued, and scheme framed, under anyprovision of this Act.

(2) The rule, notification, approval, circular, order or scheme shall be laid as soon asmay be after they are made or issued.

(3) The total period of thirty days referred to in sub-section (1) may be comprised inone session or in two or more successive sessions.

165(4) The rule, notification, approval, circular, order or scheme shall stand modified, or

cease to have effect, if both Houses agree to carry out any modification thereto oragree that it should not be made, issued or granted.

(5) However, any such modification, or annulment, shall be without prejudice to thevalidity of anything previously done under that rule, notification, approval, circular,order or scheme.

Repeals and savings.330.(1) The Income-tax Act, 1961, is hereby repealed.

(2) Regardless of the repeal of the Income-tax Act, 1961 (hereinafter referred to as therepealed Act),—(a) where a return of income has been filed before the commencement of this Act

by any person for any financial year, proceedings for the assessment of thatperson for that year may be taken and continued as if this Act had not beenenacted;

(b) where a return of income is filed after the commencement of this Act, otherwisethan in pursuance of a notice under section 148 of the repealed Act, by anyperson for the financial year ending on the 31st day of March, 2020, or anyearlier year, the assessment of that person for that year shall be made inaccordance with the procedure specified in this Act ;

(c) any proceeding pending on the commencement of this Act before any income-tax authority, the Appellate Tribunal or any court, by way of appeal, reference,or revision, shall be continued and disposed of as if this Act had not beenenacted;

(d) where in respect of any financial year after the year ending on the 31st day ofMarch, 2010 —(i) a notice under section 148 of the repealed Act had been issued before the

commencement of this Act, the proceedings in pursuance of the noticemay be continued and disposed of as if this Act had not been enacted;

(ii) any income liable to tax has escaped assessment within the meaning ofthat expression in section 116 and no proceedings under section 147 ofthe repealed Act in respect of any such income are pending at thecommencement of this Act, a notice under section 116 may be issued withrespect to that financial year and all the provisions of this Act shall applyaccordingly;

(e) any proceeding for the imposition of a penalty in respect of any assessmentcompleted before the first day of April, 2020, may be initiated and any suchpenalty may be imposed as if this Act had not been enacted;

(f) any proceeding for the imposition of a penalty in respect of any assessmentfor the year ending on the 31st day of March, 2020, or any earlier year, whichis completed on or after the 1st day of April, 2019, may be initiated and anysuch penalty may be imposed under this Act;

(g) any election or declaration made, or option exercised, by an assessee underany provision of the repealed Act and in force immediately before thecommencement of this Act shall be deemed to have been an election ordeclaration made, or option exercised, under the corresponding provision ofthis Act;

(h) where, in respect of any assessment completed before the commencement ofthis Act, a refund falls due after such commencement, or default is made aftersuch commencement in the payment of any sum due under such completed

166assessment, the provisions of this Act relating to interest payable by theCentral Government on refunds and interest payable by the person for defaultshall apply;

(i) any sum payable under the repealed Act may be recovered under this Act, butwithout prejudice to any action already taken for the recovery of such sumunder the repealed Act;

(j) any appointment made under any provision of the repealed Act, or the CentralBoard of Revenue Act, shall, so far as it is not inconsistent with thecorresponding provisions of this Act, be deemed to have been made underthe corresponding provision aforesaid and shall continue in force accordingly;

(k) any order made under any provision of the repealed Act shall, so far as it is notinconsistent with the corresponding provisions of this Act, be deemed tohave been made under the corresponding provision aforesaid and shallcontinue in force accordingly;

(l) where the period prescribed for any application, appeal, reference or revisionunder the repealed Act had expired on or before the commencement of thisAct, nothing in this Act shall be construed as enabling any such application,appeal, reference or revision to be made under this Act by reason only of thefact that a longer period therefor is prescribed or provision is made for extensionof time in suitable cases by the appropriate authority;

(m) the deduction under section 80-IA, section 80-IAB, section 80-IB, section 80-IC, section 80-ID, section 80-IE or section 80-JJA of the repealed Act shallcontinue to be allowed under this Act if the person is eligible for suchdeduction under the repealed Act to the effect as if the repealed Act has notbeen repealed.

(3) For the purposes of this section, “financial year” shall have the same meaningassigned to it in the Income-tax Act, 1961 as it stood prior to its repeal.

Power to remove difficulties331.(1) The Central Government may, by general or special order, do anything which

appears to it to be necessary, or expedient, for the purpose of removing any difficultywhich arises in giving effect to the provisions of this Act.

(2) However, no order under sub-section (1) shall be inconsistent with the provisionunder which the difficulty arises.

(3) In particular, and without prejudice to the generality of the foregoing power, anysuch order may provide for the adaptations, or modifications, subject to which therepealed Act shall apply in relation to the assessments for the financial year endingon the 31st day of March, 2021, or any earlier year.

(4) For the purposes of this section, “financial year” shall have the same meaningassigned to it in the Income-tax Act, 1961 as it stood prior to its repeal.

CHAPTER - XIVDEFINITIONS

Definitions332. In this Act, unless the context requires otherwise,-

1. “absolute value” means the numerical value without regards to its sign.2. “accountant” -means

(a) a chartered accountant within the meaning of the Chartered Accountants Act,1949, and

167 (b) any person who is entitled to act as an auditor of companies under sub-

section (2) of section 226 of the Companies Act, 1956;3. “accrual” in relation to income, expenditure or liability, with its grammatical

variations, shall include income, expenditure or liability which has arisen;4. “accumulated profits” in relation to dividend means -

(a) all profits of the company of three consecutive financial years immediatelypreceding the financial year in which its undertaking is compulsorily acquiredin the case where the company is in liquidation consequent to such compulsoryacquisition by,-(i) the Government; or(ii) a corporation owned or controlled by the Government under any law for

the time being in force; and(b) all profits of the company up to the date of distribution or payment of dividend

or upto the date of liquidation, as the case may be, in any other case;5. “actual cost” in relation to a business capital asset shall be the cost computed

under this Act;6. “adjusted cost of acquisition” means the aggregate of -

(a) cost of acquisition of the asset;(b) cost of any improvement made thereto; and(c) expenditure incurred wholly and exclusively in connection with the transfer of

the asset,7. “advance-tax” means the advance income-tax payable in accordance with the

provisions of section 233; and8. “advance ruling” shall have the meaning assigned to it in section 302;9. “agreement” includes any arrangement or understanding or action in concert,

whether or not such arrangement, understanding or action, is-(a) in writing;(b) formal; or(c) intended to be enforceable by legal proceedings;

10. “agricultural income” means the following income -(a) any profits and gains derived from cultivation of agricultural land;(b) any rent derived from any agricultural land;(c) any rent derived from any farm house;and(d) any income derived from saplings or seedlings grown in a nursery;

11. “agricultural land” means any land situated in India which is used for agriculturalpurposes and,-(a) is assessed to land revenue in India; or(b) is subject to a local rate assessed and collected by officers of the Government

as such;12. “allied Acts” mean the -

(a) Income-tax Act, 1961;(b) Wealth-tax Act, 1957;(c) Gift-tax Act, 1958;(d) Interest-tax Act, 1974; and(e) Expenditure-tax Act, 1987;

13. “amalgamated company” means -(a) a company with which amalgamating company or companies merge; or(b) a company formed as a result of merger of two or more amalgamating

companies;

16814. “amalgamating company” means-

(a) a company which merges with another company, or(b) a company which merges with another company to form a new company;

15. “amalgamating co-operative” means-(a) a co-operative which merges with another co-operative; or(b) every co-operative merging to form a new co-operative;

16. “amalgamation” in relation to,-(a) a company means the merger of an amalgamating company or companies with

an amalgamated company, if(i) all the assets and liabilities of the amalgamating company immediately

before the merger become the assets and liabilities of the amalgamatedcompany;

(ii) shareholders holding seventy five percent or more, in value of the sharesin the amalgamating company (other than shares already held by theamalgamated company or its nominee or its subsidiary, immediately beforethe merger), become shareholders of the amalgamated company; and

(iii) the scheme of amalgamation is in accordance with the provisions of theCompanies Act, 1956; and

(b) a co-operative society means the merger of an amalgamating co-operativewith an amalgamated co-operative, if -(i) all the assets and liabilities of the amalgamating co-operative immediately

before the merger become the assets and liabilities of the amalgamatedco-operative;

(ii) the members holding seventy five per cent. or more voting rights in theamalgamating co-operative become members of the amalgamated co-operative; and

(iii) the shareholders holding seventy five per cent or more in value of the sharesin the amalgamating co-operative (other than the shares held by theamalgamated co-operative or its nominee or its subsidiary, immediately beforethe merger) become shareholders of the amalgamated co-operative; or

(c) an unincorporated body or a proprietory concern means the succession of anamalgamating unincorporated body or proprietory concern with anamalgamated company, if,-(i) all the assets and liabilities of the body or concern relating to the business

immediately before the succession become the assets and liabilities ofthe amalgamated company;

(ii) the participants of the body or the proprietor of the concern do not receiveany consideration or benefit, directly or indirectly, in any form or manner,other than by way of allotment of shares in the amalgamated company;

(iii) the aggregate of the shareholding in the amalgamated company of theparticipants of the body or the proprietor of the concern, upon succession,is not less than fifty per cent of the total value of the shares in thecompany; and

(iv) in the case of an amalgamating unincorporated body, all the participantsimmediately before the succession become the shareholders of thecompany in the same proportion in which their capital accounts stood inthe books of the body on the date of the succession;

16917. “Andhra Pradesh Land Pooling Scheme” means the Land Pooling Scheme covered

under the Andhra Pradesh Capital City Land Pooling Scheme (Formulation andImplementation) Rules, 2015 made under the provisions of the Andhra PradeshCapital Region Development Authority Act, 2014 (Andhra Pradesh Act 11 of 2014)and the rules, regulations and Schemes made under the said Act;

18. “Appellate Tribunal” means the Appellate Tribunal constituted under section210;

19. “approved fund” means -(a) an approved provident fund;(b) an approved superannuation fund;(c) an approved gratuity fund; or(d) a fund established under the Coal Mines Provident Fund and Miscellaneous

Provisions Act, 1948;(e) Deposit-Linked Insurance Fund;

20. “approved gratuity fund” means a gratuity fund which has been approved by theBoard in accordance with the scheme framed and prescribed by the CentralGovernment in this behalf;

21. “approved provident fund” means a provident fund which has been approved bythe Pension Fund Regulatory Development Authority in accordance with thescheme framed and prescribed by the Central Government in this behalf;

22. “approved superannuation fund” means a superannuation fund which has beenapproved by the Pension Fund Regulatory Developement Authority in accordancewith the scheme framed and prescribed by the Central Government in this behalf;

23. “arm’s length price” shall have the meaning assigned in section 91;24. “assessment” includes -

(a) an intimation under section 171 if no communication has been served on theperson under section 173;

(b) reassessment;(c) any order under section 189 rectifying any mistake apparent from the record;(d) any order giving effect to the directions of an Appellate Authority; and(e) any order under section 187;

25. “asset” means(a) a business asset; or(b) an investment asset;

26. “Assistant Commissioner” means a person appointed to be an AssistantCommissioner of Income-tax under section 110;

27. “associated concern” shall have the meaning assigned to it in section 91;28. “Assistant Director” means a person appointed to be an Assistant Director of

Income-tax under section 110;29. “associated enterprise” shall have the meaning assigned to it in section 91;30. “associated operation” shall have the meaning assigned to it in section 91;31. “associated person” shall have the meaning assigned to it in section 91;32. “Board” means the Central Board of Direct Taxes constituted under the Central

Boards of Revenue Act, 1963 and notified by the Central Government for thepurposes of this Act;

33. “backward classes” means such classes of citizens, other than the ScheduledCastes and the Scheduled Tribes, as may be notified, from time to time, by theCentral Government or any State Government;

17034. “banking company” means a company to which the Banking Regulation Act,

1949, applies;35. “banking institution” shall have the meaning assigned to it in sub-section (15) of

section 45 of the Banking Regulation Act, 1949.36. “block of assets” means a group of business capital assets falling within a class

of business capital assets, for which the same percentage of depreciation isprescribed;

37. “books” or “books of account” includes ledgers, day-books, cash books, account-books, stock register and other books, kept -(a) in the written form;(b) as data stored in a disc, floppy, tape or any other form of electro-magnetic data

storage device; or(c) as print outs of the data stored in any of the form referred to in clause (ii);

38. “broken-period income” means the income for the period commencing from thedate on which the debt instrument is acquired by the person or the beginning ofthe financial year, whichever is later, and ending on the date on which the securityis sold, and calculated in the prescribed manner;

39. “business” includes -(a) any trade, commerce or manufacture;(b) any adventure, or concern of that nature;(c) any profession;and(d) any vocation;

40. “business asset” means-(a) business trading asset; or(b) business capital asset;

41. “business capital asset” means,-(a) any capital asset self -generated in the course of business;(b) any intangible capital asset in the nature of,-

(i) goodwill of a business,(ii) a trade mark or brand name associated with the business,(iii) a right to manufacture or produce any article or thing,(iv) right to carry on any business,(v) tenancy right in respect of premises occupied by the assessee and used

by him for the purposes of his business, or(vi) licence, right or permit (by whatever name called) acquired in connection

with, or in the course of, any business;(c) any tangible capital asset in the nature of a building, machinery, plant or

furniture;or(d) any other capital asset connected with or used for the purposes of any

business of the person;42. “business reorganisation” means reorganisation of business of two or more

residents, involving -(a) an amalgamation;(b) a merger under a scheme sanctioned and brought into force by the Central

Government under the Banking Regulation Act, 1949; or(c) a demerger;

43. “business trading asset” means stock-in-trade, consumable stores or raw materialsheld for the purposes of business;

17144. “cantonment” means Cantonment Board as defined in section 3 of the Cantonments

Act, 1924;45. “capital asset” means property of any kind held by a person other than business

trading asset;46. “capital employed in the business” in relation to actual cost means the aggregate

of the paid-up share capital, debentures and long-term borrowings -(a) in a case where the prescribed expenditure is incurred before the commencement

of the business, as on the last day of the financial year in which the businessof the company commences;

(b) in any other case as on the last day of the financial year in which the extensionof the business is completed, or the new business commences production oroperation, in so far as such capital, debentures and long-term borrowingshave been issued or obtained in connection with the extension of the businessor the setting up of the new business of the company;

47. “capital gains” means the income as computed under section 38;48. “Capital Gains Savings Scheme” means the scheme framed and prescribed by the

Central Government in this behalf;49. “card game or other game of any sort” includes any game show, an entertainment

programme on television or electronic mode, in which people compete to winprizes or any other similar game;

50. “Chief Commissioner” means a person appointed to be a Chief Commissioner ofIncome-tax or Director General of Income-tax under section 110;

51. “child” in relation to an individual, includes a step-child and an adopted child ofthat individual;

52. “closely-held company” means a company which is not a widely held company;53. “Coffee Board” means the Coffee Board constituted under section 4 of the Coffee

Act, 1942;54. “cold chain facility” means a chain of facilities for storage or transportation of

agricultural and forest produce, meat and meat products, poultry, marine and dairyproducts, products of horticulture, floriculture and apiculture and processed fooditems under scientifically controlled conditions including refrigeration and otherfacilities necessary for the preservation of such produce;

55. “Colombo Declaration” means a declaration issued in Colombo on the 21st day ofDecember, 1991 by the Heads of State or Government of the Member Countries ofSouth Asian Association for Regional Cooperation established on the 8th day ofDecember, 1985 by the Charter of the South Asian Association for RegionalCooperation;

56. “Commissioner (Appeals)” means a person referred to as Commissioner of Income-tax (Appeals) under section 110;

57. “Commissioner” means a person referred to as Commissioner of Income-tax or aDirector of Income-tax under section 110;

58. “commodity derivative” means commodity derivative in accordance with provisionsof the Commodity Transaction Tax.

59. “communiao dos bens” means the system of community of property under thePortuguese Civil Code of 1860 in force in the State of Goa and in the Union territoriesof Dadra and Nagar Haveli and Daman and Diu;

60. “company” means-(a) any Indian company,(b) any body incorporated by or under the laws of a country outside India, or

172(c) any person who is or was assessable or was assessed as a company under the

Indian Income-tax Act, 1922, or the Income-tax Act, 1961;61. “Competent Investigating Authority” means any income-tax authority prescribed

as such;62. “Comptroller and Auditor-General of India” means the Comptroller and Auditor

General of India appointed under Article 148 of the Constitution of India;63. “computer software” means-

(a) any computer programme recorded on any disc, tape, perforated media orother information storage device; or

(b) any customized electronic data or any product or service of similar nature, asmay be notified by the Board;

64. ‘‘consolidated scheme’’ means the scheme with which the consolidating schememerges or which is formed as a result of such merger;

65. ‘‘consolidating scheme’’ means the scheme of a mutual fund which merges underthe process of consolidation of the schemes of mutual fund in accordance with theSecurities and Exchange Board of India (Mutual Funds) Regulations, 1996 madeunder the Securities and Exchange Board of India Act, 1992;

66. “Controller of Insurance” shall have the meaning assigned to it in clause (5B) ofsection 2 of the Insurance Act, 1938;

67. “converted property” means -(a) any property having been the separate property of an individual has been

converted by the individual into property belonging to the family through theact of impressing such separate property with the character of propertybelonging to the family or throwing it into the common stock of the family; or

(b) any property which has been transferred by the individual, directly or indirectly,to the family otherwise than for adequate consideration;

68. “co-operative bank” shall have the meanings assigned to it in Part V of the BankingRegulation Act, 1949;

69. “co-operative sector company” means a company in which not less than fifty-oneper cent of the paid up equity share capital is beneficially held by, one or more co-operative societies throughout the financial year;

70. “co-operative society” means a co-operative society registered under the Co-operative Societies Act, 1912 or under any State or Provincial Act for the timebeing in force for the registration of co-operative societies;

71. “Cost Inflation Index” in relation to a financial year means the index as the CentralGovernment may specify by Notification in the Official Gazette, having regard toseventy five per cent. of the average rise in the consumer price index for urbanmanual employees for the immediately preceding financial year;

72. “cost of the project” in relation to actual cost means the actual cost of the fixedassets, being land, buildings (including expenditure on development of land andbuildings), leaseholds, plant, machinery, furniture, fittings and railway sidings ,which are shown in the books of the person -(a) in a case where the prescribed expenditure is incurred before the commencement

of the business, as on the last day of the financial year in which the businessof the person commences;

(b) in any other case, as on the last day of the financial year in which the extensionof the business is completed, or the new business commences production oroperation, in so far as such fixed assets have been acquired or developed in

173connection with the extension of the business or the setting up of the newbusiness of the person;

73. “cultivation” includes any process ordinarily employed by a cultivator or receiverof rent in kind to render the produce raised or received by him fit to be taken tomarket;

74. “current income from ordinary sources” means the net result of the aggregationunder sub-section (3) of section 66;

75. “current income from the special source” means the income referred to in sub-section (2) of section 67;

76. “date of setting up of a business” means -(a) in the case of business of manufacturing, production or processing of goods,

the date on which the manufacture, production or processing of the goodsbegins after successful trial run of the plant; or

(b) in any other case, the date on which it is ready to commence its commercialoperations;

77. “debt” includes a security, debenture, deposit, loan or borrowing;78. “debt instrument” means a paper or electronic obligation that enables the borrower

to raise funds by promising to repay the lender, or investor, in accordance with theterms of a contract and includes note, bond, certificate, mortgage, lease, loan,borrowing or other agreement between the borrower and the lender;

79. “withholding of tax at source” with all their grammatical variations, mean deductionor collection of tax under Chapter VIII;

80. “demerged company” means -(a) the company whose undertaking is transferred, pursuant to a demerger, to a

resulting company; or(b) the authority or the body constituted or established under a Central, State or

Provincial Act, or a local authority or a public sector company, which is splitup or reconstructed, to form a resulting company;

81. “demerger” means -(a) the transfer, pursuant to a scheme of arrangement under sections 391 to 394 of

the Companies Act, 1956, by a demerged company of one or more of itsundertakings to any resulting company, if-(i) all the assets and liabilities of the undertaking or undertakings immediately

before the transfer become the assets and liabilities of the resultingcompany;

(ii) the assets and the liabilities are transferred at values (other than changein the value of assets consequent to their revaluation) appearing in itsbooks of account immediately before the transfer;

(iii) the resulting company issues, in consideration of the transfer, its equityshares to the shareholders of the demerged company on a proportionatebasis;

(iv) the shareholders holding seventy-five per cent or more, in value of theshares in the demerged company (other than shares already held by theresulting company or its nominee or its subsidiary, immediately beforethe transfer), become shareholders of the resulting company or companies,otherwise than as a result of the acquisition of the assets of the demergedcompany or any undertaking thereof by the resulting company;

(v) the transfer of the undertaking is on a going concern basis; and

174(vi) the transfer is in accordance with such other conditions as may be notified

by the Central Government having regard to the necessity to ensure thatthe transfer is for genuine business purposes; or

(b) the splitting up, or the reconstruction, of any authority or a body constitutedor established under a Central, State or Provincial Act, or a local authority ora public sector company to form a resulting company, in accordance with theconditions as may be notified by the Central Government;

82 “Department” means the Income Tax Department established under section 108;83. “Deposit-linked Insurance Fund” means a fund established under-

(a) the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948; or(b) the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952;

84. “depository” shall have the meaning assigned to it in the Depositories Act 1996;85. “Deputy Commissioner” means a person appointed to be a Deputy Commissioner

of Income-tax under section 110;86. “Deputy Director” means a person appointed to be a Deputy Director of Income-

tax under section 110;87."derivative" shall have the meaning assigned to it in clause (ac) of section 2 of the

Securities Contracts (Regulation) Act, 1956;88. “designated capital asset” means,—

(a) the land or building or both owned by the person as on the 2nd day of June,2014 and which has been transferred under the scheme;

(b) the land or building or both in respect of which the land pooling ownershipcertificate has been issued under the scheme to the person; or

(c) the reconstituted plot or land, as the case may be, received by the person inlieu of land or building or both referred to in clause (a) in accordance withthe scheme, if the reconstituted plot or land, as the case may be, is transferredwithin two years from the end of the financial year in which the possessionwas handed over to him;]

89. “determination” includes assessment, modification and review.90. “Director” means a person appointed to be a Director of Income-tax under section

110;91. “Director General” means a person appointed to be a Director General of Income-

tax under section 110;92. “director”, “manager” and “managing agent”, in relation to a company, have the

meanings respectively assigned to them in the Companies Act, 1956;93. "Dispute Resolution Panel" means a collegium comprising of three Commissioners

of Income-tax constituted by the Board for this purpose;94. “distributed income” in relation to an investment pooling vehicle means the amount

of its surplus actually paid to its investor or unitholder, as the case may be, bywhatever name called;

95. “dividend” distributed or paid by a company,-(a) shall include the following, namely:-

(i) any distribution by a company, if such distribution entails the release bythe company to its shareholders of all or any part of the assets of thecompany;

(ii) any distribution to its shareholders by a company of debentures,debenture-stock, or deposit certificates in any form, whether with orwithout interest, and any distribution to shareholders of its preferenceshares by way of bonus;

175(iii) any distribution made to the shareholders (other than shareholders not

entitled in the event of liquidation to participate in the surplus assets) ofa company on its liquidation;

(iv) any distribution to its shareholders by a company on the reduction of itscapital, been capitalised or not; and

(v) any payment by a closely-held company, to the extent of its accumulatedprofits, if such payment is -(A) by way of advance or loan to a shareholder being the beneficial

owner of equity shares holding not less than ten per cent of thevoting power; or

(B by way of advance or loan to any Hindu undivided family, or a firm,or an association of persons, or a body of individuals, or a company(hereafter in this clause referred to as the said concern), in whichsuch shareholder is a member or a partner or a shareholder, and inwhich he has a substantial interest; or

(C) to any person on behalf, or for the individual benefit, of suchshareholder; and

(b) shall not include the following, namely:-(i) any advance or loan made to a shareholder or the said concern by a

company in the ordinary course of its business, where the lending ofmoney is a substantial part of the business of the company;

(ii) any dividend paid by a company which is set off by the company againstthe whole or any part of any sum previously paid by it and treated as adividend within the meaning of sub-clause (e), to the extent to which it isso set off;

(iii) any payment made by a company on purchase of its own shares from ashareholder in accordance with the provisions of any law relating tocompanies for the time being in force; and

(iv) any distribution of shares pursuant to a demerger by the resultingcompany to the shareholders of the demerged company (whether or notthere is a reduction of capital in the demerged company);

96. “document” includes an electronic record as defined in clause (t) of sub-section(1) of section 2 of the Information Technology Act, 2000;

97. “domestic company” means a company which is incorporated in India;98. “disaster” shall have the meaning assigned to it under clause (d) of section 2 of

the Disaster Management Act, 2005;99. “draft order” means a draft of the order of the assessment under section 181;100. “due date” means,-

(a) in relation to the return of persons, -(i) the 30th June following the financial year if the person is not a company

and does not derive any income from business; or(ii) the 31st August following the financial year, in all other cases; or

(b) in relation to any other return, the date as may be prescribed for such return;101. “electoral trust” means a trust so approved by the Board in accordance with rules

made in this regard by the Central Government.102. “Employees’ State Insurance Fund” means the fund set up under the Employees’

State Insurance Act, 1948.

176103. “employer” means an entity which controls and directs an individual under an

express or implied contract of employment and is obligated to pay compensationto him;

104. “enquiry” includes verification, investigation, examination, exploration, probe,scrutiny,study, inspection and hearing;

105. “equity shares” means equity shares within the meaning of section 85 of theCompanies Act, 1956;

106. “equalisation levy” means the levy imposed under Chapter VIII of the FinanceAct, 2016.

107. “ex-serviceman” means -(a) a person who has served in any rank, whether as combatant or non-combatant,

in the armed forces of the Union or armed forces of the Indian States beforethe commencement of the Constitution (but excluding the Assam Rifles,Defence Security Corps, General Reserve Engineering Force, Lok SahayakSena, Jammu and Kashmir Militia and Territorial Army) for a continuous periodof not less than six months after attestation and has been released, otherwisethan by way of dismissal or discharge on account of misconduct or inefficiency,or

(b) in the case of a deceased or incapacitated ex-serviceman it includes his wife,children, father, mother, minor brother, widowed daughter and widowed sister,wholly dependant upon such ex-serviceman immediately before his death orincapacitation;

108. “fair market value”, in relation to an asset, means such price as may be determinedin accordance with the rules made under this Act;

109. “family” in relation to an individual, means-(a) the spouse and children of the individual; and(b) the parents, brothers or sisters of the individual, if mainly dependant on the

individual;110. “family pension” means a regular monthly amount payable by the employer to a

person belonging to the family of an employee in the event of the death of theemployee;

111. “farm house” means any building which fulfills all the following conditions -(a) it is situated on, or in the immediate viccinity of, the agricultural land;(b) the building is used-

(i) as a dwelling house, store-house, or other out-building, for agriculturalpurpose; or

(ii) to carry out any process to render the produce raised or received by theowner fit to be taken to the market;and

(c) the building is -(i) occupied by the cultivator or the receiver of rent-in-kind;or(ii) owned and occupied by the receiver of rent;

112. “fees for technical services” includes any consideration (including any lump sumconsideration) paid or payable, directly or indirectly, for -

(i) rendering of any managerial, technical or consultancy services;(ii) provision of services of technical or other personal; or(iii) development and transfer of a design, drawing, plan or software, or such

other services;113. “finance charges” means -

(a) any interest; or

177(b) any incidental financial charges;

114. “financial intermediary” means stock broker or sub-broker or such otherintermediary registered under section 12 of the Securities and Exchange Board ofIndia Act, 1992 or the Depositories Act, 1996;

115. “financial lease” and its grammatical variation, means a lease transaction where-(a) contract for lease is entered into between two parties for leasing of a specific

asset;(b) such contract is for use and occupation of the asset by the lessee;(c) the lease payment is calculated so as to cover the full cost of the asset together

with the interest charges; and(d) the lessee is entitled to own, or has the option to own, the asset at the end of

the lease period after making the lease payment;116. “financial year” means -

(a) the period beginning with the date of setting up of a business and ending withthe 31st day of March following the date of setting up of such business;

(b) the period beginning with the date on which a source of income newly comesinto existence and ending with the 31st day of March following the date onwhich such new source comes into existence;

(c) the period beginning with the 1st day of the financial year and ending with thedate of discontinuance of the business or dissolution of the unincorporatedbody or liquidation of the company, as the case may be;

(d) the period beginning with the 1st day of the financial year and ending with thedate of retirement or death of a participant of the unincorporated body;

(e) the period immediately following the date of retirement, or death, of a participantof the unincorporated body and ending with the date of retirement, or death,of another participant or the 31st day of March following the date of theretirement, or death, as the case may be; or

(f) the period of twelve months commencing from the 1st day of April of therelevant year in any other case.

117. “firm”shall have the meaning assigned to it in the Indian Partnership Act, 1932and shall include a limited liability partnership as defined in the Limited LiabilityPartnership Act, 2008;

118. “foreign company” means a company which is not a domestic company;119. “foreign currency” shall have the meanings assigned to it in section 2 of the

Foreign Exchange Management Act, 1999;120. “Foreign Institutional Investor” means such investor as may be prescribed;121.“forward contract” means a contract with an authorised dealer, as defined in section

2 of the Foreign Exchange Management Act, 1999 (42 of 1999), for providing aspecified sum in a foreign currency on or after a stipulated future date at the rate ofexchange specified in the contract;

122. “general public” shall have the same meaning assigned to in section 72;123. “Global Depository Receipts” means any instrument (by whatever name called)-

(a) created by the Overseas Depository Bank outside India against issue of foreigncurrency convertible bonds or ordinary shares, of a domestic company; and

(b) issued to non-residents;124. “Government security” shall have the meaning assigned to it in clause (b) of

section 2 of the Securities Contracts (Regulation) Act, 1956;

178125. “gross total income” for a financial year means the aggregate of the gross total

income from ordinary sources and the gross total income from special sources, forthat financial year;

126. “gross total income from ordinary sources” of a financial year means the netresult of the aggregation under sub-section (3) or sub-section (4) of section 66, forthat financial year.

127. “gross total income from the special source” of a financial year means the netresult of the aggregation under sub-section (2) or sub-section (3) of section 67, forthat special source for that financial year.

128. “head office expenditure” means executive and general administration expenditureincurred by the assessee outside India, including expenditure incurred in respectof-(a) rent, rates, taxes, repairs or insurance of any premises outside India used for

the purposes of the business or profession;(b) salary, wages, annuity, pension, fees, bonus, commission, gratuity, perquisites

or profits in lieu of or in addition to salary, whether paid or allowed to anyemployee or other person employed in, or managing the affairs of, any officeoutside India;

(c) traveling by any employee or other person employed in, or managing theaffairs of, any office outside India; and

(d) such other matters connected with executive and general administration asmay be prescribed;

129. “heavy goods vehicle” shall have the meaning assigned to it in section 2 of MotorVehicle Act, 1988;

130. “horse race” means a horse race upon which wagering or betting is made;131. “hospital” includes a dispensary or a clinic or a nursing home;132. “house property” means,-

(a) any building or land appurtenant thereto; or(b) any building along with any machinery, plant, furniture or any other facility if

the letting of such building is inseperable from the letting of the machinery,plant, furniture or facility;

133. “housing-finance public company” means a company,-(a) which is a public company;(b) whose main object is carrying on the business of providing long-term finance

for construction or purchase of houses in India for residential purposes; and(c) which is registered in accordance with the Housing Finance Companies (NHB)

Directions, 1989 given under section 30 and section 31 of the National HousingBank Act, 1987;

134. “however” shall mean an alternative intention, or a contrast, with the previoussection, sub-section, clause, sub-clause, item or phrase, as the case may be, and amodification of it under such circumstances as specified therein;

135. “incidental financial charges” means any fee, commission, brokerage, premium,tax payable or any other similar expenditure incurred for the purposes of borrowingor raising capital or incurring any debt or in respect of any credit facility which hasnot been utilized;

179136. “income” includes,-

(a) gross receipts referred to in section 21;(b) gross rent referred to in section 21;(c) full value of the consideration received or accruing as a result of the transfer

of any investment asset referred to in section 39;(d) voluntary contributions received by any person other than an individual or a

Hindu undivided family;(e) any sum withheld on payment received, in accordance with the provisions of

Chapter VIII; and(f) income of the nature referred to in column (3) of Table of the First Schedule;

137. “income from business” means the profits of the business as computed underthis Act;

138.“income under the head ‘capital gains’ ” means the income as computed undersection 35;

139. “income under the head ‘income from business’ ” means the income in respect ofthat head, as computed under this Act;

140. “income from employment” means the income as computed under this Act;141. “income under the head ‘income from employment’ ” means the income in respect

of that head, as computed under this Act;142. “income from house property” means the income as computed under section 21;143. “income under the head ‘income from house property’ ” means the income in

respect of that head, as computed under section 21;144. “income from residuary sources” means the income as computed under section

62;145. “income under the head ‘income from residuary sources’ ” means the income in

respect of the head, as computed under this Act;146. “income-tax” in relation to ,-

(a) India, means the income-tax payable under section 2; and(b) any foreign country, includes any excess profits tax or business profits tax

charged on the profits by the Government of any part of that country or a localauthority in that country;

147. “Income Tax Officer” means a person appointed to be an Income-tax Officerunder section 160;

148.“incriminating material” includes evidence found as a result of search orrequisition;

149. “indexed cost of acquisition” shall be the amount computed under section 41;150. “India” means-

(a) the territory of India as referred to in Article 1 of the Constitution;(b) its territorial waters, continental shelf, exclusive economic zone or any other

maritime zone as defined in the Territorial Waters, Continental Shelf, ExclusiveEconomic Zone and Other Maritime Zones Act, 1976;

(c) the air space above its territory and territorial waters; or(d) the seabed and the subsoil underlying the territorial waters;

151. “Indian company” means a body corporate which,-(a) is registered or established by or under,-

(i) the Companies Act,1956;(ii) the Companies Act, 2013; or(iii) a Central, State or Provincial Act;

180(iv) any law relating to companies formerly in force in any part of India other

than the State of Jammu and Kashmir;(v) any law for the time being in force in the State of Jammu and Kashmir; and

(b) has its registered or, as the case may be, principal office in India;152. “Indian income-tax” means income-tax charged in accordance with the provisions

of this Act;153. “Indian rate of tax” means the rate determined by dividing the amount of Indian

income-tax after deduction of any relief due under the provisions of this Code butbefore deduction of any relief due under section 206, by the total income;

154. “Indian ship” shall have the same meaning assigned to it in clause (18) of section3 of the Merchant Shipping Act, 1958;

155. “infrastructure facility” means the following facilities:-(a) a road including toll road, a bridge or a rail system;(b) a highway project including housing or other activities being an integral part

of the highway project;(c) a water supply project, water treatment system, irrigation project, sanitation

and sewerage system or solid waste management system; and(d) a port, airport, inland waterway or inland port;

156. “Inspector of Income-tax” means a person appointed to be an Inspector of Income-tax under section 160;

157. “insurer” means an Indian insurance company under clause (7A) of section 2 ofthe Insurance Act, 1938, which has been granted a certificate of registration undersection 3 of that Act;

158. “interest” means any amount payable to any person (including any participant),in any manner, in respect of any borrowing or debt incurred or any other similarright or obligation;

159. “interested person” shall have the same meaning assigned to it in section 109;160. "International Financial Services Centre" shall have the meaning assigned to it

in clause (q) of section 2 of the Special Economic Zones Act, 2005;161. “investment asset” means any capital asset which is not a business capital asset;162. “investment pooling vehicle” means a special purpose vehicle, which -

(a) is established or registered as a company, fund, trust, society or institutionunder any Central Act or regulations thereunder;

(b) combines capital from, or assets of, many investors to deploy it according toits particular investment strategay;

(c) distributes atleast ninty five per cent. of its surplus by, -(i) actual payout to the investors; or(ii) notionaly apportioning the surplus amongst the investors in the ratio of

their respective investment and treating the share of the investor asreinvestment by him;

(d) is registered, or recognised, by SEBI, Reserve Bank of India or Pension FundRegulatory and Development Authority;

(e) belongs to a class of investment pooling vehicles, prescribed in this behalf;163. “jewellery” in relation to a capital asset, includes -

(a) ornaments made of gold, silver, platinum or any other precious metal or anyalloy containing one or more of such previous metals, whether or notcontaining any precious or semi-precious stone, and whether or not workedor sewn into any wearing apparel;

181(b) precious or semi-precious stones, whether or not set in any furniture, utensil

or other article or worked or sewn into any wearing apparel;164. “Joint Commissioner” means a person appointed to be a Joint Commissioner of

Income-tax, an Additional Commissioner of Income-tax, a Joint Director of Income-tax or an Additional Director of Income-tax under section 110;

165. “Joint Director” means a person appointed to be a Joint Director of Income-tax oran Additional Director of Income-tax under section 110;

166. “Keyman insurance policy” means a life insurance policy taken by -(a) an employer on the life of an employee or a former employee; or(b) a person on the life of another person who is, or was, connected in any

manner whatsoever with the business of the first-mentioned person;167. “khadi” and “village industries” have the meanings respectively assigned to

them in the Khadi and Village Industries Commission Act, 1956 ;168. “know-how” means any industrial information or technique likely to assist in the

manufacture or processing of goods or in the working of a mine, oil-well or othersources of mineral deposits (including searching for discovery or testing of depositsfor the winning of access thereto);

169. “legal representative” has the meaning assigned to it in clause (11) of section 2 ofthe Code of Civil Procedure, 1908;

170. “liabilities” in relation to a demerger or slump sale shall include-(a) the liabilities which arise out of the activities or operations of the undertaking;(b) the specific loans or borrowings (including debentures) raised, incurred and

utilised solely for the activities or operations of the undertaking; and(c) in cases, other than those referred to in clause (a) or clause (b), so much of the

amounts of general or multipurpose borrowings, if any, of the assessee asstand in the same proportion which the value of the assets transferred in ademerger or slump sale bears to the total value of the assets of such assesseeimmediately before the demerger or slump sale;

171. “life insurer” means an insurer who is wholly engaged in the business of providingassurance on the life of human beings;

172. “light goods vehicle” means a vehicle which is not a heavy goods vehicle;173. “local authority” means-

(a) Panchayat as referred to in clause (d) of article 243 of the Constitution;(b) Municipality as referred to in clause (e) of article 243P of the Constitution;(c) Municipal Committee and District Board, legally entitled to, or entrusted by

the Government with, the control or management of a Municipal or local fund;or

(d) Cantonment Board as defined in section 3 of the Contonments Act, 1924;174. “long-term borrowings” means-

(a) moneys borrowed from the Government, a scheduled bank or a financialinstitution where the terms of the borrowings provide for the repayment duringa period of not less than five years, or

(b) moneys borrowed or debt incurred in a foreign country for the purchase ofcapital plant and machinery outside India, where the terms of the borrowingsprovide for the repayment during a period of not less than seven years;

175. “long-term finance” means any loan or advance where the terms under whichmoneys are loaned or advanced provide for repayment along with interest thereofduring a period of not less than five years;

176. “long term leasing” means,-

182(a) lease for a term of not less than twelve years; or(b) a lease which provides for the extension of the term thereof by a further term

or terms, if the aggregate of the term for which such lease is to be granted andthe further term or terms for which it can so extended is not less than twelveyears;

177. “lottery” includes winnings from prizes awarded to any person by draw of lots orby chance or in any other manner whatsoever, under any scheme or arrangementby whatever name called;

178. “manufacture”, with its grammatical variations, means a change in a non-livingphysical object or article or thing,-(a) resulting in transformation of the object or article or thing into a new and

distinct object or article or thing having a different name, character and use; or(b) bringing into existence of a new and distinct object or article or thing with a

different chemical composition or integral structure;179. “material” includes any books of account, document, money, bullion, jewellery or

other valuable article or thing;180. “maximum marginal rate” means the rate of income-tax applicable in relation to

the highest slab of income in the case of an individual, as specified in the FirstSchedule;

181. “medical authority” means,-(i) the medical authority referred to in clause (p) of section 2 of the Persons with

Disabilities (Equal Opportunities, Protection of Rights and Full Participation)Act, 1995; or

(ii) such other medical authority as may be notified by the Central Governmentfor this purpose.

182. “mineral” includes a group of associated minerals specified in Part A or Part B,respectively, of the Eleventh Schedule;

183. “mineral oil” shall have the meaning assigned to it in the Tenth Schedule;184. “minimum alternate tax” means the amount calculated at the rate specified in

Paragraph A of the Second Schedule and in the manner provided therein;185 .“municipality” means municipality as referred to in clause (e) of article 243P of the

Constitution of India.186. “mutual benefit finance company” means a company, -

(a) which carries on, as its principal business, the business of acceptance ofdeposits from its members; and

(b) which is a Nidhi or Mutual Benefit Society within the meaning of section 620Aof the Companies Act, 1956;

187. “mutual fund” means,-(a) a Mutual Fund registered as such under the Securities and Exchange Board of

India Act, 1992;(b) a venture capital company; or(c) a venture capital fund.

188. “National Housing Bank” means the National Housing Bank established undersection 3 of the National Housing Bank Act, 1987;

189. “net worth” shall,-(a) in relation to a demerged company, mean the aggregate of the paid-up share

capital and general reserves as appearing in the books of account of thedemerged company immediately before the demerger; and

183(b) in relation to an undertaking or division transferred under slump sale, means

the value determined in the prescribed manner;190. “ new investment asset” means the new investment asset within the meaning of

section 53;191. “National Pension System Trust” means the National Pension System Trust

established on the 27th day of February, 2008 under the provisions of the IndianTrusts Act, 1882;

192. “non-filer” in relation to a financial year means a person,-(a) who has not furnished,-

(i) a return of income for the financial year; and(ii) a return of income for two immediately preceding financial years; and

(b) who has not been issued any notice under section 151 in respect of therelevant financial year and two immediately preceding financial years;

193. “non-profit organisation” shall have the same meaning assigned to it in section109 ;

194. “non-resident” means a person who is not a resident;195. “non-resident withholdee” -

(a) means a person who is non-resident in India and receives any amount whichis liable to deduction of tax at source under Chapter VIII; and

(b) includes a foreign company;196. “notice” means the legal instrumentality by which intimation is provided;197. “option” in relation to sweat equity shares means a right but not an obligation,

granted to an employee to apply for the sweat equity shares at a predeterminedprice;

198. “order” includes an intimation;199. “original investment asset” means an investment asset in respect of which

deduction under section 53 is claimed;200. “Overseas Depository Bank” means a bank authorised by the issuing company

to issue Global Depository Receipts against issue of Foreign Currency ConvertibleBonds or ordinary shares of the issuing company;

201. “owner” in relation to a house property and land appurtenant thereto shall include,-(a) an individual who transfers otherwise than for adequate consideration any

house property to his or her spouse, not being a transfer in connection withan agreement to live apart, or to a minor child not being a married daughter;

(b) the holder of an impartible estate;(c) a member of a co-operative society, company or other association of persons

to whom a building or part thereof is allotted or leased under a house buildingscheme of the society, company or association; and

(d) a person who is allowed to take or retain possession of any building or partthereof in part performance of a contract of the nature referred to in section53A of the Transfer of Property Act, 1882.

202. “paid” shall,-(a) in relation to “Income from business” or “Income from residuary sources”,

mean incurred or actually paid, according to the method of accounting on thebasis of which the income under those heads are computed; and

(b) in all other cases, mean actually paid;203 “panchayat” means panchayat as referred to in clause (d) of article 243 of the

Constitution of India.204. “participant” means,-

184(a) a partner in relation to a firm; or(b) a member in relation to an association of persons or body of individuals;

205.“partner” shall have the meaning assigned to it in the Indian Partnership Act, 1932and shall include,-(a) a partner of a limited liability partnership as defined in the Limited Liability

Partnership Act, 2008; and(b) any person who, being a minor, has been admitted to the benefits of partnership;

206 .“partnership” shall have the meaning assigned to it in the Indian Partnership Act,1932 and shall include a limited liability partnership as defined in the Limited LiabilityPartnership Act, 2008;

207. “patent”, “patentee” and “controller” in relation to patent shall have the meaningrespectively assigned to them under section 2 of the Patents Act, 1970;

208. “pension fund” means a pension fund registered with an authority specified forthis purpose;

209. “permanent account number” means a number allotted to a person under thisCode for the purposes of identification of that person;

210. “permanent establishment” means(i) a fixed place of business;(ii) a dependent agent; or(iii) significant economic presence.

211. “permitted derivative transaction” means any transaction in derivatives, if-(a) it is carried out electronically on screen-based systems of a recognised stock

exchange;(b) it is carried out by a bank or mutual fund or any other person, through a

financial intermediary; and(c) it is supported by a time stamped contract note issued by the financial

intermediary to every client indicating in the contract note -(i) the unique client identity number allotted under any relevant Act; and(ii) the permanent account number allotted under this Code;

212. “permitted financial institution” means,-(a) a banking company or a scheduled bank;(b) a non-banking financial company;(c) a public financial institution;(d) State financial corporations;(e) State industrial investment corporations; or(f) a housing-finance development company;

213. “permitted savings intermediaries” means,-(a) approved provident fund;(b) approved superannuation fund;(c) life insurer; and(d) New Pension System Trust;

214. “philanthropic activity” shall have the meaning assigned to it in section 96;215. “person” includes-

(a) an individual;(b) a Hindu undivided family;(c) a company;(d) a co-operative society;(e) a firm;(f) a non-profit organisation;

185(g) an office, or establishment, of Central Government or the Government of a

State;(h) an association of persons;(i) a body of individuals;(j) a local authority;(k) any other artificial juridical person;and(l) any other society;

216. “person having a substantial interest in a concern”, with all its grammaticalvariation, means -

(a) a person who is the beneficial owner (including the beneficial ownership heldby one or more of his relatives, in case the person is an individual) of equityshares carrying not less than twenty per cent of the voting power, at any timeduring the financial year, in a concern being a company; and

(b) a person who is, at any time during the financial year, beneficially entitled(including the income which is beneficially entitled to one or more of hisrelative, in case the person is an individual) to not less than twenty per cent ofthe income in any other concern;

217. “person of Indian origin” means a person if he, or either of his parents, or any ofhis grand parents, was born in undivided India;

218. “person responsible for making specified payment” means,-(a) an employer, if the payment is in the nature of salary;(b) any person, if the payment is in the nature specified in column 2 of the Third

Schedule or the Fourth Schedule;219. “person with disability” means,-

(i) a person referred to in clause (t) of section 2 of the Persons With Disabilities(Equal Opportunities, Protection of Rights and Full Participation) Act, 1995;or

(ii) clause (j) of section 2 of the National Trust for Welfare of Persons with Autism,Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999.

220. "person with severe disability" means,-(i) a person with eighty per cent or more of one or more disabilities, as

referred to in sub-section (4) of section 56 of the Persons With Disabilities(Equal Opportunities, Protection of Rights and Full Participation) Act,1995; or

(ii) a person with severe disability referred to in clause (o) of section 2 of theNational Trust for Welfare of Persons with Autism, Cerebral Palsy, MentalRetardation and Multiple Disabilities Act, 1999.

221. “personal effect” in relation to a capital asset means any movable property(including wearing apparel and furniture) held for personal use by the assessee orany member of his family dependant on him, but excludes,-(a) jewellery;(b) archaeological collections;(c) drawings;(d) paintings;(e) sculptures; and(f) any work of art;

222. “perquisite” means, -

186(a) the amenity, facility, privilege or service, whether convertible into money or

not, provided directly or indirectly to an employee by the employer, whetherby way of reimbursement or otherwise, being -(i) the value of any accommodation computed in such manner as may be

prescribed;(ii) any sum payable to effect an insurance on life or to effect a contract for

an annuity;(iii) any sum payable to any permitted savings intermediaries;(iv) the value of any sweat equity share allotted or transferred, as on the date

on which the option is exercised by the employee; or(v) the value of any obligation which, but for payment by the employer,

would have been payable by the employee, computed in such manner asmay be prescribed; and

(b) the value of any other amenity, facility, privilege or service, other than thosereferred to in sub-clause (a) computed in the manner as may be prescribed;

223. “Place of effective management” means a place where key management andcommercial decisions that are necessary for the conduct of business of an entityas a whole are, in substance made;

224. “plant” includes ships, vehicles, books, scientific apparatus and surgical equipmentbut does not include tea bushes, livestock, buildings and furniture and fittings;

225. “political party” means a recognised political party under The Election Symbols(Reservation and Allotment) Order, 1968 issued vide S.O. 2959 dated 31st August,1968, as amended from time to time.

226. “predecessor” in relation to a business reorganisation means -(a) the amalgamating company, in the case of amalgamation;(b) the merging company in the case of business reorganisation referred to in

sub-clause (b) of clause (44);(c) the demerged company, in the case of demerger; or(d) the unincorporated body or the proprietary concern, in the case of business

reorganisation referred to in sub-clause (a) of clause (44);227. “preference shares” means preference shares within the meaning of section 85 of

the Companies Act, 1956;228. “pre-paid taxes” means tax paid by way of -

(a) tax deduction at source on payment received;(b) tax collection at source on payment made;(c) advance-tax;(d) self-assessment tax;(e) foreign tax credit; or(f) any other tax credit allowable under any provision of this Act;

229. “prescribed” means prescribed by rules made under this Act;230. “primary agricultural credit society” shall have the meaning assigned to it in

Part V of the Banking Regulation Act, 1949;231. “primary credit co-operative society” means,-

(a) a primary agricultural credit society; or(b) a primary co-operative agricultural and rural development bank;

232. “primary co-operative agricultural and rural development bank” means-(a) a society having its area of operation confined to a taluk; and(b) its principal object is to provide for long-term credit for agricultural and rural

development activities;

187233. “principal officer” in relation to a person, being a local authority or any other

public body or a company or an unincorporated body, means-(a) the secretary, treasurer, manager or agent of the person, or(b) any person connected with the management or administration of the person

upon whom the Department has served a notice of his intention of treatinghim as the principal officer thereof;

234. “private company” shall have the meaning assigned to it in the Limited LiabilityPartnership Act, 2008;

235. “profits in lieu of, or in addition to, any salary” includes-(a) the amount of any compensation due to or received by a person from his

employer or former employer at or in connection with his voluntary retirementor the termination of his employment or the modification of the terms andconditions relating thereto;

(b) any sum received under a Keyman insurance policy including the sum allocatedby way of bonus on such policy, if any part of the contribution to the policyis made by his employer or former employer; and

(c) any amount due to or received, directly or indirectly, by any assessee fromany person-(i) before his joining any employment with that person; or(ii) after cessation of his employment with that person;

236. “public company” shall have the meaning assigned to it in section 3 of the CompaniesAct, 1956;

237. “public financial institution” shall have the meaning assigned to it in section 4Aof the Companies Act, 1956;

238. “public sector company” means -(a) any corporation established by or under any Central, State or Provincial Act,

or(b) a Government company as defined in section 617 of the Companies Act, 1956;

239. “public servant” shall have the same meaning as in section 21 of the Indian PenalCode, 1860;

240. “quoted share” means the share of a company -(a) which is quoted regurlarly on any recognised stock exchange; and(b) the quotation of the share is based on current transaction made in the ordinary

course of business;241. “rate of exchange” means the rate of exchange determined or recognised by the

Central Government for the conversion of Indian rupee into foreign currency orvice versa;

242. “rate of tax of the other country” means income-tax and surcharge or cess thereon,if any, actually paid in the other country in accordance with the correspondinglaws in force in the said country after deduction of all relief due, but beforededuction of any relief due in the said country in respect of double taxation,divided by the whole amount of the income as assessed in the said country;

243. “rate in force” , in relation to a financial year means the rate of income-tax specifiedfor the relevant purpose -(a) in this Act;(b) in the Finance Act of the relevant year; or(c) in the relevant agreement entered into by the Central Government under section

5;

188244. “reassessment” means any assessment of tax base in pursuance to a notice

issued under section 186, whether or not,-(a) a return of person has been filed before, or after, the issue of the notice; or(b) an assessment of the person has been made before the issue of this notice;

245. “recognised stock exchange” means a recognised stock exchange as referred toin clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 andwhich fulfils such conditions as may be prescribed and notified by the CentralGovernment for this purpose;

246. “recognised commodity exchanges” means a “registered association” as definedin clause (jj) of section 2 of the Forward Contracts (Regulation) Act, 1952;

247. “record” means all records available with the relevant unit or income-tax authorityatthe time of passing of the assessment, modification or review;

248. “registered valuer” means a person registered as such by the Board for determiningthe value of any asset in accordance with the procedure as may be prescribed;

249. “relative”, in relation to an individual, means -(a) spouse of the individual;(b) brother or sister of the individual;(c) brother or sister of the spouse of the individual;(d) brother or sister of either of the parents of the individual;(e) any lineal ascendant or descendant of the individual;(f) any lineal ascendant or descendant of the spouse of the individual;(h) spouse of the person referred to in sub-clauses (b) to (f); or(g) any lineal descendant of a brother or sister of either the individual or of the

spouse of the individual;250. “remission or cessation of any liability” shall include the remission or cessation

of any liability,-(a) by a unilateral act by the assessee by way of writing off such liability in his

account or creating a reserve(by whatever name called); or(b) by virtue of there being no transaction with the creditor during the period of

three years from the end of the financial year in which the last transaction tookplace;

251. “rent” in relation to a house property means any income derived, directly orindirectly, from letting of the property;

252. “Reserve Bank of India” means the Bank constituted under sub-section (1) ofsection 3 of the Reserve Bank of India Act, 1934;

253. “resident” means a person who is resident in India within the meaning of this Act;254. “resident withholdee” means a person who is resident and receives any amount

liable to deduction of tax at source under Chapter VIII;255. “resulting company” means -

(a) one or more companies (including a wholly owned subsidiary thereof) towhich the undertaking of the demerged company is transferred in a demerger;or

(b) any authority, body, local authority or a company established, constituted orformed as a result of demerger;

256. “Retirement Benefit Savings Scheme” means a scheme framed by the CentralGovernment for the purposes of enabling a person to deposit -(a) the amount of gratuity, commutation of pension and leave encashment received

on retirement of the person, referred to in sub-clauses (xvi), (xvii) and (xviii) ofclause (j) of section 34;

189(b) the amount received or withdrawn from any account maintained with National

Pension System Trust, referred to in section 6;257. “royalty” means consideration (including any lump sum consideration but

excluding any consideration which would be the income of the recipient chargeableunder the head “Capital gains”) for-(a) the transfer of all or any rights (including the granting of a licence) in respect

of a patent, invention, model, design, secret formula, process, trade mark orsimilar property;

(b) the imparting of any information concerning the working of, or the use of, apatent, invention, model, design, secret formula, process, trade mark or similarproperty;

(c) the use of any patent, invention, model, design, secret formula, process, trademark or similar property;

(d) the imparting of any information concerning technical, industrial, commercialor scientific knowledge, experience or skill;

(e) the use or right to use of any industrial, commercial or scientific equipmentincluding ship or aircraft but excluding the amount, referred to in item numbers10 and 11 of Table in the Schedule, which is subjected to tax in accordancewith the provision of that schedule;

(f) the use or right to use of transmission by satellite, cable, optic fiber or similartechnology;

(g) the transfer of all or any rights (including the granting of a licence) in respectof:-(i) any copyright, literary, artistic or scientific work; or(ii) cinematographic films or work on films, tapes or any other means of

reproduction; or(iii) live coverage of any event;

(h) the rendering of any services in connection with the activities referred to insub-clauses (a) to (g);

258.“Rubber Board” means the Rubber Board constituted under sub-section (1) ofsection 4 of the Rubber Board Act, 1947;

259. “rural area” means any area not being an urban area;260. “safe harbour”, in relation to computation of arm’s length price, means

circumstances in which the income-tax authorities shall accept the transfer pricedeclared by the taxpayer;

261. “salary” means any amount referred to in sub-section (2) of section 21;262. “scheduled bank” means any bank listed in the Second Schedule to the Reserve

Bank of India Act, 1934;263. “Scheduled Caste” and “Scheduled Tribe” shall have the meanings respectively

assigned to them in clauses (24) and (25) of article 366 of the Constitution;264. “scientific research and development” shall mean systemic investigation and

search in a field of technology, natural or applied science (including agriculture,animal husbandary or fisheries) if,-(a) it is carried out by the assessee by means of experiment or analysis;(b) it is in the nature of,-

(i) basic research, namely, work undertaken for the advancement of scientificknowledge without a specific practical application in view;

190(ii) applied research, namely, work undertaken for the advancement of

scientific knowledge with a specific practical application in view; or(iii) experimental development, namely, work undertaken for the purpose of

achieving technological advancement for the purpose of creating new, orimproving existing materials, devices, products or processes, includingincremental improvements thereto;and

(c) it is not in the nature of ,-(i) market research or sales promotion;(ii) quality control or routine testing of materials, devices, products or

processes;(iii) research in the social sciences or the humanities;(iv) prospecting, exploring or drilling for, or producing, minerals, petroleum or

natural gas;(v) the commercial production of a new or improved material, device or product

or the commercial use of a new or improved process;(vi) style changes; or(vii) routine data collection;

265. “security” shall have the meaning assigned to it in clause (h) of section 2 of theSecurities Contracts (Regulation) Act, 1956;

266. “Securities and Exchange Board of India” means the Board established undersection 3 of the Securities and Exchange Board of India Act, 1992;

267. “securitisation trust” means a trust,-(a) which is a -

(i) "special purpose distinct entity" as defined in clause (u) of sub-regulation(1) of regulation 2 of the Securities and Exchange Board of India (PublicOffer and Listing of Securitised Debt Instruments) Regulations, 2008 madeunder the Securities and Exchange Board of India Act, 1992 and theSecurities Contracts (Regulation) Act, 1956, and regulated under the saidregulations;

(ii) "Special Purpose Vehicle" as defined in, and regulated by, the guidelineson securitisation of standard assets issued by the Reserve Bank of India;or

(iii) trust set-up by a securitisation company or a reconstruction companyformed, for the purposes of the Securitisation and Reconstruction ofFinancial Assets and Enforcement of Security Interest Act, 2002, or inpursuance of anyguidelines or directions issued for the said purposesby the Reserve Bank of India; and

(b) which fulfils the conditions, as may be prescribed;268. “self-assessment tax” means the tax paid after the financial year but before filing

the return of tax bases;269. “senior citizen” means an individual resident in India who is of the age of sixty-

five years or more at any time during the financial year;270. “service” means service of any description which is made available to potential

users and includes the provision of services in connection with business of anyindustrial or commercial nature such as accounting, banking, merchant banking,communication, conveying of news or information, advertising, entertainment,amusement, education, financing, insurance, chit funds, real estate, construction,transport, storage, processing, supply of electrical or other energy, boarding andlodging;

191271. “Sikkimese” means,-

(a) an individual, whose name is recorded in the register maintained under theSikkim Subjects Regulation, 1961 read with the Sikkim Subject Rules, 1961(herein after referred to as the “Register of Sikkim Subjects”), immediatelybefore the 26th day of April, 1975;

(b) an individual, whose name is included in the Register of Sikkim Subjects byvirtue of the Government of India Order No.26030/36/90-I.C.I., dated the 7thAugust, 1990 and Order of even number dated the 8th April, 1991; or

(c) any other individual, whose name does not appear in the Register of SikkimSubjects, but it is established beyond doubt that the name of such individual’sfather or husband or paternal grandfather or brother from the same father hasbeen recorded in that register;

272. “slump sale” means the sale of any undertaking for a lump-sum considerationwithout values being assigned to the individual assets and liabilities in such sale,other than the assignment of values to the assets or liabilities for the sole purposeof payment of stamp duty, registration fees or other similar taxes or fees;

273. “society” means a society registered under the Societies Registration Act, 1860 orunder any law corresponding to that Act in force in any part of India;

274. “sold” includes a transfer by way of exchange or a compulsory acquisition underany law for the time being in force but does not include a transfer, in a scheme ofbusiness reorganisation, of any asset by the predecessor to the successor;

275. “Sovereign Gold Bond” means the bond issued by the Reserve Bank of Indiaunder the Sovereign Gold Bond Scheme, 2015;

276. “special modes of acquisition” means,-(a) acquisition of converted property by a Hindu Undivided Family; and(b) acquisition by any person in any of the following manners,-

(i) upon distribution of any asset on the total or partial partition of a Hinduundivided family;

(ii) by way of a gift;(iii) under a will;(iv) by way of succession, inheritance or devolution;(v) upon distribution of any asset on the dissolution of an unincorporated

body;(vi) upon distribution of any asset on the liquidation of a company;(vii) upon a revocable or an irrevocable settlement to a trust; and(viii)under a transaction referred to in clause (c) to clause (f) of sub-section (1)

of section 45;277. “special source”, in all its grammatical variation, shall have the meaning assigned

to it in section 14.278. “specified association” means any institution, association or body, whether

incorporated or not, functioning under any law for the time being in force in Indiaor the laws of the specified territory outside India and notified as such by theCentral Government;

279. “specified territory” means any area outside India and notified as such by theCentral Government.

280. “specified work of art” means a work of art, archaeological, scientific or art collection,book, manuscript, drawing, painting, photograph or print;

281. “speculative transaction” means a transaction in which a contract for the purchaseor sale of any commodity, including stocks and shares, is periodically or ultimately

192settled otherwise than by the actual delivery or transfer of the commodity or scripsother than the following transactions:(a) a permitted derivative transaction;(b) a contract in respect of raw materials or merchandise entered into by a person

in the course of his manufacturing or merchandising business to guard againstloss through future price fluctuations in respect of his contracts for actualdelivery of goods manufactured by him or merchandise sold by him;

(c) a contract in respect of stocks and shares entered into by a dealer or investortherein to guard against loss in his holdings of stocks and shares throughprice fluctuations;

(d) a contract entered into by a member of a forward market or a stock exchange inthe course of any transaction in the nature of jobbing or arbitrage to guardagainst loss which may arise in the ordinary course of his business as suchmember; and

(e) a permitted derivative transaction in agricultural commodity derivatives if it iscarried out in a recognised commodity exchange;

(f) a permitted derivative transaction in commodity derivatives, other thanagricultural commodity derivatives, if it is -(i) carried out in a recognised commodity exchange; and(ii) chargeable to commodities transaction tax under Chapter VII of the Finance

Act, 2013;282. “speed boat” means a motor boat driven by a high speed internal combustion

engine capable of propelling the boat at a speed exceeding 24 kilometers per hourin still water and so designed that when running at such speed, it will plane, i.e., itsbow will rise;

283. “stamp duty value” means,-(a) the value adopted, or assessed, by any authority of the Central Government

or a State Government for the purposes of payment of stamp duty in respectof an immovable property; or

(b) the value which the stamp valuation authority would have, regardless ofanything to the contrary contained in any other law for the time being in force,adopted or assessed, if it were referred to such authority for the purposes ofpayment of stamp duty;

284. “standard tax liability” means the amount of liability calculated under sub-section(2) of section 2;

285. “State Bank of India” means the State Bank of India constituted under the StateBank of India Act, 1955;

286. “State financial corporation” means a financial corporation established undersection 3 or section 3A or an institution notified under section 46 of the StateFinancial Corporations Act, 1951;

287. “State industrial investment corporation” means a Government company withinthe meaning of section 617 of the Companies Act, 1956, engaged In the business ofproviding long-term finance for industrial projects;

288. “State Pooled Finance Entity” means such entity which is set up in accordancewith the guidelines for the Pooled Finance Development Scheme notified by theCentral Government;

289. “stop-filer” in relation to a financial year means a person, who has not furnisheda return of income, belated return or a certificate of income, for the financial year;

290.“submissions by a person”, with all its grammatical variations, includes-

193(a) any information, statement, document, account, explanation or objection

furnished by the person; and(b) any oral submissions made by the person in the course of personal hearing, if

any;291. “subsidiary” shall have the meaning assigned to it in section 4 of the Companies

Act, 1956 and includes subsidiary incorporated outside India;292. “successor” in relation to a business reorganisation means -

(a) the amalgamated company or amalgamated cooperative, in the case ofamalgamation;

(b) the merged company in the case of business reorganisation referred to in sub-clause (b) of clause (45).

(c) the resulting company, in the case of demerger;293. “successor in business” means,-

(a) a successor in relation to a business reorganisation;(b) a firm which succeeds another firm carrying on a business; and(c) a person who succeeds any other person in a business;

294. “sweat equity share” means,-(a) any security underlying any employees stock option granted under any plan,

or scheme, of the employer; or(b) any security issued by a company to its employee or director, at a discount or

for consideration other than cash;295. “tax” means -

(a) any tax chargeable under the provisions of this Act;(b) surcharge chargeable under the relevant Finance Act; or(c) cess chargeable under the relevant Finance Act;

296. “tax bases” means-(a) income or total income, as the case may be, in relation to income-tax;(b) dividend distributed in relation to dividend distribution tax; and(c) the income or total income, net wealth, or dividend distributed referred to in

sub-clauses (a) to (c) of any other person in respect of which the assessee isassessable under this Act;

297. “tax account number” means a number allotted under this Act to a person who isliable to deduct tax at source or collect tax at source under Sub-Chapter A or Sub-Chapter B of Chapter VIII;

298. “tax arrear” means any amount of tax, interest or any other sum, due from anassessee under this Act;

299. “Tax Recovery Officer” means any Income-tax Officer who may be authorised bythe Chief Commissioner or Commissioner, by general or special order in writing,-(a) to exercise the powers of a Tax Recovery Officer; and(b) to exercise or perform such powers and functions which are conferred on, or

assigned to, an Department under this Code and which may be prescribed;300. “Tea Board” means the Tea Board established under section 4 of the Tea Act,

1953;301.“test of continuity of business” - a successor shall satisfy the test of continuity of

business, if he -(a) holds at least three-fourths of the book value of fixed assets of the predecessor

acquired through business reorganisation, continuously for a minimum periodof five financial years immediately succeeding the financial year in which thebusiness reorganisation takes place;

194(b) continues the business of the predecessor for a minimum period of five financial

years immediately succeeding the financial year in which the businessreorganisation takes place;and

(c) fulfils such other conditions as may be prescribed to ensure the revival of thebusiness of the predecessor or to ensure that the business reorganisation isfor genuine business purpose.

302. “threshold limit” means the maximum amount which is not liable to income-tax.303. “tonnage income scheme” means a scheme for computation of profits of business

of operating qualifying ships under the provisions of the Ninth Schedule;304. “total income” of a financial year means the total income computed under section

71 for that financial year;305.“total income from special sources” of a financial year means the net result of the

aggregation under section 47 for that financial year.306. “total turnover” in relation to a business means the gross sum received or receivable

by the assessee, directly or indirectly, in respect of his world-wide sale of goods orsupply of services, as the case may be, of the business including any tax, duty,cess or fee (by whatever name called) collected or collectible in respect of the saleor supply;

307. “trade debt” means a debt,-(a) which has been taken into account in computing the income of the person in

any financial year; or(b) which is money lent in the ordinary course of banking or money lending

which is carried on by the person;308. “transfer”, in relation to a capital asset, includes -

(a) the sale, exchange or relinquishment of the asset;(b) the extinguishments of any rights in it;(c) its compulsory acquisition under any law;(d) its conversion into, or its treatment as stock-in-trade of a business;(e) the buy-back of any shares or other specified securities by the issuer of such

shares or securities;(f) any contribution of the asset, whether by way of capital or otherwise, to a

company or an unincorporated body, in which the transferor is, or becomes, ashareholder or participant, as the case may be;

(g) the distribution of the asset on account of dissolution of an unincorporatedbody;

(h) the distribution of the asset on account of liquidation or dissolution of acompany;

(i) any agreement allowing the possession of an immovable property, to be takenor retained in part performance of a contract of the nature referred to in section53A of the Transfer of Property Act, 1882;

(j) any agreement which enables the enjoyment of the asset, being any immovableproperty, whether by way of becoming a participant in an unincorporatedbody or acquiring shares in a company or by way of any agreement, arrangementor in any other manner;

(k) the maturity or redemption of a zero coupon bond;(l) slump sale;(m) any damage to the insured asset or its destruction as a result of -

(i) flood, typhoon, hurricane, cyclone, earthquake or any other convulsionof nature;

195(ii) riot or civil disturbance;(iii) accidental fire or explosion; or(iv) action by an enemy or action taken in combating an enemy (whether with

or without a declaration of war);(n) transfer of securities by a person having beneficial interest in the securities

held by a depository as registered owner;(o) distribution of the asset to a participant in an unincorporated body on account

of his retirement from the body; and(p) any disposition, settlement, trust, covenent, agreement or arrangement.

309. “Transfer Pricing Officer” means an Additional Commissioner, JointCommissioner, Deputy Commissioner or Assistant Commissioner, authorised bythe Board to perform all or any of the functions for determining the arm’s lengthprice in respect of an international transaction and levy any panealty connectedthereto, in respect of any person or class of persons;

310. “transportation charge” includes -(a) any amount paid (whether in or out of India) to the assessee, or to any person

on his behalf, on account of the carriage of passengers, livestock, mail orgoods shipped to, or from, any place in India;

(b) any amount received or deemed to be received in India by or behalf of theassessee on account of the carriage of passengers, livestock, mail or goodsshipped at any place outside India;

(c) any amount paid or payable, directly or indirectly by way of demurrage chargesor handling charges or any other amount of similar nature; or

(d) any amount paid or payable for charter, including an arrangement as slotcharter, space charter or joint charter or similar arrangement, of ships, aircraftor any other mode of transport, along with crew;

311. “trust” shall have the meaning assigned to it under this Act;312. “unabsorbed current capital loss” means the amount determined under this Act;313. “unabsorbed current loss from ordinary sources” means the amount determined

under this Act;314. “unabsorbed current loss from the special source” means the amount determined

under this Act;315. “unabsorbed preceeding year loss from ordinary sources” means the unabsorbed

current loss from ordinary sources, for the financial year immediately precedingthe relevant financial year;

316. “unabsorbed preceeding year loss from the special source” means the unabsorbedcurrent loss from the special source, of the financial year immediately precedingthe relevant financial year;

317. “undertaking” in relation to demerger shall include -(a) any part of an undertaking,(b) a unit or division of an undertaking,(c) a business activity taken as a whole, or(d) individual assets or liabilities or any combination thereof which constitutes a

business activity;318. “unexplained credit” means any amount found credited in the books of any

person maintained for the financial year to the extent for which, -(a) the person offers no explanation about the nature and source thereof; or(b) the person offers an explanation but fails to substantiate the explanation; or

196(c) the explanation offered by him is not, in the opinion of the Department,

satisfactory;319. “unexplained expenditure” means the value of any investment made by the person

in the financial year to the extent for which,-(a) the person offers no explanation about the nature and source of the

investments; or(b) the person offers an explanation but fails to substantiate the explanation; or

(iii) the explanation offered by him is not, in the opinion of the Department,satisfactory;

320. “unexplained investment” means the amount of any expenditure incurred by theperson in the financial year to the extent for which, -(a) the person offers no explanation about the source of such expenditure or part

thereof; or(b) the explanation, if any, offered by him is not, in the opinion of the Department,

satisfactory;321. “unexplained valuables” means the value of any money, bullion, jewellery or other

valuable article owned by the person to the extent for which,-(a) the person offers no explanation about the nature and source of acquisition of

the money, bullion, jewellery or other valuable article; or(b) the person offers an explanation but fails to substantiate the explanation; or(c) the explanation offered by him is not, in the opinion of the Department,

satisfactory;322. “unincorporated body” means -

(a) a firm;(b) an association of persons; or(c) a body of individuals;

323. “university” means a university established or incorporated by or under a Central,State or Provincial Act and an institution declared to be a University under section3 of the University Grants Commission Act, 1956;

324. “unquoted share” means the share which is not a quoted share;325. “urban area” means -

(a) an area within the jurisdiction of a municipality (whether known as amunicipality, municipal corporation, notified area committee, town areacommittee, town committee or by any other name) or a cantonment board andwhich has a population more than ten thousand according to the last precedingcensus of which the relevant figures have been published before the first dayof the financial year; or

(b) an area within such distance from the local limits of any municipality orcantonment board referred to in item (a), as the Central Government mayhaving regard to the extent of, and scope for, urbanisation of that area andother relevant considerations, specify in this behalf by notification in theOfficial Gazette;

326. “Valuation Officer” means a persons appointed as a Valuation Officer by theCentral Government and includes a Regional Valuation Officer, a District ValuationOfficer and an Assistant Valuation Officer;

327. “value of gross assets” in relation to a company shall have the meaning assignedto it under this Act;

328. “value of inventory of the business, as on the close of the financial year” meansthe value of stock of finished goods, work-in progress, raw material, stores and

197spares or any other inventory remaining in stock, as on the close of the financialyear and the value is computed in accordance with the method of accountingregularly employed by the assessee;

329. “value of inventory of the business, as on the beginning of the financial year”shall be,-(a) nil if the business as commenced during the financial year; and(b) the value of inventory of the business, as on the close of the immediately

preceding financial year, in any other case;330.“value of sweat equity shares” shall be the value of the sweat equity shares on the

date on which the option is exercised by the assessee, determined in accordancewith the method as may be prescribed, as reduced by the amount actually paid by,or recovered from, the assessee in respect of such shares;

331. “venture capital company” means such company-(a) which has been granted a certificate of registration as a venture capital company

under the Securities and Exchange Board of India Act, 1992; and(b) which fulfils all other conditions as may be prescribed in this behalf;

332. “venture capital fund” means such fund-(a) which has been granted a certificate of registration as a venture capital fund

under the Securities and Exchange Board of India Act, 1992; and(b) which fulfils all other conditions as may be prescribed in this behalf;

333. “wealth-tax” means wealth-tax leviable under Chapter VIII or any tax of a similarcharacter chargeable under any law in force in any country outside India or any taxchargeable under such law with reference to the value of the assets of, or thecapital employed in, a business carried on by the assessee, whether or not thedebts of the business are allowed as a deduction in computing the amount withreference to which such tax is charged, but does not include any tax chargeablewith reference to the value of any particular asset of the business;

334. “widely held company” means -(a) a company owned by the Government or the Reserve Bank of India;(b) a company in which not less than forty per cent of the paid-up share capital is

held (whether singly or taken together) by the Government or the ReserveBank of India or a corporation owned by that bank;

(c) a company registered under section 25 of the Companies Act, 1956;(d) a mutual benefit finance company;(e) a co-operative sector company;(f) a public company;(g) a company in which not less than fifty per cent of the paid up equity share

capital is held throughout the relevant financial year, by the companies (whethersingly or taken together) to which this clause applies; or

(h) a company which is not a private company as defined in section 3 of theCompanies Act, 1956 and the shares in such company, carrying not less thanfifty per cent of the voting power, have been allotted and were throughout therelevant financial year held -(i) by the companies referred to in clauses (a) to (g) (whether singly or taken

together); or(ii) by a subsidiary of a company referred to in clauses (a) to (g), if the whole

of the paid-up share capital of such subsidiary company has been heldby the parent company or by its nominees throughout the financial year;

335.“withholdee” means -

198(a) in relation to deduction at source, any person receiving the payment; and(b) in relation to collection at source, any person making the payment;

336. “withholding agent” means -(a) in relation to deduction at source, any entity, whether natural or non-natural,

which makes any specified payment referred to in section 222;(b) in relation to collection at source, any seller, lessor or licensor, as defined in

section 222; or(c) any entity which is obligated to furnish any return, statement, certificate under

Sub-Chapter A or Sub-Chapter B of Chapter-VIII or pay any amount of tax tothe credit of the Central Government under the said sub-chapters.

337.“working participant” means an individual who is actively engaged in conductingthe affairs of the business or profession of the unincorporated body of which he isa participant;

338. “written down value” shall have the same meaning assigned to it under this Act;339. “written off” in relation to a debt means recording an appropriate entry in the

account of the debtor so as to reduce the amount of the debt without any recoverythereof;

340. “year” means the financial year;341. “zero coupon bond” means a bond-

(a) issued by any company, fund or scheduled bank in accordance with a schemenotified by the Central Government in the Official Gazette;

(b) in respect of which no payment and benefit is received or receivable beforematurity or redemption from the company, fund or scheduled bank; and

(c) which the Central Government may, by notification in the Official Gazette,specify in this behalf.

Interpretation333. In this Act, unless otherwise stated,-

(a) a reference to any income, or to the result of any computation, shall beconstrued as a reference to both the negative and positive variation of theincome or the result, as the case may be;

(b) any direction for aggregation of two or more items, which are expressed asamounts, shall be construed also to include a direction for aggregation ofnegative and postive amounts in all their combinations;

(c) the value of any variable in a formula shall be deemed to be nil, if the value ofsuch variable is indeterminable or unascertainable.

199

THE FIRST SCHEDULERATES OF INCOME-TAX

(See section 3)

PART I

The liability to income tax, of any person, in respect of his total income for thefinancial year, which does not include income from any special source, shall be theamount of income tax calculated at the rate specified, and in the manner provided,in the following Paragraph A to Paragraph F:-

Paragraph A

(I) In the case of every individual, other than the individual referred to in items(II) and (III) of this Paragraph, or Hindu undivided family, not being a case towhich any other Paragraph of this Part applies, -

Rates of income-tax

(1) where the total income does not Nil;exceed Rs. 6,00,000

(2) where the total income exceeds 15 per cent of the amount byRs. 6,00,000 but does not exceed which the total income exceedsRs. 30,00,000 Rs. 6,00,000;

(3) where the total income exceeds Rs. 3,60,000 plus 30 per cent. of theRs. 30,00,000 amount by which the total income

exceeds Rs. 30,00,000;

(II) In the case of every individual, who is of the age of sixty years or more at anytime during the financial year,—

Rates of income-tax

(1) where the total income does not Nil;exceed Rs. 8,00,000

(2) where the total income exceeds 15 per cent of the amount byRs. 8,00,000 but does not exceed which the total income exceedsRs. 30,00,000 Rs. 8,00,000;

(3) where the total income exceeds Rs.3,30,000 plus 30 per cent of theRs. 30,00,000 amount by which the total income

exceeds Rs.30,00,000;

200

Paragraph B

(I) In the case of every co-operative society,-

Rates of income-tax

(1) where the total income does not Nil;exceed Rs.1,00,000

(3) where the total income exceeds 15 per cent of theRs.1,00,000 amount by which the total income

exceeds Rs.1,00,000;(II) In the case of every other society,-

Rate of income-tax

On the whole of the total income 15 per cent

Paragraph C

In the case of every non-profit organisation,-

(1) where the total income does not Nil;exceed Rs. 10,00,000

(2) where the total income exceeds 15 per cent. of the amount byRs. 10,00,000 which the total income

exceeds Rs. 10,00,000;

Paragraph D

In the case of every political party (1) where the total income does notNil;

exceed Rs. 10,00,000

(2) where the total income exceeds 15 per cent. of the amount byRs. 10,00,000 which the total income

exceeds Rs. 10,00,000; or tradeunion,-

Rate of income-tax

(1) where the total income does not Nil;exceed Rs. 10,00,000

(2) where the total income exceeds 15 per cent. of the amount byRs. 10,00,000 which the total income

exceeds Rs. 10,00,000;

201

Paragraph E

In the case of every unincorporated body,-Rate of income-tax

On the whole of the total income 15 per cent

Paragraph F

In the case of every local authority,-

Rate of income-tax

On the whole of the total income 15 per cent

Paragraph G

(I) In the case of a company, being a banking company -

Rate of income-tax

On the whole of the total income 10 per cent

(II) In the case of every other company,-

Rate of income-tax

On the whole of the total income 15 per cent

PART II

In the cases to which Paragraph A of rule 1 applies, where the assessee has, inthe financial year, any net agricultural income exceeding five thousand rupees, inaddition to total income from ordinary sources and the total income exceeds thethreshold limit, then,-(a) the net agricultural income shall be taken into account, in the manner provided

in clause (b) [that is to say, as if the net agricultural income were comprised inthe total income after the threshold limit but without being liable to tax], onlyfor the purpose of charging income-tax in respect of the total income; and

(b) the income-tax chargeable shall be calculated as follows:-(i) the total income and the net agricultural income shall be aggregated and

the amount of income-tax shall be determined in respect of the aggregateincome at the rates specified in the said Paragraph A, as if such aggregateincome were the total income;

(ii) the net agricultural income shall be increased by the amount of thresholdlimit, and the amount of income-tax shall be determined in respect of thenet agricultural income as so increased at the rates specified in the said

202Paragraph A, as if the net agricultural income as so increased were thetotal income;

(iii) the amount of income-tax determined in accordance with sub-clause (i)shall be reduced by the amount of income-tax determined in accordancewith sub-clause (ii) and the sum so arrived at shall be the income-tax inrespect of the total income.

PART III

In the cases to which Paragraph C of Part I applies, where the total income ofthe non-profit organisation, in the financial year, includes any amount of the naturespecified in clauses (b), (c), (d) or (e) of sub-section (2) of section 64, the liabilityto income tax of the non-profit organisation shall be the aggregate of-(a) the amount calculated at the rate of 30 per cent. on the amount specified in

clauses (b), (c), (d) or (e) of sub-section (2) of section 64; and(b) the amount of income tax calculated in accordance with the provisions of Part

I and Part II in respect of the balance of its total income.

PART IV

In the cases to which Paragraph C of Part I applies, where the total income ofa political party or trade union, as the case may be, in the financial year, includesany amount of the nature specified in clauses (b), (c), (d) or (e) of sub-section (2)of section 76, the liability to income tax of the political party or trade union, as thecase may be, shall be the aggregate of-(a) the amount calculated at the rate of 30 per cent. on the amount specified in

clauses (b), (c), (d) or (e) of sub-section (2) of section 76; and(b) the amount of income tax calculated in accordance with the provisions of Part

I and Part II in respect of the balance of its total income.

PART V

In the case where the person specified in column 2 of the Table below includesincome from any special source specified in the corresponding entry in column 3of the said Table, the liability to income tax of the person shall be the aggregate of-(a) the amount calculated at the rate specified in the corresponding entry in

column 4 of the said Table on the income specified in the corresponding entryin column 3; and

(b) the amount of income tax calculated in accordance with the provisions of PartI and Part II in respect of the balance of his total income, that is, the ‘totalincome from ordinary sources’.

TableSl. No. Person Nature of Income Rate of tax(1) (2) (3) (4)

(1) Any sportsperson, On income by way of- 20 pen centwho is not a citizen of (i) participation in India in anyIndia game [other than a game the

203winnings wherefrom are taxableunder sub-item (b) of item 4]or sport;

(ii) advertisement; or (iii) contribution of articles

relating to any game or sportin newspapers, magazines orjournals in India

(2) Any foreign sports On income by way of guarantee 20 per centassociation or institution money in relation to any game

(other than a game the winningswherefrom are taxable sub-item (b)of item 4) or sports played in India.

(3) Any person On income by way of winnings from- 30 per cent(i) any lottery or crossword puzzle;(ii) race, including horse race (not

being the income from theactivity of owning andmaintaining race horses); or

(iii) card game or any other gameor gambling or betting.

(4) Any person On income by way of - 60 per cent(i) unexplained credit;(ii) unexplained investment;(iii) unexplained expenditure; or(iv) unexplained valuables

(5) Any person On income by way of 60 per centimpermissable transaction

--------------------------------------------------------------------------------------------------------------

THE SECOND SCHEDULERATES OF OTHER TAXES

A. Tax on branch profits

1. The amount referred to in sub-section (8) of section 2 shall be calculated at the ratespecified, and in the manner provided, hereunder.

Rate of tax

On the branch profits 15 per cent.

204THE THIRD SCHEDULE

PROCEDURE FOR RECOVERY OF TAX(see Sub-Chapter O of Chapter VIII)

PART IGENERAL PROVISIONS

Definitions.1. In this Schedule, unless the context otherwise requires,-

(a) “certificate”, except in rules 7, 44, 65 and sub-rule (2) of rule 66, in respect ofany assessee means the certificate referred to in sub-section (1) of section221;

(b) “defaulter” means the assessee mentioned in the certificate;(c) “execution”, in relation to a certificate, means recovery of arrears in pursuance

of the certificate;(d) “movable property” includes growing crops;(e) “officer” means a person authorised to make an attachment, or sale, under this

Schedule;(f) “rule” means a rule contained in this Schedule; and(g) “share in a corporation” includes stock, debenture-stock, debentures or bonds.

Issue of notice.2. (1) The Collection Unit shall, upon assumption of jurisdiction under sub-section (8)

of section 122, cause to be served upon the defaulter a notice requiring the defaulterto pay the amount specified in the certificate within fifteen days from the date ofservice of the notice.

(2) The notice under sub-rule (1) shall also intimate to the defaulter that steps wouldbe taken to realise the amount under this Schedule, if he defaults to make paymentwithin the time specified therein.

When certificate may be executed.3. (1) No step in execution of a certificate shall be taken until the period of fifteen days

has elapsed since the date of the service of the notice required by the precedingrule.

(2) However, the Collection Unit may attach the whole, or any part, of the movableproperty of the defaulter, as would be liable to attachment in execution of a decreeof a civil court, within the said period of fifteen days if,-(a) he is satisfied, for reasons to be recorded in writing, that the defaulter is likely

to conceal, remove or dispose of the whole, or any part, of the movableproperty; and

(b) the realization of the amount of the certificate would in consequence be delayedor obstructed.

(3) The defaulter whose property has been so attached may furnish security to thesatisfaction of the Collection Unit and on such acceptance of the security by theTax Recovery Officer, the attachment shall be cancelled from the date on which thesecurity is accepted.

205Mode of recovery.

4. (1) If the amount mentioned in the notice is not paid within the time specified therein,or within such further time as the Collection Unit may grant in his discretion, theCollection Unit shall proceed to realise the amount by one, or more, of the followingmodes :-(a) by attachment and sale of the defaulter’s movable property;(b) by attachment and sale of the defaulter’s immovable property;(c) by arrest of the defaulter and his detention in prison;(d) by appointing a receiver for the management of the defaulter’s movable and

immovable properties.(2) The defaulter’s movable or immovable property, referred to in sub-rule (1), shall

include any property transferred directly, or indirectly, otherwise than for adequateconsideration by the defaulter to -(a) his spouse; or(b) minor child.

(3) However, in respect of any arrears due from the defaulter for the period prior todate of attainment of majority by the minor child, the property shall continue to beincluded in the defaulter’s movable or immovable property even after the date.

Interest, costs and charges recoverable.5. There shall be recoverable, in the proceedings in execution of every certificate,-

(a) such interest upon the amount of tax or penalty or other sum to which thecertificate relates as is payable in accordance with section 216, and

(b) all charges incurred in respect of-(i) the service of notice upon the defaulter to pay the arrears, and of warrants

and other processes, and(ii) all other proceedings taken for realising the arrears.

Purchaser’s title.6. (1) Where property is sold in execution of a certificate, there shall vest in the purchaser

merely the right, title and interest of the defaulter at the time of the sale, eventhough the property itself be specified.

(2) Where immovable property is sold in execution of a certificate, and such sale hasbecome absolute, the purchaser’s right, title and interest shall be deemed to havevested in him from the time when the property is sold, and not from the time whenthe sale becomes absolute.

Suit against purchaser not maintainable on ground of purchase being made onbehalf of plaintiff.

7. (1) No suit shall be maintained against any person claiming title under a purchasecertified by the Collection Unit in the manner laid down in this Schedule, on theground that the purchase was made on behalf of the plaintiff or on behalf of someone through whom the plaintiff claims.

(2) Nothing in this section shall bar a suit to obtain a declaration that the name of anypurchaser certified as aforesaid was inserted in the certificate fraudulently or withoutthe consent of the real purchaser, or interfere with the right of a third person toproceed against that property, though ostensibly sold to the certified purchaser,on the ground that it is liable to satisfy a claim of such third person against the realowner.

206

Disposal of proceeds of execution.8. (1) Whenever assets are realised by sale, or otherwise, in execution of a certificate,

the proceeds shall be disposed of in the following manner, namely :-(a) they shall first be adjusted towards the amount due under the certificate in

execution of which the assets were realised and the costs incurred in thecourse of such execution;

(b) if there remains a balance after the adjustment referred to in clause (a), thesame shall be utilised for satisfaction of any other amount recoverable fromthe assessee under this Act which may be due on the date on which the assetswere realised; and

(c) the balance, if any, remaining after the adjustments under clauses (a) and (b)shall be paid to the defaulter.

(2) If the defaulter disputes any adjustment under clause (b) of sub-rule (1), theCollection Unit shall determine the dispute.

General bar to jurisdiction of civil courts, save where fraud alleged.9. (1) Except as otherwise expressly provided in this Act, every question arising between

the Collection Unit and the defaulter or their representatives, relating to theexecution, discharge or satisfaction of a certificate, or relating to the confirmationor setting aside by an order under this Act of a sale held in execution of suchcertificate, shall be determined, not by suit, but by order of the Collection Unitbefore whom such question arises :

(2) However, a suit may be brought in a civil court in respect of any question referredto in sub-rule (1) upon the ground of fraud.

Property exempt from attachment.10. (1) Any property exempted, under Code of Civil Procedure, 1908, from attachment and

sale in execution of a decree of a civil court shall be exempt from attachment andsale under this Schedule.

(2) The Collection Unit’s decision as to what property is so entitled to exemption shallbe conclusive

Investigation by Collection Unit11. (1) Where any claim is preferred to, or any objection is made to the attachment or sale

of, any property in execution of a certificate, on the ground that such property isnot liable to such attachment or sale, the Collection Unit shall proceed to investigatethe claim or objection.

(2) However, no such investigation shall be made where the Collection Unit considersthat the claim or objection was designedly or unnecessarily delayed.

(3) Where the property to which the claim or objection applies has been advertised forsale, the Collection Unit, ordering the sale, may postpone it pending theinvestigation of the claim or objection, upon such terms as to security or otherwiseas the Collection Unit shall deem fit.

(4) The claimant, or objector, must adduce evidence to show that he had some interestin, or was possessed of, the property in question-(a) (in the case of immovable property) at the date of the service of the notice

issued under this Schedule to pay the arrears, or(b) (in the case of movable property) at the date of the attachment.

207(5) The Collection Unit shall make an order releasing the property, wholly or to such

extent as he thinks fit, from attachment or sale if, upon the said investigation, he issatisfied that, for the reason stated in the claim or objection, such property-(a) was not, at the said date, in the possession of the defaulter or of some person

in trust for him;(b) was not in the occupancy of a tenant or other person paying rent to the

defaulter; or(c) being in the possession of the defaulter at the said date, it was so in his

possession, not on his own account or as his own property, but on account ofor in trust for some other person, or partly on his own account and partly onaccount of some other person, .

(6) The Collection Unit shall disallow the claim, if, for reasons to be recorded in writing,he is satisfied that the property was-(a) at the said date, in the possession of the defaulter as his own property and not

on account of any other person;(b) in the possession of some other person in trust for the defaulter, or(c) in the occupancy of a tenant or other person paying rent to the defaulter.

(7) Where a claim, or an objection, is preferred, the party against whom an order ismade may institute a suit in a civil court to establish the right which he claims tothe property in dispute; but, subject to the result of such suit (if any), the order ofthe Collection Unit shall be conclusive.

Removal of attachment on satisfaction, or cancellation, of certificate.12. Where-

(a) the amount due, with costs and all charges and expenses resulting from theattachment of any property or incurred in order to hold a sale, are paid to theCollection Unit, or

(b) the certificate is cancelled, the attachment shall be deemed to be withdrawnand, in the case of immovable property, the withdrawal shall, if the defaulter sodesires, be proclaimed at his expense, and a copy of the proclamation shall beaffixed in the manner provided by this Schedule for a proclamation of sale ofimmovable property.

Officer entitled to attach and sell.13. The attachment and sale of movable and immovable property may be made by

such persons as the Collection Unit may from time to time direct.

Defaulting purchaser answerable for loss on resale.14. (1) Any deficiency of price which may happen on a resale by reason of the purchaser’s

default, and all expenses attending such resale, shall be certified to the CollectionUnit by the officer holding the sale, and shall, at the instance of either the CollectionUnit or the defaulter, be recoverable from the defaulting purchaser under theprocedure provided by this Schedule.

(2) However, such application shall not be entertained, if it is filed after the end offifteenth day from the date of resale.

Adjournment or stoppage of sale.15. (1) The Collection Unit may, in his discretion, adjourn any sale hereunder to a specified

day and hour; and the officer conducting any such sale may, in his discretion,

208adjourn the sale, recording his reasons for such adjournment :

(2) However, if the sale is made in, or within the precincts of, the office of the CollectionUnit, no such adjournment shall be made without the leave of the Collection Unit

(3) Where a sale of immovable property is adjourned under sub-rule (1) for a longerperiod than one calendar month, a fresh proclamation of sale under this Scheduleshall be made unless the defaulter consents to waive it.

(4) Every sale shall be stopped if, before the lot is knocked down, the arrears andcosts (including the costs of the sale) are tendered to the officer conducting thesale, or proof is given to his satisfaction that the amount of such arrears and costshas been paid to the Collection Unit who ordered the sale.

Private alienation to be void in certain cases.16. (1) Where a notice has been served on a defaulter under rule 2, the defaulter, or his

representative in interest, shall not be competent to mortgage, charge, lease orotherwise deal with any property belonging to him except with the permission ofthe Collection Unit, nor shall any civil court issue any process against such propertyin execution of a decree for the payment of money.

(2) Where an attachment has been made under this Schedule, any private transfer, ordelivery, of the property attached or of any interest therein and any payment to thedefaulter of any debt, dividend or other moneys contrary to such attachment, shallbe void as against all claims enforceable under the attachment.

Prohibition against bidding or purchase by officer.17. No officer or other person having any duty to perform in connection with any sale

under this Schedule shall, either directly or indirectly, bid for, acquire or attempt toacquire any interest in the property sold.

Prohibition against sale on holidays.18. No sale under this Schedule shall take place on -

(a) a Sunday;(b) other general holiday recognised by the State Government;or(c) any day which has been notified by the State Government to be a local holiday

for the area in which the sale is to take place.

Assistance by police.19. Any officer authorised to attach or sell any property or to arrest the defaulter or

charged with any duty to be performed under this Schedule, may apply to theofficer-in-charge of the nearest police station for such assistance as may benecessary in the discharge of his duties, and the authority to whom such applicationis made shall depute a sufficient number of police officers for furnishing suchassistance.

Entrustment of certain functions by Collection Unit20. A Tax Recovery Officer may, with the previous approval of the Joint Commissioner,

entrust any of his functions as the Collection Unit to any other officer lower thanhim in rank (not being lower in rank than an Inspector of Income-tax) and suchofficer shall, in relation to the functions so entrusted to him, be deemed to be aCollection Unit.

209PART II

ATTACHMENT AND SALE OF MOVABLE PROPERTY

ATTACHMENT

Warrant.21. Except as otherwise provided in this Schedule, when any movable property is to

be attached, the officer shall be furnished by the Collection Unit (or other officerempowered by him in that behalf) a warrant in writing and signed with his namespecifying the name of the defaulter and the amount to be realised.

Service of copy of warrant.22. The officer shall cause a copy of the warrant to be served on the defaulter.

Attachment.23. If, after service of the copy of the warrant, the amount is not paid forthwith, the

officer shall proceed to attach the movable property of the defaulter.

Property in defaulter’s possession.24. (1) Where the property to be attached is movable property (other than agricultural

produce) in the possession of the defaulter, the attachment shall be made by actualseizure, and the officer shall keep the property in his own custody or the custodyof one of his subordinates and shall be responsible for due custody thereof:

(2) The officer referred in sub-rule (1) may sell the property seized at once, if-(a) the property seized is subject to speedy and natural decay; or(b) the expense of keeping the seized property in custody is likely to exceed its

value.

Agricultural produce.25. (1) Where the property to be attached is agricultural produce the attachment shall be

made by affixing a copy of the warrant of attachment-(a) where such produce is growing crop,-on the land on which such crop has

grown; or(b) where such produce has been cut or gathered,-on the threshing floor or place

for treading out grain or the like, or fodder-stack, on or in which it is deposited;(2) A copy of warrant of attachment, where the property to be attached is agricultural

produce, shall also affixed on the outer door or on some other conspicuous part ofthe house in which the defaulter ordinarily resides, or with the leave of the CollectionUnit, on the outer door or on some other conspicuous part of the house in whichhe-(a) carries on business or personally works for gain; or(b) is known to have last resided or carried on business or personally worked for

gain.(3) Upon affixing the copy of warrant, under sub-rules (1) and (2), the produce shall be

deemed to have passed into the possession of the Collection Unit.

Provisions as to agricultural produce under attachment.26. (1) Where agricultural produce is attached, the Collection Unit shall make such

arrangements for the custody, watching, tending, cutting and gathering thereof as

210he may deem sufficient; and he shall have power to defray the cost of sucharrangements.

(2) The defaulter may tend, cut, gather and store the produce and do any other actnecessary for maturing or preserving it, subject to such conditions as may beimposed by the Collection Unit in this behalf, either in the order of attachment or inany subsequent order.

(3) If the defaulter fails to do all or any of the act referred to in sub-rule (2), any personappointed by the Collection Unit in this behalf may, subject to the like conditions,do all or any of such acts, and the costs incurred by such person shall be recoverablefrom the defaulter as if they were included in the certificate.

(4) Agricultural produce attached as a growing crop shall not be deemed to haveceased to be under attachment or to require re-attachment merely because it hasbeen severed from the soil.

(5) Where an order for the attachment of a growing crop has been made at aconsiderable time before the crop is likely to be fit to be cut or gathered, theCollection Unit may suspend the execution of the order for such time as he thinksfit, and may, in his discretion, make a further order prohibiting the removal of thecrop pending the execution of the order of attachment.

(6) A growing crop which from its nature does not admit of being stored shall not beattached under this rule at any time less than twenty days before the time at whichit is likely to be fit to be cut or gathered.

Debts and shares, etc.27. (1) In the case of a debt not secured by a negotiable instrument, a share in a corporation

or other movable property not in the possession of the defaulter except propertydeposited in, or in the custody of, any court, the attachment shall be made by awritten order prohibiting,-(a) in the case of the debt-the creditor from recovering the debt and the debtor from

making payment thereof until the further order of the Collection Unit;(b) in the case of the share-the person in whose name the share may be standing

from transferring the same or receiving any dividend thereon;(c) in the case of the other movable property (except as aforesaid)-the person in

possession of the same from giving it over to the defaulter.(2) A copy of such order shall be affixed on some conspicuous part of the office of the

Collection Unit, and another copy shall be sent, in the case of the debt, to thedebtor, in the case of the share, to the proper officer of the corporation, and in thecase of the other movable property (except as aforesaid), to the person in possessionof the same.

(3) A debtor prohibited under clause (i) of sub-rule (1) may pay the amount of his debtto the Tax Recovery Officer, and such payment shall discharge him as effectuallyas payment to the party entitled to receive the same.

Attachment of decree.28. (1) The attachment of a decree of a civil court for the payment of money, or for sale in

enforcement of a mortgage or charge, shall be made by the issue to the civil court of anotice requesting the civil court to stay the execution of the decree unless and until-(a) the Collection Unit cancels the notice; or(b) the Collection Unit, or the defaulter, applies to the court receiving such notice

to execute the decree.

211(2) Where a civil court receives an application under clause (b) of sub-rule (1), it shall,

on the application of the Collection Unit, or the defaulter, and subject to theprovisions of the Code of Civil Procedure, 1908, proceed to execute the attacheddecree and apply the net proceeds in satisfaction of the certificate.

(3) The Collection Unit shall be deemed to be the representative of the holder of theattached decree, and to be entitled to execute such attached decree in any mannerlawful for the holder thereof.

Share in movable property.29. Where the property to be attached consists of the share, or interest, of the defaulter

in movable property belonging to him and another as co-owners, the attachmentshall be made by a notice to the defaulter prohibiting him from transferring theshare or interest or charging it in any way.

Salary of Government servants.30. Attachment of the salary, or allowances, of servants of the Government, or a local

authority, may be made in the manner provided by rule 48 of Order 21 of the FirstSchedule to the Code of Civil Procedure, 1908, and the provisions of the said ruleshall, for the purposes of this rule, apply subject to such modifications as may benecessary.

Attachment of negotiable instrument.31. Where the property is a negotiable instrument not deposited in a court nor in the

custody of a public officer, the attachment shall be made by actual seizure, and theinstrument shall be brought before the Collection Unit and held subject to hisorders.

Attachment of property in custody of court or public officer.32. (1) Where the property to be attached is in the custody of any court or public officer, the

attachment shall be made by a notice to such court or officer, requesting that suchproperty, and any interest or dividend becoming payable thereon, may be held subjectto the further orders of the Collection Unit by whom the notice is issued.

(2) Where the property is in the custody of a court, any question of title or priorityarising between the Collection Unit and any other person, not being the defaulter,claiming to be interested in such property by virtue of any assignment, attachmentor otherwise, shall be determined by the court.

Attachment of partnership property.33. (1) Where the property to be attached consists of an interest of the defaulter, being a

partner, in the partnership property, the Collection Unit may make an order chargingthe share of such partner in the partnership property and profits with payment ofthe amount due under the certificate.

(2) The Collection Unit may, by the order referred to in sub-rule(1) or any subsequentorder, appoint a receiver of the share of such partner in the profits, whether alreadydeclared or accruing and of any other money which may become due to him inrespect of the partnership, and direct accounts and inquiries and make an order forthe sale of such interest or such other order as the circumstances of the case mayrequire.

212(3) The other persons shall be at liberty at any time to redeem the interest charged or,

in the case of a sale being directed, to purchase the same.

Inventory.34. In the case of attachment of movable property by actual seizure, the officer shall,

after attachment of the property, prepare an inventory of all the property attached,specifying in it the place where it is lodged or kept, and shall forward the same tothe Collection Unit and a copy of the inventory shall be delivered by the officer tothe defaulter.

Attachment not to be excessive.35. The attachment by seizure shall not be excessive, that is to say, the property

attached shall be as nearly as possible proportionate to the amount specified inthe warrant.

Seizure between sunrise and sunset.36. Attachment by seizure shall be made after sunrise and before sunset and not

otherwise.

Power to break open doors, etc.37. (1) The officer may break open any inner or outer door or window of any building and

enter any building in order to seize any movable property, if the officer hasreasonable grounds to believe that such building contains movable property liableto seizure under the warrant and the officer has notified his authority and intentionof breaking open if admission is not given.

(2) However, before breaking open, the officer shall give all reasonable opportunity towomen to withdraw.

SALESale

38. Collection Unit may direct that any movable property attached under this Scheduleor such portion thereof as may seem necessary to satisfy the certificate shall besold.

Issue of proclamation.39. When any sale of movable property is ordered by the Collection Unit, the Collection

Unit shall issue a proclamation, in the language of the district, of the intended sale,specifying the time and place of sale and whether the sale is subject to confirmationor not.

Proclamation how made.40. (1) Such proclamation shall be made by beat of drum or other customary mode,-

(a) in the case of property attached by actual seizure-(i) in the village in which the property was seized, or, if the property was

seized in a town or city, then, in the locality in which it was seized; and(ii) at such other places as the Collection Unit may direct;

(b) in the case of property attached otherwise than by actual seizure, in suchplaces, if any, as the Collection Unit may direct.

213(2) A copy of the proclamation shall also be affixed in a conspicuous part of the office

of the Collection Unit.

Sale after fifteen days.41. Except where the property is subject to speedy and natural decay, or when the expense

of keeping it in custody is likely to exceed its value, no sale of movable property underthis Schedule shall, without the consent in writing of the defaulter, take place until afterthe expiry of at least fifteen days calculated from the date on which a copy of the saleproclamation was affixed in the office of the Collection Unit.

Sale of agricultural produce.42. (1) Where the property to be sold is agricultural produce, the sale shall be held,-

(a) if such produce is a growing crop-on or near the land on which such crop hasgrown, or

(b) if such produce has been cut or gathered-at or near the threshing floor orplace for treading out grain or the like, or fodder-stack, on or in which it isdeposited.

(2) However, the Collection Unit may direct the sale to be held at the nearest place ofpublic resort, if he is of opinion that the produce is thereby likely to sell to greateradvantage.

(3) The sale shall be postponed, where, on the produce being put up for sale,-(a) a fair price, in the estimation of the person holding the sale, is not offered for

it, and(b) the owner of the produce, or a person authorised to act on his behalf, applies

to have the sale postponed till the next day or, if a market is held at the placeof sale, the next market day.

(4) When the sale has been postpone under sub-rule (3), it shall be then completedon the date postponed regardless of any price offered for the produce.

Special provisions relating to growing crops.43. (1) Where the property to be sold is a growing crop and the crop from its nature

admits of being stored but has not yet been stored, the day of the sale shall be sofixed as to admit of the crop being made ready for storing before the arrival of suchday, and the sale shall not be held until the crop has been cut, or gathered, and isready for storing.

(2) Where the crop from its nature does not admit of being stored or can be sold to agreater advantage in an unripe stage (e.g., as green wheat), it may be sold before itis cut and gathered, and the purchaser shall be entitled to enter on the land, and todo all that is necessary for the purpose of tending or cutting or gathering the crop.

Sale to be by auction.44. The property shall be sold by public auction in one, or more, lots as the officer may

consider advisable, and if the amount to be realized by sale is satisfied by the saleof a portion of the property, the sale shall be immediately stopped with respect tothe remainder of the lots.

Sale by public auction.

21445. (1) Where movable property is sold by public auction, the price of each lot shall be

paid at the time of sale or as soon after as the officer holding the sale directs and indefault of payment, the property shall forthwith be resold.

(2) On payment of the purchase-money, the officer holding the sale shall grant acertificate specifying the property purchased, the price paid and the name of thepurchaser, and the sale shall become absolute.

(3) Where the movable property to be sold is a share in goods belonging to thedefaulter and a co-owner, and two or more persons, of whom one is such co-owner,respectively bid the same sum for such property or for any lot, the bidding shall bedeemed to be the bidding of the co-owner.

Irregularity not to vitiate sale, but any person injured may sue.46. No irregularity in publishing, or conducting, the sale of movable property shall

vitiate the sale, but any person sustaining substantial injury by reason of suchirregularity at the hand of any other person may institute a suit in a civil courtagainst him for compensation, or (if such other person is the purchaser) for therecovery of the specific property and for compensation in default of such recovery.

Negotiable instruments and shares in a corporation.47. The Collection Unit may, regardless of anything to the contrary contained in this

Schedule, authorise the sale of any property, which is a negotiable instrument or ashare in a corporation, through a broker instead of directing the sale to be made bypublic auction.

Order for payment of coin or currency notes to the Assessing Officer.48. Where the property attached is current coin or currency notes, the Tax Recovery

Officer may, at any time during the continuance of the attachment, direct that suchcoins or notes shall be credited to the Central Government and the amount socredited shall be dealt with in the manner specified in rule 8.

PART IIIATTACHMENT AND SALE OF IMMOVABLE PROPERTY

ATTACHMENT

Attachment.49. Attachment of the immovable property of the defaulter shall be made by an order

prohibiting the defaulter from transferring, or charging, the property in any wayand prohibiting all persons from taking any benefit under such transfer or charge.

Service of notice of attachment.50. A copy of the order of attachment shall be served on the defaulter.

Proclamation of attachment.51. The order of attachment shall be proclaimed at some place on, or adjacent to, the

property attached by beat of drum, or other customary mode, and a copy of theorder shall be affixed on a conspicuous part of the property and on the noticeboard of the office of the Collection Unit.

215

Attachment to relate back from the date of service of notice.52. Where any immovable property is attached under this Schedule, the attachment

shall relate back to, and take effect from, the date on which the notice to pay thearrears, issued under this Schedule, was served upon the defaulter.

SALE

Sale and proclamation of sale53. (1) The Collection Unit may direct that any immovable property which has been

attached, or such portion thereof as may seem necessary to satisfy the certificate,shall be sold.

(2) Where any immovable property is ordered to be sold, the Collection Unit shall causea proclamation of the intended sale to be made in the language of the district.

Contents of proclamation54. A proclamation of sale of immovable property shall be drawn up after notice to the

defaulter, and shall state the time and place of sale, and shall specify, as fairly andaccurately as possible,-(a) the property to be sold;(b) the revenue, if any, assessed upon the property or any part thereof;(c) the amount for the recovery of which the sale is ordered;(d) the reserve price, if any, below which the property may not be sold; and(e) any other thing which the Collection Unit considers it material for a purchaser

to know, in order to judge the nature and value of the property.

Mode of making proclamation.55. (1) Every proclamation for the sale of immovable property shall be made at some place

on or near such property by beat of drum or other customary mode, and a copy ofthe proclamation shall be affixed on a conspicuous part of the property and alsoupon a conspicuous part of the office of the Collection Unit.

(2) Where the Collection Unit so directs, such proclamation shall also be published inthe Official Gazette or in a local newspaper, or in both; and the cost of suchpublication shall be deemed to be costs of the sale.

(3) Where the property is divided into lots for the purpose of being sold separately, it shallnot be necessary to make a separate proclamation for each lot, unless proper notice ofthe sale cannot, in the opinion of the Collection Unit, otherwise be given.

Time of sale56. No sale of immovable property under this Schedule shall, without the consent in

writing of the defaulter, take place until after the expiration of at least thirty dayscalculated from the date on which a copy of the proclamation of sale has been affixedon the property or in the office of the Collection Unit, whichever is later.

Sale to be by auction57. (1) The sale shall be by public auction to the highest bidder and shall be subject to

confirmation by the Collection Unit(2) However, no sale under this rule shall be made, if the amount bid by the highest

216bidder is less than the reserve price, if any, specified under clause (d) of rule 54.

Deposit by purchaser and resale in default.58. (1) On every sale of immovable property, the person declared to be the purchaser shall

pay, immediately after such declaration, a deposit of twenty-five per cent on theamount of his purchase money, to the officer conducting the sale; and, in defaultof such deposit, the property shall forthwith be resold.

(2) The full amount of purchase money payable shall be paid by the purchaser to theCollection Unit on or before the fifteenth day from the date of the sale of theproperty.

Procedure in default of payment.59. In default of payment within the period mentioned in the preceding rule, the deposit

may, if the Collection Unit thinks fit, after defraying the expenses of the sale, beforfeited to the Government, and the property shall be resold, and the defaultingpurchaser shall forfeit all claims to the property or to any part of the sum for whichit may subsequently be sold.

Authority to bid.60. (1) Where the sale of a property, for which a reserve price has been specified under

clause (d) of rule 54, has been postponed for want of a bid of an amount not lessthan such reserve price, it shall be lawful for an Department, if so authorised by theChief Commissioner or Commissioner in this behalf, to bid for the property onbehalf of the Central Government at any subsequent sale.

(2) All persons bidding at the sale shall be required to declare, if they are bidding ontheir own behalf or on behalf of their principals.

(3) The bid shall be rejected if the person bidding on behalf of his principle fails todeposit the authority.

(4) Where the Department referred to in sub-rule (1) is declared to be the purchaser ofthe property at any subsequent sale, nothing contained in rule 58 shall apply tothe case and the amount of the purchase price shall be adjusted towards theamount specified in the certificate.

Application to set aside sale of immovable property on deposit.61. (1) Where immovable property has been sold in execution of a certificate, the defaulter,

or any person whose interests are affected by the sale, may, at any time withinthirty days from the date of the sale, apply to the Collection Unit to set aside thesale, on his depositing-(a) the amount specified in the proclamation of sale as that for the recovery of

which the sale was ordered, with interest thereon at the rate of one and one-fourth per cent for every month or part of a month, calculated from the date ofthe proclamation of sale to the date when the deposit is made; and

(b) for payment to the purchaser, as penalty, a sum equal to five per cent of thepurchase money, but not less than one rupee.

(2) Where a person makes an application under rule 62 for setting aside the sale of hisimmovable property, he shall not, unless he withdraws that application, be entitledto make or prosecute an application under this rule.

Application to set aside sale of immovable property on ground of non-service of notice

217or irregularity.

62. (1) Where immovable property has been sold in execution of a certificate, such Income-tax Officer as may be authorised by the Chief Commissioner or Commissioner inthis behalf, the defaulter, or any person whose interests are affected by the sale,may, at any time within thirty days from the date of the sale, apply to the CollectionUnit to set aside the sale of the immovable property on the ground-(a) that notice was not served on the defaulter to pay the arrears as required by

this Schedule; or(b) of a material irregularity in publishing, or conducting, the sale.

(2) No sale shall be set aside on any ground referred to in sub-rule (1) unless the TaxRecovery Officer is satisfied that the applicant has sustained substantial injury byreason of the non-service or irregularity.

(3) An application made by a defaulter under this rule shall be disallowed unless theapplicant deposits the amount recoverable from him in the execution of thecertificate.

Setting aside sale where defaulter has no saleable interest.63. At any time within thirty days of the sale, the purchaser may apply to the Tax

Recovery Officer to set aside the sale on the ground that the defaulter had nosaleable interest in the property sold.

Confirmation of sale.64. (1) Where no application is made for setting aside the sale under the foregoing rules

or where such an application is made and disallowed by the Collection Unit, theCollection Unit shall (if the full amount of the purchase money has been paid) makean order confirming the sale, and, thereupon, the sale shall become absolute.

(2) Where such application is made and allowed, and where, in the case of an applicationmade to set aside the sale on deposit of the amount and penalty and charges, thedeposit is made within thirty days from the date of the sale, the Collection Unitshall make an order setting aside the sale.

(3) No order under sub-rule (2) shall be made unless notice of the application has beengiven to the persons affected thereby.

Return of purchase money in certain cases.65. Where a sale of immovable property is set aside, any money paid or deposited by

the purchaser on account of the purchase, together with the penalty, if any,deposited for payment to the purchaser, and such interest as the Collection Unitmay allow, shall be paid to the purchaser.

SALE

Sale certificate.66. (1) Where a sale of immovable property has become absolute, the Collection Unit

shall grant a certificate specifying the property sold, and the name of the personwho at the time of sale is declared to be the purchaser.

(2) Such certificate shall state the date on which the sale became absolute.

Postponement of sale to enable defaulter to raise amount due under certificate.

21867. (1) Where an order for the sale of immovable property has been made, if the defaulter

can satisfy the Collection Unit that there is reason to believe that the amount ofthe certificate may be raised by the mortgage or lease or private sale of suchproperty, or some part thereof, or of any other immovable property of the defaulter,the Collection Unit may, on his application, postpone the sale of the propertycomprised in the order for sale, on such terms, and for such period as he thinksproper, to enable him to raise the amount.

(2) In such case, the Collection Unit shall grant a certificate to the defaulter, authorisinghim, within a period to be mentioned therein, and regardless anything contained inthis Schedule, to make the proposed mortgage, lease or sale.

(3) All moneys payable under the mortgage, lease or sale referred to in sub-rule (2)shall be paid to the Collection Unit and not to the defaulter.

(4) No mortgage, lease or sale under this rule shall become absolute until it has beenconfirmed by the Collection Unit.

Fresh proclamation before re-sale.68. Every re-sale of immovable property, in default of payment of the purchase money

within the period allowed for such payment, shall be made after the issue of a freshproclamation in the manner and for the period hereinbefore provided for the sale.

Bid of co-sharer to have preference.69. Where the property sold is a share of undivided immovable property, and two or

more persons, of whom one is a co-sharer, respectively bid the same sum for suchproperty or for any lot, the bid shall be deemed to be the bid of the co-sharer.

Acceptance of property in satisfaction of amount due from the defaulter.70. (1) Without prejudice to the provisions contained in this Part, an Department, duly

authorised by the Chief Commissioner or Commissioner in this behalf, may acceptin satisfaction of the whole or any part of the amount due from the defaulter theproperty, the sale of which has been postponed for the reason mentioned in sub-rule (1) of rule 60, at such price as may be agreed upon between the Departmentand the defaulter.

(2) Where any property is accepted under sub-rule (1), the defaulter shall deliverpossession of such property to the Department and on the date the possession ofthe property is delivered to the Department, the property shall vest in the CentralGovernment and the Central Government shall, where necessary, intimate theconcerned Registering Officer appointed under the Registration Act, 1908,accordingly.

(3) Where the price of the property agreed upon under sub-rule (1) exceeds the amountdue from the defaulter, such excess shall be paid by the Department to the defaulterwithin a period of three months from the date of delivery of possession of theproperty.

(4) Where the Department fails to pay the excess amount referred to in sub-rule (3)within the period referred therein, the Central Government shall, for the periodcommencing on the expiry of such period and ending with the date of payment ofthe amount remaining unpaid, pay simple interest at one-half per cent for everymonth or part of a month to the defaulter on such amount.

Time limit for sale of attached immovable property.

21971. (1) No sale of immovable property shall be made under this Part after the expiry of four

years from the end of the financial year in which the order giving rise to a demandof any tax, interest, fine, penalty or any other sum, for the recovery of which theimmovable property has been attached, has become final in terms of the provisionof sub-chapter D of Chapter VIII.

(2) The period of limitation referred to in sub-rule (1) shall stand extended by one year,if the immovable property is required to be re-sold-(a) due to the amount of highest bid being less than the reserve price;(b) under the circumstances mentioned in rule 58 or rule 59; or(c) due to the sale being set aside under rule 62.

(3) In computing the period of limitation under sub-rule (1), the following period shallbe excluded:-(a) the period during which the levy of the aforesaid tax, interest, fine, penalty or

any other sum is stayed by an order or injunction of any court;(b) the period during which the proceedings of attachment or sale of the immovable

property are stayed by an order or injunction of any court; or(c) the period commencing from the date of the presentation of any appeal against

the order passed by the Collection Unit under this Schedule and ending onthe day the appeal is decided.

(4) Where immediately after the exclusion of the period referred in sub-rule (3), theperiod of limitation for the sale of the immovable property is less than 180 days,such remaining period shall be extended to 180 days and the aforesaid period oflimitation shall be deemed to be extended accordingly.

(5) Where the sale of immovable property is not made in accordance with the provisionsof sub-rule (1), the attachment order in relation to the said property shall be deemedto have been vacated on the expiry of the time of limitation specified under this rule.

PART IVAPPOINTMENT OF RECEIVER

Appointment of receiver for business.72. (1) Where the property of a defaulter consists of a business, the Collection Unit may

attach the business and appoint a person as receiver to manage the business.(2) Attachment of a business under this rule shall be made by an order prohibiting the

defaulter from transferring or charging the business in any way and prohibiting allpersons from taking any benefit under such transfer or charge, and intimating thatthe business has been attached under this rule. A copy of the order of attachmentshall be served on the defaulter, and another copy shall be affixed on a conspicuouspart of the premises in which the business is carried on and on the notice board ofthe office of the Collection Unit.

Appointment of receiver for immovable property.73. Where immovable property is attached, the Collection Unit may, instead of directing

a sale of the property, appoint a person as receiver to manage such property.

Powers of receiver.74. (1) Where any business or other property is attached and taken under management

under the foregoing rules, the receiver shall, subject to the control of the Collection

220Unit, have such powers as may be necessary for the proper management of theproperty and the realisation of the profits, or rents and profits, thereof.

(2) The profits, or rents and profits, of such business or other property, shall, afterdefraying the expenses of management, be adjusted towards discharge of thearrears, and the balance, if any, shall be paid to the defaulter.

Withdrawal of management75. The attachment and management under the foregoing rules may be withdrawn at

any time at the discretion of the Collection Unit, or if the arrears are discharged byreceipt of such profits and rents or are otherwise paid.

PART VARREST AND DETENTION OF THE DEFAULTER

Notice to show cause76. (1) No order for the arrest and detention in civil prison of a defaulter shall be made

unless the Collection Unit has issued and served a notice upon the defaultercalling upon him to appear before him on the date specified in the notice and toshow cause why he should not be committed to the civil prison.

(2) The provisions of sub-rule (1) shall not apply if the Collection Unit, for reasonsrecorded in writing, is satisfied-(a) that the defaulter has, with the object or effect of obstructing the execution of

the certificate, after the drawing up of the certificate by the Collection Unit,dishonestly transferred, concealed, or removed any part of his property; or

(b) that the defaulter has, or has had since the drawing up of the certificate by theCollection Unit, the means to pay the arrears or some substantial part thereofand refuses or neglects or has refused or neglected to pay the same.

(3) A warrant for the arrest of the defaulter may, regardless of anything contained insub-rule (1), be issued by the Collection Unit, if he is satisfied, by affidavit orotherwise, that the defaulter is likely to abscond, or leave the local limits of thejurisdiction of the Collection Unit, with the object, or effect, of delaying the executionof the certificate.

(4) The Collection Unit may issue a warrant for the arrest of the defaulter if appearanceis not made in obedience to a notice issued and served under sub-rule (1).

(5) A warrant of arrest issued by a Collection Unit under sub-rule (3) or sub-rule (4)may also be executed by any other Collection Unit within whose jurisdiction thedefaulter may for the time being be found.

(6) Every person arrested in pursuance of a warrant of arrest under this rule shall bebrought before the Collection Unit issuing the warrant as soon as practicable andin any event within twenty-four hours of his arrest (exclusive of the time requiredfor the journey).

(7) The Collection Unit shall at once release the defaulter if he pays the amountentered in the warrant of arrest as due and the costs of the arrest to the officerarresting him.

(8) For the purposes of this rule, the karta of a Hindu undivided family shall be deemedto be the defaulter if the defaulter is the Hindu undivided family.

Hearing.

22177. The Collection Unit shall give the defaulter an opportunity of showing cause why

he should not be committed to the civil prison, when the defaulter appears beforethe Collection Unit in obedience to a notice to show cause or is brought before theCollection Unit under rule 73.

Custody pending hearing.78. Pending the conclusion of the inquiry, the Collection Unit may, in his discretion,

order the defaulter to be detained in the custody of such officer as the CollectionUnit may think fit or release him on his furnishing security to the satisfaction ofthe Collection Unit for his appearance when required.

Order of detention.79. (1) Upon the conclusion of the inquiry, the Collection Unit may make an order for the

detention of the defaulter in the civil prison and shall in that event cause him to bearrested if he is not already under arrest.

(2) The Collection Unit may, before making the order of detention, give the defaulteran opportunity of satisfying the arrears by-(a) leaving the defaulter in the custody of the officer arresting him, or of any

other officer, for a specified period not exceeding 15 days; or(b) releasing him on his furnishing security to the satisfaction of the Collection

Unit for his appearance at the expiration of the specified period if the arrearsare not so satisfied.

(3) The Collection Unit shall direct the release of the defaulter, who is under arrest, ifhe does not make an order of detention under sub-rule (1).

Detention in and release from prison.80. (1) Every person detained in the civil prison in execution of a certificate may be so

detained,-(a) where the certificate is for a demand of an amount exceeding two hundred and

fifty rupees-for a period of six months;and(b) in any other case-for a period of six weeks.

(2) However, he shall be released from such detention-(a) on the amount mentioned in the warrant for his detention being paid to the

officer-in-charge of the civil prison, or(b) on the request of the Collection Unit on any ground other than the grounds

mentioned in rules 78 and 79.(3) A defaulter released from detention under this rule shall not,-

(a) be discharged from his liability for the arrears merely by reason of his release;and

(b) be liable to be rearrested under the certificate in execution of which he wasdetained in the civil prison.

Release81. (1) The Collection Unit may order the release of a defaulter who has been arrested in

execution of a certificate upon being satisfied that-(a) he has disclosed the whole of his property and has placed it at the disposal of

the Collection Unit; and(b) he has not committed any act of bad faith.

222(2) The Collection Unit may order the rearrest of the defaulter in execution of the

certificate, if he has ground for believing the disclosure made by the defaulterunder sub-rule (1) to have been untrue.

(3) However, the period of the detention of the defaulter in the civil prison shall not inthe aggregate exceed that authorised by rule 77.

Release on ground of illness.82. (1) The Collection Unit may, at any time after a warrant for the arrest of a defaulter has

been issued, cancel the warrant on the ground of serious illness of the defaulter.(2) The Collection Unit may, in a case where a defaulter has been arrested, release him

if, in the opinion of the Collection Unit, he is not in a fit state of health to bedetained in the civil prison.

(3) A defaulter, who has been committed to the civil prison, may be released therefromby the Collection Unit on the ground of the existence of any infectious orcontagious disease, or on the ground of his suffering from any serious illness.

(4) A defaulter released under this rule may be rearrested, but the period of his detentionin the civil prison shall not in the aggregate exceed that authorised by rule 77.

Entry into dwelling house.83. For the purpose of making an arrest under this Schedule-

(a) no dwelling house shall be entered after sunset and before sunrise;(b) no outer door of a dwelling house shall be broken open unless such dwelling

house or a portion thereof is in the occupancy of the defaulter and he or otheroccupant of the house refuses or in any way prevents access thereto; but,when the person executing any such warrant has duly gained access to anydwelling house, he may break open the door of any room or apartment if hehas reason to believe that the defaulter is likely to be found there;

(c) no room, which is in the actual occupancy of a woman who, according to thecustoms of the country, does not appear in public, shall be entered into unlessthe officer authorised to make the arrest has given notice to her that she is atliberty to withdraw and has given her reasonable time and facility forwithdrawing.

Prohibition against arrest of women or minors, etc.84. The Collection Unit shall not order the arrest and detention in the civil prison of-

(a) a woman; or(b) any person who, in his opinion, is a minor or of unsound mind.

PART VIMISCELLANEOUS

Officers deemed to be acting judicially.85. Every Chief Commissioner, Commissioner, Collection Unit or other officer acting

under this Schedule shall, in the discharge of his functions under this Schedule, bedeemed to be acting judicially within the meaning of the Judicial Officers ProtectionAct, 1850.

Power to take evidence.86. Every Chief Commissioner, Commissioner, Collection Unit or other officer acting

223under the provisions of this Schedule shall have the powers of a civil court whiletrying a suit for the purpose of receiving evidence, administering oaths, enforcingthe attendance of witnesses and compelling the production of documents.

Continuance of certificate.87. No certificate shall cease to be in force by reason of the death of the defaulter.

Procedure on death of defaulter.88. The proceedings under this Schedule (except arrest and detention) may be

continued against the legal representative of the defaulter, and the provisions ofthis Schedule shall apply as if the legal representative were the defaulter, if thedefaulter dies, at any time, after the certificate is drawn up by the Collection Unit.

Appeals.89. (1) An appeal from any original order passed by the Collection Unit under this

Schedule, not being an order which is conclusive, shall lie to the Chief Commissioneror Commissioner.

(2) Every appeal under this rule must be presented within thirty days from the date ofthe order appealed against.

(3) Pending the decision of any appeal, execution of the certificate may be stayed ifthe appellate authority so directs, but not otherwise.

(4) Where a Chief Commissioner or Commissioner is authorised to exercise powers assuch in respect of any area, then, regardless of anything contained in sub-rule (1),all appeals against the orders passed before the date of such authorisation by anyCollection Unit authorised to exercise powers as such in respect of that area, or anarea which is included in that area, shall lie to such Chief Commissioner orCommissioner.

Review.90. Any order passed under this Schedule may, after notice to all persons interested,

be reviewed by the Chief Commissioner, Commissioner, Collection Unit or otherofficer who made the order, or by his successor in office, on account of anymistake apparent from the record.

Recovery from surety.91. A person may be proceeded against under this Schedule, if he has become surety

for the amount due by a defaulter, as if the person were the defaulter.

Subsistence allowance.92. (1) The sum payable for the subsistence of a defaulter, who is arrested or detained in

the civil prison, from the time of arrest until he is released shall be borne by theCollection Unit

(2) Such sum shall be calculated on the scale fixed by the State Government for thesubsistence of judgment-debtors arrested in execution of a decree of a civil court.

(3) Sums payable under this rule shall be deemed to be costs in the proceeding.(4) However, the defaulter shall not be detained in the civil prison or arrested on

account of any sum so payable.

Forms.

22493. The Board may prescribe the form to be used for any order, notice, warrant, or

certificate to be issued under this Schedule.

Power to make rules.94. (1) The Board may make rules, consistent with the provisions of this Act, for regulating

the procedure to be followed by Chief Commissioners, Commissioners, CollectionUnits and other officers acting under this Schedule.

(2) In particular, and without prejudice to the generality of the power conferred by sub-rule (1), such rules may provide for all, or any of, the following matters, namely:-(a) the area within which Chief Commissioners, Commissioners or Collection Units

may exercise jurisdiction;(b) the manner in which any property sold under this Schedule may be delivered;(c) the execution of a document or the endorsement of a negotiable instrument or

a share in a corporation, by or on behalf of the Collection Unit, where suchexecution, or endorsement, is required to transfer such negotiable instrument,or share, to a person who has purchased it under a sale under this Schedule;

(d) the procedure for dealing with resistance, or obstruction, offered by any personto a purchaser of any immovable property sold under this Schedule, in obtainingpossession of the property;

(e) the fees to be charged for any process issued under this Schedule;(f) the scale of charges to be recovered in respect of any other proceeding taken

under this Schedule;(g) recovery of poundage fee;(h) the maintenance and custody, while under attachment, of livestock or other

movable property, the fees to be charged for such maintenance and custody,the sale of such livestock or property, and the disposal of proceeds of suchsale;

(i) the mode of attachment of business.

Saving regarding charge.95. Nothing in this Schedule shall affect any provision of this Act whereunder the tax

is a first charge upon any asset.

THE FOURTH SCHEDULE(See section 9)

INCOME NOT INCLUDED IN TOTAL INCOME

S. No. Exempt Income(1) (2)

1. Agricultural income.2. Amount received by way of-

(a) daily allowance received by any person by reason of his membership ofParliament or of any State Legislature or of any Committee thereof;

(b) any allowance received by any person by reason of his membership ofParliament under the Members of Parliament (Constituency Allowance) Rules,1986;

(c) any constituency allowance received by any person by reason of his

225membership of any State Legislature under any Act or rules made by thatState Legislature.

3. Any sum received by an individual as a member of a Hindu undivided family, if,-(a) the sum has been paid out of the income of the family, or(b) in the case of any impartible estate, the sum has been paid out of the income

of the impartible estate belonging to the family.4. The amount of family pension received by the widow or children or nominated

heirs, as the case may be, of a member of the armed forces (including para-militaryforces) of the Union, if the death of such member has occurred in the course ofoperational duties, in such circumstances and subject to such conditions, as maybe prescribed.

5. Any income arising to a foreign company, as the Central Government may, bynotification in the Official Gazette, specify in this behalf, by way of royalty or feesfor technical services received in pursuance of an agreement entered into with thatGovernment for providing services in or outside India in projects connected withsecurity of India.

6. Any income arising to a foreign company, or a non-resident, not being a company,by way of royalty from, or fees for technical services rendered in or outside Indiato, the National Technical Research Organisation;

7. Income of the European Economic Community derived in India by way of interest,dividends or capital gains from investments made out of its funds under suchscheme as the Central Government may, by notification in the Official Gazette,specify in this behalf.

8. Any amount of interest -(a) on deposits with any scheduled bank, made with the approval of the Reserve

Bank of India, by a bank incorporated in a country outside India and authorisedto perform central banking functions in that country;

(b) on securities held by the Issue Department of the Central Bank of Ceylonconstituted under the Ceylon Monetary Law Act, 1949;

(c) on a loan advanced by the Nordic Investment Bank to a project approved bythe Central Government in terms of the Memorandum of Understanding enteredinto by the Central Government with that Bank on the 25th day of November,1986; or

(d) on a loan granted by European Investment Bank in pursuance of the framework-agreement for financial co-operation entered into on the 25th day of November,1993 by the Central Government with that Bank.

9. Income accruing or arising to a person, if -(a) the person is a member of a Scheduled Tribe as defined in clause (25) of Article

366 of the Constitution ;(b) the person resides in -

(i) the States of Arunachal Pradesh, Manipur, Mizoram, Nagaland andTripura, or

(ii) any area specified in Part I or Part II of the Table appended to paragraph20 of the Sixth Schedule to the Constitution, or

(iii) the areas covered by notification No. TAD/R/35/50/109, dated the 23rdFebruary, 1951, issued by the Governor of Assam under the proviso tosub-paragraph (3) of Paragraph 20 of the sixth schedule of the Constitutionas it stood immediately before the commencement of the North-EasternAreas (Reorganisation) Act, 1971, or

226(iv) the Ladakh region of the State of Jammu and Kashmir; and

(c) the income is in the nature of dividend or interest on securities or from anysource in the areas or States specified in sub-clause (b).

10. Income accruing or arising to a Sikkimese, other than a Sikkimese woman who, onor after the 1st day of April, 2008, marries an individual who is not a Sikkimese,-(a) from any source in the State of Sikkim; or(b) by way of dividend or interest on securities.

11. The accumulated balance due as on 31st day of March, 2019 and becoming payableto an employee participating in the approved provident fund;

12. Any accretion, by way of interest, dividend, bonus, or any other similar amounts,by whatever name called, to the balance as on 31st day of March, 2019 and becomingpayable to an employee participating in the approved provident fund;

13. The accumulated balance due as on 31st day of March, 2019 and becoming payableto an employee participating in the approved superannuation fund;

14. Any accretion, by way of interest, dividend, bonus, or any other similar amounts,by whatever name called, to the balance as on 31st day of March, 2019 and becomingpayable to an employee participating in the approved superannuation fund;

15. Any amount not exceeding twenty five per cent. of the amount of contributionsmade by a person till the 31st day of March, 2019, partialy withdrawn from theNational Pension System Trust, in accordance with terms and conditions specifiedunder the Pension Fund Regulatory and Development Authority Act, 2013;

16. Any amount not exceeding forty per cent. of the aggregate of the accumulatedbalance as on 31st day of March, 2019 and any accretion thereto by way of interest,dividend, bonus or any other similar amounts by whatever name called, becomingpayable to a person due to closure of his account, for whatever reason, maintainedwith the National Pension System Trust;

17. Such income and amount thereof, as notified by the Central Government in thisbehalf, arising to a body or authority, if-(a) it has been established or constituted or appointed under -

(i) a treaty or an agreement entered into by the Central Government with twoor more countries; or

(ii) a convention signed by the Central Government;(b) it is not established or constituted or appointed for the purposes of profit;

and(c) it is notified by the Central Government in the Official Gazette for the purposes

of this clause.18. Any payment from an account, opened in accordance with the Sukanya Samriddhi

Account Rules, 2014 made under the Government Savings Bank Act, 1873.19. The amount of remuneration received by an individual who is not a citizen of India,

if the following conditions are fulfilled:-(a) such individual is an official, by whatever name called, of an embassy, high

commission, legation, commission, consulate or the trade representation of aforeign State, or as a member of the staff of any of these officials, for servicein such capacity;

(b) the remuneration of the corresponding officials or, as the case may be, membersof the staff, if any, of the Government resident for similar purposes in thecountry concerned enjoys a similar exemption in that country; and

(c) the members of the staff are subjects of the country represented and are notengaged in any business or profession or employment in India otherwise than

227as members of such staff.

20. The amount received by an individual who is not a citizen of India by way ofremuneration as an employee of a foreign enterprise for services rendered by himduring his stay in India, if the following conditions are fulfilled-(a) the foreign enterprise is not engaged in any trade or business in India;(b) his stay in India does not exceed in the aggregate a period of ninety days in

such financial year; and(c) such remuneration is not liable to be deducted from the income of the employer

chargeable under this Act.21. The amount received by, or due to, any individual being a non-resident, who is not

a citizen of India, by way of remuneration, if the following conditions are fulfilled:(a) such remuneration is for services rendered in connection with the employment

on a foreign ship; and(b) his total stay in India does not exceed in the aggregate a period of ninety days

in the financial year.22. The amount of remuneration received by an individual who is not a citizen of India,

if the following conditions are fulfilled:-(a) he is an employee of the Government of a foreign State during his stay in

India; and(b) his stay in India is in connection with his training in any establishment or

office of, or in any undertaking owned by,-(i) the Government; or(ii) any company in which the entire paid-up share capital is held by

the Central Government, or any State Government or Governments, orpartly by the Central Government and partly by one or more StateGovernments; or

(iii) any company which is a subsidiary of a company referred to in item (b);or

(iv) any corporation established by or under a Central, State or ProvincialAct; or

(v) any society registered under the Societies Registration Act, 1860 (14 of1860), or under any other corresponding law for the time being in forceand wholly financed by the Central Government, or any State Governmentor State Governments, or partly by the Central Government and partly byone or more State Governments.

23. Any amount received by an assessee under the Bhopal Gas Leak Disaster(Processing of Claims) Act, 1985 (21 of 1985) in excess of the amount, if any,allowed as a deduction in any financial year on account of any loss or damagecaused to him by such disaster.

24. Interest on deposit certificates issued under the Gold Monetisation Scheme, 2015notified by the Central Government.

25. Interest on bonds-(a) issued by a local authority; and(b) specified by the Central Government by notification in the Official Gazette;

26. The amount of interest on deposits in a Non-Resident (External) Account in anybank in India, if the account is held by an individual who -(a) is resident outside India in terms of clause (w) of section 2 of the Foreign

Exchange Management Act, 1999; or(b) has been permitted by the Reserve Bank of India to maintain the aforesaid

228account.

27. The amount of interest payable by a scheduled bank, other than a co-operativebank, to a non-resident or to a person who is not ordinarily resident, on depositsin foreign currency where the acceptance of such deposits by the bank is approvedby the Reserve Bank of India.

28. Any amount received, whether in cash or in kind,-(a) in pursuance of any award instituted in the public interest by the Central

Government or any State Government or instituted by any other body andapproved by the Central Government in this behalf; or

(b) as a reward by the Central Government or any State Government for suchpurposes as may be approved by the Central Government in this behalf in thepublic interest.

29. The amount of family pension received by any member of the family of an individualwho had been in the service of the Central Government or State Government andhas been awarded “Param Vir Chakra” or “Maha Vir Chakra” or “Vir Chakra” orsuch other gallantry award as the Central Government may, by notification in theOfficial Gazette, specify in this behalf.

30. Any sum received as compensation, from the multilateral fund of the MontrealProtocol on non-use of Substances that Deplete the Ozone layer under the UnitedNations Environment Programme, in accordance with the terms of agreement enteredinto with the Government of India.

31. Any income of an individual, if-(a) the income,-

(i) accrues to him outside India; or(ii) is received outside India, in the year, by or on behalf of such individual;

(b) the income is not derived from a business controlled, or a profession set up, inIndia;

(c) the income relates to,-(i) the financial year in which the individual ceases to be a non-resident; or(ii) the financial year immediately succeeding the financial year in which the

individual ceases to be a non-resident; and(d) the individual was a non-resident for nine years immediately preceding the

financial year in which he has ceased to be a non-resident.32. Any amount received from the Central Government, a State Government or a local

authority by an individual, or his legal heir, by way of compensation on account ofany disaster, as reduced by the amount received by the individual or his legal heirwhich has been allowed as a deduction under this Act on account of any loss ordamage caused by such disaster.

33. The amount of interest on bonds-(a) issued by a local authority or by a State Pooled Finance Entity; and(b) specified by the Central Government by notification in the Official Gazette.

34. The amount of capital gain arising on account of-(a) transfer of agricultural land situated in a rural area;(b) transfer of any personal effect;(c) transfer of deposit certificates issued under the Gold Monetisation Scheme

2015 notified by Central Government.35. Gross rent in respect of any one palace in the occupation of a Ruler, if the annual

value of the palace was exempt from income - tax -

229(a) before the commencement of the Constitution (Twenty-sixth Amendment) Act,

1971;(b) by virtue of the provisions of -

(i) the Merged States (Taxation Concessions) Order, 1949;(ii) the Part B States (Taxation Concessions) Order, 1950; or(iii) the Jammun and Kashmir (Taxation Concessions) Order, 1958.

36. Any income and amount thereof notified by the Central Government for this purposeaccruing to any person from any international sporting event held in India, if suchevent -(a) is approved by the international body regulating the international sport relating

to such event;(b) has participation of more than two countires; and(c) is notified by the Central Government.for the purpose of this paragraph.

37. any income under the head “Capital gains” from transfer of a designated capitalasset arising to a person, being an individual or a Hindu undivided family, if-(a) he was the owner of the asset as on the 2nd day of June, 2014; and(b) he transfers the asset under the Andhra Pradesh Land Pooling Scheme;

38. Any income received by an individual as a loan, either in lump sum or in instalment,in a transaction of reverse mortgage referred to in clause (v) of sub-section (1) ofsection 45.

39. Any allowance or perquisite paid or allowed outside India by the Government to acitizen of India for rendering service outside India.

40. Any amount received by the employee, from one or more employers, in connectionwith termination of his service, voluntary retirement or separation, if-(a) the amount is received under any scheme framed for this purpose in accordance

with the rules as may be prescribed; and(b) the aggregate of the amount does not exceed the prescribed limit;

41. Any amount of compensation received by a workman under the Industrial DisputesAct, 1947 or under any other law for the time being in force or under any award orcontract of service, at the time of his retrenchment in accordance with the provisionsof clause (b) of section 25F of the said Act or five lakh rupees, whichever is less.

42. Any amount of a prescribed scholarship received by a student to meet the cost ofhis education;

43. Any sum received by any person from an insurer in respect of a life insurancepolicy upon death of the insured person.

44. Any income received in India by a foreign company on account of supply ofgoods or services to any person in India, if-(a) the receipt of the income in India by the foreign company is in pursuant to an

agreement, or an arrangement, entered into by the Central Government orapproved by the Central Government;

(b) the income is received in Indian currency;(c) the goods or services are notified by the Central Government in this behalf;(d) the foreign company and the agreement, or arrangement, are, having regard to

the national interest, notified by the Central Government in this behalf; and(e) the foreign company is not engaged in any activity, other than receipt of such

income, in India;45. Any income accruing to a foreign company, if -

(a) it accrues on account of sale of crude oil from a storage facility in India;

230(b) the sale is to any person resident in India;(c) the storage and sale by the foreign company is pursuant to an agreement or

an arrangement entered into by the Central Government or approved by theCentral Government; and

(d) the foreign company and the agreement, or arrangement, are, having regard tothe national interest, notified by the Central Government in this behalf;

46. Any income accruing to a foreign company, if-(a) it accrues on account of sale of leftover stock of crude oil, if any, from a

storage facility in India;(b) the sale is carried out after the expiry, or on termnination, of the agreement, or

the arrangement, referred to in clause (49); or(c) the sale is in accordance with the terms mentioned in the agreement or the

arrangement, as the case may be; and(d) it fulfills the conditions notified by the Central Government in this behalf;

47. Any income arising from any specified service which is chargable to equilisationlevy.

THE FIFTH SCHEDULE(See Section 10)

PERSONS NOT LIABLE TO INCOME-TAX

S.No. Exempt Persons(1) (2)1. Any office, or establishment, of the Central Government or the Government of a

State or a Union Territory.2. Panchayat.3. Municipality.4. Municipal Committee and District Board, legally entitled to, or entrusted by the

Government with, the control or management of a municipal or local fund.5. Cantonment Board.6. The Coffee Board.7. The Rubber Board.8. The Tea Board.9. The Tobacco Board.10. The Marine Products Export Development Authority.11. The Agricultural and Processed Food Products Export Development Authority.12. The Spices Board.13. The Coir Board.14. The Prime Minister’s National Relief Fund.15. The Prime Minister’s Fund (Promotion of Folk Art).16. The Prime Minister’s Aid to Students Fund.17. The Chief Minister’s Relief Fund, in respect of any State.18. The Lieutenant Governor’s Relief Fund in respect of any Union territory;19. The National Foundation for Communal Harmony.20. The Insurance Regulatory and Development Authority.21. Any investment pooling vehicle22. New Pension System Trust.

23123. Deposit-linked Insurance Fund.24. The Employees’ State Insurance Fund.25. Any electoral trust, if-

(a) ninety five percent of the aggregate of all donations received by it during thefinancial year and the surplus, if any, brought forward from any preceedingfinancial year is distributed to political parties; and

(b) such electoral trust functions in accordance with the rules made by the CentralGovernment.

26. A corporation established for promoting the interests of the members of theScheduled Castes or the Scheduled Tribes or backward classes or of any two or allof them, if it is established by a Central, State or Provincial Act;

27. Any body, institution or association, if-(a) it is formed for promoting the interest of the members of the Scheduled Castes

or the Scheduled Tribes or Backward classes or of any two or all of them; and(b) it is wholly financed by Government;

28. Any corporation established by the Central or State Government for promotingthe interests of the members of a minority community.

29. Any statutory corporation established for the welfare and economic upliftment ofex-servicemen being the citizens of India.

30. Any co-operative society formed for promoting the interests of the members of theScheduled Castes or Scheduled Tribes or both, if -(a) the membership of the co-operative society consists of only other co-operative

societies formed for similar purposes; and(b) the finances of the society are provided by the Government and such other

societies.31. Any Regimental Fund or Non-Public Fund established by the armed forces of the

Union for the welfare of the past and present members of such forces or theirdependants.

32. Any fund set up, on or after 1st day of August, 1996, by an insurer under a pensionscheme,-(a) to which contribution is made by any person for the purpose of receiving

pension from such fund; and(b) which is approved by the Controller of Insurance or the Insurance Regulatory

and Development Authority.33. An authority (whether known as the Khadi and Village Industries Board or by any

other name) established in a State by or under a State or Provincial Act for thedevelopment of khadi or village industries in the State.

34. Any body or authority (whether or not a body corporate or corporation sole)established, constituted or appointed by or under any Central, State or ProvincialAct which provides for the administration of any one or more of the following,(a) public religious or charitable trusts; or(b) endowments (including maths, temples, gurdwaras, wakfs, churches,

synagogues, agiaries or other places of public religious worship); or(c) societies for religious or charitable purposes registered as such under the

Societies Registration Act, 1860 (21 of 1860), or any other law for the timebeing in force.

35. Any association, authority, body, institution or trust, if-(a) it is established for the purpose of public religious services;(b) it is established for the benefit of general public;

232(c) it applies its income wholly for public religious purposes;(d) its funds or assets are invested or held, at any time during the financial year in

the modes specified in seciton 66; and(e) its funds or assets are not used or applied or deemed to have been used or

applied, directly or indirectly, for the benefit or any interested person.(f) it is registered under any law of the Central or State Government for the

regulation of religious endowment;(g) it maintains books of account and obtains an audit report from a accountant if

its gross receipts in any financial year exceed five lakh rupees;36. The SAARC Fund for Regional Projects set up by Colombo Declaration.37. Any income of the nature, and to the extent, notified by the Central Government,

arising to a body or authority which -(a) has been established or constituted or appointed under a treaty or an

agreement entered into by the Central Government with two or more countriesor a convention signed by the Central Government.

(b) is established or constituted or appointed not for the purposes of profit;(c) is notified by the Central Government in the Official Gazette for the purposes

of this clause.38. The Central Electricity Regulatory Commission constituted under sub-section (1)

of section 76 of the Electricity Act, 2003.

THE SIXTH SCHEDULE[See section 14 (2)]

COMPUTATION OF INCOME FROM SPECIAL SOURCES

1. The income from any special source shall be computed in accordance with theprovisions of this Schedule.

2. The income from any special sources shall be the aggregate of -(a) any amount by way of accrual or receipt, as the case may be;(b) any amount accrued or received as reimbursement of any expenditure incurred

by the person; and(c) any tax borne by the person by whom the income is payable.

3. No deduction or allowance or set-off of any loss shall be allowed in computationof income from the special sources.

4. The income computed under paragraph 2 shall be presumed to have been computedafter giving full effect to every loss, allowance or deduction under this Act.

5. The written down value of any business asset used for the purposes of earningincome from any special source shall be computed as if the person has claimed andhas been actually allowed the deduction in respect of depreciation under this Act.

6. The amount of common costs (including depreciation) attributable to the specialsource and presumed to have been allowed under paragraph 4 shall be determinedin such manner as may be prescribed.

THE SEVENTH SCHEDULE(See section 53)

PART A DONATIONS ELIGIBLE FOR HUNDRED PER CENT DEDUCTION

2331. The Prime Minister’s National Relief Fund.2. The National Defence Fund set up by the Central Government.3. The Prime Minister’s Armenia Earthquake Relief Fund.4. The Africa (Public Contributions - India) Fund.5. The National Foundation for Communal Harmony.6. Any university or educational institution of national eminence as may be approved

by the prescribed authority in this behalf.7. Any Zila Saksharta Samiti constituted in any district under the chairmanship of the

Collector of that district for the purposes of improvement of primary education invillages and towns in such district and for literacy and post-literacy activities.

8. The National Blood Transfusion Council or to any State Blood Transfusion Councilwhich has its sole object the control, supervision, regulation or encouragement inIndia of the services related to operation and requirements of blood banks.

9. Any fund set up by a State Government to provide medical relief to the poor.10. The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air

Force Central Welfare Fund established by the armed forces of the Union for thewelfare of the past and present members of such forces or their dependants.

11. The National Illness Assistance Fund.12. The Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in

respect of any State or Union territory, as the case may be, where such Fund is-(a) the only Fund of its kind established in the State or the Union territory, as the

case may be;(b) under the overall control of the State or the Union territory, as the case may

be;(c) administered in such manner as may be specified by the State Government or

the Lieutenant Governor, as the case may be.13. The National Sports Fund set up by the Central Government.14. The National Cultural Fund set up by the Central Government.15. The Fund for Technology Development and Application set up by the Central

Government.16. The National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental

Retardation and Multiple Disabilities constituted under sub-section (1) of section3 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, MentalRetardation and Multiple Disabilities Act, 1999 (44 of 1999).

17. The Government or any such local authority, institution or association as may beapproved in this behalf by the Central Government, to be utilised for the purposeof promoting family planning.

18. The Indian Olympic Association or to any other association or institutionestablished in India, as the Central Government may, having regard to the prescribedguidelines, by notification, specify in this behalf for-(a) the development of infrastructure for sports and games; or(b) the sponsorship of sports and games, in India and where the sum is paid by an

assessee, being a company.19. A rural development fund set up and notified by the Central Government.20. The National Urban Poverty Eradication Fund set up and notified by the Central

Government.21. Any company, research association or national laboratory or university, college or

other institution, if-(a) it is engaged in carrying on scientific research and development; and

234(b) such company, association, university, college or other institution is approved

in this behalf subject to conditions and in accordance with such guidelinesand manner as may be prescribed.

PART B

DONATIONS ELIGIBLE FOR FIFTY PER CENT DEDUCTION

1. The Jawaharlal Nehru Memorial Fund referred to in the Deed of Declaration ofTrust adopted by the National Committee at its meeting held on the 17th day ofAugust, 1964.

2. The Prime Minister’s Drought Relief Fund.3. The National Children’s Fund.4. The Indira Gandhi Memorial Trust, the deed of declaration in respect whereof was

registered at New Delhi on the 21st day of February, 1985.5. The Rajiv Gandhi Foundation, the deed of declaration in respect whereof was

registered at New Delhi on the 21st day of June, 1991.6. Any other fund, any institution or any organisation which is approved under

section 53;7. The Government or any local authority, to be utilised for any charitable purpose

other than the purpose of promoting family planning.8. Any authority constituted in India by or under any law enacted either for the purpose

of dealing with and satisfying the need for housing accommodation or for the purposeof planning, development or improvement of cities, towns and villages, or for both.

9. Any corporation established by the Central Government or any State Governmentfor promoting the interests of the interest of a minority community.

10. A temple, mosque, gurdwara, church or other place as is notified by the CentralGovernment to be of historic, archaeological or artistic importance or to be a place ofpublic worship of renown throughout a State or States, to be utilized for the renovationor repair of such temple, mosque, gurdwara, church or other place.

Note:- (a) For the purposes of item 7 of Part B, “town” means a town which has apopulation not exceeding one lakh according to the last preceding censusof which the relevant figures have been published before the first day ofthe previous year.

(b) For the purposes of item 8 of Part B, -(i) “National Blood Transfusion Council” means society registered,as

such under the Societies Registration Act, 1860 under theadministrative control of the Union Ministry of Health and FamilyWelfare;

(ii) “State Blood Transfusion Council” means a society registered, inconsultation with the National Blood Transfusion Council, underthe Societies Registration Act, 1860 under the administrative controlof the Department of Health of the respective State Government.

235

THE EIGHTH SCHEDULE[See Section 42 (2)]

DETERMINATION OF COST OF ACQUISITION IN CERTAIN CASES

Serial Nature of investment Mode of acquisition Cost of acquisition of theNumber asset investment asset

01 Shares in an amalgamated By way of transfer The cost of acquisition tocompany, being an Indian referred to in clause the assessee of the sharesin company (k) or clause (l), as the the amalgamating company

case may be, or predecessor co-operative of sub-section (1) bankof section 37.

02. Transferable interest of By way of transfer The cost of acquisition topartner referred to in referred to in clause(f) the person of the sharessection 42 of the Limited of sub-section (1) of in the company immediatelyLiability Partnership Act, section 39 before its conversion into2008 (6 of 2009) limited liability patnership.

03. Shares or debenture in a By way of transfer That part of the cost of bond,company referred to in clause (q) debenture, debenture-stock

or clause (r) of sub- or deposits certificates insection (1) of section 37. relation to which the

investment is acquired bythe assessee

04. Shares in the resulting By way of a transfer The amount which bears tocompany or co-operative effected under a scheme the cost of acquisition ofbank of demerger. shares held by the assessee

in the demerged companyor co-operative bank,the same proportion as thenet book value of the assetstransferred in a demergerbears to the net worth of thedemerged company orco-operative bankimmediately before suchmerger.

05. Original shares in the By way of transfer in any The cost of acquisition ofdemerged company or manner. the original shares held byco-operative bank the assessee in the

demergedcompany immediatelybefore the demerger asreduced by the amount as

236so arrived at under column(4) of serial number 3 of this Table

06. Shares or any other By way of purchase of The amount actually paid bysecurity. share or such other the person for acquiring

security. the asset.

07. Any right to renounce the By way of purchase of Nilentitlement to subscribe the original share orto shares or any other other securitysecurity

08. Any right to subscribe By way of purchase of The amount actually paidto additional shares or the original share or by the person for acquiringany other security on the other security the assetbasis of holding theoriginal share or security

09. Shares or any other By way of allotment on Nil.security. the basis of holding any

share or any othersecurity without payment

10. Right in the nature of By way of purchase of The aggregate of thean entitlement to the right in the nature of amountof purchase pricesubscribe to shares an entitlement to paid by the assessee to theor any other security subscribe the shares or person renouncing the right

any other security. and the amount paid by himto the company orinstitution, as the case maybe, for acquiring the capitalasset.

11. Sweat equity shares. By way of allotment or The fair market value of thetransfer, directly or sweat equity sharesindirectly, by an employer which has been takento his employee (including into account whileformer employee) computing the value of

perquisite for the purposesof section 21.

12. Shares of a recognised Under a scheme of Cost of acquisition by thestock exchange in India demutualisation or assessee of his original

corporatisation approved membership of the Stockby the Securities and Exchange.Exchange Board of India.

237

13. Trading or clearing rights Under a scheme of Nilof a recognised stock demutualisation orexchange in India acquired corporatisation approvedby a shareholder. by the Securities and

Exchange Board of India.

14. Shares or stocks of a (a) in pursuance of Cost of acquisition ofcompany. consolidation or division the shares or stock from

or sub-division of all or which the investment asset any of the share is derived.capital of the companyinto shares of largeramount or smaller amount,as the case may be, than itsexisting shares; or(b) by way of conversionof any shares of thecompany into stockof the same company,or re-conversion thereof;or(c) by way of conversionof one kind of shares of thecompany into another kindof shares of the same company

THE NINTH SCHEDULE[See sections 202]

COMPUTATION OF PROFITS OF BUSINESS OF OPERATINGA QUALIFYING SHIP

1. The profits of the business of operating a qualifying ship for a financial year,-(a) shall be computed in accordance with the provisions of this Schedule, at the

option of the person; and(b) on exercise of the option, shall be determined in accordance with the formula-

A + B - CWhere A = the total tonnage income of the financial year ;

B = the aggregate of the amounts referred to in sub-section (2) ofsection 31; and

C = the amount of negative profit computed under this Schedule inrespect of the business of operating a qualifying ship , for anyfinancial year immediately preceeding the relevant financial year.

2. The tonnage income of the financial year in respect of each qualifying ship shall bethe daily tonnage income of the ship multiplied by the number of days duringwhich the ship is operated by the company as a qualifying ship.

3. The daily tonnage income of a qualifying ship having tonnage referred to in column(1) of the Table given below shall be the amount specified in the corresponding

238entry in column (2) of the said Table:

TABLEQualifying ship having Amount of daily tonnagenet tonnage income

(1) (2)up to 1,000 tons Rs. 46 for each 100 tonsexceeding 1,000 tons but not more Rs. 460 plus Rs. 35 for eachthan 10,000 tons 100 tons exceeding 1,000 tonsexceeding 10,000 tons but not more Rs. 3,610 plus Rs. 28 for eachthan 25,000 tons 100 tons exceeding 10,000 tonsexceeding 25,000 tons Rs.7,810 plus Rs. 19 for each

100 tons exceeding 25,000 tons.

4. The profits of the business of operating a qualifying ship shall be treated as ‘nil’for the financial year, if the profits determined under paragraph 1 is negative.

5. The profits computed under this Schedule shall be presumed to have beencomputed,-(a) after giving full effect to every loss, allowance or deduction referred to in

sections 35 to section 40 (both inclusive);(b) after giving full effect to any deduction allowable under sub-chapter-I of

Chapter III in relation to the profits of the business of operating a qualifyingship .

6. The written down value of any business asset used in the business of operating aqualifying ship shall be computed as if the assessee has claimed and has beenactually allowed the deduction in respect of depreciation under section 36, initialdepreciation under section 37 and terminal allowance under section 38.

7. The amount of common costs (including depreciation) attributable to the businessof operating a qualifying ship and any other business shall be determined in suchmanner as may be prescribed.

8. The successor in a business reorganisation of the business of operating aqualifying ship shall be allowed a deduction in respect of the negative profitdetermined in the case of the predecessor for,-(a) the financial year immediately preceeding the financial year in which the

business reorganisation has taken place if the reorganisation is on the firstday of the financial year; and

(b) the period beginning with the first day of the financial year and ending on the dayimmediately preceeding the date of business reorganisation, in any other case.

9. A company shall continue to be regarded as an operator of a qualifying ship evenin the case of temporary cessation of operation of the ship.

10. A company shall not be regarded as the operator in respect of a ship if the ship hasbeen chartered out by it on bareboat charter-cum-demise terms.

11. A ship shall not be considered as qualifying ship if it temporarily ceases to be aqualifying ship.

12. The book profit or loss derived from the core shipping activities of a qualifyingshipping company shall be excluded from the book profit of the company for thepurposes of section 104.

23913. The provisions of this Schedule shall not apply to a qualifying shipping company

if it is party to any transaction or arrangement which amounts to an abuse of thetonnage income scheme as provided in this Schedule.

14. The Board may make rules for the purposes of computation of income from thebusiness of operating a qualifying ship in respect of the following,-(a) method and time for opting into the tonnage income scheme and the period

for, and circumstances under, which the option shall remain in force;(b) circumstances under which a company may be excluded from the tonnage

income scheme;(c) such other conditions for applicability of tonnage income scheme having

regard to the need for generating internal accruals for acquiring new shipsand training of crews;

(d) limits for charter in of tonnage;(e) prevention of abuse of the tonnage income scheme, having regard to the need

to ensure that no transaction or arrangement results, or but for the rule prescribedhereunder, would have resulted in a tax advantage being obtained for-(i) a person other than a qualifying shipping company; or(ii) a qualifying shipping company in respect of its activities other than its

business of operating a qualifying ship ;(f) valuation of goods or services where these are transferred between the

business of operating a qualifying ship and any other business carried on bya qualifying shipping company; and

(g) determination of arm’s length price of the business transactions if thearrangement of transactions results in abuse of the tonnage income scheme.

15. In this Schedule, unless the context otherwise requires,-(a) “bareboat charter” means hiring of a ship for a stipulated period on terms

which give the charterer possession and control of the ship, including theright to appoint the master and crew;

(b) “bareboat charter-cum-demise” means a bareboat charter where the ownershipof the ship is intended to be transferred after a specified period to the companyto whom it has been chartered;

(c) “business of operating qualifying ships” means the core shipping activitiesand the permitted incidental shipping activities.;

(d) “core shipping activities” means,-(i) the activities relating to operation of a qualifying ship;(ii) the activities in connection with, or for the execution of, a service contract

under which a qualifying shipping company agrees to transport a specifiedquantity of specified products at a specified rate, between designatedloading and discharging ports over a specified period by a qualifyingship;

(iii) on-board or on-shore activities of qualifying ship comprising of faresand food and beverages consumed on board; and

(iv) slot charters, space charters, joint charters, feeder services, or containerbox leasing, of a qualifying ship;

(e) “permitted incidental shipping activity” means any activity relating tochartering out of a qualifying ship on bareboat charter terms, maritimeconsultancy, loading or unloading of cargo, ship management or maritimeeducation or recruitment if the aggregate accruals or receipts from all such

240activity does not exceed one-fourth per cent of the turnover from the coreshipping activities;

(f) “qualifying shipping company” means a company, which fulfills all thefollowing conditions, namely: -(i) it is an Indian company;(ii) the place of effective management of the comapny is in India;(iii) it owns at least one qualifying ship; and(iv) the main object of the company is to carry on the business of operating

ships;(g) “qualifying ship” means a ship, which fulfills all the following conditions

namely:-(i) it is a sea going ship or vessel of fifteen net tonnage or more;(ii) it is a ship registered or licensed under, or for the purposes of the Merchant

Shipping Act, 1958;(iii) a certificate indicating the net tonnage of the ship has been issued under,

or for the purposes of, the Merchant Shipping Act, 1958 and is in force;(iv) it is owned or chartered in by the qualifying shipping company wholly, or

partly in an arrangement such as slot charter, space charter, or joint charter;and

(v) the ship is not -(A) a seagoing ship or vessel if the main purpose for which it is used is

the provision of goods or services of a kind normally provided onland;

(B) a fishing vessel as defined in clause (12) of section 3 of the MerchantShipping Act, 1958;

(C) a factory ship including a vessel providing processing services inrespect of the processing of the fishing produce;

(D) a pleasure craft, being a ship primarily used for the purposes of sportor recreation;

(E) harbour and river ferries;(F) offshore installations; and(G) used as a fishing vessel for a period of more than thirty days during

a financial year;(h) “seagoing ship” means a ship if it is certified as such by the competent

authority of any country;(i) “tonnage” shall mean,-

(i) the tonnage specified on a certificate issued under, or for the purposesof, Merchant Shipping Act, 1958; and

(ii) the deemed tonnage in a case where an arrangement has been enteredinto by the qualifying company for purchase of slots, slot charter orsharing of a qualifying ship, calculated in such manner as may beprescribed.

(j) “tonnage income scheme” means a scheme for computation of profits of thebusiness of operating qualifying ships under paragraph 1 of this Schedule;and

(k) “total tonnage income” shall mean the aggregate of tonnage income fromoperating of all the qualifying ships.

241THE TENTH SCHEDULE

COMPUTATION OF PROFITS OF THE BUSINESS OFMINERAL OIL OR NATURAL GAS

1. The profits of the business of mineral oil or natural gas shall be the gross incomefrom the business carried on by the person at any time during the financial year asreduced by the amount of business expenditure incurred by the person wholly andexclusively for the purposes of the business during the year.

2. The gross income referred to in paragraph 1 shall be the aggregate of,-(a) the accruals or receipts derived by the assessee from,-

(i) the business of mineral oil or natural gas;(ii) the leasing or transfer of whole of, or part of, or any interest in, any,-

(A) mineral oil or natural gas rights; and(B) asset used in the business of mineral oil or natural gas; and

(iii) the transfer, demolition, destruction or discarding of any business captialasset (other than land, goodwill or financial instrument) in respect ofwhich deduction has been allowed, or allowable, under paragraph 3 inany financial year; and

(b) the amounts referred to in sub-section (2) of section 31.3. The amount of business expenditure referred to in paragraph 1 shall be the aggregate

of the amount of,-(a) operating expenditure referred to in section 33, incurred by the person;(b) permitted finance charges referred to in section 34, incurred by the person;(c) expenditure on any license charges, rental fees or other charges, if actually

paid;(d) capital expenditure incurred by the assessee;(e) expenditure on infructuous or abortive exploration of any area;(f) expenditure referred to in clauses (a) to (f) incurred before commencement of

the business;(g) payment to Site Restoration Accomulate maintained in State Bank of India in

accordance with the Schemes may be prescribed.4. The profits of the business of mineral oil or natural gas shall be treated as ‘nil’ if the

profits determined under paragraph 1 is negative.5. The profits computed under paragraph 1 shall be presumed to have been computed,-

(a) after giving full effect to every loss, allowance or deduction referred to insections 35 to section 38 (both inclusive);

(b) after giving full effect to any deduction allowable under Sub-Chapter-H3 ofChapter III in relation to the profits of the business of mineral oil or natural gas.

6. The written down value of any business asset used in the business of mineral oilor natural gas shall be computed as if the assessee has claimed and has beenactually allowed the deduction in respect of depreciation under section 36, initialdepreciation under section 37 and terminal allowance under section 38.

7. The amount of common costs including depreciation attributable to the businessof mineral oil or natural gas and any other business shall be determined in suchmanner as may be prescribed.

8. The provisions of this Schedule shall apply to the business referred to in and anyother business referred to in paragraph 1, which fulfills the following conditions,namely:-

242(a) it is not set up by splitting up, or the reconstruction, of a business already in

existence;(b) it is not set up by the transfer to the business of machinery or plant previously

used of any purpose.9. In this Schedule, unless the context otherwise requires,-

(a) ‘business of mineral oil or natural gas’ means any business consisting of theprospecting for or extraction or production of mineral oil or natural gas;

(b) ‘mineral oil’ means crude oil, being petroleum in its natural state before it isrefined or otherwise treated but from which water and foreign substanceshave been extracted;

(c) ‘natural gas’ means any sub-soil combustible gaseous fossil fuel;(d) ‘oil and gas right’ means any reconnaissance permit, technical cooperation

permit, exploration right, or production right assigned under the Oilfields(Regulation and Development) Act, 1948, or any right or interest therein;

(e) any machinery or plant which was used outside India by any person otherthan the person shall not be regarded as machinery or plant previously usedfor any purpose, if-(i) the machinery or plant was not, at any time prior to the date of the

installation by the assessee, used in India;(ii) the machinery or plant is imported into India from any country outside

India; and(iii) no deduction on account of depreciation in respect of the machinery or

plant has been allowed or is allowable under the provisions of this Code,or the Income-tax Act, 1961, as it stood before the commencement of thisAct, in computing the total income of any person for any period prior tothe date of the installation of the machinery or plant by the assessee;

(f) the condition specified in clasue (b) of paragraph 7 shall be deemed to havebeen complied with if the total value of the machinery or plant or any partthereof, previously used for any purpose and transferred to the businessreferred to in paragraph 1, does not exceed twenty per cent of the total valueof the machinery or plant used in the business;

(g) the capital expenditure referred to in clasue (d) of paragraph 3 shall notinclude any expenditure incurred on the acquisition of any land includinglong term lease, goodwill or financial instrument.

THE ELEVENTH SCHEDULEMinerals and Group of Associated Minerals

PART A Minerals

1. Aluminium ores.2. Apatite and phosphatic ores.3. Beryl.4. Chrome ore.5. Coal and lignite.6. Columbite, Samarskite and other minerals of the “rare earths “ group.7. Copper.

2438. Gold.9. Gypsum.10. Iron ore.11. Lead.12. Manganese ore.13. Molybdenum.14. Nickel ores.15. Platinum and other precious metals and their ores.16. Pitchblende and other uranium ores.17. Precious stones.18. Rutile.19. Silver.20. Sulphur and its ores.21. Tin.22. Tungsten ores.23. Uraniferous allanite, monazite and other thorium minerals.24. Uranium bearing tailings left over from ores after extraction of copper and gold,

ilmenite and other titanium ores.25. Vanadium ores.26. Zinc.27. Zircon

Part BGroups of Associated Minerals

1. Apatite, Beryl, Cassiterite, Columbite, Emerald, Felspar, Lepidolite, Mica,Pitchblende, Quartz, Samarskite, Scheelite, Topaz, Tantalite, Tourmaline.

2. Iron, Manganese, Titanium, Vanadium and Nickel Minerals.3. Lead, Zinc, Copper, Cadmium, Arsenic, Antimony, Bismuth, Cobalt, Nickel,

Molybdenum, and Uranium minerals, and Gold and Silver, Arsinopyrite,Chalcopyrite, Pyrite, Pyphrotite and Pentalandite.

4. Chromium, Osmiridium, Platinum, and Nickel minerals.5. Kyanite, Sillimanite, Corrundum, Dumortierite and Topaz.6. Gold, Silver, Tellurium, Selenium and Pyrite.7. Barytes, Flourite, Chalcocite, Selenium, and minerals of Zinc, Lead and Silver.8. Tin and Tungsten minerals.9. Limestone, Dolomite and Magnesite10. Ilmenite, Monazite, Zircon, Rutile, Garnet and Sillimanite.11. Sulphides of copper and iron.12. Coal, Fireclay and Shale.13. Magnetite and Apatite.14. Magnesite and Chromite.15. Talc (Soapstone and Steatite) and Dolomite.16. Bauxite, Laterite, Aluminous Clays, Lithomorge, Titanium, Vanadium, Gallium

and Columbium minerals.